Value Analysis involves assessing each process step through the eyes of the customer and determining whether the step is a Value Adding Activity (VA), a Non-Value Adding Activity (NVA) or a Value Enabling Activity (VE).
To be considered Value Adding (VA), the step must meet all of the three of the following criteria:
- The step transforms the item toward completion (something changes)
- The step is done right the first time (not a rework step)
- The customer cares (or would pay) for the step to be done
If a step fails to meet any one of these criteria, it is considered either:
- Non-Value Adding (NVA): Typical Non-Value Adding Activities include rework, inspection, movement and any of the 8 Wastes.
- Value Enabling (VE): These activities are considered NVA from a customer perspective but can be satisfying a regulatory/ compliance issue or other business requirement. These are also called Non-Value Added but Necessary, Business Value Add or Non-Value Added but Required.
Uncovering and reducing NVA or VE steps that don’t add value in the eyes of the customer is key to improving both the effectiveness and efficiency of a process.
Value Adding Activities – Value Adding Activities are any activities that produces value to customer. It meet the three criteria for a Value Adding Activity, as
- The step transforms the item toward completion
- The step is done right the first time (not a rework step)
- The customer cares (or would pay) for the step to be done
The criteria, is
- Is the customer willing to pay for this step?
- Would the customer agree that this step is necessary to achieve their goals?
- If the step is removed, would the customer perceive that the end product or service is less valuable?
Examples of it are, in Order-to-cash process: Confirm delivery date, Deliver products or in University admission process: Assess application, Notify admission outcome
Value Enabling Activities – Value Enabling Activities are activities that do not directly add value to a customer, but must be performed to allow Value Adding Activities later on. They are therefore necessary precursors to Value Adding Activities.
Non-Value Added Activities – Non-Value Added Activities refer to process steps that fail to meet one or more of the following criteria:
- The step transforms the item toward completion (something changes)
- The step is done right the first time (not a rework step)
- The customer cares (or would pay) for the step to be done
Non-Value Adding Activities add to the cost of doing business. Typical Non-Value Adding activities include rework, inspection, movement and any of the 8 Wastes.
Business value adding activities – It is necessary or useful for the business to operate. The criteria for it, is
- Is this step required in order to collect revenue, to improve or grow the business?
- Would the business (potentially) suffer in the long-term if this step was removed? Does it reduce risk of business losses?
- Is this step required in order to comply with regulatory requirements?
Example for it are,
- Order-to-cash process: Check purchase order, Check customer’s credit worthiness, Issue invoice, Collect payment, Collect customer feedback
- University admission process: Verify completeness of application, Check validity of degrees, Check validity of language test results
Steps for Analysis – Value added analysis consists of
- Decorticate the process into steps
- Steps performed before a task
- The task itself, possibly decomposed into smaller steps
- Steps performed after a task, in preparation for the next task
- Classify each step
- Value-adding (VA)
- Business value-adding (BVA)
- Non-value-adding (NVA)
Example
Example of Analysis is as
