When you run a business that makes or sells physical products, more waste means fewer profits—simple as that.
Whether it’s excess inventory or redundant processes, manufacturing waste prevents companies from achieving their full potential and makes them vulnerable to competitors. It’s nearly impossible to run a zero-waste manufacturing business. However, the right insights enable companies to proactively avoid waste and streamline production.
We’ll explore common types of manufacturing waste, how to identify waste in your production process, and most importantly, how to minimize manufacturing waste so you can maximize your profits.
7 Types of manufacturing waste
Manufacturing waste is an umbrella term for anything that requires resources but doesn’t add value for customers. Manufacturing waste can be grouped into two main categories:
- Necessary waste: This refers to items or processes that don’t directly add value to customers but are needed to run the business—for example, quality assurance testing or production planning meetings.
- Pure waste: This refers to items or activities that don’t add value and aren’t necessary to support the production process. This could be defective products or an employee waiting to use a machine.
The idea of systematic waste reduction originated from the Toyota Production System, which outlined “seven wastes of lean manufacturing:”
- Waste of inventory: Excess inventory increases storage costs. This could be overstock or “just in case” inventory to meet unexpected demands.
- Waste of transportation: Unnecessary movement of materials that isn’t necessary and doesn’t add value to customers. Examples of transportation waste include inefficient delivery routes or supply chain delays.
- Waste of motion: Movements of machinery (or employees) that are redundant or unnecessary. For example, rummaging through paperwork or constantly moving equipment around a manufacturing facility.
- Waste of waiting: Idle employees or machines that cause production bottlenecks. This could be documents pending approval, workers waiting for a machine, or goods waiting to be delivered.
- Waste of overproduction: Producing more goods than needed to meet customer needs. This increases storage costs and increases the chances of spoilage.
- Waste of overprocessing: Performing unnecessary steps in the production process. For example, painting the inside of a product that users will never see.
- Waste of defects: Defective materials or low-quality products that can’t be used because they don’t meet quality standards. This can include incorrectly assembled items or dysfunctional machinery. Defects can be the most costly type of waste because they bleed into the other six forms of waste.
All seven types of waste are detrimental to the production processes. But before you eliminate them, you have to find them.
How to identify waste in your manufacturing process
Some forms of waste are obvious, like a broken machine. But others are harder to identify. Let’s cover a few ways to find waste in your manufacturing process.
1. Gather feedback from employees
One of the easiest ways to identify waste is by sourcing feedback from everyone involved with production, such as on-site managers or production line workers. These employees can give you ground-level insights into what’s working (and what isn’t) in the manufacturing process.
2. Value-stream mapping (VSM)
Value-stream mapping, or VSM, is a flowchart that outlines every step in the production process. By mapping out the people, processes, and information needed to deliver a product, organizations can easily identify areas of waste.
VSM is also known as “material- and information-flow mapping.”
3. Statistical process control (SPC)
SPC is a technique that involves using statistical analyses to measure and monitor the manufacturing process. By quantifying aspects of the production process, companies can get evidence-based insights instead of waiting until problems surface on their own.
4 Benefits of eliminating manufacturing waste
Reducing manufacturing waste makes your company more efficient and, in turn, more profitable. Let’s take a look at four key advantages you can gain by eliminating manufacturing waste.
- Higher profits: Eliminating manufacturing waste is an effective way to reduce costs that aren’t necessary to run your business.
- Increased productivity: Eliminating roadblocks streamlines the manufacturing process so you can accomplish more in less time.
- Higher employee satisfaction: It’s hard for employees to thrive when their routines are bloated with redundant tasks or bloated processes. Eliminating manufacturing work can boost team morale and free up employees to focus on higher-level work.
- Competitive advantage: Maintaining a lean manufacturing process keeps your company competitive, especially in uncertain times when the margin for error is slim.
5 Ways to reduce manufacturing waste
Establishing practices to reduce manufacturing waste is one of the most important steps companies can take to maximize efficiency and profitability. Here are five waste reduction tips you can implement at your facility.
1. Use inventory management software
Business management software QuickBooks Enterprise gives you a comprehensive view of all materials involved in the manufacturing process. Here are a few ways QuickBooks Enterprise helps businesses reduce waste:
- Automation of manual tasks reduces the risk of human error
- Enhanced visibility helps you reduce obsolete and excess stock
- Real-time inventory tracking lets you find and transfer items quickly
2. Automate your warehouse operations
Optimizing the layout and operations within your warehouse is a key component of waste management. The most efficient way to do this is with warehouse management system (WMS) software. This enables companies to maximize storage space, automate shipping tasks, and minimize friction during picking and packing.
3. Utilize just-in-time inventory management
Just-in-time (JIT) manufacturing is an inventory management strategy where materials are only purchased and received when they’re needed for production—not before.
The key benefit of JIT manufacturing is that it makes production runs shorter. These quick turnarounds reduce the likelihood of inventory becoming damaged or obsolete. Keeping fewer raw materials on hand also means you don’t need as much storage space.
Finally, JIT can minimize labor and operations costs since the factory isn’t manufacturing products just to store them in a warehouse.
4. Reduce packaging
Rethinking how you pack and ship products can significantly reduce manufacturing waste. Even small changes can yield big benefits in terms of profit and efficiency.
For example, when Apple launched the iPhone 12 they decided to only ship a cable but not the charger or earphones. This move cut down their packaging waste and reportedly increased Apple’s profits by $6.5 billion.
5. Establish a preventative maintenance schedule
Wear and tear is a normal part of any manufacturing process. However, establishing a regular maintenance routine can catch problems before they throw a wrench into your workflow. Scrambling to fix a breakdown in real-time results almost always costs more money (and time) than proactive maintenance audits.
How QuickBooks Enterprise gives you the visibility to eliminate manufacturing waste
Whether you have five or 50,000 SKUs, QuickBooks Enterprise has all the tools you need for efficient, profitable manufacturing operations. Here are just a few features that can help your business cut down on costly waste:
- Streamline your manufacturing process by automating builds for assemblies.
- Real-time tracking of manufacturing costs from raw materials to finished goods.
- Manage your inventory and order management from one central dashboard.
Learn more about how QuickBooks Enterprise can help your business reduce manufacturing waste and set you up for success.
