Value added analysis | Value added process vs Non value added | Value Added vs Non Value added Lean
Summary
TLDRThis video explains the importance of focusing on value-added activities in business, highlighting that only 5% of actions typically add value while 95% are non-value-added. It differentiates between essential and non-essential non-value-added activities and uses the 8 wastes of lean manufacturing (DOWNTIME) to illustrate examples, ultimately urging viewers to optimize their processes.
Takeaways
- 📈 Focus on adding value to activities or processes for a successful venture or business.
- 🔢 A staggering 95% of activities are non-value-added, with only 5% being value-added.
- 💡 Value can be defined as something the customer is willing to pay for.
- 📋 Activities can be categorized into value-added, non-value-added but essential, and non-value-added and non-essential.
- 🛑 Value-added activities increase the worth of the product or service from the customer's perspective.
- ⚠️ Non-value-added but essential activities include purchasing, HR, compliance, and R&D testing, which are necessary but don't add value to the product or service.
- 🚫 Non-value-added and non-essential activities can be immediately eliminated and include rework, delays, and unnecessary handling of materials.
- 📊 The 8 wastes of lean manufacturing, represented by the acronym DOWNTIME, are major areas of non-value-added activities.
- 🏦 An example of analyzing a process is given with John's visit to the bank, where most of the time spent is on non-value-added activities.
- ⏱️ The time spent on value-added activities is minimal compared to non-value-added activities in most processes.
- 🔑 The key takeaway is to identify and focus on reducing non-value-added activities to improve efficiency and customer value.
Q & A
What is the primary focus for running a successful venture or business according to the video?
-The primary focus is to add value to all activities or processes, with only about 5% of activities being value-added.
How can value be defined in the context of business activities?
-Value can be defined as something that the customer is willing to pay for.
What are the three categories of activities mentioned in the video?
-The three categories are value-added activities, non-value-added but essential activities, and non-value-added and non-essential activities.
What are value-added activities in the context of business operations?
-Value-added activities are those that increase the worth of the product or service from the customer's perspective.
What are non-value-added but essential activities and why are they necessary?
-Non-value-added but essential activities are those that do not add value to the product or service and customers are not willing to pay for them, but they are necessary due to business requirements or legal regulations.
What are non-value-added and non-essential activities and why should they be eliminated?
-Non-value-added and non-essential activities do not add any value to the product or service and are not required by business operations. They should be eliminated to improve efficiency.
What is the significance of the 95% non-value-added activities in business operations?
-The significance is that most of the activities (95%) do not add value and customers are only willing to pay for the 5% that do add value, indicating a need for efficiency improvement.
What is the acronym DOWNTIME and how does it relate to non-value-added activities?
-DOWNTIME stands for Defects, Overproduction, Waiting, Non-utilized Talent, Transportation, Inventory, Motion, and Excess production. It represents the biggest area of non-value-added activities in lean manufacturing.
How does the video use the example of John visiting a bank to illustrate value-added and non-value-added activities?
-The example shows that most of John's time (95 minutes) is spent on non-value-added activities like driving, waiting in a queue, and filling forms, while only 5 minutes are spent on the value-added activity of completing the cash transaction.
What is the implication of the video's message for business management?
-The implication is that businesses should focus on identifying and reducing non-value-added activities to increase efficiency and customer value.
What steps can be taken to improve the value-added nature of business activities?
-Businesses can analyze their processes to identify and eliminate non-value-added activities, focus on activities that customers are willing to pay for, and optimize essential but non-value-added activities to reduce their impact on overall operations.
Outlines
📈 Understanding Value-Added vs. Non-Value-Added Activities
This paragraph introduces the critical concept of value-added versus non-value-added activities in business and ventures. It emphasizes that only about 5% of activities are value-added, meaning they increase the worth of a product or service from the customer's perspective, while approximately 95% are non-value-added. The speaker encourages viewers to subscribe and engage with the channel for content on Six Sigma, lean manufacturing, project management, and business management. The explanation delves into the three categories of activities: value-added, non-value-added but essential, and non-value-added and non-essential, providing examples for each. The importance of identifying and eliminating non-value-added activities is highlighted, along with the introduction of the 'eight wastes' of lean manufacturing, represented by the acronym DOWNTIME.
🚗 Real-World Example of Value-Added and Non-Value-Added Activities
The second paragraph offers a real-world example to illustrate the difference between value-added and non-value-added activities. It uses the scenario of a person named John who needs to visit a bank for a cash transaction. The process is broken down into several steps: driving to the bank, waiting in a queue, filling out forms, completing the transaction, and driving back home. The paragraph analyzes each step to identify which are value-added (completing the cash transaction) and which are non-value-added (driving to and from the bank, waiting in the queue, and filling out forms). The summary reveals that out of 100 minutes spent, only 5 minutes are value-added, reinforcing the point that most activities are non-essential from a customer's perspective. The speaker invites viewers to subscribe, like, share, and comment with suggestions for future video topics or feedback on the content.
Mindmap
Keywords
💡Value-Added Activities
💡Non-Value-Added Activities
💡Essential
💡Non-Essential
💡Lean Manufacturing
💡Downtime
💡Defects
💡Overproduction
💡Waiting
💡Non-Utilized Talent
💡Inventory
💡Motion
💡Excess Processing
Highlights
Approximately 95% of activities in a business are non-value-added, with only 5% being value-added.
Value-added activities are those that increase the worth of the product or service from the customer's perspective.
Non-value-added activities that are essential include necessary steps that customers are not willing to pay for but are unavoidable.
