The Lean Six Sigma value-added is a crucial part of lean thinking. It can be defined in many different ways depending on the context. Lean thinking is about defining the value proposition of the product or service to the customer. Value can only be relevant at a certain price and at a particular time. The customer’s need, or voice, is what it represents.
The value of what you produce is determined by your customer. Customers will always determine the value of your product. This article will explain what value-added work (VA) looks like and provide some examples of other common definitions.
Organizations have a problem when it comes to defining value. They tend to focus on what they can deliver rather than what customers want. This is the fallacy of “we know their needs better than they do”. The result can be more efficient for Muda if they try to improve the delivery or design process. Womack and Jones frequently cite the use of hubs in the airline industry as an example of this (Lean Thinking. Jones & Womack 1996, Simon & Schuster). Although the hubs are designed to meet the airline’s needs, they do not offer what the customer wants: an easy journey from point A to point b.
There are three types of activities.
- Value-Added: A customer can pay for an activity if it has any benefit; it alters the form, fit or function of a product, service, or product; it converts input into output; it’s not waste.
- Non-value added (NVA), also known as Type II NVA. These activities are not necessary and provide no benefit to internal or external customers. They can be eliminated immediately.
- Sometimes called Type I NVA (Business Value Added) These activities are not of any benefit to customers as defined above, but they are necessary due to current process limitations. Inspections, management approvals and most quality assurance activities are all common examples. Technical support activities are also common.
Value Stream Analysis is key to categorizing each activity and determining if it creates or is was waste.
There are four major derivations of VA. The first is customer value-added work. This is work that is significant to your customer and is worth the price you are willing to accept.
The second is BVA (business value-added) work. This is work that you need to keep your business running but it is transparent to your customers, who likely won’t be interested in or care about whether or not your doing it. Your HR, legal, and accounting departments are essential to running a business. However, your customer doesn’t really care about these functions and wouldn’t pay you for them. This type of work is often called business non-value added (BNVA), if it does not directly benefit your customer.