Value Streams

Value Streams
Superfactory Excellence Program™

www.superfactory.com
© 2004 Superfactory™. All Rights Reserved. 1

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Outline
 What are Value Streams?

 History - Toyota
 Identifying the Value Streams
 Value Stream Mapping
 The Current State
 The Future State
 Unique Situations
 Enhancing the Future State
 Implementing Change
 Roadblocks

What Are Value Streams?
A Value Stream is the set of all actions (both value added

and non value added) required to bring a specific product
or service from raw material through to the customer.

Types of Value Streams
•“Whenever there is a product (or service) for a customer,

• there is a value stream. The challenge lies in seeing it.”
• 3 enterprise value streams:
• Raw Materials to Customer - Manufacturing
• Concept to Launch - Engineering
• Order to Cash - Administrative Functions

History of Value Streams - Toyota
 Toyota is one of the most efficient manufacturers in the

world
 Building 2 million cars a year outside Japan
 Aiming to become No 1 globally by 2010!
 Not because of brilliant products – but because of a
brilliant production system
 Called Lean Production or Lean Thinking

 Toyota has probably the most efficient supply base in the

world
 300 1st tier suppliers - 2-3 per part
 Co-located and tightly synchronized by 2-4 hourly milk
rounds from Toyota
 Conducting joint process analysis together for 30 years
 As a result each supplier delivers each part 99.9995%
right first time on time!

 Toyota has been building cars to order in Japan for 30

years
 Based on a continuing relationship with many of its
customers through door-to-door selling!
 Which it also uses to smooth orders on production
 Yes – buffered by long lead-time export orders

 Toyota probably has one of the most efficient distribution systems

– for service parts
 Dealers pre-diagnose and pre-order parts they need – they do not
stock them!
 Local Distribution Centers deliver 2-3 times a day
 Regional Distribution Centers deliver daily
 Most of their parts suppliers can make and ship all the parts
required in a day by the next day
 The system copes with 400,000 part numbers and is being rolled
out across the globe

 Toyota’s success is based on a different business logic: -

 Organized to manage the whole value stream for each product
family – rather than to manage and optimize each asset and
firm in isolation
 Pulling the right products through the system quickly as
required by the customer – rather than making to forecast and
selling from stock to strangers
 Based on operational capability and joint process analysis -
rather than relying on supplier auctions and big centralized
information systems

Identifying the Value Stream
 The starting point is to learn to distinguish value creation

from waste in your whole value stream
 By putting on waste glasses!
 By choosing a product family
 By assembling the team and taking a walk together up the
value stream
 And drawing a map of what you find!

Identifying the Value Stream
process level
Start Here single plant

(door to door)
multiple plants
across companies

Value Stream Improvement vs. Process
Improvement
Value Stream
Process Process Process
Customer
Assembly
Stamping Welding
Cell
Raw Finished
Material Product

Value Stream Mapping
 Helps you visualize more than the single process level

 Links the material and information flows
 Provides a common language
 Provides a blueprint for implementation
 More useful than quantitative tools
 Ties together lean concepts and techniques

• Follow a “product” or “service” from beginning to end,

and draw a visual representation of every process in the
material & information flow.
• Then, draw (using icons) a “future state” map of how
value should flow.


 Directly observing flows of information and physical goods

for a product family as they now occur
 Summarizing these flows visually
 Envisioning future states that leave out wasted steps while

introducing smooth flow and leveled pull

Features to Include
 Total steps versus value creating steps
 Total time versus value creating time
 Noise (demand amplification) in order flow
 Quality/capability (defect damping) of each facility
 Availability of each facility
 Hand-offs, work-arounds and total logistics costs
Note: This is not a product costing exercise! Follow one

component path all the way back to raw material

Information For A Process Data Box
(to be collected on the shop floor)
 Cycle time
 Changeover time
 Process reliability (uptime)
 Scrap/Rework/Defect rate
 Number of product variations
 Number of operators
 Production batch sizes
 Working time (minus breaks)
 Pack size

Objective for Every Value Stream
 Correct specification of value
 Elimination of wasteful steps
 “Flow where you can”
 “Pull where you can’t”
 Management toward perfection

Using the Value Stream Mapping Tool
Product/Service
“Family”
current state Understanding how things

drawing currently operate. Our Baseline!
future state Designing a lean flow. Our Vision!

drawing
plan and
implementation The goal of mapping!

