View Full Version : Value Added - Definition of 'Value Added' and the Three Levels of Value Added
David Mullins 1st March 2002, 12:13 AM "Value-added" is one of those terms that Q people use to death and then it gets them in trouble.
I glossed through an article somewhere (unfortunately I think it was in an airline magazine) which talked about 3 levels of "value-added".
First was your straight out, no questions asked, we make the product that goes to the customer group, labelled people who add value.
Second was those in administrative, purchasing, accounting and (gulp) quality type areas, who don't necessarily add value directly to the actual product going to the customer, but whose function is necessary if the customer is to receive the product IFOTA1 (in full, on time, to A1 spec - that wasn't the term used in the article). I can't remember the label applied to this group.
Finally you've got those that don't add value and aren't necessary. These bludgers are called snr management, sorry, anal retentive, sorry, civil servant, sorry, I can't remember their label either.
Unfortunately I was sitting in the aisle seat of the last row in the plane, and a very nice :lick: air hostess / customer service rep / trolley dolly ended up squating in the aisle and talking ;) to me for the next 2 hours. Subsequently I forgot to retain the mag with the article:smokin:. Scored some free alcohol though. (I don't know that she should've continued talking to me whilst the old guy several rows up suffered with a nose bleed, but she did).:ko:
Anyway, has anybody seen anything like this article, where they can fill in the blanks for me?
Hey, let's call it a birthday present alright?
Marc 1st March 2002, 03:05 PM No takers on this one, eh? I'm not sure what to say because to me what is or isn't 'Value added' is as much a personal opinion as it is defined within each company. some companies do not see inspection as value added, for example, but I don't always see it that way. To me it depends upon what the risk is if you don't do the inspection.
I can't recite the standard classes of what is and what isn't. I think that's a Cost of Quality thing.
CarolX 1st March 2002, 04:28 PM David,
1st - Happy Birthday! You hit the big 40 !
Hope your day was great.
2nd - Call the airline-see if they will mail you a copy of the mag.
CarolX
D.Scott 4th March 2002, 08:38 AM Nobody else is jumping in so I guess it is safe to stir up a discussion.
Value added, as applied to processes, is anything which translates into something useable/useful to the customer. The customer can be either internal or external.
The same thinking should be applied to value added in any other part of the business. Does it have/add anything useable/useful to whatever it is you are trying to do?. If it just makes a lot of noise or sits there looking pretty, it may not add anything but noise and beauty which might not be useful to the customer.
Inspection as value added? Sure it is, if it actually adds something. I have seen 100% inspection imposed as a corrective action (yes, I know - another topic) on every CAR received. Because of the procedure, even a packaging CAR requires 100% inspection of the parts (would probably be OK if 100% of the packaging). Sure, the wrong corrective action was applied, but the point is, the action wasn't value added.
An after hours receptionist (hope I don't offend anyone) who sits at the front desk to greet visitors and answer the phone doesn't add much value if the door is locked and the phones are on automatic.
I hope that's enough to get some others going on the subject.
Dave
M Greenaway 4th March 2002, 08:49 AM The air hostess squatting in the aisle sounds like a much more interesting topic - how did you get on Dave ? ;)
energy 4th March 2002, 09:03 AM During our Lean Manufacturing training, Value Added was used to define those processes that the Customer really cares about. I never thought about it as it affects internal customers. Most everything we do affects somebody else in the organization. The Customer doesn't care about how many times you inspect his product. They care about receiving the right part, on-time delivery and price. The more I see this term used, the more I see it as one of those things that someone came up with to replace "wasted effort" in your business as well as anything that doesn't add to the bottom line. You can make a case for anything being Value Added, especially when it comes to eliminating a position. Like Mine!:vfunny: Purely subjective and given more attention when coming from Top Management. JMHO :ko: :smokin:
db 4th March 2002, 01:26 PM These are from the Lean Manufacturing Glossary page of SearchManufacturing.com. The URL is http://www.searchmanufacturing.com/Manufacturing/Lean/glossary.htm
Value Added: Activities or actions taken that add real value to the product or service.
