1.4 VS Structure V18

Value Stream Structure
Teamwork is possible if the

structure is right
Adding value is now

everyone’s objective
VSS 1
Copyright © Lean Six Sigma Institute LLC
Learning Objectives
1. Understand how companies of the future will be designed by Value Streams.
2. Show how self-managed teams can perform.
3. Understand the basic concepts of Lean Accounting in Value Streams.
VSS 2
1
Content
I. BACKGROUND
II. WHAT IS VALUE STREAM STRUCTURE?
III. WHY IMPLEMENT IT?
IV. WHO PARTICIPATES?
V. PROCEDURE
VI. EXAMPLE
VSS 3
I. Background
Companies are traditionally organized by departments
and use structures similar to family trees.
Currently many companies are still organized in this way.
These systems work relatively well in high-volume,

low-mix product or service environments.
VSS 4
2
Example of traditional structure
Planning Sales Safety Legal Design Costs
Engineering Manufacturing Packaging Marketing Service Client needs

VSS 5
Functional Structure Organizational structure types
Departmental Structure
Purchasing
Assembly Warehouse Punching

Human
Resources
Reception
Forming
Matrix Structure Sales Cutting Painting Department
Production Office Office

Director Engineering Quality
Office 1 2
VSS 6
3
Can you answer the following questions?
§ At what speed the customer is willing to buy? (Takt-time)

§ What is the companies' capacity?
§ Where is the main constraint?

§ Are we delivering our products or services on time?
§ Do you really know what the customer thinks about your products?
§ Are you reaching the costs goals and are you making money?
§ Does everybody know the same goals?
VSS 7
Agile Companies
A company that has decided to be agile in response

to the client’s needs, and is sufficiently productive to
stay in the market, should consider:
§ Direct and effective communication.

§ A flat and agile organization.
§ Clearly defined roles and responsibilities.
§ Shared analysis and decision making.
VSS 8
4
A strategic plan is as strong as the
structure that supports it
Purpose
Ideation
Long term
Identity
intention
Culture Goals
Vision
Structure Metrics
Strategy
VSS 9
Value Stream Structure

The way companies of the future are being designed.
§ Now the organizational structures are adjusted to current needs, with the
complexity of providing a wide variety of services or products and minimal
volumes.
§ This is generating the need to go back to basics, which is that a team of

people from different areas are focused on delivering value to the client
and taking responsibility for the entire process, analyzing information and
making decisions.
VSS 10
5
II. What is Value Stream Structure?
§ They are business units composed of all those directly responsible for the
activities of a family of products or services.
§ Decisions are made and results delivered from start to finish
§ They have multidisciplinary staff.
§ Each value stream will be analyzed through

a map (VSM), where you will see the process
flow of information, activities and materials.
VSS 11
Value stream structure

Management
Team
Value Stream 1
Value Stream 2
Value Stream 3
Business Product Human Admin. & Information Quality Maintenance
Development Development Resources Finance Technology Control
Each value stream represents a product or service family.

VSS 12
6
III. Why implement value streams?
§ To eliminate all the bureaucracy that

prevents to develop successful businesses.
§ It gives management time to plan, analyze

the future of the business, and devote
more energy to future development.
§ It allows strategies such as Lean Six Sigma

to be successful.
VSS 13
IV. Who participates?
Level 3: Owners and Directors
Level 2: Value Stream Teams and Support

Level 1: Production or Service Teams VSS 14
7
V. Procedure to implement value streams
1. Define level 1 staff and train them on their roles (standardized work).
2. Define level 2 staff and train them on their roles (leader standard work).
3. Design the value office and boards for the reviews of each level (Andon, Leader
Standard Work, etc.)
4. Analyze the performance of the value stream:
§ Update the box score and floorboards
§ Value stream cost analysis
5. Design how the level 3 (management team) will work, if the pilot was successful in
the deployment phase.
VSS 15
1. Define 1st level staff and train them on their roles
§ Leaders:
• Teach, motivate, evaluate knowledge
• Evaluate standards, challenge standards
§ Operators
• Operate with quality taking into account speed and safety.
§ Material handlers
• Never stop the process due to lack of materials.
§ Technicians
• Repair and maintain the equipment in optimal conditions so
that it never stops or harms people or materials.
VSS 16
8
Level 1 Responsibilities
Operators, supervisors, material handlers and technicians
§ Conduct meetings at the beginning and end of a shift
§ Daily planning and hourly analysis of progress
§ Team-based decision making
§ Analyze their own results
§ Solve problems
VSS 17
Update the Day-by-the Hour Board
02/07/18
VSS 18
9
2. Define 2nd Level Staff and train them on their roles
Value stream manager, financial analyst, customer
service representative, sales associate, scheduler,
manufacturing engineer, quality analyst, etc.
Responsibilities
§ Work in the “value office”

