Sunday, October 2, 2011

What you have to do vs. what you want to do

By Angela Childs

Is value all in the eye of the beholder? The answer is no. At least not when it comes to what adds value in a business.

I was asked to be the speaker at a monthly meeting of the Fort Wayne chapter of Project Management Professionals. As I thought about the possible topics, I decided to talk about what I spend more and more time helping our clients with which is streamlining their business processes.

That phrase “streamlining business processes” is so overused that we don’t pay attention to it anymore. It has become sales speak but the concept is very real and critical in today’s business climate. For the presentation, I challenged the project managers to look at business processes the way they would look at manufacturing when implementing Lean.

With Lean, one of the areas of study is value-added vs. non value-added activities. Non value-added activities are classified as waste. The concept is this – value-added activities are those your customer wants, needs, and is willing to pay for. This is how your revenue is generated. Non value-added activities are those that don’t generate revenue. Things that fall into this category are handling, walking, filing, inspecting, waiting, packaging, searching, sorting, stacking, reading, etc.

This is a tricky concept. When I say to a client, “Walking an order over to production is not a value added activity”, I hear back “It is because that’s how the order starts. We can’t start work without a copy of the order.” Okay, true, but this is not the only option. I suggest that the “walking” is waste and can be eliminated. I also suggest that the walking is probably not the only waste going on here. I bet there are also copies being made, and that those copies being filed in multiple places by multiple people, that some of them are stapling on backup documents. I could go on, but you get the picture.

Non-value added activities are a huge opportunity for every business. Let’s look at it this way – there are three ways to become more profitable – find a way to charge higher prices despite the competition (Blue Ocean Strategy), create something no one else has (eliminate competition, for a while at least), or reduce costs. The first two are the most dramatic but they are also the hardest to do. The third one, reducing costs, we can and should do, every day.

With our clients, I encourage them to look at every area of their business that is not revenue generating. With HR, AP, Shipping/Receiving, Purchasing, etc., there are a lot of opportunities and most of the time, they find that they can not only reduce costs but they can free up valuable employees for other tasks.

I was listening to CNN shortly after I gave the presentation and they were talking about what we, human workers, excel at that can’t be automated. They were talking about critical thinking skills and how finding people that are good at wearing a lot of hats, good at inventing, then reinventing, then reinventing again are hard to find. These key people who can maximize profits and drive growth are hard to find because once a company finds one, they don’t want to let them go. We don’t want to let them go and we certainly don’t want them walking an order over to production.

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