The seven deadly wastes

Evaluate material handling systems to eliminate non-value-added costs. Knowing these seven deadly wastes will help you identify the best places in your plant to eliminate waste.

By Wendell Leimbach and John Farrell

Waste elimination is essential to increasing profitability in manufacturing and distribution businesses. The endless pursuit of waste elimination is the essence of lean manufacturing. Eliminate waste by understanding the seven deadly wastes and identifying where they exist. Use that understanding to evaluate your material handling systems and determine if there’s justification for improvements, particularly because direct labor may be a minor component of the eliminated waste.

What is waste?

Waste is anything that adds cost, but not value, to a product. While products differ in each factory, typical wastes found in manufacturing environments are quite similar. After years of working to eliminate waste, Toyota, the Japanese automobile manufacturer, identified these seven wastes as the most deadly to profitability:

  • Overproduction
  • Wait time
  • Transportation
  • Processing methods
  • Inventory
  • Motion
  • Defects

Identify the waste

Each of the seven deadly wastes must be clearly understood to recognize where it exists in your operations. Some wastes are noticeable, and some are more subtle. After you understand each and consider how it relates to your business, you’ll think of many ways to reduce or eliminate each one. In fact, the best ideas usually come from production and maintenance workers. These groups should be encouraged and rewarded for their ideas and initiatives to improve operations. Most companies waste 70% to 90% of their resources, and even the very best companies probably have as much as 30% waste. Every plant should develop continuous improvement systems that reduce cost and improve operational effectiveness by endlessly pursuing elimination of these wastes.

Overproduction

Overproduction is the result of producing more product than the market requires and represents one of the greatest wastes in manufacturing operations. When the market is strong, this waste might not be noticeable, but, when demand drops, overproduction produces serious problems with unsold inventory and wasted by-products. Wasted by-products include material handling, storage space, inventory interest charges, machinery and equipment, defects, overhead, workers and paperwork.

Overproduction generates difficulties that often obscure more fundamental problems. A key element for eliminating overproduction lies in the understanding that machines and operators don’t have to be fully utilized to be cost efficient, as long as customer demands are met. This concept is difficult for many plant professionals to grasp. It’s helpful for any worker to think of the next downstream operation as the "customer" and produce only the quantity of product the customer actually requires.
Extra inventory results when more raw materials are consumed and more wages than necessary are paid. Extra inventory leads to additional material handling, storage space and interest paid on money used to carry the extra inventory. Additional staff, computers and equipment might be needed to monitor the extraneous goods. As serious as these problems are, even more critical is the confusion about what the priorities are, or should be. When people get distracted, they can’t focus on meeting the customer’s requirements of high quality, lowest cost and correct timing.

Overproduction waste can be reduced significantly or completely eliminated by a material handling system that controls material flow through production to match material supply to customer demand. One effective control is to use the material handling system as a tollgate that won’t let anything move until it’s pulled by a customer order.

Wait time

Unlike overproduction, waste from waiting usually is readily identifiable. Idle workers (who have already completed the required amount of work) or employees who spend much time watching machines but are powerless to prevent problems are two examples of the waste of waiting. A material handling system that regulates the work flow at an efficient pace (small buffer queues may be necessary) minimizes or eliminates wait time waste. Weak links in the material handling system that cause wait time include engineering drawings, gauging and equipment/tooling defects.

Evaluate each of these work elements during design of the material handling system with a process failure mode and effect analysis to identify and eliminate these problems. Ideally, use only the machinery and personnel for the time required by the pace of work that meets the production demand.

Transportation

Transportation, including double or triple handling of raw and finished goods, is another commonly observed waste. Often the root cause of this waste is a poor layout of the factory floor and storage facilities, which can mean long-distance transportation and over-handling materials. Temporary storage and frequent changes of storage locations aggravate the situation. Transportation waste can be eliminated by minimizing the distances materials must travel, better process coordination, better transportation methods and general organization of the operation.

A material handling system focused on optimum product movement minimizes transportation waste. To achieve optimum product movement, use computer simulation on the plant layout to determine which configuration is most effective. Using the material handling system as a Band-Aid to cover over other problems only adds cost with no value and perpetuates the underlying problems.

