Roshan Joshi believes that the operational inefficiencies in Heritage Organic are a necessary part of the artisanal process. However, Geeta Sharma…

Several activities in Heritage Organic's operations can be classified as 'Non-Value-Added (NVA) activities. An NVA activity is defined as work that is not valued by the customer, does not improve the quality or function of a product or service, creates waste, and adds costs for which the customer is not willing to pay. The identified NVA activities in Heritage Organic are: Moving: The manual process of moving partially aged products from the fermentation facility to the aging facility is a "Moving" activity. The scenario defines this as an activity that uses time and resources to move materials and work-in-process from one department to another. Customers do not value this movement; they only care about the final quality and timely delivery of the product. Waiting: The delays of finished bottled spirits in the temporary holding bay waiting for quality control checks is a "Waiting" activity. The scenario defines this as an activity where materials or work-in-process use time and resources by waiting for the next process. This delay adds no value to the final product. Inspecting: The comprehensive inspection of every tenth bottle is an "Inspecting" activity. The scenario states that inspecting is a wasteful activity if the product was produced correctly the first time. While it ensures quality, the ideal state is to have a process so robust that inspection becomes unnecessary. Storing: The long periods that finished goods spend in the storage facility before dispatch is a "Storing" activity. The scenario defines this as using time and resources while a good or material is held in inventory. This is generally considered wasteful unless, like in the example of the wine manufacturer, the storage time itself adds to the product's quality. Since the balsamic vinegar and spirits are aged in a separate process, and the storage of finished goods is causing delays, it is a non-value-added activity. Scheduling: The haphazard scheduling of production runs is a "Scheduling" activity. The scenario states that this is not necessary if the company knows how to produce on demand. This inefficiency leads to poor resource utilization and increased costs. The strategic implication of eliminating these NVA activities is to reduce waste, optimize resource utilization, and lower operational costs. By focusing on cross-functional processes and identifying these wasteful activities, Geeta can enhance the company's performance, which in turn will positively impact the company's valuation through increased future cash flows. ALTERNATIVE The internal audit report of Heritage Organic Limited highlights several activities that do not add value to the product and can therefore be classified as non-value-added activities. These activities consume time, labour and resources but do not improve the taste, quality or uniqueness of the company's products. Customers are willing to pay for the traditional ageing process and artisanal quality of the balsamic vinegar, but they are not willing to pay for delays, unnecessary movement of goods, idle time or inefficient processes. Hence, such activities should be reduced or eliminated without affecting the traditional identity of the company. One major non-value-added activity is the labour-intensive movement of partially aged products between facilities. The transportation of products from one location to another does not improve the quality of the vinegar and only increases handling time and logistics cost. Way Out -> The company can reduce this inefficiency through better layout planning, automated material handling systems and improved coordination between facilities. This would reduce transportation cost, save time and improve operational efficiency. Another non-value-added activity identified in the process is the unnecessary waiting time arising when barrels remain unattended in the staging area due to forklift operators being engaged in other non-essential activities. This idle time does not enhance the quality or value of the product; instead, it disrupts the smooth flow of operations, increases handling delays and reduces overall operational efficiency. Way Out -> The company can address this inefficiency through proper scheduling of material handling activities, deployment of dedicated forklift operators and better coordination between production and warehouse teams. Use of real-time tracking and workflow planning systems can further streamline movement of barrels across facilities. Eliminating such delays would ensure uninterrupted workflow, faster processing and better utilisation of manpower and equipment. The delay in quality control checks is also a major bottleneck. Finished bottled spirits remain in temporary holding areas waiting for inspection due to shortage of inspectors. Although quality inspection is important, excessive waiting does not add value for customers. Way Out -> The company can improve this process by increasing inspection capacity, using automated quality testing methods and introducing quality checks during the production process itself. This would reduce delays and improve delivery speed. Similarly, the inspection of 10% of total production consumes significant time and human resources. Excessive inspection is considered a non-value-added activity because quality should ideally be built into the production process rather than checked after production. Way Out -> The company can adopt practices such as Total Quality Management (TQM), employee self-check systems and process control techniques to reduce dependence on large-scale inspections. This would lower inspection cost and improve process reliability. The storage facility of the company is also highly disorganised, resulting in finished goods remaining in warehouses for long periods before dispatch. Excess inventory and prolonged storage do not create any value for customers and only increase storage and carrying costs. Way Out -> Better inventory management, warehouse organisation and demand forecasting can help reduce unnecessary storage time. This would improve inventory turnover and cash flow position. Further, production delays caused by unscheduled machine maintenance are also non-value-added activities. Machine breakdowns interrupt production and create delays without contributing to product quality. Way Out -> The company can introduce preventive and predictive maintenance systems to reduce unexpected breakdowns. This would improve production continuity and machine utilisation. The company can also adopt Total Productive Maintenance (TPM) practices, where both maintenance staff and machine operators collectively work towards improving equipment effectiveness and reducing breakdowns. Further, the company may use Overall Equipment Effectiveness (OEE) as a performance measurement tool to monitor machine availability, operational efficiency and quality output. Strategic implication The strategic implication of eliminating these non-value-added activities is highly significant for Heritage Organic Limited. The company can reduce operational costs, improve efficiency and respond faster to market demand while still preserving its traditional artisanal methods. The traditional fermentation and ageing process, which forms the core identity of the brand, can continue unchanged. However, operational inefficiencies such as waiting time, unnecessary movement, excessive storage and production delays should be removed because they do not contribute to customer value. Therefore, the company should focus on maintaining the traditional craftsmanship that differentiates its products in the market while modernising inefficient operational processes. This balanced approach would help Heritage Organic improve profitability, protect market share and achieve long-term sustainable growth without losing its heritage value.