Value Added vs Non-value Added Activities

​Introduction

​When it comes to running a successful venture, one of the most important things to do is ensuring that you add value to all your activities. Whether you are organizing a charity sale or starting a service business you want to ensure that whatever you offer is actually worth your customer’s investment.
Many people know about the concept of value addition but have a misguided understanding of what does and doesn’t count as a value-added activity. Below is a comprehensive guide that should come in handy in this case.

What exactly are value added activities?

Value added activities are ventures that are altered from their original form to offer the highest possible quality. For an activity to be considered truly value-added it needs to have these 3 key features.


​1. Modification
This means that the final product, whether tangible or not, is different from what you started out with as the business. It is, of course, important to strike a balance between modification and budget monitoring. That way you do not end up spending too much money or even time changing something that needed only slight adjustments.


​2. Value for money
Once you have changed the product or service, the next thing to do is always marketing and sales. Here, you want the clients to feel like what they are paying matches the quality they are receiving. So it is not enough to just modify your product; you need to make it good enough to spend money on.


​3. First time’s the charm
Finally, value addition means getting things done right on the first try. This means that neither you nor your customer has to incur any further costs to make it perfect. 

What are non-value-added activities?

One definition of non-value-added activities is those that are left in their most basic form. They are often full of flaws and challenges and not worth the investment. Non-value-added activities could lead to decent products, but could cost too much in terms of time and/or money to prepare.​

Examples:

Examples to help put things in perspective; value added or not?

1. Repair activities
Repairs are only done on faulty products. This means that though there is modification, you did not get it right the first time.
Verdict: Non value added

2. Assembly
In assembly processes, you take components that were already high quality and functional and you put them together to form something new. There is modification, value for money and if the components are in good condition, there will be no need for repairs.
Verdict: Value added

3. Overproduction
If you produce more than you need or can sell then it doesn’t really matter how good the quality is. You will have to deal with the logistic nightmares storage and inventory. There is also the risk of deterioration and wastage.
Verdict: Non value added.

4. Service provision
Say you go to a restaurant and order a cup of coffee. It is converted from the basic ingredients and served as something you would definitely pay money for.
Verdict: Value added

5. Over-processing

Here is where businesses do more than is necessary to modify a product. For example, adding features which client does need or even recognize. It is an unnecessary waste with no real value added and the customer won’t even notice the difference.
Verdict: Non value added.

​Bottom line

​In a nutshell, the aim of value added services is to save time, save money, minimize effort and produce high quality. Apply the LEAN tool and you should notice a difference in your business in no time.

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