Is there a component of lean that’s more widely taught than The Eight Wastes? In any lean seminar or text, they are usually among the first concepts mentioned. (Sometimes, they are represented as The Seven Wastes. That one usually leaves out “Un-utilized Talent” or something similar.)
Here they are, just as a reminder:
- Excess Movement/Transportation
- Excess Inventory
- Excess Motion
- Unused/Underused Talent
We’ve never been particularly fond of the attention given to The Eight Wastes. It’s not that we think the idea of reducing waste isn’t important. It’s just that we have issues with a concept that prompts two modes of thought that are antithetical to a successful lean implementation:
1. Waste comes from everybody but me
2. Reducing Waste = Reducing Costs
Look Over There for Waste…Not Here
The idea of “waste” is a strong negative. Who wants to own up to waste in their own department or operations?
Overproduction? Talk to the salespeople who make the forecast.
Defects? Talk to the people in purchasing who buy the cheapest materials they can find.
Excess movement? Hey, we didn’t design this plant.
Waiting? Tell me about it! Talk to the operations upstream!
And so on.
Many might agree that waste in the organization is a serious problem, but far fewer are likely to agree that they are the source of that waste. Right away, then, the organization is involved in a debate about waste, its sources, and its solutions rather than how to improve processes throughout the organization.
Reducing Waste = Reducing Costs
The second issue we have with The Eight Wastes is that they tend to focus on cost reduction. Managers who see cost reduction as the most important objective of a lean initiative are likely to fail. Attention to Eight Wastes can accompany too strong a focus on reducing costs. Implementing a successful lean initiative requires a significant investment; if the organization is looking for quick cuts in costs, it won’t make those needed investments. Successful lean implementations have as their primary goal just one thing: the creation and delivery of customer value.
Instead of Eight Wastes…Focus on Creating Customer Value
Years ago, Ron worked for a maker of optical lenses. His company serviced smaller, local opticians and optical laboratories. The opticians and labs could not compete with “big-box” providers on price. Ron’s employer knew that the value it provided to its customers was personalized and trusted service, a quick turnaround time on orders and reasonable pricing, in that order.
Orders placed by East Coast customers before 4 p.m. were shipped in time for receipt by 10 a.m. the next morning. Those customers asked if they could place their orders later in the day (as late as 7 p.m.) and receive them even earlier the next day. Their techs started work at 7 a.m.; having them idle until 10 a.m. wasn’t efficient.
Many suppliers would consider this demand to be over and above what they should expect. The lens maker’s usual shippers, UPS and FedEx, couldn’t deliver on a demand like that because of their centralized sorting and redistribution systems.
Ron and his team challenged themselves to develop an order fulfillment process that could meet their customers’ demands without being overly expensive.
The team found a private courier service that operated along the eastern seaboard, covering 90% of the company’s East Coast clientele. This courier service would pick up as late as 8 p.m. Their vans would go to New Jersey, where they would sort orders and “cross-dock” in a parking lot! The courier could reach all of the lens makers; customers by 6 a.m. the following morning, well in time for their 7 a.m. starts.
Because of the added value, customers were happy to pay a premium to get their products delivered before the start of the shift. The lens makers’ customers saw their own revenues increase due to increased throughput and improved on time delivery to their patients. Their operating costs decreased as they utilized their employees more efficiently. It was a win for both the lens maker and its customers.
Some might ask, “It’s not clear that waste was removed. No costs were removed; in fact, costs may have increased if the new courier charges more for its service. How is this a good example of ‘lean’?” The premise of the question is wrong. The attention to “cost reduction” has managers thinking that lean is focused on getting rid of something that hurts the organization. The very nomenclature “lean” connotes “reducing” or “getting rid of.”
We think that lean has been misunderstood in this country. Lean is about improving the flow of value to the customer. Anything that gets more value to the customer or gets value to the customer more quickly and consistently is “lean” even if cost is not reduced. (As this example shows, when manufacturers work with their customers to identify what they value, they may be able to increase their pricing.)
Smart lean managers don’t ask how lean can help them reduce costs. They ask how lean can help them deliver more value to customers faster.
A Different View of The Eight Wastes
And that brings us back to the Eight Wastes. Once we see that delivering value to customers rather than cost cutting is the primary goal of any lean initiative, that list takes on new importance. Why are delays important? Because they disrupt the flow of value to customers. Why is excess inventory important? Because it disrupts the flow of value to customers. Why are defects and errors important? Well, you get the idea.
We’re willing to sing the same melody as those who claim the Eight Wastes are vital, but with very different lyrics: the Eight Wastes are key, not so much because they represent hidden costs to the company, but because they hinder the flow of value to the customer.
Rick once found himself being asked to explain lean to a group of steelworkers and engineers. He asked what lead time the operation quoted to customers who ordered steel from them. “Twelve weeks,” was the reply. “How often do you hit that quoted lead time?” Rick asked. Team members replied, “Almost never. Usually, we deliver in 16 to 24 weeks. It’s been as high as 32 weeks.”
Rick continued, asking, “What if you could improve your processes such that you could hit that quoted lead time consistently—even if you didn’t take a nickel out of your operating costs. Would it make a difference to the business?”
The team answered, “Sure. We’d gain market share.” Rick went on, “So, what if, through further process improvement, you could hit, say, an eight-week lead time consistently even if you didn’t take a nickel out of your operating costs?” One of the engineers on the team leaned back in his chair: “We’d control the market.” Gaining market share through better, more consistent delivery of value to the customer is the goal of lean, not cost reduction. Maybe it’s a little too strong to suggest that we forget the Eight Wastes all together. But let’s change the focus to addressing the Eight Barriers to Customer Value.
Ron Jacques is a 35-year veteran within the lean, manufacturing and consulting arenas. He is a Certified Lean Practitioner who has delivered hundreds of kaizen and transformational solutions to clients and companies within the Pharma, Medical Device, Automotive, Food/Beverage, Electronics, Military Defense, Personal Care, Consumer Durables and Capital Equipment industries.
Rick Bohan, principal, Chagrin River Consulting LLC, has more than 25 years of experience in designing and implementing performance improvement initiatives in a variety of industrial and service sectors. He is also co-author of People Make the Difference: Prescriptions and Profiles for High Performance.