Definition Value Added - Definition of 'Value Added' and the Three Levels of Value Added

Elsmar Forum Sponsor
#32
Re: In regards to Inspection not being Quality Assurance;

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
 
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lee01

#33
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!
 
#34
The title of this thread is Definition of 'value added'

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
 
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lee01

#35
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
 
E

energy

#36
A quicky!

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:
 
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David Mullins

#37
customer's viewpoint

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.
 
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Dave W 2005

#38
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
 
J
#39
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.
 
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Dave W 2005

#40
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...
 
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