The Current State
 Completed in a day
 Performed by a cross functional team responsible for
implementing new ideas
 Resulting in a picture (and team observations) of what
we “see” when following the product

The Current State
Typical Steps to Complete a Current State Drawing
 Document customer information

 Complete a quick walk through to identify the main
processes (i.e., how many process boxes)
 Fill in data boxes, draw inventory triangles, and count
inventory
 Document supplier information
 Establish information flow: how does each process know
what to make next?
 Identify where material is being pushed
 Quantify production lead time vs. processing time

The Current State
 What product family will you map?
 Hint: Define the product family from the most
downstream point on your map
 Simple definition of a product family: A group of product
variants passing through similar processing steps using
common equipment just prior to shipment to the
customer
 Some examples: Medium sized electric drills or a family
of drill motors; a car platform or an alternator family; an
airframe or a product family of major subassemblies
(e.g., tails)
 Note that the concept is fractal: A product family is
composed of many components which can also be
product families – it all depends on where you start!

The Current State
 Which part of the product will you follow upstream?

 Hint: Most novice mappers want to follow every part in
the product. But you actually learn much more by
following only one part on your first map!
 Remember: The first objective of mapping is to raise
consciousness of waste. (You may well want to follow
other parts later.)

The Current State
 Who will be the members of your mapping team and the

team leader?
 The team ideally includes representatives of every firm
and every relevant function – operations, PC&L,
purchasing, sales, finance, engineering.
 The logical leader is from the lean team or supplier
development group in the most down-stream firm.
 Because the assets employed are owned by several
firms, the leader may feel responsible but will have little
authority and therefore must…lead!

The Current State
 How many facilities up the value stream will you include?

 The ideal map goes from raw materials to customer.
 This will generally be too hard as you get started.

The Current State
 How many individual actions (steps) on the product are

there, what is the total throughput time, and what is the
throughput distance?
Example: There are 73 steps, total throughput time is 44

days, and throughput distance is 5300 miles.
 Critical question: How do we know whether a step and its
attendant time create value?
Put yourself in the position of the customer and ask if you

would pay less for the product or be less satisfied if a given
step and its necessary time were left out.
Example: 8 of the steps and 55 minutes of throughput time

create value!

The Current State
 What is the capability of each production facility (quality x

delivery) and its responsiveness (EPE?)
 Where are the delays in information flow, how lengthy are

they, and how much are orders amplified as they move
upstream?
Hint: Include the right information in the map. Distinguish

between forecasts & capacity plans and actual production
releases.

The Current State
 Where and how large are the inventories in the physical

flow?
Hint: Carefully distinguish buffer stocks, safety stocks, and

shipping stocks. Then determine “standard inventory” for
current system design and capabilities.

The Current State
 How reliable is each transport link (on-time delivery

percentage) and how many expediting trips per year are
needed?
Note: By multiplying quality data from by on-time delivery

data you can calculate the “fulfillment level” each facility as
perceived by the next downstream customer. This is a key
measure from a total value stream perspective.

The Current State

Extended Current-State Map
MACHINE COMPANY ASSEMBLY COMPANY

MATERIAL CUSTOMER
SUPPLIER Production Production
Control Control
WHSE DIST
FORGE MACH ASSY

The Current State
 Typical Results
 80 – 90% of total steps are waste from standpoint of
end customer.
 99.9% of throughput time is wasted time.
 Demand becomes more and more erratic as it moves
upstream, imposing major inventory, capacity, and
management costs at every level.
 Quality becomes worse and worse as we move
upstream, imposing major costs downstream.
 Most managers and many production associates expend
the majority of their efforts on hand-offs, work-arounds,
and logistical complexity.

The Future State
Completed in a day with the same team

Focused on:
 Creating a flexible, reactive system that quickly adapts to
changing customer needs
 Eliminating waste
 Creating flow
 Producing on demand

The Future State
 Activities aligned with our business strategy

 Efforts focused on NET improvements for the company
 Metrics supportive of fundamental change
 Simple, constant communication of our plans and

achievements as an enterprise

The Future State

The Future State
 Where can you introduce flow and pull within each facility?
 When we leave out wasted steps, create continuous flow,

and introduce pull in every plant the product passes
through we can achieve a striking reduction in steps and
throughput time. But note that demand amplification is not
affected.

The Future State
 How can you introduce smooth and level pull between

facilities while reducing shipment quantities and increasing
shipment frequencies?
 What is the rate of consumption by the end customer (and
what is takt time?) and how can the rate of demand be
communicated to all value stream partners?
 Where is the pacemaker process for the entire value stream
and how is it scheduled (build to order?, build to stock?,
build to ship?)
Critical issue: How to untangle simple demand loops from

facility to facility from high level MRP/ERP systems suited
for capacity planning.