Processing methods

Maintenance and manufacturability are keys to eliminating waste from process methods. Well-maintained fixtures and machinery require less operator labor to produce a quality product. Regular preventive maintenance, including total preventive maintenance, also reduces defective pieces produced. Using the principles of design for manufacturing and taking into account manufacturability during product design reduces or eliminates processing waste before production even begins.

Material handling systems that control material and orientation while identifying parts using RFID and barcodes best accommodate automated material loading and unloading as well as the other process improvements, which will minimize wastes. Don’t install a material handling system for an inherently faulty process. Evaluate work processes proactively using process failure modes and effects analysis to identify failure modes for corrective actions. In addition, institute procedures that continuously improve and upgrade process control and monitoring equipment to further identify and reduce processing wastes.

Inventory

Inventory waste is closely connected with overproduction. Excess inventory requires extra handling, storage space, interest charges, people and paperwork. Because of the substantial cost associated with excess inventory, you should be taking rigorous measures to reduce inventory to minimum levels.

It’s essential to dispose of obsolete materials and produce only the number of items the next process requires. Purchase only the required amounts of materials, but be sure to weigh carefully any savings achieved through volume discounts against inventory and storage costs. Manufacture products only in optimum lot sizes. If you desire a material handling system that can handle orders of variable size, you must have very low setup and changeover costs to ensure that variations in customer order size don’t have a meaningful economic impact.

In many operations, inventory can hide a myriad of other problems. As inventory levels drop, you’ll need to address certain problems. These include poor scheduling, machine breakdowns, quality problems, long transportation times, vendor delivery times, line imbalance, lengthy setup time, absenteeism, lack of housekeeping or factory organization, and communication problems within the organization, with suppliers and with customers. Material handling systems that control production flow help reduce inventory levels to an optimum.

Motion

Waste motion is defined as time spent not adding value to the product or process. Movement doesn’t equal work.

Motion waste is most often revealed in the actions of workers as they search for tools, how they pick and place tools and parts that are kept out of immediate reach of the workstation, and the time spent walking among machines if they are responsible for several workstations.

A carefully planned layout and fixture selection can eliminate motion waste. Material handling system changes that improve the material flow through value-added operations are a major opportunity to reduce motion wastes. Implementation of 5S when changing or installing new material handling systems can identify and eliminate or minimize many of the motion wastes. Be sure to include the process engineers in any material handling system design changes.

Defects

Product defect wastes aren’t simply those items quality control rejects before shipment. Instead, product defect waste actually causes other types of waste throughout the manufacturing process.

These other wastes include wait time that increases costs and lead times for subsequent processes, rework that increases labor costs to make parts usable, additional labor required for disassembly and reassembly, additional materials needed for replacement parts, the extra labor involved in sorting defective from acceptable parts, and scrapping defective pieces, which wastes both materials and work already performed.

In many cases, defective material handling procedures can scrap or damage materials. Defective material handling systems can be improved by performing process failure mode and effects analysis to identify operating procedures required to reduce or eliminate the defects. When designing new material handling systems, perform a design failure mode and effects analysis on the equipment to identify and eliminate sources of damage.

As bad as they might be, the previous are insignificant in comparison to a customer discovering your defects for you. Not only are extra warranty and delivery costs involved, but customer dissatisfaction might result in loss of future business and market share.

Eliminate defect waste at the source by establishing a system to identify defects (or the conditions that cause defects) as they occur. Authorize anyone on the plant floor to take corrective action. Without this preventive system in place, other time-saving efforts are futile. There’s no advantage to using highly automated machinery to make defective parts faster.

The first step to eliminating the seven deadly wastes is to understand and identify each one within the operation. After that, take corrective measures to reduce, control or eliminate the problems. Such action may require simple, inexpensive solutions to a single workstation or changes as massive as a new factory floor layout and more efficient machinery. Appropriate solutions require careful study of the operation, clearly defined objectives, and thorough investigation of the benefits to be gained by each change.

Wendell Leimbach is director and John Farrell is senior consultant at RSM McGladrey in Timonium, Md. Contact them at wendell.leimbach@rsmi.com and john.farrell@rsmi.com, respectively.

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