Waste is Costly

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In our last post in our series on lean, we introduced the seven wastes.

Why does waste matter?

Waste matters for a number of reasons, though the top three for me are listed below:

  1. It’s damaging to the environment
  2. It’s expensive
  3. It’s slow
  4. It wastes human lives and potential

I’m going to cover the first two items here today and we’ll circle around on the last two in future posts.

Waste is a non-value-added activity, as the customer won’t pay you for it (don’t believe me? Try to sell your customer scrap parts and let me know how that works for you). In terms of the expense of waste, each of the seven wastes is ultimately paid for by the customers, but many are simply absorbed the company. The “absorption” by the company means the company is less profitable and has less money to, say, provide benefits to employees, pay raises to deserving workers, or provide a myriad of corporate perks that so many people have come to rely upon.

The loss of profitability also affects each of us in terms of our retirement. Let me explain here. If you have a 401k, that’s the primary vehicle most people are using to get them to a comfortable retirement. That 401k has mutual funds. Those mutual funds hold shares of stocks. Those stocks pay dividends and fluctuate in value in accordance with the overall profitability. Thus, when profitability goes down, the statistical probability you will have to financially support your parents in their later years goes up.

So, corporate profitability matters. And it matters a lot.

Somewhere, an anti-capitalist hippie just died.

There’s a misconception among a large percentage of the population that corporations are necessarily wasteful enterprises. You will hear stories of factories laying off workers (treating them like just another machine in the process), the huge amount of scrap that ends up in landfills, corporations that pollute, and the fact that a high percentage of actions performed each day don’t add value (and thus are not meaningful).

Lean thinking says there’s nothing necessary about the state of many of these corporations, as they actually damage the company long-term.

Each of these activities is not only bad for the individual that works for such a company, but it’s also bad for the customer that consumes the products or services products. And, even more, it also harms the overall wellbeing of the corporation.

Employee turnover is expensive.
Scrap in landfills is expensive.
Not adding value is expensive.
Pollution is expensive.

There’s been a shift of increasing awareness in the business community of the high cost of waste (whether in physical waste or wasted potential). Even pollution itself, one of the worst of all corporate villainies, is highly expensive when you consider it in its entirety. After all, the company that pollutes first had to acquire, process, and manipulate whatever material it was that created the pollution before having a byproduct that they then used to pollute with. The company wasn’t able to store and sell it, for example. The company wasn’t able to reduce it. Instead, the company paid the cost to pollute (and often must pay fines and more). And, of course, the rest of the community also suffers when companies engage in such activity. The solution to pollution is to properly consider all of the costs for polluting (and in some instances to ensure the corporation pays all of the costs and not simply the community at large).

There’s clearly exception to the above rule where a “Tragedy of the Commons” could occur. But, in general, a recognition of the high costs associated with pollution and waste are being more recognized than ever, which is truly the best long-term sustainable approach to sustainability.

Waste is expensive and damaging. In our next post we’ll talk about the waste of human potential.

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