Clara is hoping to use the information to compare the performance of her department with similar departments nationally and also identify potential areas for cost reduction. Discuss.
Value-added activities
Value-added activities are important to the customer.
Value-added activities increase the worth of the product or service to the customer.
Non-value-added activities
Non-value added activities consume time and cost but add no value for the customer.
Minimizing or eliminating the non-value added activities increases productivity and reduces costs.
Non-value added activities may be associated with lack of quality-dealing with customer complaints
Inspecting components from suppliers
Order entry errors
Grey activities
Activities that are of no value to the customers but may be essential to the functioning of the departments
Assigning work and communicating with employee’s falls into this category.
General principle
Managers clearly understood that there was a need to reduce time on non-value added activities and reinvest this time in value-added activities.
Internal v external
Managers were concerned that what external parties thought was value added the “internal” view was different.
How do you reconcile the different views?
Bureaucracy Managers
Commented that some activities have to be undertaken because of the pressure from the bureaucracy even though they do not add value
Non-value added activities
Need to talk to past customers to revue success.
Checking someone’s work was seen as non-value added activity.
Photocopying was seen as both - value and non-value added activity: clearly a problem of definitions.
Research
Is research a value-added activity?
Is monitoring projects a value-added activity?
If a project is a bad decision then it is not a value-added activity.
Do we know the outcomes? Helps identify value-added activities.
Outputs
Does department have a clear understanding of who benefits from the information provided?
Has the department benefited the local community?
Cannot control demands from other departments!
Can the department identify discretionary and compulsory activities?
Should the department develop a system of charging for work done for other departments?
Summary
Clearly the managers found it difficult to agree if the output of the department added value to the local community.
Will additional investment be attracted to the area?
Are jobs being created?
Difficult to measure outputs!