The Future State
 What is the production rhythm (takt time) for each

production facility needed to meet demand?
 How can orders be passed upstream more frequently with
minimum delays?
 Where and how will you level the mix and volume at each
facility?
 Where can you you introduce transport milk rounds?
Additional issue: Who should organize these loops –

suppliers or customers?
 What warehousing steps can you leave out completely?

The Future State
 Where do you have freed up production space?

 What activities could you move over to the customer?
 What steps and transport links can you leave out by
compressing the value stream?
 What are the costs and benefits to each value stream
partner of compressing the value stream and how will these
costs and benefits be shared?
This is a hard question!

The Future State
 What type of “right-sized’ tools could further speed flow in

co-located processes?
 How can you replicate and relocate integrated production
activities close to each major customer?
 What are the costs and benefits for each value stream
partner of pioneering right-sized technologies and relocating
activities, and how will these be shared?
This is the hardest question!

The Future State
 Almost all value streams today pass through many

information processing points and facilities, owned by many
firms.
 Creating future states within the walls and information

systems of a single facility is difficult… but doable with a
small team.
 Creating future states across many facilities and firms

requires new methods going beyond traditional business
practices.

Administrative Mapping
 Administrative activities are often a major percentage of

the total throughput time
 Goal: 400% improvement in productivity over 10 years
 Modest opportunities on the plant floor; Untapped
opportunities off the plant floor

Administrative Mapping: Integrated
 Include functions such as engineering, purchasing, and

order entry for product families which have routine
activities prior to scheduling
 Place the process boxes between the customer and the
scheduling function
 Minimize the data collection to the basics of cycle time
or quality, and document the impact on leadtime

Administrative Mapping: Separate Maps
 Better for redesigning overhead and administrative

support areas touching value streams
 Order processing
 Warranty activities
 Job quotes
 Not useful for activities outside a value stream
 Data boxes must have attributes focusing on cost,
quality, and service
 “Inventory” is typically paperwork
 Information flow is typically informal

Unique Situations
Make to Order and Engineer to Order Shops
 Many shops have a combination of repetitive and non-

repetitive products (indicating product families)
 Product families might be difficult to see – focus on
machines/operations and work content time
 Engineering might be included in the information flow for
lead time impact, etc.
 Pitch is typically arbitrary to the manager
 Employment of pitch requires detailed knowledge of work
content and routings for jobs

Unique Situations
Including Subassemblies
 Focus on major subassemblies first

 Select one or two which might represent different types
of situations
 Generic vs. specific to the product family
 Outsourced tasks within assembly
 Follow the format for parallel flow, and always include

the main assembly process!
 For large fabricating and assembly operations, consider
maps for each major subassembly with a “macro map”
indicating the entire product family

Unique Situations
Different Changeover & Cycle Times, etc.
 Current state mapping might uncover:

 Several different machines performing the same
operation
 Different products within the family with different
data box characteristics for a specific process
 Capture the range of values as opposed to an average
value

Unique Situations
Mapping Final Inspection/ Repair/Rework
 Judgment counts!
 Minimal repair/rework might be captured as a data
attribute at the final step.
 If nearly every part needs assessment or extra work,
consider a separate process box.

Unique Situations
Pull Within an MRP Environment
 A combination push and pull is usually just a push

system!
 Multiple production triggers typically lead to
overproduction.

Unique Situations
Assemble-to-Order Options in a Future State
 Finished goods supermarkets can be expensive in value

streams which have many finished part numbers within
a product family
 To minimize inventory costs, try to find the upstream
location where the value stream has very few variations
and consider a supermarket of WIP at that point.
 Customers orders can “drop” to this location, with FIFO
lanes controlling production into shipping.

Enhancing the Future State
 Create a new language for a civilized discussion about

optimizing entire value streams to create a “win-win-win”.
 By jointly drawing extended value stream maps.
 To stop focusing on each other’s margins – which are

typically very small – and start focusing on each other’s
waste which is typically very large.

Create Flow & Pull in Plants

MATERIAL CUSTOMER
Control Control
WHSE DIST
FORGE MACH ASSY

 Eliminates a quarter of the wasted steps.
 Reduces total throughput time by 50%.
But…
 Only a small effect on demand amplification and

workarounds.
 No effect on logistics and complexity costs.
A “price of admission” to the value stream team, requiring

little time and practically no capital.

