Value Stream Mapping

Making Improvements That Add Value

Organizations continually strive for lean and efficient operations. Particularly in the current
economic climate, your company may ask you to find opportunities for lean improvement in
your department or area, so that you can deliver the same value to the customer at lower cost
to your organization. However, it can be a challenge identifying where these opportunities
are.

For example, you may know that you need to improve your production process, because
products are coming back with defects. In that situation, what do you need to do to improve
quality? One option is to put more resources into physical inspections. But will that solve the
problem, or will it just add cost to a process that's flawed somewhere else?

Process Improvement
Process improvement is successful only when you address the underlying problem. A useful
way of improving processes successfully is to use a lean manufacturing technique called
Value Stream Mapping (VSM). It originated at car manufacturer Toyota, where they called it
'material and information flow mapping.' VSM is now widely used in a variety of industries
as a way of identifying improvement projects.

The basic idea behind Value Stream Mapping is this: if the underlying process is right, the
outcome will be reliable. To get the process right, you have to understand the sequence of
activities that provide value to your customers.

VSM looks at the full, end-to-end process. It helps you map visually how information and
materials flow through all of the activities that occur – from the time an order is placed, to the
time the product or service is delivered. The start is with customer needs, where the map
shows how and when information is received. The end is when the product or service is
delivered to the customer, with the map showing how decision-making and communication
processes affect the whole flow.

By looking at your process from start (receiving orders or forecasts) to finish (warehousing or
distributing the product), you can clearly identify steps where no real value is added, or
where there's a bottleneck – and thus, you can eliminate these types of waste. Your original
Value Stream Map becomes the baseline for improvement initiatives that eliminate no-value,
wasteful activities.

Note that the map is only as detailed as it needs to be. In other words, it has to contain enough
information about the flow of information and physical products to help you identify
problems and potential improvements, but no more than this.
Don't confuse Value Stream Mapping with Value Chain Analysis or Porter's Value Chain.
These tools look at the strategic part of what your company offers its customers. They ask
you to evaluate whether your final product can be improved, so that you add more value for
your customers, and thus increase your appeal. By contrast, VSM looks at how the product is
made – to ensure that each step adds value to the overall process.

Also, don't confuse VSM with flow maps or flow charts. Value Stream Maps look at
processes at a higher level than typical process flow maps or flow charts. Traditional process
flow charts are typically used to examine one specific process in detail (for example, how a
customer complaint is handled). Producing a VSM helps you identify what the key value-add
activities are, so you can eliminate the activities that don't add value.

How to Create and Use Your Value Stream Map

The objective of Value Stream Mapping is to create a picture of how items (such as materials,
designs, or customer needs) flow through the value stream – from raw materials and inputs
through to the customer's end product.

Value Stream Mapping is best applied to processes that are reasonably routine and
standardized. Manufacturing companies are obvious examples of these, however, any
organization that delivers a standard set of products or services is likely to benefit from
applying VSM. Value Stream Mapping is unlikely to be useful where work processes change
continuously or where bespoke products are delivered, because the flow may change with
each customer or project.

Take these steps to use the Value Stream Mapping tool:

• Step One – Identify the Product or Service to Map

Choose a process for which you would like to implement leaner, more efficient
practices.

It's important here to define the scope of your map. Identify the start and end points,
and make sure that you map from one end of the process to the other end, so you can
see where the blockages and non-value activities are.

You also need to identify which part of the overall process you need to look at. As an
example, if the amount of profit you're generating from each order is falling, then you
may want to look at how an entire order is fulfilled. If the volume of orders is falling,
then you may want to look at the sales process in more detail.

If you have shared equipment or other resources then, instead of looking at the
manufacture of one product, you might want to look at manufacturing as a whole
system.

To illustrate the steps of creating a Value Stream Map, we'll use a simple example:
the process of transforming an Internet order into a shipped product.
• Step Two – Draw the Current Value Stream Map

To help you draw the map, gather a team of people representing the stakeholders in
the process. Include people who both manage and support the various parts of the
value stream. It is vitally important here to include people who actually do the work,
and not just the managers of team leaders - otherwise you risk creating a VSM that
shows what should happen, rather than what actually happens.

You can then observe and gather data to complete the map:

• Brainstorm who is involved, both internally and externally; what is needed to

deliver the product or fulfill the customer need; and the tasks or activities that
go into producing the products.
• Put these tasks in order, as much as possible, and include costs and actual
working time for each task, in order to build up a picture of average
performance for each task (and – ultimately – for the entire, end-to-end
process).
• Look at the delays in between stages of the process – for example, the length
of time a task sits in someone's in-tray – and add that.

Here are the tasks involved in order processing and delivery for our example:

• Order entry and processing.

• Supplier liaison.
• Inventory management.
• Order picking.
• Packaging.
• Shipping.

Depending on your operations, any of these tasks could be the subject of its own
Value Stream Map – that's why defining scope is so important.

Here's how you would organize the tasks in our example:

 There are software programs available to draw Value
Stream Maps, and there's a set of shapes typically used
to represent various parts of the process. You may or
may not want to use these, however it's important to
map your process clearly, and it's also important to
ensure that everyone understands what the symbols you
use mean.

