Waste Assessment

Vision of every Organization

Consistent Growth Brand Leadership

Balanced Score Card

A methodology helping the management to translate its vision & business strategy into action

It has four different perspectives: Financial perspective Customer perspective Process perspective Learning & Innovation perspective

Balanced Scorecard

ProcessPerspective

Learning & Innovation Perspective

Financial Perspective

CustomerPerspective

Barriers to accomplish the Vision

Constraints or bottlenecks in the business processes are the barriers to higher profit and higher customer satisfaction

The effects of the constraints appear in the form of waste of materials, machines, energy, time, efforts etc.

How to improve Business performance?

Continual Improvement in business processes through:

Detection of waste Elimination of waste

Objectives of Waste Assessment?

To identify the quantum of current Waste in the entire value stream of the company

To assess the cost of Waste

To determine the reduction potential of Waste

Use the above information to Prioritize the improvement action needed to

eliminate the waste Develop Improvement Action Plan

Business Process

A Business process transforms inputs into out puts. Any transformation process or business activity either;

creates Value or

generates Waste (Muda)

Value

Waste

What is Value?

Value : A capability provided to a customer at the right time at an appropriate price, as defined in each case by the customer.

Value is created by the producer. From customer’s point of view, this is why producer exists.

What is Waste (Muda)?

Waste is defined as any human activity which absorbs resources but creates no value;

Mistakes which require rectification Production of items no one wants so that inventories pile up Processing steps which are actually not needed Movement of employees and transport of goods from one place to

another without any purpose Group of people in downstream activity waiting because an

upstream activity has not delivered in time Goods and services which does not meet the needs of customer

Types of Waste

Waste of Over production Waste of Unnecessary

Inventory Waste of Defects Waste of Unnecessary

Motions Waste of Inappropriate

Processing Waste of Waiting Waste of Transporting

Waste of Untapped Human Potential

Waste of Inappropriate Systems Waste of Energy & Water Waste of Material Service & Office Waste Waste of Customer time Waste of Defecting Customers

1. Waste of Overproduction

Produced to compensate loss in production due to absenteeism, equipment break down, higher rejection rate, inconsistency in operation

Instead of eliminating the root cause companies go for overproduction

2. Waste of Inventory

More than the required stock of finished product, work-in process and raw materials do not add any value

They add cost of operation by blocking more money, increased requirement of transportation, storage and handling

In many situations extra inventory gets scrapped due to limited shelf life or becomes obsolete due to design changes

3. Waste of Defects

Defects or rejects interrupt production and require expensive rework

Rejects have to be scrapped Defective products may

damage the tools and jigs installed on machines

4. Waste of Motion

Any motion of a persons body not directly related to adding value is non productive

Any action such as lifting or carrying a heavy object, should be avoided

5. Waste of Processing

Sometimes inadequate technology or design leads to muda in processing

Unproductive striking of the the press, de-burring of the product, machine idling cause muda

6. Waste of Waiting

Muda of waiting occurs when the hands of the operator are idle

Operator’s work is put on hold because of line imbalances, lack of parts, or machine downtime or operator monitoring the machine when machine is adding value to the job

7. Waste of Transport

Transport is an essential part of operations, but moving materials and products add no value

Any process physically distant from main line adds muda of transport

Use of conveyors, fork lifts, trucks and other transport system has to be minimized

8.Waste of Untapped Human Potential

The purpose of efficient system is “to create thinking people”

Human potential just does not need to set free. It requires clear communication as to what is needed (both from management and to management), it requires commitment and support, it requires a culture of trust and mutual respect.

Example : Not using creative brain power of employees, not listening, thinking that only managers have idea worth pursuing

9. Waste of Inappropriate system

Unnecessary record keeping, checking, reconciling is pure waste

It is not the operation that consumes time and money; it is the paperwork or systems

Remove waste before automation

10. Waste of Energy & Water

Energy here refers to sources of power: electricity, gas, oil, coal and so on

Energy & water are not only the significant sources of cost , but there is moral and social responsibility to preserve them for future generations

11. Waste of Materials

Conservation of materials is direct saving of cost.

To reduce the wastage of materials a Life Cycle Cost approach is needed.