Leveled Pull Between Facilities

MATERIAL CUSTOMER
Control Control
OXOXOXO
WHSE
FORGE MACH ASSY

 50% of wasted steps are now eliminated.

 Total throughput time falls to 35% of current state.
 Demand amplification falls from +/- 30% to +/- 5%.
 Quality improves because of reduced time between creation
of defects and discovery downstream.
 Logistics costs may increase slightly but total value stream
costs fall substantially.
A logical next step that requires a lot of knowledge but not

much capital.

Begin Value Stream Compression

MATERIAL
Control Control
CUSTOMER
ASSEMBLY
Same Site
FORGE MACH
Same Site

 Another 5% of wasted steps disappear.

 Throughput time falls to 30% of current-state time.
 Demand amplification falls a bit further.
 Quality improves a bit further.
 Hand-offs and transport links begin to disappear.
Requires shared principles of collaboration, willingness to

spend capital at one point to reduce costs at another, and a
way for winners to compensate losers.

Complete VS Compression

MATERIAL
Control Control
CUSTOMER
FORGE MACH ASSY
Same Site

 75% of wasted steps are now eliminated.

 Throughput time shrinks to less than 10% of current-state
time and within acceptable wait time of the customer: The
entire value stream is now running make-to-order rather
than make-to-forecast!
 Demand amplification is eliminated.
 Quality is higher and consistent from start to finish.
 Transport links and information needs shrink dramatically.
A giant leap requiring strong principles of collaboration but
potentially a “game changer” for every participant in the
extended value stream!

 Achieving a responsive Flow through your plant is only possible

when each step is:-
 Available when needed with no interruptions (TPM)
 Can be changed over quickly enough to make every product
every cycle (SMED)
 Is capable of making the required volumes with no errors (6
Sigma)
 Is aligned with other steps in the process (right sized tools)
 And when orders vary within agreed limits (covering peaks
with co-managed off-line buffers)

Implementing Change
Don’t Wait!
You need a plan!
• Tie it to your business objectives.
• Make a VS Plan: What to do by when.
• Establish an appropriate review frequency.
• Conduct VS Reviews walking the flow.

Implementing Change
 Remember the other two value streams!

 Administrative activities are often a major percentage of
the total throughput time
 Goal: 400% improvement in productivity over 10 years
 Modest opportunities on the plant floor; Untapped
opportunities off the plant floor

Implementing Change
Critical Success Factors

 Management must understand, embrace, and lead the
organization into lean thinking
 Value stream managers must be empowered and
enabled to manage implementations
 Improvements must be planned in detail with the
cross functional Kaizen teams
 Successes must be translated to the bottom line
and/or market share

Implementing Change
 Continuously improving fundamentally flawed processes

will yield limited results.
 Simply automating existing manual processes can also
yield limited results.
 Seriously challenging old practices will provide the
dramatic results desired.

Implementing Change
 We’ve only recently introduced the idea of “value stream

management” within facilities and companies.
 No one currently devotes mind-share to (or has any
authority for) extended value streams.
 Purchasing departments typically lack credibility, both
internally and externally, for initiatives beyond traditional
“bargaining”.
 Lean improvement groups typically lack a mandate to go
beyond isolated techniques for “supplier development”.

Implementing Change
 The lead can come from anywhere along the value stream.
 The initial need is a collective decision by senior
management in every participating firm to give extended
value stream mapping a try.
 The next need is for multi-firm, multi-function value stream
teams to identify and remove obvious waste.
 The continuing need is for longer-term collective value
stream analysis moving toward ideal states.
 An amazing thought: Is there a role for consultants as
honest-broker advisors to value stream teams?

Implementing Change
 Manufacturing recession focuses everyone’s mind.

 We have already done experiments with hyper margin
squeezing in 1991-92; everyone knows it leads to lose-
lose-lose outcomes.
 Consciousness is steadily rising about value stream
thinking; many managers are now ready to tackle
extended value streams.

Implementing Change
 The map is just a picture of ideas!

 The fundamental change is in how we choose to manage the
value stream as an integrated system of decisions and tasks.