§ Weekly planning and review of Box Score
§ Daily analysis of obligations, profitability, potential
problems and requirements
§ Daily analysis of results
§ Take action
§ Solve level 2 problems
§ Support level 1
VSS 19
Define 2nd Level Staff and train them on their roles
Support areas: HR, Maintenance, IT, etc.
Responsibilities:
§ They work in their processes as internal service

providers
§ Weekly planning
§ Daily analysis of box score results,
responsibilities, profitability and potential
problems
§ Take action
VSS 20
10
3. Value office design
You must select an area in which the value

stream team members will work.
The room must have:
§ Visibility to areas that generate value

§ A strategic location
§ Proper lighting
§ Work stations for each member
§ A meeting table at the center of the room
§ A projector and screen
§ Writing board
VSS 21
Value office / Control tower
People responsible for the value stream work full-time in the

value office. They have scheduled meetings to review and
analyze results, and make decisions.
§ Value stream Manager

§ Sales
§ Planner/Buyer
§ Finance
§ Process Engineer
§ Quality Engineer
§ Equipment Engineer
VSS 22
11
4. Analyze the performance of the value stream
A. Update the Box Score
The Box Score provides:
§ Lean measurements that replace traditional ones

§ Methods to identify the financial impact of Lean improvements
§ An improved way to understand the cost of products and the cost of value streams
§ New ways to make decisions related to price and profitability
§ Better ways to decide between buying or producing
§ A way to focus the business around the value created by customers
VSS 23

A. Update the Box Score
§ Every week the box score is
updated to identify
opportunities and to know
if the established goals
have been reached.
§ The box score meeting is

held every week with all
members of the value
stream.
VSS 24
12
B. Value stream cost analysis Product / Service A
Traditional cost method Labor = 17 minutes

Labor rate: $24.23 per hour
Overhead rate: 600%
3 minutes 6 minutes Product A
Labor = $6.87
6 minutes 6 minutes Product B Overhead = $41.19
Material = $42
Operation Operation Total Cost = $90.06
Operation
#2 # 2 #1
Product / Service B
Output Labor = 24 minutes
10 per hour Labor rate: $24.23 per hour
Operation Operation Overhead rate: 600%
Operation # 3 Operation # 4
#3 #4 Labor = $9.69
4 minutes 4 minutes Product A Overhead = $58.15
6 minutes 6 minutes Product B
Material = $42
Total Cost = $109.84
VSS 25
Analyze the performance of the Value Stream

B. Value stream cost analysis Product / Service A
Conversion cost = $580 per hour
Lean Accounting Units produced = 10 per hour
3 minutes 6 minutes Product A Per unit
Conversion cost = $58
6 minutes 6 minutes Product B Material Cost = $42
Total Cost = $100 (REAL COST)
Operation Operation
Operation
#2 # 2 #1
Product / Service B
Output Conversion cost = $580 per hour
10 per hour
Operation Units produced = 10 per hour
Operation
Operation # 4
Operation # 3
#3 #4 Per unit
4 minutes 4 minutes Product A Conversion cost = $58
6 minutes 6 minutes Product B
Material Cost = $42
Total Cost = $100 (REAL COST)
VSS 26
13
Lean Accounting benefits
§ Eliminate waste from administrative and accounting processes
§ Internal understanding of the real costs of a company’s products and/or services
§ Better marketing and sales strategies

§ Members of the value stream share a common objective
§ Guides decision-making in relation to the value created for customers and the business
§ Financial statements delivered every week
§ Eliminate bureaucracy that prevents better communication and therefore better results
§ Calculate and evaluate the benefits of a Lean implementation
VSS 27
5. Develop management team (3rd level if the pilot was successful)
Managers, directors and chief executives
Responsibilities:
§ Strategic planning and monitoring

