Types of Waste - Lean Management Tutorial

Welcome to the second chapter of the Lean Management tutorial (part of the Lean Management Certification Training).

We will talk in detail about “Types of Waste” in this lesson.

In the next section, we will start with the agenda of what we are going to cover in this section and then study in detail about each waste.

Agenda

Here is the brief agenda, we will

  • Understand the main types of waste

  • Understand the Additional type of waste

  • Conclude the lesson with examples and discussion

In the next section, we will go through the main types of waste.

The Main Ones

During the development of the Toyota Production System, Taiichi Ohno and Dr. Shigeo Shingo identified seven distinct forms of waste.

The main seven types of waste are:

  • Waste due to transportation

  • Excess inventory

  • Motion for parts/people

  • Somebody waiting for another process to complete

  • Over-production

  • Unnecessary over-processing of the product

  • Defects

In this sub-section, we will cover in detail each type of waste.

We will start with waste due to transportation in the next section.

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Transportation

We can define waste due to Transportation as any movement that does not add value. It can be a movement of material, supplies, or resources.

Now that you know about this waste, the next question that probably will come to your mind is How do you find this waste?

There are some characteristics to look for in this.

If you have extra carts, forklifts, or dollies, you will be spending effort moving these from one place to another. Having multiple storage locations might appear to be a good idea.

But, the material may move from receiving location to a storage location, from one storage location to another, or from a storage location to the point of use, before it is finally consumed in production. If there is a complex inventory management system, you may find it difficult to locate materials and might cause unnecessary transportation.

Any extra space in the production facility can cause transportation waste as that additional space will add to the time taken to move from one place to another. And finally, an odd layout of the facility can cause significant transportation waste compared to things that are placed close to each other.

Whenever possible, materials should be received in the appropriate quantities and kept directly to the point of use to reduce transportation waste.

In IT sector, since there is no physical movement of raw material or parts, there is no waste. But, when you have people travel from one location to another, it would be considered transportation waste compared to if the same person could get the work done remotely.

Let us take an example of the Aviation sector, for an airline, if some of the spare parts for Boeing aircraft model 747 are stored in a storage facility, and the dependent parts for the same aircraft model are stored in another facility.

For some of the maintenance needs, the transportation would be needed for both the facilities. In this example, the waste could have been minimized if all the spare parts related to an aircraft model are kept in one single storage location. 

Also, the location of the storage facility could be determined by looking at the air traffic for the particular aircraft model and the airline’s hub, etc.  

In the next section, we will cover inventory related waste.

Inventory

The definition of Inventory type of waste is Any supply more than process requirements necessary to produce goods or services just-in-time.  

Here are some of the characteristics you can look for to identify inventory related waste. 

If you have excess materials between the processes, it will create a delay in processing and might interfere with the process flow.  

The excess inventory will require additional resources for handling, counting, tracking, reporting, and management, thus resulting in additional cost. On top of this, there will be an additional investment for this excess inventory which will result in cash being tied up and impact the overall cash flow in the business.  

With excess inventory lying around, you would need additional storage space or existing storage space used up, which potentially could have been freed up for some other activities. Some of the excess stock might become unusable after a certain period if it is perishable, or gets expired, or gets damaged during storage. 

In some cases, if stored for a longer duration, it might even get obsolete and hence not usable. In the picture, one can see that somebody has stocked up lots of carpets, but the sales team is not selling them as standard.  

Hence, the inventory will take storage space, cost and might become obsolete.

Sometimes, depending on the physical layout of storage, stacking of the items, and the way inventory is retrieved, it might lead to LIFO (Last In First Out) instead of FIFO (First In First Out) retrieval of inventory. This will cause some of the items that are stored early in the cycle not get accessed for a long period.  

In the next section, we will cover motion related waste.

Motion

The definition of Motion type of waste is Any movement of people, resources, or machines which do not contribute or add value to the product or service.  

For any production system or service, some of the processes would need human interaction.  

To get things done the person operating the machine need to make movements. Unnecessary human motion in the ergonomics of bending, reaching, twisting, lifting, handling, requiring two hands instead of one not only wastes one's effort but may cause health and safety issues.  

In the system, some of the machines or processes may not have an adequate level of visual controls to show the status, progress, or alerts. In cases of lack of visual controls, somebody will have to keep checking on the status of the machines and will cause unnecessary motion.  

On the machine floor, the tools needed to carry out any operations need to be available at the location of need. In cases the tools are not organized or kept in order, the operator might have to spend time and effort looking for tools.  