Implementing Change
Each Value Stream needs a Value Stream Manager
Process 1 Process 2 Process 3

“Customer”
Kaizen
The conductor of implementation:

•Focused on system wins
•Reports to the top dog
The Value
Stream Manager

Implementing Change
 Use your strategic plan as a guide

 Find the gaps in necessary performance
 Improve value streams to meet the performance
 Create new metrics to support new ways of thinking and acting
 Understand true product family costs
 Manage operations by the value stream data
 Always have a future state

Implementing Change
Typical Results
 Throughput time falls from 44 days to 6 (87%)
 Wasted steps fall from 65 to 27 (60%)
 Transport distance falls from 5300 miles to 1100 miles
 Demand amplification is reduced from 20% to 5%
 Inventories shrink by 90% percent
 Defects are reduced to the same rate at the start of the

process as at the end
 Throughput time shrinks to within customer wait time,
meaning all production is to confirmed order

Roadblocks
 75 years of bad habits

 Financial focus with limited cost understanding
 A lack of system thinking and incentives
 Metrics supporting a 75 year old model
 Limited customer focus
 Absence of effective operating strategies

Roadblocks
 Traditional approaches do not focus on the value stream

 Create “perfect competition” at the next level of supply
upstream, by attracting many bidders.
 Improve bargaining power through scale economies in
raw materials buys as well.
 Turn up the competitive pressure with reverse auctions
where possible.
 Demand continuing price reductions in multi-year
contracts whatever happens to volume.
 Note the lack of process analysis of the value stream!
 “Market will insure lowest costs & highest efficiency!”

Roadblocks
 Margin squeezing rather than true cost reduction.
 Persistent shortfalls in quality and delivery reliability.
 Low-ball bidding and the engineering change game.
 Collapse of “partnership” and “trust” in economic downturns

(2001!), replaced by “survival of the fittest”.

Wrong Ways to Address Roadblocks
 Programs of the month (band aids)

 Meetings, meetings, meetings, meetings
 Silo optimization

THINK LEAN!

Value Streams

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Value Streams

Superfactory Excellence Program™

© 2004 Superfactory™. All Rights Reserved. 1

 Current contact information can be found at: www.superfactory.com

© 2004 Superfactory™. All Rights Reserved. 2

 What are Value Streams?

© 2004 Superfactory™. All Rights Reserved. 3

A Value Stream is the set of all actions (both value added

© 2004 Superfactory™. All Rights Reserved. 4

•“Whenever there is a product (or service) for a customer,

© 2004 Superfactory™. All Rights Reserved. 5

 Toyota is one of the most efficient manufacturers in the

© 2004 Superfactory™. All Rights Reserved. 6

 Toyota has probably the most efficient supply base in the

© 2004 Superfactory™. All Rights Reserved. 7

 Toyota has been building cars to order in Japan for 30

© 2004 Superfactory™. All Rights Reserved. 8

 Toyota probably has one of the most efficient distribution systems

© 2004 Superfactory™. All Rights Reserved. 9

 Toyota’s success is based on a different business logic: -

© 2004 Superfactory™. All Rights Reserved. 10

 The starting point is to learn to distinguish value creation

© 2004 Superfactory™. All Rights Reserved. 11

Start Here single plant

© 2004 Superfactory™. All Rights Reserved. 12

© 2004 Superfactory™. All Rights Reserved. 13

 Helps you visualize more than the single process level

© 2004 Superfactory™. All Rights Reserved. 14

• Follow a “product” or “service” from beginning to end,

© 2004 Superfactory™. All Rights Reserved. 15

© 2004 Superfactory™. All Rights Reserved. 16

 Directly observing flows of information and physical goods

 Summarizing these flows visually

 Envisioning future states that leave out wasted steps while

© 2004 Superfactory™. All Rights Reserved. 17

 Total steps versus value creating steps

 Total time versus value creating time

 Noise (demand amplification) in order flow

 Quality/capability (defect damping) of each facility

 Availability of each facility

 Hand-offs, work-arounds and total logistics costs

Note: This is not a product costing exercise! Follow one

© 2004 Superfactory™. All Rights Reserved. 18

© 2004 Superfactory™. All Rights Reserved. 19

 Correct specification of value

 Elimination of wasteful steps

 “Flow where you can”

 “Pull where you can’t”

 Management toward perfection

© 2004 Superfactory™. All Rights Reserved. 20

current state Understanding how things

future state Designing a lean flow. Our Vision!

© 2004 Superfactory™. All Rights Reserved. 21

© 2004 Superfactory™. All Rights Reserved. 22

 Document customer information

© 2004 Superfactory™. All Rights Reserved. 23

© 2004 Superfactory™. All Rights Reserved. 24

 Which part of the product will you follow upstream?

© 2004 Superfactory™. All Rights Reserved. 25

 Who will be the members of your mapping team and the

© 2004 Superfactory™. All Rights Reserved. 26

 How many facilities up the value stream will you include?

© 2004 Superfactory™. All Rights Reserved. 27