Any activity that consumes resources but creates no value for the customer. Most activities are waste—muda—and fall into one of two types. Type one muda creates no value but is unavoidable with current technologies and production assets. An example would be inspecting welds to ensure they are safe.

Type two muda creates no value and can be eliminated immediately. An example is a process with disconnected steps in process villages that can be quickly reconfigured into a cell where wasteful materials movements and inventories no longer are required.

Most value-stream activities that actually create value as perceived by the customer are a tiny fraction of the total activities. Eliminating the large number of wasteful activities is the greatest potential source of improvement in corporate performance and customer service.