The Concept of Value Streams

The concept of a value stream is borrowed from Michael Porter's Value Chain framework. The value chain is a model that helps analyze specific activities through which firms create value and competitive advantage. By locating the value creating processes next to one another and by processing one unit at a time, work flows smoothly from one step to another and finally to the customer.

Mr. Kulasooriya

This chain of value-creating processes is called a value stream. A value stream is simply all the things done to create value for the customer. It requires identifying all steps necessary to design order and produce the product across the whole value stream, to highlight non-value adding waste. The whole value stream covers processes from ordering raw materials to delivery of the finished product to the customer.

(See example of baking a cake)

Value stream mapping (VSM) is a powerful tool used to visualize both the material and information flow for any manufacturing or administrative process. VSM traces the flow of products in the back door as raw material, through all manufacturing process steps and off the loading dock as finished product. Analysis begins with the current state map-it illustrates the current operating environment.

Contrast that to the future state map-it charts the path to where you're going and aids in the development of a plan on how to get there.

Value Analysis

When mapping, focus should be horizontal across systems and departments, from order to delivery, not vertical in the departmental silo. In general, it is useful to divide activities into three categories:

Value Adding Activity:

Those activities that in the eyes of the end customer make a product more valuable. A value adding activity is simple to define; it results in something the customer would pay for.

Non-Value Adding Activity:

Those activities that in the eyes of the end customer do not make a product more valuable and are not necessary, even under present circumstances. These activities are clearly "waste" and should therefore be the target of immediate or short-term removal.

Necessary Non-Value Adding Activity:

Those activities that in the eyes of the end customer do not make a product more valuable, but are necessary unless the existing supply process is radically changed. This type of waste is more difficult to remove in the short term and should be a target for longer term radical change.

Benefits of Value Stream Mapping

" Draws both material and information flows of your current value stream
" Creates a vision of the future by uncovering wastes and opportunities to create flow - and making them visible to all

" Draws a blueprint for lean transformation-the future state map
" Prioritizes activities needed to achieve the future state
" Enables broad participation in shaping the future

Once the value stream mapping is completed, it is vital to analyze all process metrics to uncover wasteful activities of the process.