Business Center

Value Add

The Tool and Why It’s Valuable

Value in a Lean system can only be defined by the customer. Any step that changes the form or function of a product or service is done right the first time, and the customer is (or would be) willing to pay for is value added. Otherwise, it is non-value added.

Non-value add (NVA) activities consume time, funding, and/or space, but do not contribute to creating value. These activities reduce the overall ability to meet customer needs. Some non-value add activities include approvals, rework, and inspection. Some tasks are required by others in the operation or to comply with regulations, but not desired by the customer. These tasks can be labeled “business or regulatory non-value-add.” The aim of a Lean system is to eliminate or reduce non-value add activities.

How to Apply It

  1. Analyze each step in the process, asking these 3 questions:
    • Is the customer willing to pay for or use their time (e.g. waiting in line) for the activity?
    • Does this step transform the product or service in terms of form or function?
    • Is this task done right the first time?
  2. If you cannot answer yes to each of the 3 questions, then it is likely that the activity is non-value-added.
  3. Take action to eliminate any non-value add activities, rationalize and automate any business or regulatory non-value add activities, and innovate to link existing value add activities.
Pearls and Pitfalls
  • Helping others understand what customers want and need (value) is critical for the development of an efficient, effective process.
  • Employees doing the work do not define value defines value.
  • Understanding that customer expectations change only the customer - what delights today is a necessity or no longer wanted next year. Therefore, continuous improvement is a perpetual process.

Key Tips

  • Improvement is attained by the elimination of any non-value add activities and by reducing, rationalizing, and automating non-valued add activities that are required for the business or required by law.
  • Internal customers are important partners in refining a process, but they do not dictate what is value-added for an external facing process.

Exceptions:

  • If you are using Simple SOLVE, and only fixing a specific part of the process where an internal customer is the end-user, then he/she determines the value.
  • If you are working on a strictly internal facing process (e.g. travel requests) then the internal customer determines the value.

Examples of Value Add and Non-Value Add

Activity Type
Definition
Examples
Improvement Approach

Value Add(VA)

G
Customer wants to pay for it (time or $), and Changes the product or service, and Done right the first time.
  • Issue license
  • Process tax return
Link to Improve Flow / Innovate

Non-Value Add(NVA) / Waste

R
Activities which consume time and/or space, but don’t contribute to creating value
  • Approvals
  • Rework
  • Inspection
Eliminate the Wasteful Activity

Business or Regulatory Non-Value Add (B-NVA, R-NVA)

Y

B-NVA: Required to run the business

R-NVA: Required by law or regulation

  • Reports
  • Some approvals
Reduce, Rationalize, or Automate