Examples of essential non-value-added activities include purchasing, HR activities, compliance, R&D, testing, and inspection for quality defects.
Non-value-added and non-essential activities do not add value to the product or service and are not required by business operations.
Examples of non-essential non-value-added activities include rework, delayed start, and handling of materials between operations.
The video emphasizes the importance of focusing on adding value to all business activities or processes.
The channel posts videos related to Six Sigma, lean manufacturing, project management, and business management.
Value can be defined as something that the customer is willing to pay for.
Activities can be categorized into value-added, non-value-added essential, and non-value-added non-essential.
Eliminating non-value-added and unnecessary activities is crucial for improving business efficiency.
The 8 wastes of lean manufacturing are summarized by the acronym DOWNTIME.
DOWNTIME stands for Defects, Overproduction, Waiting, Non-utilized talent, Transportation, Inventory, Motion, and Excess production.
An example is given where John visits a bank, illustrating the difference between value-added and non-value-added activities in his process.
John's process of visiting the bank includes driving, waiting in a queue, filling forms, completing the transaction, and driving back.
In John's example, only the five minutes spent completing the cash transaction are considered value-added.
The video encourages viewers to subscribe, like, share, and comment with suggestions for future content.
The video provides a clear distinction between value-added and non-value-added activities, emphasizing the need for businesses to focus on activities that customers are willing to pay for.
Transcripts
most of you are already aware
that if you want to run a successful
venture or a business then you need to
focus
more on adding value to all your
activities
or process but approximately 95
of all the activities that you do are
non-value-added activities
and only five percent is your
value-added activities
so in this video let's understand the
difference
between value-added and non-value-added
activities whether it is
essential or non-essential
so if you are watching this video for
the first time on my youtube channel
then please make sure that you hit that
subscribe button and
please press that bell icon so that you
are notified whenever i post a new video
on my youtube channel
so in this channel i post videos related
to six sigma
clean manufacturing project management
and business management
so before understanding the difference
between value-added
versus the non-value entered activities
let us first get
familiarized with this term value
so value can be defined as something
which customer is willing to pay for
we can categorize each step or
activities that we do
into three forms one is the value-added
activities that we do
second is the non-value-added activities
which are
essential and finally the non-value edit
activities which are
not essential so we will look at each
one of these one by one
so we'll start with value added
activities
so value-added activities are those
which increases the worth of the product
or services from the customer
perspective
then we have the non-value-added
activities which are essential
these are those who do not add any value
to the product or service
and customer is also not willing to pay
for it but somehow
you cannot avoid them as they are
necessary
it includes like purchasing any new
product
hr activities compliance related
activities
any r d testing inspection of parts
for quality defects they are generally
required by any business
requirement or they are governed by law
or government regulation
finally we have the third category which
is non-value added
and non-essential also that means which
do not add any value to the product or
service
and also are not required by business
operations
and can be immediately emulated
it includes like rework delayed start
or handling of the materials between
different operations
generally 95 percent of all the
activities that you do
are non-value-added activities and only
five percent of the activities
are value-added so are your customers
willing to pay for only five percent
this simply means that all the work that
you do
customer case only for those five
percent which is adding value to the
customer and not the next 95 percent
which is like hidden
let's understand this more from this
grid
so we'll list all the tasks like
non-value-added activities here
and value edit activities on the top and
on this
column we will list the necessary and
unnecessary activities
so if it is non value added and
necessary we can eliminate it
if it is non value added and unnecessary
we need to eliminate it as soon as
possible
if that is the only option we have
if it is a value added and necessary
that should be your
goal and if it is a value added
and unnecessary we need to eliminate if
possible
so we need to work out on all these four
parameters
the eight waste of lean manufacturing
as a biggest area of non-value added
activities
is given by acronym downtime
d-o-w-n-t-i-m-e
where d stands for defects
product or services that are not
acceptable to the user or the end
customer
o stands for our production
producing more than that is desired by
the end customer
then we have w which stands for waiting
that is when someone in the downstream
or upstream is waiting for next action
in the process
and stand for non-utilized talent
that is not utilizing the 100 talents in
the company
t stands for transport
that is unnecessary transportation from
one point to another without any any
value i stands for inventory
which includes raw material working
process or the finished code which are
stored
then we have m which stands for motion
that is unnecessary movement of people
and finally we have e
that is your access production
that is adding more steps than that is
required which is not adding any
value let's take an example here
assuming that john wants to visit bank
for some cash transaction
his house is 30 minutes from that place
so he come in a taxi and as soon as he
arrives at the bank he saw there's a
huge queue in front of bank
he steps out of car and stands in the
queue and waits for his turn
now let us analyze all this process and
see what is
value-added here and what is
non-value-added activities that
john has to perform for this cash
transaction at this particular
bank so the steps are
drive to the bank will take 30 minutes
and then he needs to stand in a queue
which will take another 20 minutes
then he needs to fill up any forms which
will take 15 minutes
finally he will complete the cash
transaction which will only take
five minutes and then finally he need to
drive back to home which will in that
take 30 minutes
so this entire process will take him
100 minutes now let's bifurcate this
into
value-added and non-value-added
activities
so the first activity is drive back to
home which is your
non-value-added activity next is
waiting in a queue which is again a
non-value-added activity
filling up forms is also a non-value
added activity
yes but completing the cash transaction
is a value add
because you're getting cash in your hand
and then finally drive back to home is
and also a
non value added activity now if you sum
this non value edit you will get
95 minutes and your total time was 100
minutes
that means only five minute is your
value added
which is approximately the five percent
is the value addition here
unless 95 percent activities that you
have done
is non-value added
so that is all i have on this video if
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