Real Value: Attributes and features of a product or service that, in the eyes of customers, are worth paying for.
There are also things that are mission critical that are not “value added”, such as payroll and maintenance. You can’t operate without them, but the customers usually won’t pay for as a line item on the invoice.
:thedeal:
gpainter 29th April 2002, 09:22 AM Value- low price, high quality- the customer wants it all
Value added- something that contributes to to value
db 29th April 2002, 05:46 PM When I'm teaching the QS-9000 Internal Auditing course, this topic comes up (4.2.5.2). I mention the definition listed in my earlier post, and add that some functions might not be “value added”, but are still critical to mission success. The two I list are:
Payroll – a non-value added function, but the operation will cease without it.
Restrooms -- a non-value added use of floor space, but required by law. Once again, without them, the operation will cease.
Geoff Cotton 30th April 2002, 03:44 AM To me value added is simply anything that changes the fit form or function of a product or service.
Does the Quality Assurance Department add value ?????
Geoff
Atul Khandekar 30th April 2002, 04:09 AM Sometimes I feel Lean and ABC stretch the definitions too far. If there is no payroll function, there is no motivation for adding real value.The idea I think is not to consider any costs as indirect costs or overheads.
As for QA department, the questions to be asked are:
1.In the eyes of customers, are the activities worth paying for?
QA Dept would actually take actions to ensure that real value is added to the product. So I think they are.
2. Will the operations cease without QA department?
M Greenaway 30th April 2002, 04:49 AM Geoff
The customer will pay for quality. Part of most quality department functions is to assure the quality of the product or service - hence the quality department adds value.
Claes Gefvenberg 30th April 2002, 06:34 AM Of course QA adds value....
...and if we didn't think so, I suppose we wouldn't be in this line of work, right?
It may be computers, cars, raw steel, wood or services... Our quest is to aid our respective organisations to make certain that the customer gets the agreed merchandise to a cost that is beneficial to both us and our clients. If that isn't adding value, I don't know what is...
/Claes
Atul Khandekar 30th April 2002, 09:09 AM Some interesting thoughts here...
http://www.16949.com/Forums/showthread.php?s=&threadid=1463
energy 30th April 2002, 09:38 AM Geoff Cotton said:
To me value added is simply anything that changes the fit form or function of a product or service.
Geoff
In the good ole days, that definition would be grounds for MRB(Material Review Board for you young folk), with Customer's approval. We would have needed Government approval for anything that changes form, fit or function of a product or service. I have a problem connecting it with a Value added definition. But, it wouldn't be the first time that I mis-read something.:bonk:
:ko: :smokin:
Mike S. 30th April 2002, 11:20 AM I think the term "value added" is one of those relative terms that can be correctly defined in many different ways depending on the viewpoint of the user(s). IMO, to be used effectively in an organization it has to be defined by that organization. My boss used to define it to mean (for our organization) direct operations performed on something that the customer was willing to pay for. For example, if we took a piece of Aluminum bar stock and machined a complex part from it to a customer drawing specification and then plated it with Silver, the machining operations and Silver-plating operations were value-added and the support operations like the purchasing of the bar stock, sales order entry, inspection, shipping, and finance/billing operations were non-value added. Right or wrong, that was our definition and it may or may not work for others.
Mike S.
energy 30th April 2002, 12:04 PM Atul Khandekar said:
Some interesting thoughts here...
http://www.16949.com/Forums/showthread.php?s=&threadid=1463
Good link, Atul. Man, I was all over that one. I now see where Geoff was coming from. For example, Louie, who works on the burr bench making minimum wage knocking the burrs off that drilled hole is "value added" while all the other non manufacturing employees are merely flotsam or jetsam. That's a Navy term for debris. Oh yea!:vfunny: :ko: :smokin:
M Greenaway 30th April 2002, 12:09 PM Mike
If we consider your defenition and then look at Lean Manufacturing principles of removing all non-value adding activities we would be unable to produce anything !!
Geoff Cotton 30th April 2002, 12:22 PM Energy,
I thought my comment regarding QA might get a reaction.
