Performance Management to Focus on Value-Added Activities

Abstract

Added value can be defined as products, services, processes, and activities, which generate a certain value to the organization and enterprise. Value-added must be regarded from the customer viewpoint and is everything for which the customer is willing to pay for. It is important that value-added is recognized and perceived as value by the client. Many studies have shown that we only add value to a product for less than 5–15% of the time, and the rest of the time is wasted (Helmold & Terry, 2016a, b). The opposite is non-adding value or waste as shown in Fig. 13.1. Waste (Japanese: muda, 無駄) is anything which adds cost or time without adding any value or any activity which does not satisfy any of the above conditions of value-added or a non-value-adding activity in a process. The focus of operations management must therefore be on eliminating such activities like waiting time or rework (Ohno, 1990; Liker, 2004). Enterprise must target value-added process and eliminate or reduce waste, whereby waste can be visible (obvious) or invisible (hidden) as shown in Fig. 13.2.

Most Business Processes Are 90percent Waste and 10percent Value-Added Work.

Jeffrey Liker