The 7 Wastes of Lean Enterprises

The main driver for a Lean Enterprise is to compress the time period from customer order to receiving payment from the customer. This is achieved by identifying and eliminating waste or non value added activities. In a conventional supply chain and in individual enterprise, there are potentially huge amounts of different wastes, famously known as The 7 Wastes. Recently an eighth waste, underutilized people, has been added to this category. Taiichi Ohno (developer of Toyota Production System) suggests that these account for up to 95% of all costs in non-Lean manufacturing environments.


These wastes are:

1. Overproduction – Producing items for which there are no customer demands. The Lean principle is to use a pull system, or producing products just as customers order them. Service organizations operate this way by their very nature. Manufacturing organizations, on the other hand, have historically operated by a Push System, building products to stock (per sales forecast), without firm customer orders. Anything produced beyond the customer demand (buffer or safety stocks, work-in-process inventories, etc.) ties up valuable labor and material resources and hence is a waste.


2. Waiting – Time during production (service) when no value is added to product (service). This includes waiting for material, information, equipment, tools, stock-outs, lot processing delays, equipment downtime, capacity bottlenecks, etc. The Lean principle is to use a just-in-time (JIT) system– not too soon, not too late.


3. Transportation – Unnecessary moving and handling of parts. This includes transporting work-in-process (WIP) long distances, trucking to and from an off-site storage facility. Lean demands that the material be shipped directly from the vendor to the location in the assembly line where it will be used. Material should be delivered to its point of use. The Lean term for this technique is called point-of-use-storage (POUS).


4. Over-Processing – Unnecessary processing or procedures than necessary to meet customer demand. Common examples deburring and multiple inspecting. Statistical process control techniques can be used to eliminate or minimize the amount of inspection required. Value Stream Mapping is another lean tool that can be used for this purpose also. This tool is frequently used to help identify non-valued-added steps in the process (for both manufacturers and service organizations).
   
5. Excess Inventory – Excess raw material, Work-In-Process (WIP), or finished goods. Inventory beyond that needed to meet customer demands negatively impacts cash flow and uses valuable floor space. Lean concepts like supermarket, and kanban can be used to tackle this waste.
   
6. Defects – Scrap, rework, replacement production, and inspection. Production defects and service errors waste resources in four ways. First, materials are consumed. Second, the labor used to produce the part (or provide the service) the first time cannot be recovered. Third, labor is required to rework the product (or redo the service). Fourth, labor is required to address any forthcoming customer complaints. Total Quality Management (TQM) is one of the lean tools that can be used to for reducing defects.


7. Excess Motion – Unnecessary motion of people or equipment that adds to value to product (service). This is caused by poor workflow, poor layout, housekeeping, and inconsistent or undocumented work methods. Value Stream Mapping (see above) is also used to identify this type of waste. Tools like 5S, cell design and Ergonomic workspace design can be used to eliminate this waste.


8. Underutilized People – Underutilization of mental, creative, and physical skills and abilities of employees of the organization. Some of the more common causes for this waste include – organizational culture, inadequate hiring practices, poor or non-existent training, and high employee turnover.