Waste is anything that does not add value to a product or service.
The acronym TIM WOODS has been used as a helpful way of identifying waste:
- Transport - minimise movement of materials so processes are near each other
- Inventory (stock) - aim for 'just-in-time' production
- Motion - improve workplace ergonomics and reduce unnecessary motion of business operations
- Waiting - aim for smooth flow to eliminate waiting periods
- Overproduction - aim to make what the customer orders, just in time
- Overprocessing - use resources of appropriate capacity to achieve required quality
- Defects - aim for zero defects
- Skills (unused) - not using the full potential of staff by wasting their knowledge, experience and ideas
The following are also considered as waste for Lean methods:
- inappropriate systems
- energy and water
- service and office wastes
- customer time
- losing customers
It is almost impossible to eliminate all waste, but by setting a target of zero waste you can cut it to a minimum. The first step is to look at the entire business process. You should involve your staff and draw on their expertise. You might find it helpful to start with departmental meetings, but it is essential to avoid a process of allocating blame. The objective is to identify the causes of problems and solve them.
- Look at your existing processes and identify areas where waste is a problem. You could compare materials and component purchases with output, look at waste disposal reports, talk to relevant managers or operators, or simply walk around your business.
- Get additional information from customers or suppliers if necessary. Specialist waste disposal contractors may be able to provide further input.
Calculate the cost of waste, which you can base on straightforward replacement costs or on opportunity cost (through lost potential sales). The costing should be based on detailed, informed and accurate criteria, and should include:
- replacement of raw materials
- scrap products
- delays while faults are identified and remedied
- labour costs for making replacement components and products
- staff costs in dealing with customer complaints, including possible discounts on further sales
- lost business from customers who go elsewhere, or from potential customers who hear of your quality problems
You might find that it doesn't make financial sense to resolve minor waste problems - eg if one product in 1,000 is faulty, it might not be worth the cost of improving it to one in 10,000. Bear in mind, however, that faulty products affect your image with customers, and this can have cost implications.