Abstract

The value-added ratio (VAR) can measure improvement in all processes in all organizations. For a given process, VAR equals the time devoted to process steps of interest to the customer divided by the total process cycle time. The typical VAR is less than 10%, often less than 1%. Therefore, the greatest room for process improvement is in reducing wasted time in the nonvalue-added steps of the process. Although it is unrealistic to expect VARs to come close to 100%, world-class organizations attain VARs much higher than 20%. Improving VAR should be done without absolute targets and without compromising quality. A VAR improvement program requires leadership from top management and participation of employees.