What is Value Added?
The most important thing to understand about value concepts is that they always revolve around the customer. Customers are the ones who set the standard for value, which means it’s based on whether the customer believes the product or service will address their specific needs. Increasing appeal by adding value may encourage buyers to spend more money on more advanced solutions or persuade them to try the solution in the first place.
With this in mind, you can understand the term value added (VA) to apply to any process or action that increases the appeal of a particular solution to customers. What constitutes value is usually obvious and logical, but it’s still easy to get it wrong if companies are out of touch with their base.
The Benefits of Value Added
Understanding how to add value is everything in business. Every company seeks to maximize the value they deliver to customers as they minimize the work and resources it takes to deliver it. The benefits of value addition are all positive and revolve around anything that improves the desirability of the solution, which could include things like aesthetics, features and accessibility.
How to Calculate Value Added
Business leaders need to understand what processes, tasks and activities in their workplace are actually adding value. These are the parts of the business that are making money, which means they need to be the central priority moving forward. The goal of any lean management program is to invest in VA activities and remove everything else.
The simplest way to calculate value added is to look at the “before” and “after” for each procedural stage. This means asking questions like: Did this process accomplish the necessary or expected transformation? Was meaningful progress made or was there a lot of wasted or pointless effort? Was item quality compromised during this development stage?
What is Non Value Added?
Non value added (NVA) processes are those that do not provide much, if any, value to the product or solution under development. This could take the form of something as simple and mundane as shuffling items around a workspace more than necessary. Ultimately, a NVA process is any development stage, task or activity that does not contribute to the value of the solution in the eyes of the customer.
The Benefits of Non Value Added
Studying the concept of NVA is just as important as value addition when it comes to embracing lean management practices. The consequences of waste and inefficiency are the same as failing to capitalize on new opportunities. Embracing more efficiency doesn’t stifle innovation, it actually fosters it. An efficient workplace has more financial and intellectual resources for new developments and improvements.
How to Calculate Non Value Added
You can figure out what your non value added processes are by asking yourself the same basic questions. You need to know if each step of each development stage is adding value to the final product. A NVA is any type of investment, whether it’s time, labor or space, that does not directly contribute to the value of the solution for the end buyer.
Value Added vs Non Value Added: What’s the Difference?
Value and non value added are inverse concepts that are two sides of the same coin. The only difference is in the positive and negative. Value added processes make meaningful and worthwhile contributions to the quality of the deliverable, while NVAs do not.
It’s important to note that many value adding processes actually do have NVA components within them. These differences are revealed as businesses analyze and map their processes to a finer degree. This type of detailed and data-driven analysis provides essential insight for developing a lean management strategy.
Value Added vs Non Value Added: Who would use VA and NVA?
Any business that wants to truly take control of their internal operations and streamline them in a meaningful way must examine process value. Leaders need to know where value is being added and where it’s not. They also need to know where resources are spent on NVA processes and if any of them could potentially decrease value by compromising quality.
Choosing Between Value Added and Non Value Added: Real World Scenarios
Successful businesses need to approach lean management goals from both sides if they want to get the most out of their efforts. Cutting NVA waste frees up more resources for profitable pursuits and mitigates unnecessary risks. Investing in VA activities to improve the quality of the product increases customer relations, grassroots marketing and brand image.
Customer is the King of Value
When it comes to value, the customer really is the king and they are always right. That’s because value is really just a word that describes the subjective and constantly-changing desirability of a particular solution for people drifting in a sea of problems. Business leaders need to listen to their customers and learn from them before they try to address VA and NVA in their own company.