Up to 80% of everything we do to make a product or provide a service doesn’t add any value to the customer!

Improve Your Business with Lean Thinking – Waste

In last month’s newsletter we introduced the concept of Lean Thinking as a way of improving your business and stated over coming months we would be developing and sharing some of the concepts and tools used in this philosophy.

Typically an organisation calculates the price of a product or service using the following formula:

Selling Price = Cost of Product or Service + Profit

However, the Selling Price is determined by your Customer, if your price is too high then you will not get a sale. Your customer is only willing to pay for what they perceive as value.  They compare your prices to those of your competitors and make their decision based on their value set; it could be convenience, quality, reputation, reliability, service etc.The Profit is determined by the business owner as they are the ones taking all the risk of providing resources: people and materials, equipment, buildings etc.

This leaves the Cost of Product or Service as the only area where improvement can be made in order to increase the business’s competitiveness.  This is done by focusing on the elimination of waste in all its various forms and the creation of value for the customer faster.

Waste is not just what is in the rubbish bin, but includes everything organisations do to make their product or service from procuring materials through to receiving payment from the customer.  An easy way to get your team to remember and focus on waste is ask the question: “Have you seen TIM WOODStoday?”  TIM WOODS is an acronym which helps us remember all the different forms of waste.

T – Transport	Transportation of any component or product (includes files etc.) through to delivery to the customer
I – Inventory	Excessive work in progress and finished goods including office supplies etc
M – Motion	Any movement of people and paper or electronic exchanges which does not add value

W – Waiting	Waiting for anything, work, material, people, information, signatures etc
O – Overproduction	Making more stock than is necessary, producing reports which aren’t used, ineffective meetings
O – Over Processing	Putting more work and effort into the work than is required
D – Defects	Defective products or materials, errors made during any part of the product or service
S – Skills	Underutilisation of people, unbalanced workloads

If you have not seen TIM WOODS today then you’re not looking, as up to 80% of everything we do to make a product or provide a service doesn’t add any value to the customer!

If you would like any assistance trying to find TIM WOODS in your business contact Workplace Partners as our Business Advisors are experts at finding him.

Get in touch today to find out more.

For further information or assistance call us on 1300 116 400 or email [email protected].

Article by Grant Winter