:biglaugh:
My thoughts are that we in QA do add value in the sense that we protect the customer, we are always looking to improve the product and make it more robust to what the customer tries to do with it, and we are always looking to take 'waste' out of the supply chain thereby reducing the cost to all involved.
Geoff
Mike S. 30th April 2002, 01:03 PM M Greenaway said:
Mike
If we consider your defenition and then look at Lean Manufacturing principles of removing all non-value adding activities we would be unable to produce anything !!
_________________
M,
Please re-read my post. I did not say that is MY definition, it was my boss' definition (the President of the company). If I had written it that way I'd be saying I and all of QA (not to mention the people that cut my paycheck!) bring no value to the company and perhaps should be eliminated (not too likely I'm gonna do that!), but the boss was reminded that under his definition HE was non-value added and he understood that. His goal was not to eliminate what he called non-value added, just to reduce it as much as possible. It was just his definition; everyone in the room needed to understand what the term meant and, being the Prez, he got to choose. As we see in the Cove all the time, sometimes different people (and pretty smart folks at that) define or interpret the same thing differently. Heck, I haven't seen a concesnus on value-added yet, have you??!!
Another term that prompted lots of discussion was defining "on-time delivery" for our products and "lateness" for employees regarding their start times. Think those are easy? NOT!:bonk:
Mike S.
JRKH 30th April 2002, 01:28 PM Figured I'd throw in my 2c worth.
I like the idea of splitting the terms into value added and mission critical.
Value added would apply anything directly to the products produced.
Mission critical to the other areas.
I would liken it to the old idea of machine productivity. Theoretically speaking, the only time a machine is making money is when it is making chips (from the old days when I ran lathes).
Therefore tool changes etc. were not making money therefore were not value added. However tool changes were necessary, therefore critical to the mission. Thus "Mission Critical".
James
David Mullins 30th April 2002, 11:06 PM Basically we can't agree on a definition for "value-added" (just like 'quality'), so we need to split it up.
I don't agree with James' "mission critical" theory, as the tool change isn't mission critical.
Having spent time with the USAF I'm pretty confident I understand their interpretation of mission critical, and it doesn't fit the fragmentation of "value-added".
Does QA add value?
Not to the product (directly). If the machine operator takes the day off, the parts don't get made, and no value is added. If the QA person takes the day off, there is no impact to the machining of product (efficiency is probably improved, if anything).
BUT, QA does add value to the business! Insert your own examples here.
If we sacked the QA dept, profits should increase in the short term, then decrease in the long term. Reduced overheads in the short term become lost business, increased warranty claims, higher rework rates and costs, etc.
So can we agree that there are several types of value adding, as stated in the opening post?
M Greenaway 1st May 2002, 04:54 AM I think we can say that everything is value-adding, just as everything affects quality in its broadest terms.
Try asking your customers if they would mind if you did away with the quality function at your plant as it did not add value - I think you would get your answer !
Atul Khandekar 1st May 2002, 06:40 AM Does QA add value?
Not to the product (directly). If the machine operator takes the day off, the parts don't get made, and no value is added. If the QA person takes the day off, there is no impact to the machining of product (efficiency is probably improved, if anything).
BUT, QA does add value to the business! Insert your own examples here.
If we sacked the QA dept, profits should increase in the short term, then decrease in the long term. Reduced overheads in the short term become lost business, increased warranty claims, higher rework rates and costs, etc.
Interesting argument! Not so long ago we read on the forums that QA folks should 'work themselves out of jobs'!
Question is WHERE and HOW does QA add value? In inspection? creating charts? Documentation? If QA takes actions that make the processes robust or reduce waste, isn't value added to the product directly?
IMHO, the 'Lean' definition of non-value Added items really focusses on reducing and eliminating (where possible) the wastage and delays in certain operations such as handling, storage, inspection, setup and those that Mike S. mentioned. You cannot completely eliminate the operations themselves. It is possible that there are such wastages in activities that are usually considered value-added as well!
JMO, FWIW
-Atul.
