Business Management Articles / Manufacturing
HOW TO FIND HIDDEN WASTES
Rene T. Domingo (email comments to firstname.lastname@example.org)
Profitability does not imply absence of wastes.
Your company could be making money and losing
money at the same time. The danger is that
you could be making more than you lose, thus
hiding the problem and opportunity to earn
much much more. If you are hitting or exceeding
your profit targets, self-congratulation and
complacency sets in. Chances are, nobody in
management will suspect or investigate any
wasteful operations and decisions made in
the prior year.
Wasteful operations are not sustainable in
the long run. High sales, market share, and
industry leadership will be eroded eventually
by wastes that remain unchecked. The most
immediate effect of wastes will be on cost.
Higher wastes mean higher unit production
costs or service costs. Waste become integrated
into material and labor costs. Overhead will
similarly rise. Inevitably, products which
do not have wasteful processes will get their
share of overhead wastes allocated from wasteful
product lines. By applying the cost-plus formula,
higher costs means higher prices. Market share
will shrink as a result of the exodus of your
price-sensitive customers. Profits will shrink
as a result of higher costs and lower market
The other effect of wastes will be on quality
and delivery. Wasteful operations have a tendency
to hide and aggravate quality problems - defects,
scrap, and rework. Wasteful processes add
to lead times like manufacturing cycle times
and order processing times. The result will
be delayed deliveries and long waiting times.
Poor quality and poor delivery due to wastes
will lead to lower markets shares, lost customers,
and lower profits. The bottom line of all
wastes is that there will be no bottom, just
Waste or muda in Japanese, can be defined
as anything unnecessary used or done in the
process of coming out with any output. This
output can be a product, service, or information
that is required or ordered by a user or customer.
Waste can be a non-value adding input, process,
or product feature. Value analysis and value
engineering (VA/VE) addresses the first and
third items. VA/VE aims to eliminate unnecessary
product or design features, and inputs or
raw materials. Process wastes or unnecessary
activities or steps are examined and removed
by the industrial engineer's work simplification
technique and by the business process reengineering
and hidden wastes
There are two major categories of waste that
are useful in waste management:
1. obvious waste
companies, known for lean and mean manufacturing
systems, have discovered that the second type,
hidden waste or waste we do not see, is much
bigger than the obvious wastes. Most obvious
wastes are trivial and easily eliminated.
The problem is the hidden wastes that are
hard to spot and therefore hard to stop. The
lesson is that companies should devote their
efforts and resources in uncovering and identifying
hidden wastes, rather than waste their time
firefighting obvious wastes. Hidden wastes
are not necessarily unseen. They are visible,
but not normally recognized as wastes. There
are four types of hidden wastes.
1. waste from overproduction
waste from unnecessary processes
waste from unnecessary transport
waste from unnecessary waiting
When defective products pile up, we easily
recognize these as wastes or obvious wastes
and raise hell. When good products pile up,
we call these inventory and continue with
our work routine as if nothing unusual has
happened. Ironically, unnecessary inventory
is one of the biggest hidden wastes in any
company, and probably more wasteful than defects.
We see inventory, but we are indifferent to
it and recognize it as current assets, something
of value. Unless inventory can be sold or
used right away, waste is incurred continuously
in terms of holding costs - interest, space,
insurance, manpower- and obsolescence or spoilage
cost. These huge costs are carried in the
books as "normal" operating expenses
as if they are necessary in running the business.
Just-in-time manufacturing systems and the
fastfood business have debunked this assumption.
Customers can be served and satisfied while
carrying a minimum if not zero inventory.
Do not be deceived by neatly arranged stocks
in shelves, and warehouses. These may be wastes
lurking for years and eating your profits
away. Inventory wastes can be in the form
of excessive purchases of raw materials and
office supplies, and overproduction of work-in-process
and finished goods. There are also wastes
in issuing your employees too many pencils,
paper, punchers and other supplies that they
do not need or cannot use right away.
from unnecessary processes
When an employee comes to work and sits down
the whole day behind his desk doing nothing,
we easily recognize this situation as waste,
and quickly reprimand him. But the next day,
he comes to work, picks up a pen and starts
writing something, anything, the whole day.
