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For instance, a credit manager has many “customers” – the finance department, legal, etc. These would be willing to pay for (one of the criteria that define value add) an activity that mitigates the risk of a customer exceeding a credit limit. But the ultimate customer may not be willing to pay for it, so the same activity in the same process is both a value add or, at best a necessary non-value add.

It is a great question, one that many people struggle with. It is also the reason a SIPOC is so important to your project. When you define where the process begins and ends, you have framed the process to be studied. Those that receive output from that framed process are the customers. Those that provide materials, machines, methods, etc. to that framed process are its suppliers. Those that work inside the frame are just that – part of the process. Now, just as you noted, if you narrow the scope of the process to any one step listed in the SIPOC, you could define it as your process as well. And if you do, some people working inside the frame are now suddenly suppliers. The ones that receive the output from that one step are now the customers. So it all depends on the focus of what process are you studying.

Now your question was about evaluating the steps to determine if they are value-added. You asked about various departments and even about the “ultimate customer,” which usually means to people, the entities that pay your company for your products or services. I hope you can see that “it depends” on what process you are focused. Value-added means it is of value to the customer in your SIPOC, which may not be the “ultimate customer” at all.

So, all steps that don’t meet the three criteria of value-added, are by definition, non-value added. Certainly there are “internal” resources that want to make steps value-added for their purposes. These are what are many times the steps that become “non-value added – required.”

Craig Tickel

Craig is a Senior Consultant at GoLeanSixSigma.com and a Master Black Belt with over 25 years of success working with companies like Procter & Gamble, Johnson & Johnson, General Electric, Starwood Hotels & Resorts and Stepan Company. He’s an expert at helping people learn and apply Lean Six Sigma to achieve their goals.