JRKH 1st May 2002, 06:40 AM Dave Mullins said
......I don't agree with James' "mission critical" theory, as the tool change isn't mission critical......
Dave,
A tool change in a machine is critical to the mission of that machine. If I need to Drill and Tap a hole I must have a tool change even though I am not directly effecting the product during the change. It may not be the best example, but I believe it is still valid.:truce:
M Greenaway said
I think we can say that everything is value-adding, just as everything affects quality in its broadest terms.
Try asking your customers if they would mind if you did away with the quality function at your plant as it did not add value - I think you would get your answer !
Martin,
Makes sense to me. However if the QA dep't isn't percieved as value added, it can still be stripped, ripped and rendered ineffective by management. It is one thing to have a "quality dep't", and quite another to have a Quality Company.
James
E Wall 1st May 2002, 05:04 PM We have discussed this before in at least one other thread, I would encourage anyone pursueing this topic to perform a search and read some of the past posts.
One of the best summaries I've seen recently is from Jim Womack's Lean Institute:
I get many e-mails from the Lean Community asking for definitions of the terms we commonly use. For example, a respondent recently wanted to know how Lean Thinkers tell "value-creating" activities from those that are "non-value-creating".
It’s actually very simple: Map out the value stream for a product, noting every step and action performed on information and materials. Then, for each action and step, ask if the customer would think the product would be worth less if that activity could be left out. If the customer won’t miss it, it isn’t value
creating!
Common sense to me dictates not just the activity itself but the fallout from it's exclusion long-term.
lee01 2nd May 2002, 01:48 PM The quality function albeit inspection, spc or any other activity can not be associated with adding value to the product in question! I’m deeply surprised to find that people would say otherwise?
Anybody, in my opinion, who is adding value to a product must be doing something to the product to make it as the customer specifies. Any quality activity does not change the product in any way, it confirms that the product is manufactured and/ or is confirming to specification. This activity is aiding the manufacture of the part not manufacturing the part itself.
Its like this, two people have a game of tennis, the umpire aids the two in ensuring the game is played to the rules. He is not playing himself. Same as for Quality. We are assuring the part is correct, but we are not adding value to the part because we are not changing the part to coincide with customer specifications.
For every second a part is being manufactured, the person who is manufacturing it is theoretically charging the company his/ her salary. He/ she in turn is paid by the company for the part he/ she has just created
For every second a part is being inspected, the person who is inspecting it is theoretically charging the company his/ her salary. He/ she in turn is paid by the company for the part that someone else created. (He/ she has not added value)
In a theoretical and ideal world the part would always be correct, there would be no need for quality at all, does that mean we would have to sell the part cheaper because the inspector/ quality guy has not had his hands on it?
Lee01 (Interested, very interested)
:rolleyes:
Geoff Cotton 3rd May 2002, 04:18 AM Who needs 'inspectors', our operators are responsible for ensuring that what they produce is to the required standard.
IMHO Inspection is not Quality Assurance
M Greenaway 3rd May 2002, 04:48 AM You can only say your inspection function is not adding value if they never find anything wrong. In which case you could successfully do away with them.
Your customer will not pay for defective products :bonk:
lee01 3rd May 2002, 04:54 AM For a start I never said the inspection activity is quality assurance nor would I imagine it is! Inspection is however, held under the Quality banner and depending on the organisations current position and outlook on quality, this could be just a simply inspection or a quality control, quality assurance or TQM orientated organisation.
In my opinion and that’s all it is, any activity that can be deemed as non-productive must be held as a non-value adding operation. Inspectors and quality personnel as a whole are non-productive
As for operators being in control of their own work, great! I personally would disagree though. Operators have a personality that consists of self-preservation. I have come across operators not highlighting failures to try to disguise their own shortcomings. Okay this is highly wrong and should not happen but it does and always will. But if you feel confident in you’re operators being able to demonstrate errors on their part?
Inspectors should always be used in a random/ petrol manner to assist the operators.
