Process improvement is undertaken for a multitude of reasons which include – improve customer satisfaction, mitigate risk, improve employee satisfaction, eliminate/contain non-value added costs.
A non-value added cost is an expense that is incurred, but does not add to the value or perceived value of your product or service. Simply stated, it is a cost your customers will not want to pay. Instead you will assume the cost out of your profits. During periods of low margin, company owners should attempt to protect their profit margins by eliminating or containing non-value added costs.
There are many examples of non-value added costs in the manufacturing industry. My goal is to point out potential non-value added costs in the services industry which create delay, require rework, and re-focus resources off of providing the services your business offers. All of the examples presented have parallels in manufacturing.
|Non-Value Added Costs in the Services Industry|
|Human Resources||Employee – absenteeism, attrition, lack of training|
|Information Technology||Data unavailable or hard to find|
|Management||Constant reactionary state, i.e. focus on fighting fighers; and lack of employee empowerment requiring manager sign-off/approval|
|Planning & Analysis||Re-work associated with bad planning|
|Operations||Unreliable suppliers, defects in supplies|
How does your company compare?© Copyright 2012 Regis Quirin, All rights Reserved. Written For: CFO Tips - What you need to know, to be a CFO TODAY!