§ Monthly review of results and annual strategic planning
§ If necessary, weekly meetings for decision making
§ Look for new business opportunities
§ Support level 2
§ Conduct “Gemba Walks” frequently
VSS 28
14
Develop management team (3rd level if the pilot was successful)
VSS 29
VI. Example: initial situation

Individual work centers
The ACME company had a
departmental work structure and
separate offices in which people only
worked in groups when they met in
the meeting room.
VSS 30
15
Departmental structure
Purchasing

Human
Resources
Reception
Forming
Sales Cutting Painting
Meeting Meeting
General
Production Engineering Quality Room Room
Manager 1 2
VSS 31
Define the pilot value stream
Purchasing

Human
Resources
Reception Value
Forming stream 1
Cutting
Bending
Welding
Sales Cutting Department Painting
Assembly Painting
Meeting Value
Manager Production Engineering Quality Room Office
VSS 32
16
Example: pilot value stream phase
Value
Stream 1
Die-cutting
Welding
Assembly
Shipping
Members:
Value Stream Manager
Equipment Engineer
Value Materials Engineer
Office Process Engineer
Coach
Cost Engineer
Planner-Buyer
VSS 33
Deployment of all value streams
Purchasing
Free Space Warehouse Free Space

Human
Resources
Reception Value Value Value Value Value

stream 1 stream 2 stream 3 stream 4 stream 5
Cutting Cutting Cutting Cutting Cutting
Bending Bending Bending Bending Bending
Welding Welding Welding Welding Welding
Sales Painting Painting Painting Painting Painting Free Space
Assembly Assembly Assembly Assembly Assembly
Value Value Value Value Value

Manager
Office Office Office Office Office
VSS 34
17

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Value Stream Structure

Teamwork is possible if the

Adding value is now

1. Understand how companies of the future will be designed by Value Streams.

2. Show how self-managed teams can perform.

3. Understand the basic concepts of Lean Accounting in Value Streams.

II. WHAT IS VALUE STREAM STRUCTURE?

III. WHY IMPLEMENT IT?

IV. WHO PARTICIPATES?

These systems work relatively well in high-volume,

Planning Sales Safety Legal Design Costs

Engineering Manufacturing Packaging Marketing Service Client needs

Functional Structure Organizational structure types

Assembly Warehouse Punching

Matrix Structure Sales Cutting Painting Department

Production Office Office

§ At what speed the customer is willing to buy? (Takt-time)

§ Where is the main constraint?

§ Does everybody know the same goals?

A company that has decided to be agile in response

§ Direct and effective communication.

Value Stream Structure

§ This is generating the need to go back to basics, which is that a team of

§ Decisions are made and results delivered from start to finish

§ They have multidisciplinary staff.

§ Each value stream will be analyzed through

Value stream structure

Each value stream represents a product or service family.

§ To eliminate all the bureaucracy that

§ It gives management time to plan, analyze

§ It allows strategies such as Lean Six Sigma

IV. Who participates?

Level 3: Owners and Directors

Level 2: Value Stream Teams and Support

Copyright © Lean Six Sigma Institute LLC

1. Define 1st level staff and train them on their roles

Operators, supervisors, material handlers and technicians

§ Conduct meetings at the beginning and end of a shift

§ Daily planning and hourly analysis of progress

§ Team-based decision making

§ Analyze their own results

Update the Day-by-the Hour Board

§ Work in the “value office”

Define 2nd Level Staff and train them on their roles

Support areas: HR, Maintenance, IT, etc.

§ They work in their processes as internal service

You must select an area in which the value

The room must have:

§ Visibility to areas that generate value

Value office / Control tower

People responsible for the value stream work full-time in the

§ Value stream Manager

The Box Score provides:

§ Lean measurements that replace traditional ones

4. Analyze the performance of the value stream

§ The box score meeting is

Traditional cost method Labor = 17 minutes

Analyze the performance of the Value Stream

§ Internal understanding of the real costs of a company’s products and/or services

§ Better marketing and sales strategies

5. Develop management team (3rd level if the pilot was successful)

Managers, directors and chief executives

§ Strategic planning and monitoring