WASTE IS NOT desirable, especially in construction. To be more competitive we need to drive waste out of our operations. Most of us recognize waste in the form of defects and scrap. But this is just the tip of the iceberg!
In Lean Thinking, value and waste are opposites. "Value" is what the customer is actually willing to pay for the product or service. Economists define value as the ratio of the usefulness of a product or service to its costs. This includes the product's functions and features and it relates to the whole product, service or both. Costs include the price paid and also the cost in time and hassle in obtaining and using the product or service. Many customers, in today's fast-paced world, place greater value on convenience and ease of use than on the dollar price.
The seven types of waste are:
1. Defects This is a product or service that contains errors, requires rework or does not function as designed. For construction, this waste includes the wrong installation, defects in fabrication, punch lists and many kinds of change orders. Misunderstanding the customer's requirements or expectations can cause defects. Not meeting the required code is waste. Defects often come from not having and using standard processes.
2. Over-production of goods We create waste when we produce more than the customer needs or is needed at that time. In construction this happens when we fabricate material too early so we can keep the shop workers busy. It happens when we stockpile material either in the warehouse or at the jobsite. While we always need to get new work, even estimating jobs that are not won is a waste. If we print more blueprints or make more copies of a report than needed, it is over-production and waste.
3. Transportation This is the waste of moving materials or goods. Though necessary, any movement of a product does not usually add value. Unless one is able to fabricate while transporting the product, nothing is changed during the movement to add value. Sometimes the product is damaged while being transported, resulting in more waste.
In construction, this waste happens when we move the material around the shop; when we load it on the truck or trailer; when we haul it to the job; when we unload it; and when we move the material from the lay-down area to the installation point. This type of waste is increased by a poor site or yard layout, by the lack of an organized system for storing or staging the material, by poor logistics planning, by receiving material too early or by any combination of these factors.
4. Waiting When people, equipment or product wait for other processes or workers to finish an up-stream activity, it is waste. Construction is full of examples such as when a crew waits for instructions or materials, when a fabrication machine waits for material to be cut and even when payroll waits for the always-late timesheets. Waiting is often caused by poor communication between the field, support functions or suppliers. It is also caused when equipment needed to complete the upstream task breaks down. Poor coordination between the trades will also cause this waste.
5. Over-processing This waste happens when there are unnecessary or extra steps in the process or if there are any steps that do not create value. The more steps in any process the more chances for mistakes in processing. In construction this waste includes over-engineering, needing multiple signatures on a requisition, multiple handling of timesheets, duplicate entry on forms or in data-entry fields, and getting double and triple estimates from suppliers. Over-processing is caused by a lack of standard methods or processes, by poor communication and poor planning. Even when a standard process exists, this waste often occurs as the process slowly changes over time and it is not updated.
6. Motion Employees walking around do not add value. These "treasure hunts" occur when workers must go looking for tools, material or information. In the office, when we are looking for files, reports, reference books, drawings, contracts or vendor catalogues, it is waste. Poor planning and organization often cause this waste. It happens because we don't have a designated place for everything.
7. Inventory Any material or parts not currently being used by the customer is waste. In construction, this includes uncut sheet metal and pipe, work in process and finished fabrications. Some contractors claim that they have no inventory because they job cost it. While this may work for the IRS, if the material is not yet installed and being used by the customer, it is waste. This waste includes spare parts, unused tools, consumables, forms and copies, employee stashes and personal stockpiles.
While some inventory may be needed to ensure that the work is performed in a timely manner, it is still waste to be attacked and reduced as much as possible. Inventory is costly but much of the costs are hidden. Inventory ties up working capital and space; it must be controlled and continually monitored; it must be annually audited; and it often leads to additional handling.
Contractors traditionally build inventory because of unreliable support from their shop, suppliers or the delivery function. Sometimes contractors build inventory to save money through bulk buys. The money saved in bulk buys is usually eaten up by the hidden, but real, costs of holding, managing and moving inventory. Inventory can also come from having free shop time, which is then used to fabricate ahead of schedule.
There are opportunities to reduce waste in every company and organization. Next month we will discuss how to reduce waste.
Dennis Sowards, now an industry consultant, led the development of the High-Performing Contractor Assessment model for the Sheet Metal and Air Conditioning Contractors' National Association. His company is Quality Support Services. He can be reached at [email protected] or at 602/740-7271.