4. Waste Management

Waste can come in several forms, all throughout the organization, from poor time management to incorrect resources assigned to tasks, insufficient documentation, poorly designed processes, hiccups in supply chain, and many other areas that have a “bad” spot in the process and generate waste. In this chapter we will look at some specific areas in the operation such as human resources, process organization, departmental staffing, manufacturing, facilities, and managerial organization that are typically culprits in waste generation.

When we consider how to approach organizational improvements by reducing or eliminating waste, the fundamental thought process will require a project management philosophy of Streamline Thinking.

This will be very difficult because it demands the evaluator to think outside of the box and away from an established paradigm for a normal everyday process in the department. This can be uncomfortable because there will be some changes affecting only processes, materials, or equipment, whereas other changes could lead to movement or elimination of human resources, which can be very difficult. It is important to understand the difference between waste and inefficiency.

Waste refers to parts of a process that are simply not needed or are overstaffed, or things that can be eliminated without affecting the outcome of the process. Inefficiency refers to areas that are “needed” but require improvement to be better and could affect the outcome of a process. In either case, an evaluation should be done to assess the documented process against the actual process for unnecessary things that can be eliminated. The manager should be looking not only at the components of each task, but also the need for each task, as well as the staff needed, at a minimum, to complete the tasks. The manager might solicit the resources doing the tasks for their opinion as well as a process developer for ideas on areas that can be removed.

Task evaluation requires a keen eye on the details of each task in the process. The evaluator must ask herself why each part of the task is there and whether it is required in the overall outcome of the process. This is critical because there might have been unneeded steps added in the design phase or steps added later that really are not needed to accomplish the desired output, and this is waste. Look at the details of each task step and you might find small things that are being done that are not necessary and waste time and material. People performing tasks in a process sometimes add little steps that are not necessary and add time (waste). Focus on the things being done, the materials used, and why each part of the current process is being done, and you will usually find things that can be eliminated. Remember, everything that is used costs money and every minute that is spent costs time and money; so determine what the minimum requirement is to complete each task in the process and make sure that it is as lean and efficient as possible.

If there are resources who are highly skilled and there are assigned tasks not utilizing their skills, the organization is wasting those resources. The organization has the resources available, but is simply not using them to the fullest benefit to the organization. If a resource is doing tasks utilizing her skills, those tasks are performed at higher efficiency and the resource is not being wasted within the organization. Other resources not skilled for tasks to which they are assigned might be struggling or performing at a lower efficiency, but it could be that they are skilled in other tasks to which they are not assigned—this also is a wasted resource within the organization. This is where the manager needs to identify the difference between wasted utilization of resources and poor efficiency in processes.

The difference is in how the manager views human resources in the department. Human resources viewed at the process level would be seen as efficient or not (process efficiency), whereas resources viewed at the organizational level would see poor skill-set utilization as wasting good resources on bad assignments (resource waste). This is the kind of waste we want to eliminate within the department and organization. This does not mean a reduction in workforce, just an evaluation of the skills that resources have against the task assignments they are given.

With the evaluation of processes and resource utilization, the number of staff will probably be evaluated as well, and the manager can determine whether the department has the correct number of human resources. It might be determined that there are some processes that simply have too many resources assigned, and a reduction of staff could improve the cost overhead of a process.

Processes are generally designed to be staffed at the optimum, but can acquire more resources over time for any number of reasons. This is why a periodic review of staff used in the department is needed in order to avoid overstaffing and waste.

The other part of this warning in evaluating staff reduction, when there’s no economic downturn, would be streamlining the organization by eliminating resources when it’s apparent that they are not necessary, or at least when the perception within the organization suggests that they’re not necessary. Resources might question management’s motives for arbitrarily laying off people, resulting in others in the department having to take on more responsibility, and might wonder why this has to be the case. In an economic downturn, staff reduction is typically viewed as a temporary endeavor to reduce cost, and most staff in the organization understand what is happening and why. In this case, management is obviously intending to streamline the organization, which puts an incredible strain on the remaining staff because this does not appear to be a short-term endeavor. This might result in people leaving if they do not agree with the work environment that has been created as a result. So streamlining your processes to reduce waste might result in cost reduction as well as a reduction in workforce. You have to be careful about balancing this against overstressing the workforce and having them take on too many responsibilities, which is not sustainable!

Engineering is a difficult department to evaluate because there might not be as many “set” processes defining how to accomplish tasks. Much of engineering is based on first-level prototype, trial-and-error-type processes, making it a great place to evaluate waste generation. Here are some things to consider when evaluating waste in a department like engineering:

• Number of resources assigned to tasks

• Supplies and materials bought for prototypes

• Equipment being brought in to test prototypes

• Software being purchased and the question of whether the group will use it beyond that project

• Floor and office space being used

Departments like engineering can have a tendency to overspend in these areas because they want to make sure that they have enough to cover what is needed; however, in many cases, too much is purchased out of habit, and this process needs to be checked to reduce further waste.

