Processes either add value, or add waste to the production of an item or service.
Waste elimination is one of the most effective ways to increase profitability in a business.

To eliminate waste it is important to fully understand exactly what waste is and where it can be found. Toyota, the Japanese automobile manufacturer, after years of work to remove waste, identified the following seven wastes as the most prominent ones.

These seven wastes apply to any organization:

1. Overproduction is to produce more than is needed to meet a customer's need or to produce it before it is required. It is the result of producing to the 'Just in Case' scenario instead of 'Just in Time'.

2. Waiting This occurs whenever time is not being used efficiently. Much of a product/services lead time is tied up in waiting for the next operation. This usually is because the material flow may be poor, the production run too long or the distances between work centers are too great. It is not unusual for a product/service to spend 99% of it's time waiting. Waiting may sometimes seem to contradict overproduction, but time can be used to add value by improving the processes. In a service business waiting is also applicable and includes waiting to get paid, waiting for information, waiting for customers, etc.

3. Transporting Customers do not want to have to pay for transportation between processes, so this is a clear source of a non-value cost. Also every transport event is an opportunity for damage/loss to occur and the quality to deteriorate.

4. Inappropriate Processing Can be easily explained by using the analogy 'using a sledge hammer to crack a nut'. Are you using the right tool/process for the job? Are you using big expensive high precision equipment when simpler tools would suffice? Are you using the right person for the job?

5. Unnecessary Inventory Work in Progress (WIP) is a direct result of overproduction and waiting. Reducing WIP allows the other problems to surface. The analogy often used is that of a ship sailing along on a sea of WIP which hides rocks below the water level. Lowering the water level of the sea of WIP allows the problems to be addressed as they surface. If this is not done there is a high probability that the ship will run aground.

6. Unnecessary Motions This waste is related to ergonomics and is seen in instances of bending, stretching and reaching.

7. Defects Cost money either now or later and their costs impact directly on the bottom line. They can be internal defects found before sale and incur the costs of scrap, rework or delays. They can also be external defects which have been delivered to customers and incur the costs of warranty claims, on-site repairs and potential loss of customers

Example of Waste Audit