The 7 Wastes

We are living through testing times

Our governments are being tested as they try to enact programs to instill confidence in the
economy and their constituents. Companies are being tested as they are forced to react to
dramatic challenges in the marketplace that have seemingly materialized overnight and
without warning. Individuals are being tested in the security of themselves and their
families.

Although not a perfect gauge for the state of the economy, the Dow Jones industrial
average has dropped from a high of just over 14,000 in the beginning of October 2007 to a
low of just under 8,400 in October of 2008. In fact, the Dow was at just over 13,000 in the
middle of May. How can one rationally explain such a precipitous fall in such a short time?
Likewise, how can one rationally explain the rise of oil from $90 a barrel trend in February of
this year, to a peak of $145 a barrel (a 62% increase) in July and then the crash to $65 a
barrel (a 65% decrease) in October? How can such a closely watched and managed
commodity, such as oil, have all of this movement within less than 9 months?

I believe it is a prayer from St. Francis of Assisi; Lord, give me the courage to change that
which I can, the strength to endure that which I cannot, and the wisdom to know the
difference.

We cannot impact the stock-markets or the credit markets. We cannot affect the price of oil
or other commodities. And we cannot change the economy on the macro level.

However, we can make a difference in economics on the micro-level within our homes and
within our businesses. Whether personally or in the companies for whom we work, we have
the ability to make a difference to increase productivity, eliminate waste, and have an
indelible and positive effect on the bottom-line. But we have to want it and be willing to do
something about it and, most importantly, we cannot be paralyzed by it.

The elimination of waste is one of the most effective and immediate ways to increase the
profitability of any business or family. Every action in every process has a cost, but not every
action brings a value and those actions that do not add value only add waste.

Contained in the practice of Lean is the discussion of the seven wastes. Originally
developed byToyotas Chief Engineer, Taiichi Ohno, waste (or muda in Japanese) was
classified into seven categories. The ability to identify the nature of waste and to take action
towards its elimination eventually formed the core of the Toyota Production System
(TPS) and Lean Manufacturing.

The seven wastes as defined by Taiichi Ohno are:

1.Overproduction

Defined in its simplest form, overproduction is to make something before it is required. Not
only does overproduction tie-up much needed cash in illiquid inventory, it actually inhibits
the flow of materials and is a key contributor to degradation in quality and productivity.

The simple solution to overproduction is to stop producing unless there is an order. Instead,
schedule and produce only what can be immediately sold (with a concentrated effort on
improving machine change-over and reducing set-up times). But this requires considerable
courage because overproduction hides many sins in the production process.

2. Waiting

If you look at your production process, whenever you see idle inventory, you have waste. A
great many Value Stream Maps (VSM) reveal that an excess of 95% of the production
process in traditional batch and queue manufacturing will be spent waiting for the next
action. In the Theory of Constraints (TOC), it is argued that an hour lost in a bottleneck is an
hour lost to the entire output capability of the business and can never be recovered. Think
about it, time is the one thing that cannot be recouped. Once spent, it is gone forever.

3. Transporting

Moving inventory to and fro certainly adds cost to an item but it adds NO value. I have
been in many companies where the material is acted-upon, moved to a wait-state, moved
again to be acted-upon, again to a wait-state, etc
Production assets should be engineered and deployed so that the production process is as
near-continuous as possible. But what about outside the four-walls of the enterprise
the supply chain? I read where the same hunk of metal will cross between Detroit, Michigan
and Windsor, Canada almost a dozen times before it is consumed in a car. How can this not
possibly be wasteful?

4. Inappropriate Processing
Make sure the proper tools are used for the appropriate tasks. Automation does not have to
be expensive. And just because you have the machine that goes ping, does not mean it
should be used in every situation. Oftentimes economical automation (often older
generation equipment), when combined with immaculate maintenance and deployed under
the proper circumstances will yield far greater economic results and at the same time make
the company more nimble.

5. Unnecessary Inventory

When you both overproduce and wait, the result is Work-in-Process (WIP). As stated earlier,
excess inventory and WIP hide many sins on the production floor but increase lead-times,
take-up real-estate, and decrease quality. To improve operating performance, excess
inventory and WIP must be reduced and a continuous process flow between work-centers
must be engineered.

The result of achieving such an environment will give you a competitive advantage in
reducing lead-times to shipment, improving overall customer service, the slashing of
inventories and costs of production, and an increase in quality.

6. Unnecessary / Excess Motion

This waste is the most human related as it deals mostly with ergonomics. The types of bodily
movement, the level of repetition and their intensity, and the time it takes, all have an
impact on productivity. From injuries that are the result of lifting objects which are too
heavy, to repetitive stress disorder, and everything in between all result in waste.

7. Defects

Defects have a most obvious and direct impact on the bottom-line. Whether a defect results
in the product requiring rework or having to be scrapped outright, the costs are
tremendous. When all of the less tangible costs such as inspecting, scheduling and lost
capacity are also factored into the equation, a focus on defect elimination will yield
incredible results.

I have worked in many companies that the difference between being profitable and not can
be a reduction of a mere 10% in defects and the associated costs.

How good can you be? Performance Improvement Potential

Cost to produce down 20-50%
Rework and Scrap down 25-90%
Lead time decreased by 50-90%
Overall cycle time decreased by 60%+
Inventory down 50%
Cost of quality reduced by 60%+
Floor space reduced by 30-70%
Purchasing costs down 5-10% every year
On-time performance TO PROMISE 99%+
On-time performance TO REQUEST 90%+

In times like now, we cannot sit idly by waiting for a bailout. We have the opportunity to
determine our own destiny. All we need is the will.

By Joseph Paris

Paris is the Founder and Chairman of the XONITEK Group of

Companies; an international management consultancy firm
specializing in all disciplines related to Operational
Excellence, the continuous and deliberate improvement of
company performance AND the circumstances of those who
work there to pursue Operational Excellence by Design
and not by coincidence.

He is also the Founder of the Operational Excellence Society,

with hundreds of members and several Chapters located
around the world, as well as the Owner of the Operational Excellence Group on Linked-In,
with over 25,000 members.

For more information on Paris, please check his Linked-In Profile at:
http://de.linkedin.com/in/josephparis

Also find me at; Operational Excellence Society, XONITEK, or my Blog.

I am also the author of State Of Readiness Operational Excellence as Precursor to

becoming a High-Performance Organization