Lean system: value added (VA) vs non Value Added (NVA) - ERADICATING WASTE (TIMWOOD)

Every generation needs a revolution - an entrepreneurial revolution

Not all activities are created equal.  Thus we have to make choices and decisions.  Some decisions are more important than others.   Others are just activities.  Thus we put on the top of our lists activities that create value and wealth.

Say in replacing brake pads of a car:    What are the activities involved:

        Activities                                       VA                        Non VA              Time spent

1,  Bring car to garage                                                          /                        5 minutes

2.  Fill up paper works                                                          /                       5  minutes

3.  Endorsement of car to mechanic                                      /                       1 minutes

4.  Mechanic checks car/paper works                                   /                        5 minutes

5.  Mechanic jacks up car                                                      /                        2 minutes

6.  Mechanic removes tires/brake pads       /                                                   10 minutes

7.  Mechanic orders new brake pads           /                                                     2 minutes

8.  Mechanic installs brake pads                  /                                                    2 minutes    

9.  Mechanic reinstalls wheels                                                  /                        2 mechanics

10.  Mechanics lowers jack                                                        /                       2 minutes   

                                          Total                 14                          22                      36

If the total time in the garage of 36 minutes.  only 14 minutes were value added.  In many jobs, there 

are many tasks that non value added.  Some are regulatory though like paper works.  Some tasks are cause of outright waste.  Like TIMWOOD

                      T                -     TRANSPORTATION    (to and fro warehouse, DC, storage bins)

                      I                 -      INVENTORY  (too much, just in time is better, lean stocks)

                      M                -    MOTION   (wasted motion, unnecessary, maarte)

                      W                      WASTE   (of time, maerials, motion, talking, bad workmanship)

                       O                      OVER PRODUCTION (it is better for some factories to stop producing

                                                so as not to waste labor, materials, time and money

                      O                      OVERCONTROL   -  too many cooks spoil the broth.  Too many

                                               sign offs, controller, inspection

                      D                      DELAY   - in payment, waiting for signatures, arrival of materials

                                               solution   D I N (Do it now) Sitting on a problem.  Delaying action  

The goals are:

     1.  Reduce delays

     2.  Reduce waste.  Reduction of waste creates value and wealth

     3.  Make VA robust:   invest in machines and automation  Make it faster and easier.  E. g. make

          it easier to install brakes.  Gather all the tools near the workplace.  Avoid distraction in

          VA tasks

     4.  Lessen parts and steps in VA

     5.  Employ engineers and supervisors to study the much better way.             

Cost Reduction - The Cost of Doing nothing

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 30, 2016

Today marks the death of national hero.  What could mean the death of companies?   High costs and expenses.  Remember that the basic formula for business is

           Sales
          -Cost
          = Gross Profit

Thus you try your best to pour resources and key activities into sales while at the same time
 Reducing your op ex, cap ex and other expenditures.

And yet none could be worse than expenses for doing nothing.

1.  In lean system, in the acronym for waste (MUDA) TIMWOOD, several of these refer to not doing anything:

        I -  nventories -  machinery raw mat, finished goods that are lying idle in the warehouse consume a lot of space and cost of money

        W aiting  for someone to finish the job, for someone to sign check payments, sign PO

        D elay  like waiting can consume a lot of time (which is an expensive resource.  In US you pay this by the hour.  That is why in Japan, they have JIT (Kanban system) of material usage and the rapid change over of tools in production.  They reduced this from weeks to single digit number of minutes. Delay in the production line costs money

 2. Shipping companies are aware of this   That is why ships: especially the large ones:

   1. Use container to speed up loading and unloading.  They have loading and unloading plan to speed up operations, thus, last in first out in loading containers for containers to be offloaded in the next port of calls. Thus a large PANAMAX container ship must load unload in major ports like HK or Singapore in 24 hours or less.  The cost of doing nothing involve the huge depreciation of the ship (plus the interest expense on its financing), the huge labor costs of the crew, fees from the cost of port call excluding demurrage, berthing fees which accumulate on a daily basis;

  2. Thus for the next port of call, its pays that custom duties are processed before the ship actual docking at the port.  Many customs provide this advanced payment system

Thus we have to improve our own operations to counter the cost of doing nothing:

1.  POs that are left unsigned for the past six months.  The POs concern:

     repairs of equipment
     materials needed for a new business

2.  Projects like road development being unattended to by Engineers.  Some crucial steps are not being attended to.  In the meantime, although we have funds for the project, for which we pay P300,000 a quarter (P1,200,000 a year) our Engineer does not care and must be spanked or banged in the head.  Equally responsible are accounting staff and other members of general management

3.  Accomplishments of people who went on overtime must be scrutinized. Currently they are not.

Accomplishments of every one must be demanded.  Work plan and work achievements are needed. What with very expensive starting salary.  Otherwise, what we taunt as our people are our assets, means that if they are dead weight, they bring down the company with their high cost of doing
nothing

A lot of education is needed at this area of financial management operations (lean system)