Lee01
lee01 3rd May 2002, 04:58 AM sorry, patrol not petrol
Lee01
Claes Gefvenberg 3rd May 2002, 05:37 AM lee01 said:
In my opinion and that’s all it is, any activity that can be deemed as non-productive must be held as a non-value adding operation. Inspectors and quality personnel as a whole are non-productive
Lee01
Um... Lee, I disagree. I think you need to redefine non-productive....
Let's say that we remove all the people you mentioned here: What impact would that have on a companys long time result? ...or even its survival?
I have worked with assembly and manufacturing, as well as most quality related jobs from inspector to managing a QMS. Why do you think I went into quality related jobs in the first place? I'll tell you: Because I thought that was a good way to make an impact on the companys performance... I still think so today. I've seen it work. I still feel it adds value to both end products and over all company performance.
/Claes
lee01 6th May 2002, 07:52 AM No matter how you try to improve the performance of a quality system, improve employees workmanship, improve the engineering process etc. If you are not involved in the actual activity of manufacturing the part in question then you must be considered nen-productive. And as a result add no value to the part. You have not changed anything about the part for bar/ billet state to its required form.
The time its spent in your posession, its losing value as its paying your wage . If you are changing it to comply to customer requirement then you are adding value. Ie: - If you supply the part to the customer without it being manufactured (in bar. billet format) then its worthless to the customer. If supply the part manufactured as required then the customer will pay up for the part. If supply the part manufactured as required then conduct quality activities on the part, the customer will only pay for the manufactured part, not the quality activity, thus the quality activity is not adding value!
Claes Gefvenberg 6th May 2002, 08:44 AM The title of this thread is Definition of 'value added'. Ok, so we do not define 'value added' in the same way...
I think 'value added' could also concern preventing certain costs from occuring... If so, may not inspectors and quality personnel be able to add value?
/Claes
lee01 7th May 2002, 04:56 AM Okay, The definition in my opinion is someone who contributes to 'changing' something (or providing a required service - service industry) to create a customer requirement (Such as a turned part). He/ she is adding value to something that has non.
The quality function is providing the person who is creating this part a sevice but it is not a value adding activity to the part. But I would assume adds value to the business (if providing a continuous improvement service).
Summerise:
* - Value adding is someone who's time spent is manufacturing/ providing a service to 'create' what the customer requires.
* - The quality function can be described as adding value to the 'business' if the activity is classed as a continuous improvement activity.
Lee01
energy 7th May 2002, 07:50 PM Only the customer can define what is value added. What do they expect for their buck? Triple inspection? I think not. Fancy packaging? I think not. What you think as a supplier doesn't matter. Your customer wants his product, correct and on time at a reasonable cost. What you think is value added in your processes, means nothing! JMHO:eek: :ko:
David Mullins 7th May 2002, 09:15 PM energy said:
Only the customer can define what is value added. What do they expect for their buck? Triple inspection? I think not. Fancy packaging? I think not.
As a customer of the Miss World Pageant, I am 100% for fancy packaging, and as for triple inspection...........
Do they add value??? I don't know, but I want world peace too.
Dave W 20th May 2002, 10:55 AM I'm going to put a different spin on this...
If, for example you start with raw material, it has value because you can resell it. As soon as you start work on it (i.e. the first cut), it has no (or little value) - who wants to buy damaged goods?
You continue to add cost to the material until it reaches a point where you can sell it again. Then it has value.
I guess the point I am trying to make is that all these operations may not be value added, but adding cost.
All operations need to minimised so that the difference between the selling price and the cost price is as much as possible.
Inspection is another of those things that you want to get rid of and still be able to sell the product.
Dave
JRKH 20th May 2002, 01:26 PM Dave W said:
I'm going to put a different spin on this...
If, for example you start with raw material, it has value because you can resell it. As soon as you start work on it (i.e. the first cut), it has no (or little value) - who wants to buy damaged goods?
You continue to add cost to the material until it reaches a point where you can sell it again. Then it has value.
I guess the point I am trying to make is that all these operations may not be value added, but adding cost.
All operations need to minimised so that the difference between the selling price and the cost price is as much as possible.
