Value Stream Map - What is it? How do we use it?

a value stream map is a great business tool it's a great way to isolate communicate and quantify what you're doing that adds value versus what you're doing that is waste value stream mapping came out of lean manufacturing but it's incredibly useful it's commonly used in a lot of industries it's especially useful in healthcare and surprisingly financial services so let's walk through a simple example the value stream map from a manufacturing facility let's say you work for a motorcycle company but the company's not making enough money something is screwing up your profits let's figure out what's going on in your assembly plant as it turns out you've only got two percent value at a time the rest is all waste well how does that happen where could that be let's identify it let's say that you make 10 motorcycles per day the time it takes from the time the parts roll off the truck until they go out the door as a finished product it's a finished motorcycle is 10 days and let's say it cost $20,000 per bike all right pretty simple cost here let's make the map we start with a customer this little bar looking Simpsons symbol over here now in this case the customer is the dealership what value do you provide to the dealership moving parts around the factory or around the assembly plant has zero value the value you add is assembling the part so that's it everything else is waste so let's get back to the map we have identified our customer a note goes to the office and then you say to your suppliers we need parts in a value stream map remember information right to left process left to right first thing that happens stuff comes in on a truck or that's a truck it's pretty common symbol and then it comes to your warehouse it sits in the warehouse because you want to have enough inventory so you don't have to shut down you want to have some safety stock and you have five days worth so that's a million dollars now the next big processing step is a pre assembly where you went put the components together and you're pretty good at this and it takes about two hours and then you have a big and you have a whole lot of work in progress waiting for the next step let's say you have a hundred thousand dollars worth of pre assemblies ready to go the next big step you must all the engines and the drive trains so you're pretty good here you get a bunch of these done and then you have a whole lot of these ready to go these partially assembled bikes and let's say you have $500,000 worth of this stuff ready to go the next big step you add the finishing touches the wiring harnesses the decals the logos all the cool stuff that brakes kind of important and let's say you have four hundred thousand dollars worth of finished bikes you got 20 bikes done ready to go in this triangle here so where is the value versus where is the waste let's look at a timeline stuff comes in off the truck by the time it leaves it takes ten days where is your value look at the spikes in the Sawtooth two hours for the pre assembly one hour for the engine and then two hours for the wiring harnesses in the electrical five hours of value-added time divided by 240 hours that you've had this stuff and what do you get two percent value at a time the rest it's all waste now you have a value stream map that shows you where you're adding value where your waste is now we can talk about where your money's going now that we can see this we have two million dollars in inventory well that's a lot so look at all this work in progress we have an inventory work in progress and finished goods two million dollars sitting there tied up in inventory what could you do if you freed up that capital and that inventory costs you a lot of money let's start about fun let's start with financing suppose your cost of capital is 10% all right let's cost you 200 grand a year just to own this inventory and work-in-progress floor space in your factory in your warehouse that ain't cheap moving it around costs a lot of money to every four truck cost you $100,000 per year now if we look here if we look at this inventory we can say we have two million dollars tied up but it's costing us five hundred grand a year just to have this stuff well there's all your profit five hundred five hundred thousand dollars I mean that's still a lot of money with a value stream map you can see where all these all your profits are going while you're not making money so if you like this value stream map it's a great tool give us a call we'll show you some of the best practices we'll show you how you can use a value stream map to isolate the value added versus a waste at your company we'll walk you through the entire process we will help you get your cost down and your profits up

Channel: Communication for Geeks

Views: 155,004

Rating: 4.8322024 out of 5

Keywords: Lean Six Sigma, Operational Efficiency, Continuous Improvement, Lean Manufacturing, Value Stream Map, Process Improvement, Stakeholder Analysis

Id: MVbZkRjNO4Q

Length: 4min 57sec (297 seconds)

Published: Thu Aug 24 2017