Value Adding?
Are your business process steps adding value? Have you ever reviewed your business processes end to end to understand if they are delivering real value to your customer? Are there process steps that are costing you time and money?
The steps undertaken to get from point A to B, say taking a customer order to delivering the product ordered can be broken down into 3 different types:
· Value Add Steps
· Non-value Add Steps
· Business Non-value Add Steps
Value Add, Non-value add & Business Non-Value Add
Value add steps are the steps that are necessary to get the product from A to B and should be looked at through the eyes of the customer i.e. what process steps as a customer am I willing to pay for. As little as 5% of the steps in a given process can be value add.
Non-value add are steps that are ‘wasteful’ for example do you take your customer orders off DM’s but then manually input into another order system? Are there a lot of back and forth with customers before they give an order to clarify issues? Are you often waiting on ingredients/parts to complete the customer product? These can be classified are non-value add steps.
Next, we have Business Non-Value steps. These are steps that the customer would not be willing to pay for but from a business and legal perspective they are needed. Examples of this are accountancy fees, QA checks etc…
Simple Template
One way of reviewing a process is to document all the steps in that process, every little step no matter how mundane you think it is. Then you will need to review each step and assign low long it takes to complete this step and if the step is value add, non-value add or business non value add. I have a simple template to help with this process.
You will need to be brutally honest here and remove sentiment as much as possible. Look at each step from the point of view of a paying customer and ask, “am I willing to pay for this step in the process?”. Or to look at it another way, if I knew as a customer that part of the price I am paying for a product or service includes this step am I okay with that?
Once you have all the steps documented with the classification of value its time to review the non-value steps in detail. Are you surprised at how much of the process is made up of non-value adding steps? Now that you are aware of the wasteful parts of the process you can tackle them and consider firstly do I need to be doing that step at all, is there a way to automate the step or would it be cheaper for me to outsource that step?
The best way to really challenge the non-value added process steps is to document your Future State process. If you where to have the slickest process possible what would that look like? You might not get to that process today; you may never get to that idealised process. The purpose of the Future State is to know where you are aiming to get to and what the process could be like if you start working on improving it.
20% Improvement
Often when I undertook a business process review for the first time it was possible to improve the process by 20%. By reviewing a process, implementing simple Continuous Improvement tools and giving a process the focus it needs 20% improvement results are not uncommon.
Improvement can mean speeding up a process so the goods flow quicker from order to delivery. Improvement can mean that you internally reduce the time & effort to get the product from A to B, which frees up time to spend on other areas of the business. Improvement can also mean that you reduce defects and errors to the customers. It really depends on the process you are reviewing.
The end result of a process review should be a reduction in non-value added steps and lead to a quicker and simpler process with fewer errors and improved customer satisfaction.
Let me know how you get on with the template if you used it by emailing me on info@deirdrehicks.ie or on Instagram through my DM’s. I’d love to hear how it works for you…Also you can sign up below to get regular updates straight to your inbox.