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Waste does not add any value to a product or service. Toyota engineer Taiichi Ohno came up with seven categories of waste (called muda in Japanese): waiting, transporting, processing, inventory, motion, defects/rework, and overproduction.

Waiting Waiting is encountered everywhere: waiting for a machine that has broken down; delay in arrival of materials; or being late for a meeting. The cause can be bad planning, bad organization, lack of proper training, lack of control, or laziness and lack of discipline.

Transporting Transporting or moving things from one place to another is a common form of waste that does not add value to products. It should be eliminated or reduced as much as possible. There are two aspects to be considered: eliminating the need for transport by better layout; and improving the method of transport.

Processing Processing waste is inherent in design. For example, an electronic typewriter has fewer parts and processes than a mechanical one. Replacing a metal dustbin with a plastic one can reduce several steps in the production process. Using preprinted forms can save paperwork. Unnecessary processing and procedures are other forms of waste.

Inventory When excessive inventory is carried, it ties up valuable financial resources, may deteriorate over time, and takes up space. Work in process and finished stock are also waste.

Motions Movement of equipment or people adds no value. All physical work can be broken down into basic motions. Motion study is one aspect of industrial engineering that assists in reducing wasted motion. Usually this is done by improving the workplace layout, practicing good housekeeping and workplace organization, and introducing low-cost automation.

Defects/rework Waste caused by poor-quality products and defective parts or poor service is a common form of wast. Time must be spent in reworking poor products or addressing customer complaints. Last-minute urgent requirements may disrupt systems and cause delays in delivery to customers. Sometimes poor quality causes accidents.

Overproduction Often manufacturing produces more than is needed. Unused products may have to be discarded when not required later, which is costly. Overproduction is caused by poor planning, poor forecasting, producing too early, and lack of quality control.

Other types of waste identified recently include: untapped human potential; inappropriate systems; and energy and water.
See also: Toyota Production System; Lean Production System

The Social Accountability (SA) 8000 standard is a global social accountability standard for decent working conditions based on international workplace norms of the International Labour Organization (ILO) conventions, Universal Declaration of Human Rights, and UN Convention on the Rights of the Child. The standard was developed by Social Accountability International (SAI), established in 1997. Under the auspices of SAI, representatives of all stakeholders including trade unions, human rights organizations, academia, retailers, manufacturers, and contractors as well as consulting, accounting, and certification firms cooperated to develop SA 8000 in 1999 and revise it in 2001. The SA 8000 standard and verification system is a credible, comprehensive, efficient tool for assuring humane workplaces. The major elements of SA 8000 are:

1. Child labor (no workers under the age of 15 years)

2. Forced labor

3. Health and safety

4. Freedom of association and right to collective bargaining

5. Discrimination (no discrimination based on race, caste, origin, religion, disability, gender, sexual orientation, union or political affiliation, or age)

6. Working hours (comply with applicable laws but in any event no more than 48 hours per week with at least one day off for every seven-day period)

7. Compensation

8. Management systems (encourage integration of the standard into organizational management systems and practices)

Sanitary and phytosanitary (SPS) measures deal with food safety and animal and plant health standards. SPS measures (standards) are set by international organizations (the FAO-WHO Codex Alimentarius Commission for food safety; the International Office for Epizootics for animal health; the FAO’s Secretariat of the International Plant Protection Convention for plant health).

The scatter diagram is one of the seven basic tools of quality control, which include the histogram, Pareto chart, check sheet, control chart, cause-and-effect diagram, and flow chart. Scatter diagrams show the relationship between two variables. They are basically a graphic tool depicting the influence that one variable has on another. A common diagram of this type usually displays points representing the observed value of one variable corresponding to the value of another variable. The scatter diagram is a very broad picture of the relationship and will only help to confirm that a relationship exists and how strong it is. It provides a visual and statistical test of how strong or weak the relationship is (see accompanying figure). The stronger the tie or dependency, the greater the likelihood that a change in one will impact the other. A scatter diagram is very useful when it is necessary to adjust the value of a variable but one is not sure of the effects of this variable on the other.


Strong Correlation

Strong Correlation

Scatter Diagram2

Moderate Correlation

Scatter Diagram

Weak Correlation

Securitization is a financial tool that relies on cash flows of underlying assets. Under a securitization scheme, a company raises money by issuing securities that are backed by specific underlying assets. These underlying assets vary from collateral real estate to loans such as mortgages and auto loans. Cash flows borne by the underlying assets are the sources of funds for investors in securities.

Depending on the differences in underlying assets, securitization products can be classified as asset-backed securities, residential mortgage-backed securities, commercial mortgage-backed securities, collateralized debt obligations, and asset-backed commercial paper.


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