We call this event "work". We leave
the employee alone and may even tap him at
the back saying "Keep up the good work".
We don't bother to ask what he is writing,
why, and for whom. We confuse motion with
work. If there are no users or readers of
his written output, then all his efforts are
wasted. There are more waste in people doing
something, then in people who are not doing
anything. In the first example, the daydreaming
employee is just wasting time; in the second,
the busy employee wastes both time and paper.
Rarely do employees daydream the whole day;
most employees do something, or "move"
the whole day. Underneath this busyness lies
a vast potential of hidden wastes to uncover.
Unnecessary processes, operations, steps,
activities abound in the hustle and bustle
of a typical working day in both the office
and factory. We feel good if we see people
busy doing something, whether or not it adds
value to the product or service. We confuse
efficiency and hard work with effectiveness.
We see employees and managers afflicted with
AIDS or As If Doing Something, and this is
from unnecessary transport
When an employee walks back and forth the
corridor or takes the elevator up and down
the whole day, we call this situation loitering,
and reprimand him right away. Of course, rarely
do we see this obvious waste. When the same
employee walks back and forth, this time carrying
an envelope (possibly empty), we call this
activity "work" or "transport"
of document. We don't bother to ask why he's
transporting it. After analysis and work flow
simplification, maybe there is no need to
transport the document at all, or transport
to a closer location would be sufficient.
In much the same way, if we see an empty company
truck or vehicle plying its route back and
forth, we right away call the transport waste.
If the vehicle does the same thing, this time
loaded with goods or people, we are easily
deceived and call the process "necessary
transport". We transport people, goods,
materials, supply, documents, checks back
and forth everyday. We see this activity as
productive work because, again, people look
busy. We do not see the hidden wastes in unnecessary
transport of something. In most cases, we
could not fault the carriers - employees,
drivers, haulers, messengers. They are just
complying with the wasteful systems and procedures
designed by management.
from unnecessary waiting
The most subtle or most hidden waste is unnecessary
waiting. We waste time everyday waiting for
something or someone before we could start
an activity. We wait for delayed raw materials
or supplies to start production. We wait for
latecomers to start a meeting. We wait for
delayed transport (cars, elevators, carts)
before we can move things or ourselves. We
wait for maintenance to fix broken equipment
before we could resume our work. In the situations
above, we obviously waste time and our time
is wasted by somebody else. What is difficult
to spot is the hidden type of unnecessary
If an employee comes to work and stands up
in the middle of the office or factory the
whole day staring into the distance, we immediately
call his attention and ask him why the hell
he is doing what he doing. This obvious waste
of course very rarely happens. But when the
same employee stands up the whole day, doing
nothing, in front of an equipment (machinery,
fax, printer, copiers, etc.) we consider this
"staring" and "waiting"
activity "work". We are deceived
into thinking that he needed there to watch
the equipment, when in fact the equipment
can run by itself without his presence. In
many factories, we see workers "manning"
equipment when in fact they are just watching
and staring at them. Unnecessary waiting can
be minimized by making the equipment faster
and more reliable, or assigning employees
several equipment to handle.
Wastes come in many sizes - big and small,
and magnitudes - trivial and dramatic. They
come in many shapes and colors. Not all wastes
are black, ugly, and dirty. They are not always
in the wastebasket. Wastes can be bright and
pretty. Do not be deceived by appearances
and sizes. Let us look for the wastes that
we do not see - the hidden wastes. Before
we can stop wastes, we have to spot them first.
In fact, recognizing wastes is more difficult
and important than eliminating them. Many
managers find it most difficult to admit that
there are wastes in their respective departments.
Finding wastes is 80% of the solution. Failure
to eliminate uncovered wastes or tolerating
such is tantamount to dereliction of managerial
responsibility. Remember that in waste, there