Create and use the Value Stream Map to understand true value and improve your business.
What is a Value Stream Map?
Understanding all the working parts of any business can be difficult. Significant clarity can come from using Value Stream Mapping to identify key activities and the ways they are connected to each other. Goods or Services delivered to the Customer doesn't just happen. It's a combination of people, processes and technology that work together to provide the value that a Customer is wiling to pay you! We will cover the basics of the Value Stream Map in this post for those Just Starting Out on their Supply Chain journey.
Why spend the time?
Value Stream Maps are a foundational part of improving the process and growing the business. Here are a few ways we have used the method to help a business.
Connect business strategy with real activities needed to achieve the strategy - Quantify your "North Star"
Add Return on Investment (ROI) metrics to justify and prioritize the improvement activities for the business
Help target areas of the business to improve
Reduce waste or unneeded steps to increase speed or reduce costs
Improve engagement with the team and show progress in improving the business
Reduce Supply Chain risks
Customer
The Value Stream Map always starts in the upper right corner with the Customer. After selecting a product or service line to map, define who is the customer. Identify your customer by name, location and what service or goods they purchase from the business. The end Customer could be directly serviced by your company or with another relationship such as a wholesaler. Consider the Sales Pipeline for this customer. How does your team market, gather leads, validate opportunities, and close deals with the Customer? Include these details as part of the Sales Pipeline
Once the Customer is onboard, how do they communicate orders to your business? Document the ways inventory is ordered or planned with your team. Include order types or methods (ex. Electronic Data Interchange (EDI), email, eCommerce). Add in the frequency of orders and quantity of what they order. Are there any customer service or account management activities needed to support the customer?
Document ways your Customer communicates with your team once they are onboard. How does your Customer order goods and/or services? Consider the frequency of these orders, quantities (ex. each, case, skid) and any additional planning information including forecasts or demand predictions.
Process
Let's look inside your business to identify the key activities used to produce the good or service for the Customer. Identify the main activities and sequence of these efforts needed to produce the good or service. Add in any outsourced processes that ae needed to support the process. Keep this at a high level at this point. We like to use departments or major parts of the organization chart as a good level of detail at this step. Use arrows to show the direction of flow between activities.
Consider any inventory that is used in-between key process steps and use the triangle to identify. This could be inventory stored in a warehouse or Work In Process inventory located in between process steps. Physical inventory is easier to see and count in manufacturing or distribution environments. Inventory identification becomes tougher in a service processes but there is inventory to consider. Look at queues for service processes that hold or batch activities. In sales processes, the queue to create a sales proposal or provide internal approvals could be used as inventory identifications in your process map. Call center incoming inquiries waiting in queues or Interactive Voice Response (IVR) paths can be identified as inventory also.
Raw Materials
Each business has different levels of vertical integration they control. Most processes need some type of raw material to feed the internal business process we just mapped. Identity the sources of these process inputs in the upper left corner of your Value Stream Map. Consider the methods your business interacts with these outside companies to order materials. Include the quantity, timing and potential quality requirements of these vendors or suppliers.
Make sure to add in all vendors for similar materials. Many times this part of the Value Stream Map can surprise the business as there are more vendors used to support the business than originally thought. This can be a great place to consolidate spend into fewer suppliers to drive cost and service improvements. Alternatively, heavy dependance of a few supplies for critical parts could show a high risk point for the Supply Chain. The introduction of new secondary source vendor can reduce overall risks of shortages to the business.
Transportation / Delivery
Connect your customers with how goods or services are delivered from your facility and to the customer location. These connection points can include the type of transportation methods for goods, which can include Truckload (TL), Less Than Truck Load (LTL) or small parcel shipments. Connections of business systems such as ERP's or WMS's can use technologies like API's as delivery methods of data for service processes. Documentation of these data exchanges can get technical and tricky. Focus the map documentation on providing the method, direction of data flow, and a summary of the data type.
Systems
The last part of a great Value Stream Map is documenting the systems used to run the business. These systems can be simple like a visual board or Excel sheet. They can be a complex Enterprise Resource Planning (ERP) systems. Identify the type of system and what part of the process it touches via arrows. Also add in the activity this business technology provides for the business. Our example uses a Production Control System to provide schedules to each of the key processes and orders for Raw Materials sent to our Supplier.
Put it Together
You have a achieved what few businesses have done, your business is on paper. This "Current State" map is a living document that should be updated as your business changes. Adding this clarity to your business can jump start the conversation on what to improve first. The map can also provide direction or a "North Star" for strategy development for the business. A foundational part of your business is in place, now build on it.
Tools
Start with paper, big paper. We like using the biggest kraft paper we can find. Find a large wall that can be used for a extended time in the office or operations floor. The more traffic by the wall and map the better the awareness from the team on improvement activities. This method can also be used as teaching method to collect feedback from the team. Use large 3M Post It Notes to start labeling the parts of Value Stream and place on the large paper.
Lucid Chart or Visio can be used later to document the paper Value Stream Map. The electronic files can be used to communicate the Value Stream Mapping outside one facility and track changes.
References
Get more Value Stream Map details from the masters at Learning to See by Mike Rother and John Shook
Tips
Collect a current copy of your organization chart before you start mapping. This is a good document to use to make sure you don't miss any parts of the organization.
Please leave us a comment on the questions and issues you are having with your business and supply chain. We will use your feedback to create future posts based on your feedback. Check out how Easy Supply Chain helps solve Supply Chain problems here.
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