This is a guest post by Pam Cargill. Pam is an expert at optimizing residential solar operations. She’s helped scale operations both at Alteris Renewables (now RGS Energy) and Sungevity. She knows all the secrets of the larger installers and is now running her consulting practice, Chaolysti, to spread what she’s learned.

Here are a few ways you can learn more from Pam.

• Pam is hosting a 1 hour webinar on the event on May 22nd at 1pm EST titled “Using 7 Forms of Waste and the Critical Path Method to Lower Operational Soft Costs in Residential Solar”
• Pam is also teaching a module in our free 3 week online Residential Solar Sales Optimization Course that starts on June 17th. There’s large different between the webinar and the course. While the webinar content will still be amazing, it’s more of a lecture than a class. In the course, you will be applying these lessons to your business, having student to student interaction, and getting one on one feedback from Pam.

Enter Pam Cargill. 

Soft costs. While analysts have been long on talk analyzing what they are and how they are impacting the industry, they have been short on solutions. Why? Because residential solar is, by nature of its need to interface with a varied landscape of regulatory and policy issues, a complex business. It is equal parts finance, construction, and high-tech. Since there is no common formula to apply to reduce soft costs nor a single soft cost category that installers should universally tackle first, installers should use a more individualized approach to evaluating their project delivery process to find out which areas would be most impactful to improve first.

This post, geared for owners and/or operations managers of residential solar installation companies, will teach you about the 7 Forms of Waste, a powerful categorization methodology you can apply in your operations to begin to learn where time, energy, and money is misspent, a leading causes of customer dissatisfaction. In residential solar, maximizing customer satisfaction is crucial because the leading source of low-cost leads is from the referrals of currently installed customers according to solar analyst Nicole Litvak, author of GTM Research’s U.S. Residential Solar PV Customer Acquisition: Strategies, Costs and Vendors.

What is the 7 Forms of Waste?

The 7 Forms of Waste is a framework used in proven cost reduction methodologies from the Toyota Production System (TPS), now commonly referred to as “Lean Production” or simply Lean. Using this framework, you can begin to reframe your operations in the language of what your customer considers valuable. By classifying all process activities into these two categories of “value added” and “non value-added” activities, you can begin to take action improving valuable parts and removing or reducing non value-added waste.

Who is the Customer?

In order to begin categorizing waste activities, employees must identify and understand their internal customers and the final customer. These relationships are key to meeting customer expectations. For example, design staff drafting plan sets must meet the needs of the AHJ, Utility, installers, and the final customer. Without seeing the AHJ, Utility, and installers as customers of their product, the designer could overlook important safety or design requirements in order to meet a customer-specified design constraint, which could cause rework and delays if in conflict with AHJ or Utility requirements or real-world installation practices. When each employee frames the recipient of their work as a customer, they are more likely to see how their activities could be value-added or non-value added. When framed in this way, management can also work more intelligently together to streamline handoffs and minimize or remove re-work related to misalignment of goals.

What Defines “Non Value-Added?”

A value-added process is an activity that a customer is willing to pay for that contributes to the end product they expect. Non value-added processes, on the other hand, fall into two categories – business requirements and pure waste. Business requirements comprise the overhead of the company: your fleet of vehicles, HR activities, compliance-related activities (especially if you deal with finance or credit). Examples of pure waste are excessive coordination meetings, generating reports that are not read or acted upon, multiple layers of approval, and any kind of rework. The 7 Forms of Waste are comprised by these two-types of non value-added activities.

7 Forms of Waste and Common Residential Solar Examples

Now that you understand how to identify your internal and external customers and know how to identify value-added and non value-added activities, let’s look at the 7 Forms of Waste: What they are, what they mean, and an example of each one so you can learn how to see them in your own company.

Transport

The unnecessary motion or movement of materials or information, including work-in-process, from one operation to another. This adds time to the process during which no one adds value.

Example: Ordering from a vendor that cannot drop ship directly to the customer site or to your warehouse, hence product must move through several channels, adding time and potential for loss or damage in the process which could further delay the project.

Inventory

This refers to inventory that is not directly required to fulfill current Customer orders. Inventory includes raw materials, work-in-process and finished goods. Inventory all requires additional handling and space. Inventory is often closely associated with Waiting and Over-Production.

Example: Ordering more rails, mid-clamps, and wire than is necessary for the amount of projects currently in progress and run rate of equipment. This thinking compounds and causes company capital to become tied up unavailable for other uses and causes warehousing space to become crowded which can lead to demand to expand.

Motion

Built-in extra steps taken by employees to accommodate inefficient process, rework, reprocessing, overproduction or excess inventory.

Example: Developing and automating queues for plan set rework instead of reducing or eliminating the need for rework.

Waiting

This refers to downstream inactivity that occurs because previous activities are not delivered on time. Idle downstream resources are then often used in activities that either don’t add value or result in overproduction.

Example: Installers cannot perform installations because plan sets are not completed fast enough to pull permits and schedule jobs. These installers are then sent out on site evaluations or given warehouse “housekeeping” tasks.

Over-Production

Overproduction occurs when an operation continues after it should have stopped.

Example: Plan set is “overproduced” — it includes additional sheets, viewports, and data points above and beyond what the AHJ or Utility needs to approve the permit or installer needs to build the project.

Over-Processing

This occurs any time employees put more work on a project than required to satisfy the customer. This also includes using components that are more precise, higher quality, or expensive than absolutely required.

Example: A designer spends extra time on a project researching and specifying a non-standard piece of equipment deemed necessary due to site conditions that the customer did not pay extra money for.

Defects

This refers to products or services not conforming to the company’s internal specification or expectation of internal or that of the final Customer thus leading to Customer dissatisfaction.

Example: AHJ redlines and rejects a plan set because design did not follow a local municipal code unknown to or forgotten by the designer. The designer cannot work on a new plans and must now research the issue and schedule rework of old plan set.

Now that you understand how to see the 7 Forms of Waste, you can begin to categorize activities. In our next post, we will build on this understanding to cover the next step in process improvement: mapping your process using the Critical Path Method.

Pamela Cargill is Principal and Founder of Chaolysti, a strategic consulting firm that helps residential solar installers operate more efficiently through direct relationships and program development with solar services providers. Follow her on twitter: @chaolyst