Waste isn’t defined by customers

Most people introduced to lean manufacturing say it is primarily about eliminating waste. They continue, “Waste is defined as something that the customer is not willing to pay for.” But what if customers can’t be trusted to define value?

My friend and colleague, Doc Hall, founder of both the Association of Manufacturing Excellence and the Compression Institute, constantly challenges people to consider “what if your entire business is waste?” Answering that question requires long term thinking that many of us can’t do well. To even begin to answer it requires that unambiguous definition of the terms “value” and “waste.” I argue that “value” has ethical and moral components, not simply financial.

Addicts pay for unknown mixtures they are told are heroin. Some turn to crime, even robbing family members, to get the money to buy the drugs. Does that mean heroin has tremendous value?

Children are surrounded by toys on holidays and birthdays. Younger ones prefer to play with the wrapping paper and boxes. Many toys are never played with; all end up cluttering the earth, whether floating in the ocean or buried in a land fill. Does that mean the entire toy industry is waste? But I wonder, do toys that develop skills in children have value? Perhaps a segment of the toy industry is waste – entire product lines, if not companies.

That new cell phone and smart watch we can’t wait to buy? Both contain rare earth materials, as do electric cars and wind turbines. The mining of rare earth minerals also throws off radioactive waste. A thousand dollars is a lot of money for an iPhone X, but perhaps it’s not enough.

If customers aren’t the best ones to define value, what about workers? Coal miners in Appalachia would argue that coal mining has value because it gives them jobs. That, despite black lung disease and air pollution in the use of coal. So, jobs over health? But if jobs are the definition of value, we shouldn’t try to become efficient. The more inefficient our processes, the more jobs required.

Investors buy and sell stocks, defining the financial value of a public firm in the process. They do so to increase their personal wealth. Stocks go up and down every day, taking the personal wealth of investors and publicly held companies with them. What, if anything, does this mean to the concept of value, and its opposite, waste?

Social workers, teachers, and nurses are paid little, especially in comparison to professional athletes or FinTech employees. Which offers more value? Profitability has little to do with real value. Profitability is a means to an end, not an end in itself. The goal should be to improve the lives of all five constituencies: suppliers, customers, investors, employees, and the community at large-which includes the future. That can’t be done without profits; focusing solely on profits serves only personal greed.

As you spend energy working to eliminate waste in your company and your supply chain, I encourage you to contemplate what brings net positive value and what does not.

The easy definition of value, what customers pay for, is not the one to guide long term decisions. Nor most short-term ones.

As published in AME’s Target Online