Occam’s Razor, Value Added, and Waste

The manufacturing people I know are not fond of theories. They prefer to be on a shop floor with oil mist in the air and machines banging away, observing and acting on the actual situation, than in a conference room, drawing boxes and arrows on a white board, calling it a system and arguing about it. Theories, however, are not a luxury. We need them to structure, organize and focus our thinking about the reality we perceive. Pascal Dennis calls them mental models, and, as Georges Matheron used to say, nothing is as practical as a good theory. A good theory is sophisticated enough to solve real problems, yet simple enough for people  to understand and apply. This is a tall order. To fulfill it, you must not only be inclined to abstract thinking, but you must also have the time to do it, and the ability to communicate.

And there are theories on how to make theories, such as Occam’s Razor, which says that,  among competing theories, you should use the simplest until you have evidence to prove it false. Scientists, engineers, medical doctors, and cops do this all the time. If you make a theory more complicated than it needs to be for its purpose, you make it more difficult to confirm or refute, apply, and teach. About Lean, Occam’s Razor says that we should not have more hypotheses or concepts than strictly needed, as they would be unnecessary, or  muda. If we had a list of seven categories of waste for building theories, Occam’s Razor might provide the first: Unnecessary complexity.

When you read Jim Womack’s theory of Lean, as expressed in Lean Thinking and replicated in much of the American and European literature, you find that it is based on a concept of value-added (VA) that is more complex than the concept of waste (muda) used in the Japanese literature. Jim Womack’s VA is defined as what “the customer is willing to pay for.” I found no reference to this notion either in the works of pioneers like Taiichi Ohno and Shigeo Shingo, or academic observers like Yasuhiro Monden or Takahiro Fujimoto, whose works are available in English. Even a recent author like Mikiharu Aoki, whose 2009 book on the heart of introducing TPS is only available in Japanese, manages to explain the entire system without this notion. It is also absent from Jeffrey Liker’s Toyota Way. You do find occasional references to “value-adding work” in the Japanese literature, but always to designate activities that physically change materials, which is not the same as Womack’s VA. If they don’t need this concept, do we?  or is it a violation of Occam’s Razor?

The confusion about VA is reflected in the large amount of questions and requests for clarification that every mention of it generates in discussion groups. VA sounds deep, and everybody wants to make sure they understand what it is,  how to recognize it, and how to separate activities among “Value-added,”  “Non-value added but necessary” and “Unnecessary.” In particular, the distinction between “Value-added”  and “Non-value added but necessary” would be useful if there were differences in the actions taken about these two categories of activity. Let us take two examples:

  1. Fastening two parts with a screw is usually put in the “Value-added” column. About this kind of operation, first you make sure it is effective, meaning that you use the right screw on the right parts, thread it truly, and apply the right torque. Then you work on making it efficient, so that, for example, no operator has to walk six feet back and forth to pick one screw or fetch a screwdriver.
  2. Revision control on process specs usually goes into the “Non-value-added but necessary” category. A customer would not be thrilled to pay for it, but the plant could not operate without it. First, you want to make sure it is effective, so that the right instructions are posted at each workstations and the right programs downloaded to machine controllers. Then you want to make it efficient, so that engineering changes are either rejected or approved and implemented promptly, without using an army of people to do it.

The two F’s, Effectiveness and Efficiency, are what you pursue in both cases, in the same order. Several people have tried to explain to me how fundamentally different these cases were, but I still don’t see it. I really don’t care how different the activities may be from a philosophical standpoint. All I am interested in is what you do about them, and if the actions are the same, I see no point in having two categories. One argument I heard is that you do “non-value added but necessary” activities only because you have not yet found a way to eliminate them. But the same is true value-added activities. The fastening operation could be automated, the screw replaced by a rivet, or the parts could be welded together, or the entire assembly could become a single molded part… Just because the operation is “value-added” doesn’t mean you are not trying to eliminate it.

Using just two categories — what you need to do and what you don’t — is not only simpler but these two categories are also easier to tell apart. As we all know, customers’ willingness to pay is only proven by actually payments, and therefore cannot be clearly established for a fastening operation half way through an assembly line. On the other hand, an operation is unnecessary if and only if its elimination would not degrade performance in any way, and we have Ohno’s list of waste categories to help us locate them. If we eliminate any kind of waiting, for example, we know that we will improve quality, reduce costs,  accelerate delivery, without jeopardizing safety or hurting morale. We don’t need to look anywhere outside the workstation to establish this.

Womack’s VA/NVA analysis bestows the “value-added” label on a small number of activities while branding everything else as “non-value-added.” By contrast, Ohno’s list of waste categories is finite. and everything that is not explicitly identified as waste is accepted as necessary. Whenever this kind of classification is made, it is only valid under current conditions.

13 comments on “Occam’s Razor, Value Added, and Waste

  1. I have always considered paperwork that must be filed to comply with some (overreaching) government regulation as “non-value added but necessary”. Much internal paperwork is purely NVA and should be eliminated. There is always a better way.

