The term value added refers to the value added to a product or service by an activity or operation.
It is work that a customer would be happy to pay for.
Perhaps not surprisingly analysis of many businesses and associated processes find that there is a
distinct lack of activities that add real value to a product or service.
- Value Added Analysis will commonly identify three distinct type of activity:
- Customer Value Added
- gives a clear benefit to the customer.
- An activity for which the customer would be prepared to pay.
- Business Value Added
- activities performed for internal business reasons.
- These activities may exist for a number of reasons eg. inefficient processes, legislation,
internal or external bureaucracy.
- No Value Added
- activities that add no value e.g correcting errors/defects
(perhaps the most common activity), wasted transport, checking and waiting
The aim of any new business process must be to eliminate no value added, reduce and,
where possible, eliminate business value added and enhance and build more customer value added.