What is Non-Value Added Activity?

Non-Value Added Activity

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Non-Value Added Activity

Non-value added activities are operations or tasks that take time, resources, or space but do not add any value to the product or service from the perspective of the customer. In other words, these are activities that a customer is not willing to pay for.

Elimination or reduction of non-value added activities is a key goal of lean manufacturing and process improvement methodologies such as Six Sigma. By identifying and minimizing these activities, a business can improve its operational efficiency, reduce costs, and increase customer satisfaction.

Examples of non-value added activities could include:

  • Inspection and Rework: Checking products for defects or errors and repairing faulty products do not add value to the final product; rather, they are necessary due to earlier inefficiencies or mistakes.
  • Waiting: This refers to idle time where a worker, machine, or product is waiting for the next step in the process. This could be due to poorly coordinated operations or inefficient workflow.
  • Inventory: Excess inventory requires storage and ties up capital without adding value to the customer. This includes overproduction of goods and storage of unused raw materials.
  • Transportation: Moving products or materials around excessively does not add value. Ideally, the layout of the production process should be optimized to minimize unnecessary movement.
  • Overprocessing: Doing more work or adding more features to a product than what the customer requires or is willing to pay for is considered a non-value added activity.

Remember that some non-value added activities might be necessary due to regulatory requirements or specific business needs, and they can’t always be completely eliminated. However, they should be constantly evaluated and reduced as much as possible.

Example of Non-Value Added Activity

Let’s consider a fictional company, “XYZ Manufacturing,” that produces electronic devices.

  • Inspection and Rework: Suppose that during a quality control inspection, XYZ finds that 5% of the devices have minor defects requiring rework. The inspection and rework do not add value from the customer’s perspective because they would expect to receive a defect-free product in the first place. Instead, these activities represent an extra cost and delay.
  • Waiting: If the electronic devices spend a significant amount of time waiting to be moved to the next stage of the production process, this wait time is a non-value added activity. It does not contribute to the final product and increases the total production time.
  • Inventory: If XYZ Manufacturing holds more raw materials or finished products than necessary, the costs associated with storing these excess goods do not add value for the customer.
  • Transportation: Suppose the layout of XYZ’s factory is such that parts have to be moved a considerable distance from one workstation to another. The time and effort spent on this transportation do not add value to the final product.
  • Overprocessing: If XYZ Manufacturing adds certain high-tech features to their devices that most customers don’t use or even care about, the time and resources spent on developing and installing these features are non-value added.

By identifying these non-value added activities, XYZ Manufacturing could focus on implementing changes to reduce or eliminate them, such as improving their quality control procedures to reduce defects, reorganizing the layout of their factory to minimize transportation, and better aligning their product features with customer preferences to avoid overprocessing. These changes would help them save costs and improve efficiency, ultimately benefiting both the company and the customers.

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