A key component to working more productively and to increasing profit is to eliminate waste in the production by identifying and eliminating it through continuous improvements. There is no one better to help identify and implement improvements than the people who do the work.
In theory, Lean thinking classifies wastes into 9 categories each of which is an added cost. When everyone in the company is focused on eliminating waste, the company will improve:
- Pricing to customers, meaning potentially higher sales volumes
- Wages it can afford to pay its people
- Profitability
- Its reputation, and the types and status of work it does
- Its culture – everyone is happier working in a successful company
Anytime your people are working on processes that do not directly add value for the customer, these processes are WASTE! Some waste cannot be avoided, but all waste must be reduced to its absolute minimum. Your customers do not pay your company, or get any value out of your crews emptying their truck at night. However, we must empty our trucks each night to prepare for tomorrow. To minimize waste, we must find the fastest, most efficient means of emptying our trucks so that we maximize our time working on billable work that adds value for our customers and revenue to our company.
For many projects, non-value-added activities (waste) accounts for over 80% of the activities in a job. Fueling the trucks, moving materials from supplier to work area, cleaning up the work area, getting tools and equipment are all examples of waste. These tasks are necessary, but the customer doesn’t get any value from them. The customer only cares about the end result – the service or product you’ve provided. Therefore – to run a superior, profitable company that exceeds its competition in sales, profits, and employee wages, everyone must understand how important minimizing time and costs are.
Although the concept of Lean originated in the manufacturing sector, it has tremendous application in the service industry. The “waste” is even more in services because of two reasons:
- In services, unlike manufacturing, there are no machines, only people, and their through the day efficiency cannot be measured and controlled as easily. The more variation – the greater the opportunity for waste.
- Because most of the waste is in terms of actions/activities of people, it is difficult to observe and classify.
By properly applying the concepts of Lean into the service sector, it’s possible to eliminate 50% or more of the cost in doing any activity.
Why? Because what Lean considers as waste, most services organizations take for granted as a necessary evil of the way they work. There is tremendous potential to improve service, profit and opportunity for every key member of the company
The following are the types of wastes as originally identified by the proponents of the Lean thinking.
Overproduction
Producing more then demanded, or getting something ready before it is needed. Example, over-excavating a patio area. If the specifications call for 6”, but you excavate to 12”, you incur extra costs in fill removal, excavation time, base material costs and base installation time.
Waiting
This is pure non value added time when resources are waiting to start their next process. Examples include waiting for instruction, waiting for the next load of mortar to be delivered to the backyard, or waiting in line for fuel.
Transportation
Transportation is a necessary waste. The customer doesn’t get added value from the truck delivering stone, they just want the stone installed. Minimize waste by minimizing the transportation of labor, equipment and materials to the jobsite. An example would be an equipment breakdown. The equipment needs to be transported to a repair facility, a replacement needs to be transported to the jobsite, then both need to be eventually transported back to their proper situations. While the equipment is being transported, crews are less productive, labor costs are rising, and job schedules are extending. Old or poorly maintained equipment can be a death trap for contractors.
Unnecessary / Extra Processing
Activities that are done but not needed and should not be done. Some simple examples are like inspection (when it should be done right the first time) or filling out paperwork that is never used.
Unnecessary Inventory
Although your accountant will treat inventory as an asset, it is important to realize that inventory is an operating cost. Inventory that spoils, goes obsolete, or is otherwise rendered unnecessary is costly. A good example is skids of bagged concrete mix inventoried at the yard, but uncared for. After getting rained on a few times, the concrete hardens and the material turns to waste. Plant material that is ordered to the yard, then dies is another common example.
Defects
These are wastes due to not doing it right the first time. Each time there is a problem with quality – or doing less than specifications, the following costs are incurred:
- The time and cost of doing the work improperly in the first place
- The time and cost of doing the rework
- The time and effort of dealing with the customer about the defects
- The cost of replacement materials, deliveries, etc.
- The cost of a potentially lost referral, or dissatisfied customer
- The frustration of employees who have to go back to repeat work
Unnecessary Motion
This is a result of poor design of workflow, poor layout, an unorganized work area, and inconsistent or undocumented work methods. Work areas should be setup in a manner that maximizes productivity and minimizes motion back and forth. An organized tool trailer minimizes motion – employees are not forced to walk around emptying shelves, racks or trays looking for parts which should be readily available.
Human Talent or Potential
Every company problem cannot rest on the shoulders of the owner. Every eye and mind in the company needs to be constantly seeking out better, more efficient ways of completing the work. When every employee is contributing the improvement of the company, the company will improve its financial results. When a company’s financial results improve, all the key employees have a greater opportunity to share in the rewards and improve their standard of living.
Resistance to Change – Saying ‘No’
Fear of change is a major contributor of waste. Companies hang on to old, inefficient processes – many never stop to even think of possibilities to work smarter. As an owner manager, it’s much safer and easier to reject change; to maintain ‘the way we’ve always done it’. Owners and employees must be encouraged to embrace every change as an opportunity to improve the company. When opportunities to improve emerge, owners and managers must be hungry to seize them.