    • The difference between paperwork that is produced as part of a government mandate and excess internal paperwork is that the first is a condition for being in business while the second is not. What more do you need to know in order to decide what to do?
      The government may not be your customer but is definitely a stakeholder in your business. As citizens we expect it to respect every business as a contributor to the economy, but also to make sure that it does not harm people through unsafe work practices or products, pollute the environment, or mislead the public about its financials.
      What we want the government to do about other businesses does not necessarily please us when it affects our own, but we have to acknowledge it as necessary. Qualifying it further as “non-value added” strikes me as pointless because it has no practical consequences.

  2. I don’t really agree with your statement that Ohno never talked in terms of VA/NVA. Ohno never used those terms but in “Toyota Production System – Beyond Large Scale Production” he explains the origin of the wastes very simply.

    On page 19 he says:
    “This means that if we regard only work that is needed as real work and define the rest as waste, the following equation holds true whether considering workers or the entire line: Present Capacity = Work + Waste”

    He even goes onto claim that true efficiency is when you eliminate all of the waste and only keep the work. He doesn’t use the terms value added or non-value added but I see absolutely no difference between his definition of “work” and Womack’s definition of Value Added. Ohno calls identification of wastes to eliminate as “The preliminary step toward application of the Toyota production system”. The word preliminary implies that he was speaking of waste in terms of the same absolute that Womack speaks of. Overproduction, Waiting, Transportation, Processing Itself, Inventory, Movement, and Defects are simply Ohno classifying of “Waste”.

    I don’t think the two “theories” compete as much as they compliment.

  3. Dear Kris:
    I guess my key point was not clear. In a nutshell:
    1. Ohno’s model: two categories, work and waste
    2. Womack’s model: three categories: VA, NVA but necessary, and NVA.

    Three categories is more complex than two. Occam’s Razor tells me not to use the more complex model unless I have compelling evidence that it is more powerful than the simpler one. I don’t, and I don’t know of any Lean expert in Japan who disagrees with me.

    • Okay. I guess I needed the nutshell explanation. Now I totally agree with you. I’ve never liked the NVA but Necessary description. Necessary will depend on the perspective of the viewer. It’ really a distinction of the difficulty of the waste to be eliminated. When you say that it is NVA and Unnecessary you are really saying that it is low hanging fruit that someone should have eliminated yesterday. When you say it is NVA but Necessary it means that eliminating this waste will have an effect on other processes or systems that may or may not be valuable.

      I completely agree that distinguishing between the necessary and unnecessary waste is in itself wasteful. Calling the waste necessary also takes away from the tension that you need in order to drive continuous improvement. Necessary implies that the waste is okay.

      Of course, not everyone has the intestinal fortitude that Ohno had. One of the most interesting conversations in any lean class I have ever taught occurs when I tell them that everything leadership does falls in the category of waste. It might not be best but it is easier to follow that up with a statement by saying that it their work is necessary. 🙂

  4. Comment in the Lean Six Sigma Worldwide discussion group on LinkedIn:

    Very interesting distinction, and I agree with your foundational argument. Over-analyzing is likely a tendency for many of the personality types that pursue Lean (and Six Sigma) philosophies, and I must admit, has probably been a fault of my own on more than one occasion. Adding more and more categories and distinctions only makes the method more complex and time consuming. I guess that old adage K.I.S.S. applies

  5. Comment in the Lean Six Sigma discussion group on LinkedIn:

    I don’t care for the seven wastes because they are at different levels of specificity. For example, waiting can include the other six (transportation, inventory, motion, overprocessing, overproduction, defects). And, they don’t tell me if they are needed (!).
    I’ve been a long-time proponent and user of Occam’s razor, as I am always trying to reduce and simplify.
    However, for me the reduction (as the context of theories being practical–nice insight!) has to provide an answer to “how does this help?” or “how do I use this?” Reducing to what you need to do and what you don’t, appears to help.
    However, what if I need something simply because I made the process too complicated? How do I distinguish between something I need to do at this point in a process even though it is not something I need to do at all for the overall purpose. How do I ensure I have the right scope to know whether I need to do something? The two categories do not appear to tell me.
    For example, do I really need to get my car keys to start the car if I know how to hot-wire it?

  6. Comment in the Lean & Kaizen discussion group on LinkedIn:

    Very insightful that James Womack and Daniel Jones simplify VA as “what the customer is willing to pay for.” Can’t be any more clear than that! That the other LEAN masters, Ohno, et. al., do not make this distinction was very revealing as well.

  7. Comment in the Lean Six Sigma Canada discussion group on LinkedIn:

    I agree.

    In terms of efficiency and effectiveness, I see efficiency as how fast a hole can be drilled but effectiveness covers whether or not we actually need the hole.


  8. Comment in the Lean & Kaizen discussion group on LinkedIn:

    When I spoke the first time about Occam’s Razor a person said to me ” We are not at philosophy school, we work in a factory.” At the end of the training he changed his idea about the benefit of Occam theory application. Thanks a lot for the news

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