EIGHT(8) AREAS OF WASTE

Chapter 7

Prepared by: Czarina Jhen C. Sison

Introduction:
 An organization is the collection of structures, processes, and people working
collaboratively to pursue a mission and achieve business goals. While
organization aim to pursue their missions and goals by adhering to principles of
efficiency and effectiveness, many suffer various degrees of dysfunction during
day-today operations. These issues can result in the erosion of stakeholder value
up to the point insolvency, but internal auditors can support management
efforts and curtail these dynamics from taking hold by anticipating problems,
reviewing current dynamics, and making recommendations for improvement.
WHAT IS A WASTE?
 The Merriam-Webster dictionary defines waste as the:
- loss of something valuable that occurs because too much of it is being used or because it is
being used in a way that is not necessary or effective.
- an action or use that results in the unnecessary loss of something valuable.
- a situation in which something valuable is not being used or is being used in a way that is not
appropriate or effective.

 Waste is anything done or acquired that is not required to successfully complete an activity or
support a process. Waste manifests itself in many ways, often resulting in higher time
consumption or underutilized financial resources.

 The eight areas of waste model provides a simple methodology to identify actions and items
that reduce the value obtained from available resources. The model can be used as a diagnostic
tool, as one of the elements used during the development of audit programs.
All these three segments of the definition show that waste occur because more resources than
necessary are being used, or the resources are not being used in the most appropriate and effective
manner. This highlights the importance of:

 Proper Planning – it involves the structure of the operating area, the step-by-step activities that
will be performed to produce a product or deliver a service, the training of workers, setting
expectations for performance, and deploying appropriate tools and machines.

 Proper Execution – there are two key aspects to effective execution: performance monitoring,
which can be ongoing or periodic, and issue identification and remediation.
 EIGHT AREAS OF WSTE
1. OVERPRODUCTION
2. WAITING
3. TRANSPORTING
4. UNNECESSARY PAPERWORK OR PROCESSING
5. UNNECESSARY INVENTORY
6. EXCESS MOTION
7. DEFECTS
8. UNDERUTILIZED EMPLOYEES
 OVERPRODUCTION
 Overproduction refers to the production of a given output in excess of what is required.
Avoiding overproduction can be a challenge in manufacturing operations, where items are
often produced and stocked for sale later.
 Batch production is a common practice, often embraced as a best practice to take advantage of
economies of scale.
 When items are stored for later there is an added risk of theft and damage, and to address these
risks, organizations perform cycle counts and physical counts, build/rent and use climate-
controlled facilities, implement access controls, and in general build an infrastructure to address
overproduction, thus incurring costs that would be absent if production matched demand.
 WAITING

 Waiting sometimes occurs because there is a lack of coordination and timing between
complementary activities within an organization or a process. One part of the process produces
on a certain schedule, and the subsequent operation is either not ready for the input, cannot keep
pace with the number or timing of inputs, or needs additional information before proceeding.

 In all of these cases, the auditor can help the organization by examining what is happening,
where, why, and by whom, then recommending improvements to the process that will allow
production to occur more evenly.
 TRANSPORTING

 Transporting refers to the action moving an item from one location to another. In a
manufacturing environment, moving items from one location to another could be a requirement,
but in other instances, it is the result of poor physical layout. By going back and forth, the
operation incurs additional fuel and time costs, and it increases the likelihood of accidents and
damage to merchandise.

 Two ways to reduce transportation waste is to reduce batch sizes, focus on single-unit
processing, and design work cells so they are product oriented.
 UNNECESSARY PAPERWORK OR PROCESSING

 When we consider the use of paper in the workplace, we should aim for a work environment
where the use of paper is eliminated or greatly reduced. This can be done by converting
documents into digital form to save money by reducing the amount of paper and ink used,
increased productivity, save space, and make documentation and information sharing easier.

 Paper records are expensive to create, maintain and protect, but they are also difficult to sort,
analyze and inspect.
 UNNECESSARY INVENTORY

 Inventory consists of goods, parts and materials on hand as input for other production items or
sale to customers. Excess products, parts, materials and documentation not being processed
immediately, or ahead of requirements, constitute unnecessary inventory.

 Some helpful question include:

-Are we purchasing items just incase they are needed?
-Are items held as inventory for too long before they are actually used?
 EXCESS MOTION

 Processes are designed to achieve a stated purpose and to deliver a product or service.
Unfortunately, many processes are saturated with excess motion causing excessive costs, delays
and pain. In the long term, the impacts can be substantial.
 DEFECTS
 Quality is a key differentiator among competing organizations. Even in the non-profit sectors,
stakeholders expect transactions to be performed without defects. Customers expect flawless
products and services. Failure to do so has deleterious effect on the organization’s reputation
and has a negative impact on customers propensity to buy. In general, customers are demanding
higher quality while insisting on low prices.

 Defects are caused by errors, often associated with making a mistake or producing something
that has flaw in it.
 UNDERUTILIZED EMPLOYEES
 “Our employees are our greatest asset” is a common expression made by organizations. Yet
when the activities surrounding recruitment, selection, hiring, motivating, evaluating, training,
developing and promoting employees are put under the microscope, it becomes clearly evident
that in most organizations there is a huge gap between the statement and management’s actions.

 Employees are a resource, yet they are not always treated as a resource, or even an asset.
 SUMMARY

 Waste represents the erosion of stakeholder value and both managers and employees should
work diligently to minimize it.
 The eight areas of waste model provides a simple, concise, and practical tool to identify
common areas of waste, the practices cause them, and the items that when present show that
waste are being generated. This has financial implications, has time utilization implications, has
ecological implications, and has health and safety implication.
 To the extent that these issues can be identified, resolved and mechanisms put in place to
prevent their recurrence, stakeholders within, and outside the organization will enjoy the
benefits.