Reprioritize Your Continuous Improvement Efforts to Maximize Profitability

By Mike Pircer, President, MAP Business Solutions

As companies constantly reduce resources in this tough economic environment, continuous improvement initiatives are being thrown by the wayside. Many businesses are still doing the same things with fewer employees but then find themselves coping with poor morale, disconnected processes, shrinking margins, and dissatisfied customers. Continuous improvement initiatives are either not being implemented or being executed poorly in which there are no improvements at all. Those that are being worked on have a tendency to be knee‐jerk reactions that are not well‐planned, do not involve all the key stakeholders and do not connect to the organization’s overall strategy.
Companies need to recognize business processes as value streams. These streams represent all value‐adding and non‐value‐adding activities that are required to deliver a product (good or service) from request to delivery (and ultimately, to receipt of payment from the customer). Knowing what the customer values and is willing to pay for helps differentiate which activities are truly required.
In order to put continuous improvement back in play, these are the priorities in which an organization must focus on:

 
Priority #1: Eliminate unnecessary non‐value adding activities. An organization can uncover the unnecessary non‐value‐adding activities through a myriad of tools such as:

• Value Stream Mapping
• Customer Surveys/Interviews
• Warranty Claims
• Customer Complaints

Once an organization identifies the unnecessary non‐value‐adding activities, then the required resources can focus on the elimination of these activities. These are usually “low‐hanging fruit” and can be done quickly and cheaply.

 
Priority #2: Reduce necessary non‐value‐adding activities. Necessary non‐value adding activities are recognized as processes that the customer doesn’t care about, but they are necessary to keep the operation going. These types of activities could include:

• Invoicing the customer
• Sales calls
• Material handling

For example, a salesperson for a computer repair company may be out in the field making face to face calls on prospects and clients. While the client doesn’t value (or pay for) this activity, it is necessary in order to generate more business for the organization. An improvement initiative may be to reduce the amount of travel time for the face to face meetings and incorporate more internet marketing processes. In these areas, the goal becomes to reduce the effort required to assure compliance and proper operation of the business.

 
Priority #3: Optimize value‐adding activities. These are considered the organization’s “bread and butter” processes. Improvement activities could include projects that focus on reduction of cycle time, reduction of defects, and/or reduction of downtime. Improvements in this area are generally more time and resource consuming and could be more costly.
While optimizing value‐adding activities is important, lean thinking shows that faster and more dramatic results occur by first eliminating NVA activities. The outcomes from eliminating NVA are measurable and wide ranging, including faster delivery, improved quality, freed capacity, and reduced inventory – all of which lead to greater customer loyalty, market share and reduced expenses. Collateral benefits that result from eliminating non‐value‐adding work include improved interdepartmental and interpersonal relationships, safer working conditions, and reduced workforce frustration – all of which create a work environment that attracts and retains a talented workforce, which, in turn, leads to further business growth.1
1 Value Stream Management for the Lean Office, Don Tapping and Tom Shuker