Value-added activity
A value-added activity contributes to a product's utility in a way customers recognise and are willing to pay for; in activity-based management these activities are retained and optimised while non-value-added work is targeted for.
FrameworkActivity-based management
See it move
A 20-hour production process splits into two blocks. Thirteen hours (65%) go to value-added work: machining a part to tolerance, assembling it, and testing it against specification — steps a customer would recognise and pay for. The remaining seven hours (35%) are non-value-added: moving stock, storing it, and waiting between stations, which add cost but no customer-recognised utility.
Check yourself
A furniture manufacturer is classifying its production activities as value-added or non-value-added. Which of the following is most likely to be classified as a value-added activity?