If materials needed for any process are kept too far apart, it would also lead to waste due to the motion. Unnecessary machine motion in the process might cause additional maintenance, energy cost, and machine wear, leading to quality problems. This is another form of motion waste. These are the characteristics to identify waste due to the motion.  

In the next section, we will cover waste caused due to waiting.

Waiting

Waste related to waiting can be defined as a long period of inactivity for people, machine, or material waiting for each other.

Unnecessary wait time may be caused by improper scheduling, causing people, tools, and materials not to appear in the right place at the right time. People might be waiting for machine or resources to be available; this time is wasted waiting, could have been better utilized somewhere else.  

Poor material planning and inter-dependent variables not been fully synchronized will cause unnecessary wait times between processes. Late deliveries or delays in any process can also cause wait time.  

Attempting to reduce the number of setups leads to large production batches and mass production; large batch sizes may cause some work centers to be overburdened while others are simultaneously starved and waiting for work.  

Because the traditional work ethic requires each worker to focus on productivity, these idle work centers continue working, producing excess inventory. This leads to unbalanced operations and causes waste related to waiting and have effects on other types of waste as well. These characteristics help identify and tackle waste caused due to waiting.  

Let us next discuss waste caused due to over-production.

Over Production

The overproduction type of waste is the type of waste created when production is faster or there is an excess of quantity than the internal or external customer needs.

Over-production might happen for various reasons in different production systems.  

One of the reasons is the reward system encouraging people who would have a very high level of buffers, just-in-case if something goes wrong. People tend to reward the Just-in-case mindset, i.e., (pronounced as that is) people would like to produce more to have some buffer/extra inventory just-in-case something does not get done as per the plan.  

If the system is processing large lot size batches, the production output might be much higher than needed by the next process; this would cause unnecessary waste. Improper demand planning would usually create unbalanced material flow and cause overproduction.

Producing earlier than necessary creates an excess inventory and consumes material and capacity that may be required by higher-priority work. The over-production will cause inventory stockpiles for in-process and for finished products. This would further need extra storage racks, storage space, and cost.  

Over-production leads to consumption of too many resources, people, machines, inventory, storage space, energy, and cash tied up in these assets. In addition to these direct costs, over-production creates congestion on the shop floor and masks inefficiencies in other processes. We have defined over-production and ways to identify waste due to over-production. 

In the next section, we will cover the over-Processing type of waste.

Over Processing

The definition of Over-Production type of waste is Effort which adds NO value to a product or service. Enhancements that are not valued by customers would be considered waste.  

Over-processing waste may be caused by using wrong or poorly maintained tools, improper work instructions, and inadequate training.  

Processing waste may also be due to inappropriate product design caused by a lack of communication between design and production engineering. It may also be caused by failure to understand customer needs, doing more work than the customer requires or is willing to pay for.  

Lack of clear customer specifications or inputs concerning requirements will lead to different interpretation of the same requirement and result into over-processing. Once you have the product, it is human tendency to refine it, and it is common to fall into the trap of relentless refining.  

In the banking sector, probably about ten years ago, when somebody needed to withdraw the money from their bank account, it used to go through several redundant approvals. With ATMs and Teller, the number of approvals has reduced significantly and now the banks can do better, cheaper, and faster.  

It might come to you as a surprise, extra copies or excess information can also lead to an over-processing type of waste. Going through the excess information will lead to waste.  

In the next section, we will cover waste that is caused due to defects in process or system.

Defect

A defect can be defined as the rework needed to rectify the defect in product or service to fulfill customer requirements. Anytime there are quality related problems there is additional effort and cost needed to inspect, test, rework on the defects and rejects. This is called “Cost of Poor Quality.”  

This cost of poor quality is the cost that results from the quality problem due to faulty product design, misunderstanding of requirements or mistakes. Some of the defects are caused due to insufficient training, inconsistent work methods, and instructions. Some of the defects are caused due to insufficient training, inconsistent work methods, and instructions, or improper tooling.  

Variation is a significant challenge to maintain the quality of any product or service. If your production line is integrating two parts, any variation in these parts might cause defects in the in-process or final product. Some of these defects would cause scrap and impact the business with lower profits.  

In IT sector, time and effort spent in testing the software, fixing bugs, and retesting would be considered defects. We have now covered seven types of lean waste.  

In the next sub-section, I will cover some additional types of waste that people have identified.

Other Types of Waste

 

So far we talked about seven main types of waste. There are couple more types of waste people have identified; they are:

  • Underutilized Skills

  • Waste due to wrong use of automation and wrong use of metrics.

We will start by talking about the waste due to underutilized skills.

