Identifying the difference between Value Add and Non Value Add activities

Within continuous improvement we can look at business activities in terms of how value adding they are. There is a hierarchy within this, starting with Customer Value Add, as Figure 1 demonstrates.

CVA – Customer Value Add

This is the highest level of value add in a process, it is any process or activity that is essential in order to deliver the product or service to the customer’s needs or requirements. Questions you can ask to determine if the process or activity is Customer Value Add include:

  1. Would you be unable to deliver the customer’s requirements without it?
  2. If a customer knew you were performing this process or activity would they be prepared to pay for it?
  3. Would the customer complain if the process or activity were stopped?

If the answer is yes to these questions, the process or activity is likely to be Customer Value Add.

BVA – Business Value Add

Where the customer is not concerned about whether you do a process or activity, we should then determine if it is essential from a business perspective. Some of the questions to ask are:

  1. Is it necessary in order to complete value add work?
  2. Is it necessary to reduce or mitigate financial risk?
  3. Is it a legal or regulatory requirement?
  4. Would internal stakeholders complain if the process or activity were stopped?

If the answer is yes to these questions, the process or activity is likely to be Business Value Add.

It is important not to accept these as permanent requirements. Except for some legal or regulatory processes, there may be opportunities to streamline or remove these through the regular application of continuous improvement.

NVA – Non-Value Add

Activities which do not add any value from a customer’s perspective and are not required by the business for financial, legal or other reasons are considered Non Value Add.

Ask yourself, if you were to stop the process or activity would ANYONE complain or even notice that you had done so? If the answer is no it is likely to be Non Value Add. These are wastes to be identified and removed from processes.

For those who read my Blog on types of waste, you may recall Tim Wood:

Type of Waste Example
Transportation Movement of items from one place to another
Inventory Excessive stock, items, information or paperwork waiting to be processed
Motion Excessive movement of people within a workspace or poor ergonomics
Waiting Delays between operations or waiting for parts, machines and people
Over processing Processing beyond the standard required by the customer – “Gold Plating”
Over production Producing more than the customer ordered or producing too early
Defects Reworks or failure to meet the customer specification

 

Summary

Determining whether processes or activities are Value Add is essential in order to build a robust commercial model, maximise efficiency and reduce operational overheads. For example:

  1. Customers are willing to pay for Customer Value Add
  2. Businesses absorb, but look to reduce or eradicate Business Value Add
  3. Non Value Add are systematically identified and removed.

If you would like to find out more, please contact us to see how we can help you to harness the benefits of continuous improvement and achieve

Growth Through Change.