The 8 sources of waste and how to eliminate them: improving performance with Lean management techniques.

• Author: Kavanagh, Shayne

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Waste makes organizations less able to achieve their objectives; it uses limited resources in ways that do not contribute to the organization's overall goals. Lean is an organizational performance management system characterized by a collaborative approach between employees and managers to identify and minimize or eliminate activities that do not create value for the customers of a business process, or stakeholders. One way Lean organizations strive toward their goal of perfection is by remaining constantly aware of waste so it can be avoided or eliminated. The Lean philosophy identifies eight sources of waste that detract from the value a customer receives from a business process. Educating employees about the eight sources of waste and conducting team-based reviews of business processes to look for and correct them can yield substantial benefits.

The purpose of this article is to describe and illustrate the eight forms of waste as well as the means of eliminating them. A primary example is a recent project undertaken by the City of Bloomington, Illinois, to apply Lean principles to the city's central cash receiving function.

THE EIGHT SOURCES OF WASTE AND THE CITY OF BLOOMINGTON

The Lean philosophy holds that there are eight forms of waste that commonly afflict business processes. The City of Bloomington, Illinois recently undertook a project to apply Lean principles to the central cash receiving function of their city and address sources of waste.

The project started with a half-day team meeting, where Bloomington staff learned about the eight sources of waste and discussed potential waste in the city's cash receipting process, as well as opportunities to eliminate them. The staff built on this discussion by graphically mapping out the current process and further specifying where waste might exist and what the remedies might be. They then designed a new process and agreed on the actions they would take to make the new process a reality. This article will focus on the eight sources of waste, including illustrations from Bloomington's experiences and lessons for other public agencies to consider (if you would like to learn more about the Lean approach, please see GFOA and TechSolve's free research report (1)). The eight sources of waste that will be discussed in this article are: defects; rework and correction; inspection and checking; waiting; inventory/backlog; transport; over processing; and underutilizing people's abilities. (2)

Defects. Ideally, in any process, work is performed correctly the first time. A defect happens when incorrect or incomplete work is sent to the next step in the process or to the customer. Avoiding defects starts with understanding the customer's definition of service quality.

Quality management guru Joseph Juran defined quality as a product or service's fitness for a customer's intended use. (3) Using this assumption, if a government does not have a deep understanding of what a customer wishes to accomplish, then producing a high-quality product with no defects will be impossible. Bloomington identified three types of customers (stakeholders) and their requirements:

* The Citizen. The primary customer is the citizen, who wants satisfaction; fair treatment; accuracy; and timeliness.

* The City Council, Council members want satisfied citizens and assurance that the process protects against risks from fraud, abuse, and unintentional losses.

* Other Departments. Other departments (e.g., water, police) want accurate revenue recognition and meaningful reports.

Once the customer's definition of quality is understood, the process must be controlled to consistently deliver services that are free from defect.

In 1924, physicist Walter Shewhart was working to address the issues of quality and excessive variation, and hence waste, in manufacturing processes. (4) He theorized that any human activity produces variation (since nothing can be done twice with exactly the same effect), but that by understanding variation we can manage it, and thus manage waste. This concept was expounded on by service quality guru W. Edwards Deming, who worked with Shewhart, in Deming's famous management philosophy.

Deming said that "variation is the enemy of quality." (5) Variation can result from inadequate training or work instructions, or simply human error. When used properly, technology eliminates the need for human intervention in the business process, which is the primary source of variation. For example, Bloomington considered scanning checks in order to deposit them electronically, thereby eliminating a great deal of physical handling. The new ERP system was also found to have great potential for electronically storing and transferring records for credit cards, parking fines, and utility payments. Even without new technology, however, there are many ways to reduce variation. Later in this article is a discussion on eliminating the inspection and checking wastes by increasing consistency through better controls and instruction.

Rework and Correction. The second type of...