Inspection is another of those things that you want to get rid of and still be able to sell the product.
Dave
Dave,
Very interesting thought. Sort of a binary view of value. Either it has value or it doesn't. -- On or Off. eh?
But in business it doesn't work that way. Example: Say you do a yearly inventory and have to count everything from raw stock to finished goods. Raw stock is easy, it's the cost of the materials. Finished goods is easy, it's the value when sold. But the work in process has a value based on a percentage of the finished value of the part. For instance if a part that sells for $10 is 75% complete, its assessed value for inventory is $7.50. By your rule this item has no value until it is complete and should be counted as $0.00. Nice thought but I don't think the tax man would go for it.
On the other hand, the question of whether inspection is value addied depends on the contract. If the contract calls for final inspection and/or testing and appropriate reports, then I think inspection is value added since it produces something essential to the sale of the product. Otherwise secondary inspection is redundant and should be minimized or eliminated.
James
P.S. I like the devious way your mind thinks though.
Dave W 21st May 2002, 05:09 AM James,
Not quite binary. I know things aren't quite black and white.
I, like most people think that there are different types of cost (waste). Pure waste (not job related at all) should be eliminated, all others minimised. However, some costs are easier to minimise - such as the things that don't change the form of the product.
Inspection is sort of in this category. It doesn't change the form,but is not as easy to eliminate as say a guy having to hunt around for a tool. Both carry cost.
I can't believe that an (enlightened) customer would pay for inspection if you could prove that the product quality was good enough not to need it.
If you're talking about Miss World pageants, then its a totally different story...
JRKH 21st May 2002, 06:48 AM Dave W said:
James,
Not quite binary. I know things aren't quite black and white.
I, like most people think that there are different types of cost (waste). Pure waste (not job related at all) should be eliminated, all others minimised. However, some costs are easier to minimise - such as the things that don't change the form of the product.
Inspection is sort of in this category. It doesn't change the form,but is not as easy to eliminate as say a guy having to hunt around for a tool. Both carry cost.
I can't believe that an (enlightened) customer would pay for inspection if you could prove that the product quality was good enough not to need it.
If you're talking about Miss World pageants, then its a totally different story...
Dave,
Couldn't agree more - In most cases.
My point above regarding inspection/testing is that in some cases it is necessary. For example: if I am making a component for a nuclear power plant I must have mill test reports from the steel manufacturer. My supplier cannot sell the steel to me without this paperwork. In addition, I must take a sample of this material and send it to a lab for testing to confirm the test reports. Then I must supply coppies of these reports along with results from our in-house inspection/test. None of these things change the component, but are value added because without them the component is worthless to the customer. Just like your "damaged" steel bar.
Regards
James
Michael T 21st May 2002, 09:55 AM JRKH said:
Dave,
Very interesting thought. Sort of a binary view of value. Either it has value or it doesn't. -- On or Off. eh?
But in business it doesn't work that way. Example: Say you do a yearly inventory and have to count everything from raw stock to finished goods. Raw stock is easy, it's the cost of the materials. Finished goods is easy, it's the value when sold. But the work in process has a value based on a percentage of the finished value of the part. For instance if a part that sells for $10 is 75% complete, its assessed value for inventory is $7.50. By your rule this item has no value until it is complete and should be counted as $0.00. Nice thought but I don't think the tax man would go for it.
On the other hand, the question of whether inspection is value addied depends on the contract. If the contract calls for final inspection and/or testing and appropriate reports, then I think inspection is value added since it produces something essential to the sale of the product. Otherwise secondary inspection is redundant and should be minimized or eliminated.
James
P.S. I like the devious way your mind thinks though.
You guys have invoked some very interesting thoughts...
James - following your line of thought. WIP is $7.50 if the piece is 75% complete. Okay - that's an accounting convention. However, could you sell that incomplete item for $7.50? Somehow, I doubt it. This is where Dave W.'s line of thought begins to make sense. This item really has no value until it is completed. Oh... it can have scrap value, but I think that would be significantly lower that $7.50.
