Non-value-added activity
A non-value-added activity consumes resources while adding nothing from the customer's perspective, such as machine set-up or defect inspection; eliminating such activities is the central cost-reduction lever in activity-based management.
FrameworkActivity-based management
See it move
A typical 10-hour production cycle splits sharply: only 2 hours is value-added assembly work the customer actually pays for. The remaining 8 hours is non-value-added — materials handling, queueing between departments, and defect inspection. Activity-based management targets that 8-hour share for elimination, because customers never pay for time spent waiting or being moved.
Check yourself
An automotive parts supplier finds that a significant share of its total production hours is consumed by re-inspecting components that failed initial assembly checks. Under activity-based management, how should this activity be classified and what does that imply?