Material conservation has to be incorporated during design, manufacturing, consumer usage and beyond consumer use in recovery and manufacturing

12. Service & Office Waste

All manufacturers are linked with service operations. Over production, for instance can relate to excess photocopying, wasted food and excess meetings. Inappropriate processing may relate to excess e-mails, copies in triplicate, many presentations

13. Waste of Customer Time

Where a customer is forced to wait in a queue or to wait for value adding services. This is primarily a scheduling issue. More of this waste occurs where a customer has to provide the same information several times

Waiting causes customer inconvenience or customer dissatisfaction

14. Waste of Defecting Customers

A waste that is causing concern to service managers and marketing professionals is the loss of existing customers

“It costs five times more to acquire a new customer as it does to retain the existing one”

Economic Value of Waste

Since every business activity absorbs resources and every resource has a cost

Every waste has a cost, and that is direct loss to the company

Crisis & Renewal(Harvard Business School Press)

David Hurst, author of the famous book Crisis & Renewal makes a strong case that firms need to “burn the forest” in parts of their organization in order to keep the whole organization from going up in smoke at later point

Creative solutions (identification & elimination of waste) to specific operations in crisis may be the best way to create “fire breaks” and eventually renew the whole forest.

Identify Waste in a phased manner

Waste of Over production Waste of Unnecessary

Inventory Waste of Defects Waste of Unnecessary

Motions Waste of Inappropriate

Processing Waste of Waiting Waste of Transporting

Waste of Untapped Human Potential

Waste of Inappropriate Systems Waste of Energy & Water Waste of Material Service & Office Waste Waste of Customer time Waste of Defecting Customers

Where the waste is generated?

Waste is generated in

the Value Stream

What is Value Stream?

Value stream is the set of all the specific actions required to bring a specific product through the three critical management tasks of any business:

Problem Solving task Information Management task Physical Transformation task

1.Problem Solving Task

Running from concept through detailed design and engineering to production launch

Design flow across the value stream

2. Information Management Task

Running from order taking through detailed scheduling to delivery

Information flow across the value stream

3. Physical Transformation Task

Proceeding from raw materials to a finished product in the hands of customer

Production flow across the value stream

Core Business Processes of Value Stream

Materials Management Pickling Cold Rolling Annealing & Temper Rolling Galvanizing Color Coating Packaging & Delivery

Value Stream Analysis Search for Waste

1. Map every step of the process “door-to-door” level 2. Identify every activity of the process at input, process and output

stages (Value added and Non-value added)3. Detect waste generated in each activity of the process (of all items) at

input, transformation, and output stages4. Quantify the effect of each non-value added activity or waste in

measurable units (per MT of output, %, etc.)

5. Classify the waste in three categories Those which create No value but are Unavoidable due to their

natural characteristics or beyond control of management Those which create no value but Currently inevitable due to

situational/ technological limitations (Type:1 Waste/Muda)

Value Stream Analysis Search for Waste

Those actions do not create any value and Can be Eliminated by improving the operating practices or processes (Type -2 Waste/Muda)

6. Evaluate the Cost of each waste (per MT of out put)

7. Assess the reduction potential of waste based on company standard/international bench marks (Consult Specialists)

9. Compile the quantity and cost of all types of wastes and their reduction potential (quantity & cost on annual basis)

10. Rank the the waste in their descending value order for prioritizing the waste elimination plan.

Business Process

Material Inputs• Raw materials• Consumables

• Utilities

Human Efforts • Physical

• Intellectual • Emotional

Time

Facilities• Equipment• Technology

• Infrastructure• Systems

Products

Bye-products

Defectives

Information

TransformationActivities

Information•Production &

•Delivery Schedules

Wastes appear in the following forms

Defective materials Wasted materials Excess consumption Unwanted inventory Demurrage Downtime of machines Unutilized capacity Productivity Loss Waiting time Yield loss

Re-work Defective products/scrap Downgraded products Unrecovered bye- products Returned Material Warranty Claims Complaints Cancelled orders Excess transportation cost Delayed delivery ………………………….

Classification of Waste?

Unavoidable waste: Which are not adding any value, but can not be avoided due to natural characteristics or beyond management control. Example: a definite % of Fe loss in slag, security, side trimming of HR coils etc.

Type-1 Waste: Not adding any value but are unavoidable in the current situation. These can be eliminated by making radical change, improvement in technology,innovation in system etc.

Type-2 Waste: Not adding any value and can be easily avoidable. These wastes can be eliminated by making improvements in processes and operational practices using techniques like Kaizen, Six Sigma, CRM, TPM, SCM etc.