Now, let's take that thought process to inspections. If the customer requires inspections at specific stages in the manufacturing cycle - these add value to the product just as the WIP value of the product is $7.50. However, by themselves, these inspections add no real value to the product. It will still sell for $10.00 at the end of the manufacturing process.
In an ideal world, there should be no need for inspections, yet they exist in practially every industry I can think of. The only way to sell "no inspection required" to a customer is by a long track record of consistently top quality product with no defects.
So... if we no longer require inspections and eliminate inspections from our processes (thus reducing the cost to manufacture our product) who benefits from the savings? Do we pass these savings on to the customer or do we keep them as the fruit of our success in implementing a truly quality process?
Ouch... I'm trying to think out of the box - and the lid is shut. :bonk:
JRKH 21st May 2002, 10:37 AM Michael T said:
You guys have invoked some very interesting thoughts...
James - following your line of thought. WIP is $7.50 if the piece is 75% complete. Okay - that's an accounting convention. However, could you sell that incomplete item for $7.50? Somehow, I doubt it. This is where Dave W.'s line of thought begins to make sense. This item really has no value until it is completed. Oh... it can have scrap value, but I think that would be significantly lower that $7.50.
Now, let's take that thought process to inspections. If the customer requires inspections at specific stages in the manufacturing cycle - these add value to the product just as the WIP value of the product is $7.50. However, by themselves, these inspections add no real value to the product. It will still sell for $10.00 at the end of the manufacturing process.
In an ideal world, there should be no need for inspections, yet they exist in practially every industry I can think of. The only way to sell "no inspection required" to a customer is by a long track record of consistently top quality product with no defects.
So... if we no longer require inspections and eliminate inspections from our processes (thus reducing the cost to manufacture our product) who benefits from the savings? Do we pass these savings on to the customer or do we keep them as the fruit of our success in implementing a truly quality process?
Ouch... I'm trying to think out of the box - and the lid is shut. :bonk:
Michael,
Yes I like Dave's line of reasoning too. My point is that there are situations where contractural, or legal requirements include inspections/tests and supporting paperwork. Since it is required in order to sell the item, it becomes a feature of the item. Therefore it act of inspection/test is value added. This does not mean we shouldn't try to make this activityas efficent as possible just as we would with any manufacturing process.
James
barb butrym 21st May 2002, 11:40 AM i have sat quietly by, watching this one,,,,ok..value added?
Does it add to the bottom line? give me a return on the investment? Can I charge for it?
JRKH 21st May 2002, 01:18 PM barb butrym said:
i have sat quietly by, watching this one,,,,ok..value added?
Does it add to the bottom line? give me a return on the investment? Can I charge for it?
Precisely!!
My boss says to me, "Hey we have a customer who wants to by this widget but insists on having a 100% inspection of one piece in each lot. (which we normally do not do) How long will it take to do that."
I look over the drawing and say, "about 1.5 hours".
Now the boss goes back and costs the job - including inspection, and adds his profit margin.
Sounds like value added to me.
Granted, in a perfect world inspection (indeed quality as a profession) would not be needed. But the world is imperfect, and whenever a customer insists on inspections and tests as part of a contract, that inspection is value added.
James
Dave W 22nd May 2002, 04:10 AM Whoa!
I haven't been in the luxury position to be able to work out a profit before selling for quite a while.
Normally its negotiating a price that the customer will pay, making it for as cheap as possible and taking what's left as profit (or loss).
I work in aerospace - so no surprise there!
Perhaps this goes to explain our different view of cost and value??
Dave
reigelser 27th September 2007, 01:47 PM This thread was silent for a while, but I found an interesting definition of value added:
This is an excerpt of an article from "The Gateway- Purchasing Source Guide-New England Edition - Issue No.99 - September 2007", Page 9, describing a job shop that manufactures bolts and pins and similar items for all kinds of industries:
"...These 'next generation' machine tools allow operators to focus more on the value-added aspects of set-up and monitoring their processes, and less time on manually operating the machine..."
I was under the impression that observing the process=reading a newspaper :notme: and setting up is not too value adding, but maybe I am wrong.
Joachim
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