A process analysis of value-added versus non-value added activities is a method of dissecting process steps for value content, but from the the customer's perspective.Value add analysis allows for identification of hidden costs and wasting of resources.
The first step is to construct a map of your "as-is" or current process, then look at each step and apply the following three questions;
- Would the customer be willing to pay to have this step performed?
- Was the step completed correctly the first time? Any step which starts with review, re-check or re-work is a dead give-away to wasted resources.
- Was there a physical change? If no tangible, physical change was manifested by performing a step, there is a good chance that it might be redundant or unneeded, and basically adds no real value to the overall process.
Your next step is to place each step into three basic categories:
- Value-added activities: These are essential steps that are necessary to deliver the product or service to the customer.
- Required, but not value-added: These may be business processes that are not especially meaningful to the customer, but which are essential to conducting business. An example could be documentation activities required for accreditation or compliance.
- Non-value added: These are the activities that are also known as waste. Performing these steps adds no value from the customer perspective and also does not serve some vital business function or requirement.
Doing this sort of analysis can be very eye-opening. It is not uncommon for the following types of waste to be revealed:
- Steps that have been "done this way" for long periods, but which actually are there for no specific reason.
- Steps which were linked to standards, procedures or regulations that no longer exist, or ones that no one can really locate anymore.
- Extra or redundant steps that add absolutely no value, and which can be eliminated immediately without any effects.