Author: Dário Yanagita
Technical Review: Sergio Niyama
You have probably heard this question before, as well as the standard answer. It appears in virtually all Lean literature.
My motivation for writing this article is that I have noticed significant difficulty among some students in identifying and understanding the seven wastes (Muda) of the Toyota Production System (TPS). This difficulty often arises from a lack of clarity about what value added (VA) truly is.
After all, if we do not know what value is, how can we identify its opposite waste?
I realized that the root cause of this difficulty lies precisely in understanding what value added actually means.
The concept of value added is the central starting point and the absolute focus of the entire Lean philosophy within TPS.
Value is strictly defined from the customer’s perspective: it is what the customer is willing to pay for and what transforms the product (or service) toward its desired final state.
TPS classifies activities within the value stream into three categories:
- Value Added (VA): Activities that add value and for which the customer would be willing to pay, such as assembling a component or any activity that transforms the product.
- Necessary Non-Value Added (NNVA): Activities that the customer does not pay for and that do not add value but are required due to regulations or process needs. Examples include safety inspections, legally required quality checks, and filling out tax documentation. (TPS seeks to minimize these activities.)
- Waste (Muda): Activities that do not add value and that the customer is not willing to pay for. These should be eliminated. They are the seven wastes: Overproduction, Waiting, Transportation, Inventory, Motion (people), Overprocessing, and Defects.
From the customer’s perspective, several important questions arise:
- What is the origin of value?
- How does the perception of value arise?
- Why does the customer conclude that something is worth paying for?
Let us analyze a simple everyday situation.
For example: having a sweetened cup of coffee.
Where do the packages of coffee and sugar we buy at the supermarket come from?
Why do we spend our money to buy these products?
Why do we perceive value in them?
To answer this, I propose a reflection: if we could not buy them at the supermarket and had to plant sugarcane and harvest coffee ourselves for personal consumption—what would we do?
Let us add a few more questions:
Do we have enough space to plant sugarcane and produce our own sugar?
Would the balcony of our home be enough to grow coffee for a year’s consumption?
Most likely, the conclusion is: we would not plant them.
The first conclusion I reach is that when we buy something at the supermarket, we perceive value in a product or service and we are paying for the solution, convenience, and efficiency it provides. The customer is willing to pay because the product or service makes life easier.
If an activity is not a transformation that the customer is willing to pay for (VA), it is at best a burden to be minimized or, more often, waste to be eliminated.
The true understanding of Muda begins with distinguishing between what the customer values and what the customer merely tolerates.
We may even have the skills to grow our own coffee plant or sugarcane, but we clearly perceive that it is more efficient to pay for a specialized product or service than to try to do everything ourselves especially when we lack resources such as knowledge, skills, physical space, and equipment.
When we buy coffee, we are willing to pay for all the stages that effectively transform the raw bean into the final beverage: planting, harvesting, drying, roasting, and grinding, culminating in a packaged product ready for use. These are value-added activities in the coffee value chain.
Land leasing, diesel for tractors, electricity for irrigation, and agricultural inputs are inherent production costs. The manager’s objective is to ensure that resources are used with maximum efficiency by identifying and promoting continuous value flow, Just-in-Time, and Jidoka.
In other words, the process of taking coffee from its origin to the final consumer constitutes a complex value chain, where each phase, from cultivation to industrialization and distribution, is crucial in adding perceived value to the product.
The convenience experienced by the customer when purchasing the item from the shelf is actually the result of all these processes.
The selling price materializes the perceived value and serves to efficiently compensate the entire chain. For this reason, managing and eliminating waste (Muda) becomes essential.
In essence, understanding what truly adds value is the first step toward seeing waste. When we understand what the customer values, we can more clearly distinguish what transforms the product from what merely consumes resources.
Dário Yanagita – d.yanagita@br.honsha.org
Dário has 30 years of experience in the automotive industry in Brazil, including 15 years working at Toyota do Brasil. He has expertise in machining, assembly, logistics, quality, and environmental management. He has implemented Lean production lines, Kaizen programs, managed team development plans, and led Lean transformations in companies.
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