6. Value-adding

There are a number of ways to define this term. We define it simply as “what customers are willing to pay for.” In any business, everyone needs to understand why the business exists and how it makes money. As we do the War on Waste, we ask a very simple question, “What does this company do to add value?” The answer to this simple question serves as the basis for the War on Waste.

So the question “what is waste” is intimately tied to the company’s value-added activity. There is an interesting thing that happens in the War on Waste. As employees start to identify waste, they are reflecting the effectiveness of a company’s ability to deliver value. All those things that occur in a company that keep the value from being added efficiently are wastes. During the War on Waste, we look at a company’s value-added proposition very closely. And the process for doing that is very thorough.

What we have found out is that very few employees of companies have any clue as to what the company does to add value. When we ask a typical employee of a machine shop, “What does this company do to add-value?” it is amazing that most of them have never thought about it. After a few minutes of discussion, someone notes that it is obvious that a machine shop makes money only one-way: when chips are being produced. But then some wise guy asks if they are adding value when they do assemblies for their customers. Of course, they do. Customers are paying a small fee for the assembly. And then one of the ladies in the quality department asks “what about our military customers that also pay to inspect their parts?” Best, Len Bertain