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Value Streams

Lean Manufacturing Series

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Disclaimer and Approved Use
•  Disclaimer
▫  This presentation is intended for use in training individuals within an organization. The
handouts, tools, and presentations may be customized for each application.
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•  Copyright
▫  This presentation is copyrighted by Gemba Academy LLC.

•  Approved Use
▫  The presentation may not be re-sold or re-distributed without express written permission
of Gemba Academy LLC.

•  Current contact information can be found at: GembaAcademy.com

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Contents
•  Introduction
•  Background and History
•  Components and Implementation
•  Knowledge Check

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Introduction
•  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.

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Background and History
•  The use of value stream mapping to identify and expose
waste was pioneered by Toyota during the 1980’s.
•  The concept was further developed in the U.S. by Mike
Rother and John Shook through a series of workshops at
the University of Michigan.

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Components and Implementation
•  What are Value Streams?
•  Value Stream Mapping Steps
•  Identifying the Value Streams
•  The Current State
•  The Future State
•  Administrative Mapping
•  Unique Situations
•  Implementing Change
•  Roadblocks

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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

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Value Stream Mapping Steps
1.  Identify and define the process to be mapped
2.  Map the current state
3.  Analyze waste brainstorm opportunities
4.  Develop the future state
5.  Plan and implementation of the future state

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Identifying the Value Stream
•  The starting point is to learn to distinguish value
creation from waste in your whole value stream
•  Review the 7+ classic forms of waste
•  Choose a product line or process
•  Assemble the team and taking a walk together up the
value stream
•  Draw a map of what you find!

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Value and Waste
•  Value is defined from the perspective of the customer.
What would the customer be willing to pay for?
•  Types of Waste
•  Overproduction
▫  Excess inventory
▫  Defects
▫  Non-value added processing
▫  Waiting
▫  Underutilized people
▫  Excess motion
▫  Transportation
•  Some forms of waste may be necessary
▫  Example: Regulatory requirements
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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

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Value Stream Mapping
•  Follow a “product” or “service” from beginning to end,
and draw a visual representation of every process in the
material & information 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

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Features to Include
•  Start with the basics
▫  Description of each step
▫  Time required for each step
▫  Does the step add value from the customer’s perspective?
•  After some experience, perhaps look at the following
▫  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

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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

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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

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Value Stream Mapping

•  This material is taken from LEI source material and belongs to Lean Enterprise Institute, Inc., who owns its copyright, and is used
here with permission.
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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

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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

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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)
•  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.)
© 2013 Gemba Academy LLC. All rights reserved. 19
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!
•  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.
© 2013 Gemba Academy LLC. All rights reserved. 20
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!

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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.
•  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.

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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 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.

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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.

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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

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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

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The Future State

© 2013 Gemba Academy LLC. All rights reserved. This material is taken from LEI source material and belongs to Lean 27
Enterprise Institute, Inc., who owns its copyright, and is used
here with permission.
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.

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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. Where is the pacemaker process for the
entire value stream and how is it scheduled (build to order?,
build to stock?, build to ship?)

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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 introduce transport milk rounds?
•  Additional issue: Who should organize these loops – suppliers
or customers?
•  What warehousing steps can you leave out completely?

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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!

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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!

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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.

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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

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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

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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

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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

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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

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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

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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.

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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.

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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.

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Implementing Change
•  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.

•  Remember the other two value streams!


•  Administrative activities are often a major percentage
of the total throughput time
•  Modest opportunities on the plant floor; Untapped
opportunities off the plant floor

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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
•  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.
© 2013 Gemba Academy LLC. All rights reserved. 44
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”.

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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?

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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.
•  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.

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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

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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

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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

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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

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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!”

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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”.

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Wrong Ways to Address Roadblocks
•  Programs of the month (band aids)
•  Meetings, meetings, meetings, meetings
•  Silo optimization

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Knowledge Check

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A Value Stream is the set of all actions required
to bring a specific product or service from raw
material through to the customer.

o A) TRUE
o B) FALSE

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Match the enterprise value stream with its appropriate
owner by dragging the owner to the value stream.

•  Value Stream •  Owner

□  B
Concept to Launch
A.  Manufacturing
B.  Engineering

□  C
Order to Cash
C.  Administrative
Functions
□  A
Raw Materials to Customer

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Match the Value Stream Mapping step with its appropriate
description by dragging the description to the step.

•  Value Stream Mapping •  Description


Step

□  D
Step 1
A.  Map the current state
B.  Analyze waste

□  A
Step 2
brainstorm
opportunities

□  B
Step 3
C.  Plan and
implementation of the

□ 
future state
E D.  Identify and define the
Step 4

□ 
process to be mapped
C E.  Develop the future
Step 5 state

© 2013 Gemba Academy LLC. All rights reserved. 58


What is the result of Value Stream Mapping?
(Mark all that apply)

a)  Helps you visualize more than the


single process level
b)  Links the material and information
flows
c)  Provides a common language
d)  Provides a blueprint for
implementation
e)  More useful than quantitative tools
f)  Ties together lean concepts and
techniques

© 2013 Gemba Academy LLC. All rights reserved. 59


Describe an example of a value stream in your workplace.

© 2013 Gemba Academy LLC. All rights reserved. 60


What are the steps to complete a Current State
Map? (Mark all that apply)
a)  Document customer information
b)  Complete a quick walk through to identify
the main processes (i.e., how many process
boxes)
c)  Fill in data boxes, draw inventory triangles,
and count inventory
d)  Document supplier information
e)  Establish information flow: how does each
process know what to make next?
f)  Identify where material is being pushed
g)  Quantify production lead time vs.
processing time
© 2013 Gemba Academy LLC. All rights reserved. 61
What are the typical results in the Current
State Map? (Mark all that apply)

a)  80 – 90% of total steps are waste from


standpoint of end customer.
b)  99.9% of throughput time is wasted time.
c)  Demand becomes more and more erratic as it
moves upstream, imposing major inventory,
capacity, and management costs at every level.
d)  Quality becomes worse and worse as we move
upstream, imposing major costs downstream.
e)  Most managers and many production associates
expend the majority of their efforts on hand-
offs, work-arounds, and logistical complexity.

© 2013 Gemba Academy LLC. All rights reserved. 62


What does the Future State Map focus on?
(Mark all that apply)

a)  Creating a flexible, reactive


system that quickly adapts to
changing customer needs
b)  Eliminating waste
c)  Creating flow
d)  Producing on demand

© 2013 Gemba Academy LLC. All rights reserved. 63


What are the typical results of implementing
change? (Mark all that apply)
a)  Throughput time falls

b)  Wasted steps fall

c)  Transport distance increases

d)  Demand amplification is reduced

e)  Inventories rise

© 2013 Gemba Academy LLC. All rights reserved. 64


What are some potential barriers to
implementation? (Mark all that apply)
a)  Traditional approaches do not focus
on the value stream
b)  Financial focus with limited cost
understanding
c)  A lack of system thinking and
incentives
d)  Metrics supporting a 75 year old
model
e)  Limited customer focus

© 2013 Gemba Academy LLC. All rights reserved. 65


How can you implement value stream thinking in your
organization?

© 2013 Gemba Academy LLC. All rights reserved. 66


Congratulations!!!
•  You have completed the course.

•  Visit Superfactory (www.superfactory.com) for more


information on manufacturing excellence.

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