Definitions, Tools & Techniques:
The purpose of Lean is to create value for customers.
The value of a product or service is a function of price and the customer's needs or expectations at a given time.
Products or services with a complicated design are of little value if they do not meet the customer's needs at a specific time.
The value of a product or service is not decided by the employees, suppliers or service provider. Instead, value is defined from the ultimate perspective of the customer.
Work that the customer is willing to pay for are considered to be value adding. Waste means adding cost but not adding value.
Value Adding Activities
Value adding activities transform raw materials and information into products or services which the customer is willing to pay for.
Examples include taking orders, ordering materials, laying foundations, creating codes, assembling parts and delivering of goods to customers.
Non-Value Adding Activities
Non-value adding activities consume time, space, or other resources but do not create value for customers. Customers are not willing to pay for these activities.
Examples are waiting, moving, storing, searching, counting, checking, inspecting, testing, reviewing and obtaining approvals. These activities are considered as waste and should be eliminated, combined, simplified or reduced.
By tackling waste from an end-to-end business process, not only can your company improve the value of its products and services, you can also achieve significant cost reduction, strengthen cash flow and emerge from an economic downturn with a stronger and more competitive profile.
"Price is what you pay. Value is what you get."