Manufacturing is an area with lots of opportunities for generating waste, and because there are many areas within manufacturing, this can also be a place to hide waste just as easily. In manufacturing, two primary areas of purchasing take place:

1. Manufacturing product—This is all product and materials purchased that “go into products” manufactured for the organization to sell.

2. Manufacturing support—This is all equipment, fixtures, machines, and anything required to “assist in manufacturing” products.

Product and materials that go into making up the final product to be sold are generally seen as waste free because the bill of materials is well defined and only what is needed is purchased. Two main areas of waste in manufactured products are too much inventory purchased and stored using valuable storage space, and excess inventory to address rework stuck in process. This is an example of “hidden” waste because the “rework stuck in process” area is difficult to measure and manage new versus old inventory. You don’t know the waste is there until you measure and expose it.

Manufacturing support, on the other hand, is much like engineering, in which there can be lots of waste in areas like resource allocation, special materials for fixtures, and testing that don’t get used or that get used once and never again. Time can also be wasted in manufacturing engineering when the engineers are not very efficient with the projects or testing that they are working on. Statistical process measurements need to be done and are very important, but that process needs to be streamlined, efficient, and generally trained and managed by good leadership. This can be another area where waste is “hidden” because the manager might not know what the minimum time requirements are, so he also will not know how much time is wasted.

Table 4.1. Supplier Analysis Matrix, Example

This list, after it has been created, is not carved in stone and it should be reevaluated on a regular basis. Other criteria can be added to customize the matrix. Weights can also be added to criteria that increase the importance of a particular aspect. Suppliers can change over time as a result of problems such as quality, on-time delivery, pricing, and customer service. In some cases, adding or eliminating products might change how the organization does business with that supplier.

Examples of ways a relationship can change might be a supplier having good pricing on the first item it sold in order to get a foot in the door, then switching to a higher price on future items to make up for the profit margin. Another example might be changes in how contracts are structured that introduce new conditions that might be favorable or not for the organization. One area to review is the ability of the purchasing agents to negotiate with suppliers while keeping the best interest of the organization in mind. The buyers can make or break this department, and leadership and training are required here to ensure that procurements are done correctly. If an organization is spending too much on its procurements, this is an area of waste that can be evaluated, and changes can be made to improve spending and eliminate waste.

This area in the facility costs money and should not be long-term storage for items that should be located somewhere else (hidden waste). If most of the space and equipment is used for transition and the layout is efficient, that is good. If the layout has excessive amounts of floor space used for storage or “nontransitional” purposes, that might be waste and might need to be evaluated. There needs to be a separation between inefficiency and waste, because efficiency includes things that are needed in the process but just require improvement, and waste includes things identified as not needed that therefore can be eliminated. Having an outside set of eyes to evaluate the area helps leads to more objectivity about what really is part of the process and needs to be there.

Facilities have more of a tendency to store waste than to generate waste because the facility itself is not usually associated with a specific process, but simply facilitates processes. Many organizations overbuy on the size of the facility for growth, and then fill it up and use all the space right from the start, building in waste. Utilizing the extra space is not a bad thing; it’s when the space usage turns permanent that it can become waste. This can be done from long-term planning strategies in which executive management is planning for growth potential in order to take advantage of current real estate pricing, and large areas of the building might not be utilized but are intended to be utilized later as the organization grows and expands. This is an acceptable strategy because you are able to lock in long-term leases on a larger building to get a building while it’s available. Some companies might have a smaller building and might have to move to a larger building for expansion later, costing much more on leases and affecting their bottom line, giving your organization an advantage.

Another way to look at space management within a building is to consider how much time the employees spend walking around, going to areas like restrooms, and moving within the department to accomplish normal, everyday tasks. Employees’ time spent walking around the building can be a large area of waste that can be evaluated by management and in some cases, can be improved greatly by evaluating the interior layout of the facility. Human resources, in most cases, are some of the most expensive resources in the organization, and if these resources have to spend too much time walking throughout the facility not performing tasks, they are not getting work done for the organization, creating waste. If resources have everything readily available in close proximity, this reduces the amount of walking time, improves efficiency, and can start to eliminate waste.

When managers are faced with making a decision, they are actually faced with a process, and in some cases managers lack a process for making decisions. The manager can spend a lot of time gathering information, deliberating about what course of action to take, and deciding what criteria will need to be used in making the decision. Managers can do this intuitively and quickly because they are generally more experienced and confident in their abilities. They also understand the organization and their department, and the needs and requirements for the decision. Faced with a decision, they gather information, formulate a plan, and decide on something quickly and efficiently (no waste). This is good if an organization has managers capable of doing that. Some managers struggle at making some types of decisions, while making other types of decisions very well, and this is typically due to lack of a decision-making process, which creates waste.

