Jun
Value Adding and Value Added
In lean, we are familiar with the concept of “Value Adding” activities – those activities which transform a product, service, information or cash in a way which the customer would be willing to pay for. The purpose of “lean”, of course, is to remove non-value-adding activities (i.e. waste) and, thus, create free capacity which we can use for more value-adding activities which (with the same level of resources) generates more profit.
In accounting, we also have the term “Value Added”. This has a specific definition and is the sales value of output less the value of all external inputs. That is to say that “Value Added” is sales income less the cost of bought-in goods and services.
Posted by Ross Maynard on Thu, 24 Jun 2010 read more...