Underutilized Skills

The definition of waste due to underutilized skills is Any skill that is not utilized to its full potential to add value to the customer. The people are hired based on their skills set, and their compensation is dependent on what they can deliver.  

The skills that are not utilized would be considered waste. If somebody is overqualified or have excess skills than needed to perform the job effectively, it would be considered waste, as he/she is not using his/her skills to the fullest. People might have the necessary skills and are paid for that.  

But, for various reasons, if they are underperforming and not utilizing their skills, it would cause waste to the organization. If an employee’s skills are underutilized, the morale of the employees also gets impacted.  

This means if an employee is capable of doing more but has not been allowed to or his job limits this, then the employee is demotivated and will so cause waste.  

In the next section, we will cover how wrong use of automation can cause waste.

Wrong Use of Automation

Waste due to wrong use of automation can be defined as any automation that is taking a longer than manual work or creating additional work. When thinking of automation, it is a normal tendency for people to go overboard and automate more than needed.  

Over automation will need additional effort, time, and cost to automate and also might take a longer time to complete the process. While over automation is bad, under automation is also not good. One might automate a process partially without thinking through all the workflows. It might leave out some of the manual steps as is. This might slow down the overall process, as the speed or flow will depend on the slowest part of the process.  

The time needed to automate a process should be considered along with the time it is going to save. Calculate return on investments before starting the automation. If an activity is taking 3 minutes and it is going to take one month to get it automated, and the activity would take around 2 minutes post-automation, one will have to consider if it is worth automating it.  

While automation is good for the most part, one has to be careful and check if automation is creating additional work for people and the net gain is positive or negative. The defect rate and reject rates need to be taken into consideration for automation and post automation.  

If the defect rate increases after automation, it would result in rework and hence more waste.

Let us understand this with the help of examples.

In the IT sector, a team might be performing automated testing. In this case, the things to check for will be:

  • How much time it is going to take to automate

  • What percentage of it will be automated

  • How reliable the results would be, etc.

In case the manual task used to take 10 minutes and is done four times in a year and automation takes 15 days to build, one might consider not going for automation.  

Let us take an example from manufacturing; if automation is causing an increase in the defect rates, it will increase the waste. Thorough cause analysis can be done to understand the same and fix the automation. By identifying these characteristics, we can handle waste due to wrong use of automation.  

In the next section, we will cover how wrong use of metrics can cause waste.

Wrong Use of Metrics

Any metrics that is incorrectly measured, incorrectly used, misinterpreted or misused constitutes waste due to the wrong use of metrics.

The key to success for any metrics is a right measurement at the right place. 

The first thing to understand is why the measurement is done, its purpose, and use. Ensure results and outcome is measured rather than activity.  

For example, in the aviation sector, there is a website for online booking of air tickets. If we only measure some users visiting, it will not be helpful. The key measurement will be how many users visiting the site were able to get the work done (booking, check-in, etc.).  

In case the measurement is not accurate, it would be a waste of time and effort in collecting and reporting metrics. Sometimes metrics usage can go in a wrong direction. People need to understand the purpose and spirit of the measurements and metrics.  

Metrics are used to help understand how the process and product are doing and help identify opportunities for improvements. In case people start using metrics for some other purpose, it will impact the overall metrics program.  

An example will be managed using metrics for people performance evaluation.  

If that happens, people will start reporting incorrect data related to their productivity, defects, rework, etc., and it will defeat the purpose of metrics and would be classified as waste.  

Metrics misinterpretation is the common pitfall. Some of the metrics might be misinterpreted or misaligned as target or goals. This would cause people to optimize work on things that are measured and reported instead of doing the right things.

For example, in a production environment, if the metrics are reporting some items produced and is not capturing the defects percentage chances are, people will try to produce more to achieve the targets and goals instead of doing a quality job thereby causing waste.  

Another example in the service sector will be if the metrics reported is the average duration of the support calls. The support professional may try and close the calls as early as possible and might give less attention to ensuring customer issue resolution and satisfaction.

The numbers might show that the support person was able to close a lot of calls but, will impact on the customer satisfaction – this would cause large waste. 

This covers our lesson on waste, in the next section, we will summarize what we have learned so far.

Summary

Here is what we have covered in this lesson. We talked about

  • The main seven types of waste

  • How to identify customer value

  • How to identify waste

  • what actions can be taken to reduce or eliminate them

  • Other types of waste that people have identified 

Remember any waste is an additional cost incurred which customer will not like to pay for. If we eliminate all the waste, the cost will reduce, improve quality, and improve the competitive position of the company. I hope you had a great time learning about waste, identifying, and eliminating them.

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Conclusion

Next, in the third chapter, we will learn about Tools in lean.

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