Efficiency counts Featured

8:00pm EDT September 25, 2007

Is your business efficient — or is it wasteful? One of the biggest problems in businesses today can be narrowed down to waste — of time, human capital and resources.

“Business waste is anything that does not add value to a product or service,” says Louie Hendon, program manager at Corporate College based in Cleveland. It can be obvious waste, such as unproductive meetings, excessive paperwork or wasteful use of energy consumption. Waste can also be hidden, such as poor design of business processes, excess overtime and labor.

Smart Business spoke with Hendon about the principles of waste in business, and what business owners can do to become more efficient.

Where do you see waste in businesses today?

There are seven types of waste that happen frequently in businesses — in both service and manufacturing industries. The waste centers around three areas: people, quantity and quality.

People. There are three types of waste that commonly occur with people in an organization. The first is processing waste, which is doing something that doesn’t add value to the customer. The second is motion waste, which is unnecessary activity that can cause a waste of time and the potential for injury. The third is waiting waste, any excess time it takes, for example, to process an order.

Quantity. There are three areas under this category. The first is making too much product — for example, a customer orders 500 pieces but your process only allows making 1,000. The second is inventory waste, such as product sitting idly on shelves. The third is moving waste, such as the number of times paper or items need to be moved from one area to another.

Quality. The last type of waste is fixing defects: taking the wrong order, fixing a damaged product, etc.

These types of waste are the basic principles of lean, which is a systematic approach to continually improving wasteful processes originally developed for the automobile manufacturing industry — companies such as Ford and Toyota. (You can learn more about these principles at the Lean Enterprise Institute’s Web site www.lean.org.)

Could you give an example of how lean would work in a service industry?

Let’s say a bank wants to reduce the amount of cash on hand at its branches to free up money to invest. If you take the principles of lean and closely examine the daily process of ordering money at the bank, you might find that every branch orders money differently. Some order it every day, some order it all at once. This is a wasteful process. By using the principles of lean, you can put some controls into place to deal with the waste — such as only allowing reorders of money when a branch reaches a minimum.

Another example in a service industry is the inefficient movement of paperwork. Is it really necessary to require employees to get five or six signatures on a contract before it is processed? Lean is a common-sense approach that helps companies take a hard look at what is efficient and what is wasteful.

Six Sigma is also an excellent system. (Readers can learn more about Six Sigma by visiting www.isixsigma.com). There are many consulting firms, national organizations and colleges that provide training in these techniques.

Who in an organization would best benefit from learning about these waste-reducing techniques?

Everyone can benefit: From top executives to shop floor workers to salespeople. That said, one of the key ideas regarding quality systems is that it has to come from the top down, and upper-level management needs to be spearheading the organization to adopt these methodologies and make them part of the overall business strategies.

How does an organization begin to identify waste in all these areas and become efficient?

It is difficult for an organization to go completely lean overnight. Usually going lean is done in stages, since you will need buy-in from other areas of the organization to make it successful. For example, one team or department can quickly go through the process of lean and identify the wasteful areas and brainstorm how to get rid of the waste. They can then go in and implement these ideas to see if they work. It could be as simple as moving raw materials closer — or moving all the printers to one location — or it could be more complex. The whole point of lean is to identify the waste, find a solution and then test that solution. Ultimately, this kind of process will affect the entire culture of the organization in a positive way.

LOUIE HENDON is the program manager for Lean Six Sigma at Corporate College, www.corporatecollege.com. Based in Cleveland, Corporate College offers employers affordable, cutting-edge and custom-designed training programs to enhance future work force development, job growth and job retention in Northeast Ohio. Reach Hendon at Louie.Hendon@tri-c.edu or (216) 987-2919.