What are the 7 wastes of Lean and are they relevant to small business?
In Lean business thinking, one of the key principles is the identification of waste in any process / system. There is an accepted framework for approaching this, with seven recognised ‘wastes’ of Lean, which can be used to categorise everything that doesn’t add value and indeed is harming your business.
Each waste is the root of every unprofitable or inefficient activity in your organisation. You may also see the Japanese term ‘muda’ to refer to waste. People will sometimes call them the 7 deadly wastes.
As with all concepts in Lean, they apply just as well to the small business as to the large multinational. The principles are universal applying to any system or process, focused absolutely on reducing any waste and ensuring maximum added value.
What are the 7 wastes of Lean?
Overproduction – making too much, products being created ahead of demand or too early. This can be a major problem in a small business which may lack space to store excess output, leading to wasted spend. Ultimately producing too much can lead to wasted goods that are left unsold, which carries a variety of unwanted costs and hinders your ability to reinvest.
Defects – A defective product (or service) can lead to reworking and rescheduling production, which in turn increases labour costs. Defects can lead to goods and services being delivered at a loss. They can also seriously harm your reputation, which is especially important for a small business. For example, a faulty batch of ale from your microbrewery startup may need to be recalled. It could even floor your business by making people ill. Even if it’s not as serious as this, reworking a defective batch of products can seriously hit your cashflow as you catch up.
Transportation – This is unnecessary movement of a product. Each time it’s moved you essentially suffer waste as you are not adding any value that the customer desires (unless, for instance, you have to move a product to a specialist facility for finishing). Every move is a cost and it also carries the risk of damage, delay and other problems. For example, with beer again, does it make sense for the entire bottling and packaging process to be carried out in one space where the ale is brewed in order to cut out transportation costs?
Waiting – Idle downstream resources because an upstream process has been delayed. For example, sales staff twiddling their thumbs (and being paid) because you have not been able to deliver enough product to market on time.
Inventory – Raw materials, work-in-progress or even finished goods that are sitting around not fulfilling current orders. It’s a capital expense that is not generating income. Inventory has a cost to hold – warehouses etc. It’s also a risk as it could deteriorate over time. Opportunity cost is also important – could the excess capital you spent have been better invested elsewhere, such as in marketing?
Motion – This refers to damage inflicted by the production process on what’s producing the goods – wear and tear on equipment, or even accidents to workers. Single event motion waste – like an accident rather than gradual wear and tear – can destroy a small business.
Processing – Finally, processing waste is one of the most common and easy to fix among small businesses. It refers to doing any work that is not required by the end customer – or does not add sufficient value to the customer as to warrant the time/cost on the activity. This can often be solved by good customer feedback surveys and market research to find out what it is your customers really value in your goods or services.
Think creatively about the things that your business does and within the activities that you carry out are you completely sure that all are needed and indeed ‘add value’ if you can confidently answer yes you may be as lean as you need to be. If however you are not sure, check down the 7 wastes of lean again and see if there is any waste in there!
Image by Obdan Published under Creative Commons