1. Process Mapping

Materials

Utilities

Information

Consumables

OutputProcess

Customer

2. Identification of Waste

ProcessStage

Process Elements Items Waste in form of…

Input MaterialsConsumablesUtilitiesInformation

Process EquipmentFacilitiesSystemsPeople

Output ProductsDefectivesBye-productsInformationCustomer Satsfn.

Process

Process Inputs

Category Items Waste in form of……..Raw Materials HR coil Defective material, Handling

wastage, Storage wastage, Excessinventory, Out of stock,

Consumables Acid,Inhibitor

Wastage, Excess consumption,Handling waste, Excess Inventory

Utilities Power,Water,Steam,

Excess consumption, wastage, poorQuality, untimely delivery,unavailability

Information Production& DeliverySchedules

Wrong schedules, Incompleteinformation, Incorrect Information,Not delivered in time

Transformation ActivityCategory Items Waste in form of

Equipment Breakdown, Unavailability, Downtime,Excessive maintenance,

Technology

SupportingFacilities

Process capability

Material handling,Transport, Maint.

Process Incapability, Inconsistency,Inadequate automation, Lowproductivity, Poor quality, higher consn.

Inadequate, Not in time, Not to qualitystandards

Systems CommunicationQMS,Prodn.Plng,Information mgmt.

Incorrect & incomplete information,Noncompliance of standard operatingpractices, Ineffectiveness

Operation Standardization,Operating discipline,people involvement

Yield loss, Low productivity, Unskilledmanpower, Indifferent manpower,Human errors

Human Inputs to Process

Category Items Waste in form of

Physical efforts & Time (skills)

MeetingsPresence atworkplace

Man-hours spent without anyeffective decision, Absenteeism,Mistakes, Incapability

Emotion forParticipation

MotivationEnthusiasmInitiative,Integrity

Negative attitude, Indifference,Not following the companyrules, Indiscipline, Negligence

Creativity(knowledge)

Improvementactions,Learning’s

Unutilized wisdom, Lack ofinitiative for improvements, Noquest for learning

Outputs of Process

Category Items Waste in form ofProducts Finished

productPoor quality, Down graded, Defectives,Excess Inventory, Handling wastage

Scrap Yield loss, Rejects, scrapped material,

Bye-products Unrecovered bye products, untreatedpollutants

Information

CustomerSatisfaction

Test reports,shippingdocuments,Invoice

Feedback

Wrong schedules, Incomplete information,Incorrect Information, Not delivered in time

Returned material, warranty claims, wrongdispatch, Complaints, cancelled orders

3. Quantification of Waste Process__________________________________

Waste in form of

Location /Source

Description Quantity / unitof output

4. Valuation of Waste Process__________________________________

Waste in form of

Quantity /MT ofOutput

UnitCost

Cost /MTOutput

AnnualCostImpact

Classifn.of WasteType:1/2

5. Reduction Potential of Waste Process__________________________________

Waste in form of

Currentrate / MTof Output

IndustryBenchmark

TargetWasteReduction

ExpectedReductionin Cost

6. Ranking of Waste Process__________________________________

Rank Waste in form of

AnnualValue

Value Type-1

ValueType-2

Tools

Outcome of the Business Process Waste Analysis a comprehensive document giving information:

What are the Waste? How much is the Waste? Where the waste is

generated? How much it Costs?

Which are the high waste generating processes?

Which are the highly unutilized facilities?

What are the most sensitive/critical parameters to be monitored.?

Which are the high value adding activities?

……………………………..

What Next ?after Business Process Waste Analysis

Develop an action plan to Convert the Waste into Value

PROFIT

What Next after BPWA?

Outcome of Business Process Waste Analysis

A comprehensive document giving information:

Which are the high waste generating processes?

Which are the highly unutilized facilities?

What are the most sensitive/critical parameters to be monitored.?

Which are the high value adding activities?

……………………………..

• What are the Waste?• How much is the Waste?• Where the waste is generated?• How much it Costs?

Waste is an indication of Problem

Waste is not problem It is symptom of the

problem To eliminate the waste -

the root cause of problem is to be eliminated by making appropriate improvements

How to eliminate the waste?

To attain higher profit:

Improve the Physical Transformation processes & Information Management Systems

Improve the Technology

Transform the Corporate Culture

Integrate the above three and measure through your Balanced Score Card

PROFIT

Improvement in Processes& Information Management System

Make improvements project by project

Use the well proven improvement tools like:, TPM, Six sigma, CRM, SCM, Gembakaizen etc.

Select the tools based on the requirement of projects and effectiveness felt by users

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Production Costs

Unit Price

Profits