When managers are visible in their department, productivity seems to increase, but when managers move off to meetings, productivity has a tendency to back off and can generate waste within the department. Managers must manage by example here, because their staff does pay attention to what they are doing, and the staff might send a message to their leader conveying their concern about excessive meetings.

In these types of decisions, there are two elements to consider: time wasted in the decision process itself and waste as a result of a decision that was made. Managers and staff can spend a great deal of time in just the decision-making process. This is usually a result of a lack of or no decision-making process. We know that processes help define and organize tasks to increase efficiency in accomplishing a goal.

Decisions are made every day by managers—some resulting in improvements, others resulting in generation of waste. For decisions needed on things currently happening, the manager could revert to the decision-making process that might include an evaluation of new ideas compared to the current way to validate an improvement. For a new process, this might be more difficult because there is nothing to compare it with. In either case, the manager must carefully review decisions to see whether they are creating waste in any way.

One example of good decision making for the manager is in the use of department staff. Because most human resources are responsible for certain processes in the department, their skill is best used in that capacity, and problems can arise if a resource cannot make it to work. The manager has to decide how to resolve this issue: have the process not performed for that day, have someone else perform the process, or perform the process herself. This is a very real scenario that all managers face, making this decision and covering everything that has to be done.

Cross-training is a good way to approach staffing issues. As more and more staff in the department become trained on other areas within the department, the department becomes stronger and the decision process becomes easier, reducing waste. Another byproduct of cross-training is that this allows the manager to evaluate resources in other processes within the department. This might result in seeing skills in a resource that were not known and the resource performing better at a different process than the one he was assigned. Cross-training not only strengthens the department, but also allows the manager to evaluate staffing assignments to ensure that the right skill sets are assigned to the right tasks, reducing waste by redistributing resources and improving efficiency in the department.

On a much higher level in the organization, decisions might need to be considered that evaluate areas such as organizational structure, approach in marketing, sales and product mix, design and layout of each department, and general approach to manufacturing or service. This type of evaluation can be at several levels in the organization, starting as high as the executive branch evaluating the infrastructure of the organization for efficiency and sustainability in the marketplace as well as the effectiveness in accomplishing the strategic business objective. The evaluation can be at the midlevel of management, evaluating the efficiency of each individual department or division with regard to layout, processes, and resource allocation. It is good for the organization to periodically evaluate the operation to ensure that current structuring, design and implementation of processes, and staffing are effectively accomplishing the business objectives.

One common type of change might be staff reduction as a way of reducing overhead costs. This type of change comes with a price because the process tasks have not gone away, but will now have to be done with fewer staff. This work environment results in short-term gain, but might not be sustainable.

Another efficient way to address staffing issues is to redistribute staff to other parts of the organization. Staff can be moved from one department and reassigned to another department that actually needs that skill set. This is difficult because the need for increased staff in the other department has to be analyzed to ensure that it is justified; you don’t want to simply be shifting resources around. This type of analytical approach to change should be used no matter what kinds of changes are being evaluated. Changes a manager makes in his department might affect other departments negatively, so the manager must keep an open mind as to whether the changes will be in the best interest of the organization and not just his department.

As you have seen, waste can exist all throughout the organization and at all levels within the organization. Waste can be very obvious, out in the open screaming to be addressed, as well as hidden in processes, facilities, and poor or no decision process or planning. Waste does cost organizations millions of dollars every year and sadly it often goes unchecked year after year. The manager must be looking for waste if she is going to address it. Waste must always be seen as “not needed” so it can be eliminated if possible. Dealing with waste can be difficult sometimes because hard decisions might have to be made to address what to do with it. If the manager can view waste as costing the organization time, money, or resources, she has a much better chance of identifying solutions to reduce or eliminate waste.

• The resources in the department are valuable and would not be there if they weren’t skilled and needed; it just needs to be determined where they are best utilized.

• Making adjustments to optimize resources both reduces waste in poor resource allocation and improves process efficiency by utilizing the best skill sets, making this a power tool for the manager.

• Evaluating how many resources are used on which projects ensures that projects are covered and skill sets are assigned correctly to maximize efficiency.

• One tool to evaluate spending is to construct a Supplier Analysis Matrix. A supplier analysis looks at both what has to be purchased in the organization and who the qualified suppliers are.

• Managers can mitigate this “perception” by simply communicating what meetings they “have” to attend and what their part might be. In setting this type of precedent, the manager is more transparent and the staff might be more understanding of the manager’s plight with meetings.

• To help eliminate waste, a decision-making process should be developed to efficiently guide you through a decision.

• In designing in sustainable change in cost reduction, the manager might find that he can eliminate a process or combine a process with another, allowing for a reduction in staff. This not only eliminates waste, but creates positive sustainable change.