Value added analysis | Value added process vs Non value added | Value Added vs Non Value added Lean

Summary

This 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

00:00

📈 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.

05:01

🚗 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.

Keywords

💡Value-Added Activities

Value-added activities are those that increase the worth of a product or service from the customer's perspective. In the context of the video, these activities are crucial as they are the only ones for which customers are willing to pay. An example from the script is the completion of a cash transaction at a bank, which is considered value-added because it directly provides a service to the customer.

💡Non-Value-Added Activities

Non-value-added activities are those that do not contribute to the product or service's value and for which the customer is not willing to pay. These activities, although necessary, can be reduced or eliminated to improve efficiency. The script mentions activities like purchasing, HR, compliance, and R&D testing as examples of non-value-added but essential activities.

💡Essential

In the video, the term 'essential' is used to describe activities that are necessary for the operation of a business, even though they may not add value to the product or service. Essential non-value-added activities must be addressed and optimized, as they are unavoidable. An example given in the script is the inspection of parts for quality defects, which is required by business or governed by law.

💡Non-Essential

Non-essential activities are those that do not add value to the product or service and are not required by business operations. They can be immediately eliminated to streamline processes. The script uses the example of rework, delayed starts, and unnecessary handling of materials between operations as non-essential non-value-added activities.

💡Lean Manufacturing

Lean manufacturing is a production practice aimed at minimizing waste within a manufacturing system without sacrificing productivity. The script introduces the 'eight wastes of lean manufacturing' as a significant area of non-value-added activities, emphasizing the importance of identifying and eliminating waste to improve efficiency.

💡Downtime

Downtime, represented by the acronym in the script, stands for the various forms of waste in manufacturing, including defects, overproduction, waiting, non-utilized talent, transport, inventory, motion, and excess processing. These elements are non-value-added activities that should be minimized to increase the efficiency of a business.

💡Defects

Defects refer to products or services that are not acceptable to the user or the end customer. In the context of the video, defects are a type of waste in lean manufacturing that represent non-value-added activities. The script emphasizes the importance of reducing defects to improve the quality and value of the final product.

💡Overproduction

Overproduction is the act of producing more than what is needed or desired by the end customer. It is considered wasteful as it ties up resources that could be better used elsewhere. The script uses overproduction as an example of a non-value-added activity that contributes to downtime.

💡Waiting

Waiting is identified in the script as a form of waste where time is lost due to waiting for the next action in the process. It is a non-value-added activity that can lead to inefficiencies and delays in production or service delivery.

💡Non-Utilized Talent

Non-utilized talent refers to the underuse of an organization's human resources. In the video, it is mentioned as a type of waste where the full potential of employees is not leveraged, representing a missed opportunity for value creation.

💡Inventory

Inventory in the context of the video refers to the stock of raw materials, work in process, or finished goods. Excessive inventory is considered a form of waste in lean manufacturing as it ties up capital and can lead to obsolescence, making it a non-value-added activity.

💡Motion

Motion is the unnecessary movement of people within a process. The script identifies motion as a type of waste that does not add value to the product or service but consumes time and resources, thus representing a non-value-added activity.

💡Excess Processing

Excess processing is adding more steps to a process than are required, which does not add value to the final product or service. The script uses this as an example of unnecessary complexity that can be eliminated to streamline operations and reduce waste.

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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