• Step Three – Assess the Current Value Stream

In this step, you analyze whether each activity in the process is adding value. This is
where you can look for lean improvement opportunities:

What is 'value add'?

Value-add activities change an item, and make it worth
more to the customer. Car assembly is a perfect
example: as the car body moves along the production
line, more and more pieces or assemblies are added,
making it more complete. Eventually, it becomes a
fully operational vehicle that people will buy. Each step
adds value (although clearly the most value is added
when the final component is installed!)
• At each point in the map, ask yourself, “Does this activity add value?”
• Identify your value-add points.
• Identify your no-value-add points (for example, places where material is stored,
redundant or excessive paperwork, and places where there are long lead times).
• Determine which no-value-add points are still necessary (for example, for meeting
regulatory requirements, addressing other compliance issues, and ensuring worker
safety).

• Step Four – Create a 'Future State' Value Stream Map

Map how you want your improved process to look in the future. How will the process
work after you've eliminated the waste you identified in the previous step? Follow
these tips:

• Assume that anything is possible.

• Ask yourself what your leanest competitor would do.
• Consider how you would structure the process if you were starting the
business today with unlimited capital.
• Look for similar activities, and see if there's a way to group them.
• Identify bottlenecks and critical events.
• Look for ways to simplify activities that are complex.
• Confirm that customers actually value each transformation activity.

Look for common forms of waste, such as these:

• Moving product/materials inefficiently.

• Using equipment and people unnecessarily.
• Keeping too much or too little inventory.
• Performing inefficient quality checks.
• Stockpiling finished goods.
• Adding features or conducting processing that the customer does not value.

Here are some of the opportunities for improvement in our example:

• Eliminate redundant approvals or move them earlier in the process to prevent

unnecessary work.
• Improve the flow of information (paper or electronic).
• Restructure the warehouse operations for efficiency.
• Update the inventory control system.

• Step Five – Create a Plan to Implement the Desired State

When you have identified your objectives, you can develop a plan for change. At this
point, many organizations also begin other lean processes – like Kaizen, Kanban, and
Just In Time. Remember, though, that the time you invest in VSM will pay off only if
you follow through with the implementation plan.

These guidelines will help you do that:

• Use the VSM to communicate your goals and objectives.

• In your VSM team, include people who will work with the new activities. This
helps increase buy-in.
 • Talk frequently about lean and efficient operations so that it becomes part of
your corporate culture.
• Look for ways to reward efficient work and efficiency suggestions.

• Step Six – Implement the Plan

Various techniques can be used, but one of the most popular used with VSM is a
series of 'Kaizen Blitzes,' each lasting approximately one week. These gradually move
you from the current state to the future state.

• Step Seven – Review the Results, and Repeat

Key Points
Value Stream Mapping creates a graphic representation of how a process works, showing the
links between flows of material and information.

It provides a common language for people to use to communicate what's happening, and why
things need to change. By working through the process, you'll have a much better
understanding of how your work activities fit together – and you'll be able to create an action
plan for eliminating waste and, ultimately, for increasing profits for your organization.
REMANUFACTURING
Remanufacturing is a process where a particular product is taken apart, cleaned, repaired, and
then reassembled to be used again. Many different types of products can go through this
process, including auto parts, tires, furniture, laser toner cartridges, computers, and electrical
equipment. Essentially any product that can be manufactured can also be remanufactured. In
order for a product to be considered remanufactured, most of its components should be used
(although some of them can be new if the older parts are too defective to be salvaged).
As society continues to better understand the effects of pollution and the consequences that
come with the depletion of our natural resources, different steps are being taken to ensure the
health of the environment for future generations. This general awareness has led to many new
developments to preserve our world. Remanufacturing is one such development. This process
is responsible for large energy savings, extending the lives of landfills, and cutting down on
the amount of air pollution that would normally occur when a product goes through a
reprocessing procedure.
While the basic concept is quite simple, remanufacturing is actually an extensive process. It
requires that a used product be completely disassembled in order to assess its actual
condition. If it is determined that remanufacturing is worthwhile, various parts of the product
are cleaned, restored, repaired, and replaced. Further refinements are then performed and the
product is reassembled so that it once again operates in the manner for which it was intended.
The product is then ready to be used again. Each step in this process is essential to the entire
concept of remanufacturing and careful precautions must be taken to ensure that each step is
carried out correctly.
MISCONCEPTIONS ABOUT REMANUFACTURING
Often, the process of remanufacturing gets confused with other similar activities. Rebuilt and
recharged products are very close to remanufactured ones and the three terms can often be
considered synonymous with each other. Rebuilt products usually refer to auto parts, while
recharging is usually performed on imaging products like the aforementioned toner
cartridges.
Other types of products are almost completely different from those that have been
remanufactured. For example, a remanufactured product is not a recycled one. Recycling
involves using a product or its parts as raw materials for a different product and is generally
applied to consumable goods like newspapers, bottles, and cans. Very rarely are recycled
products resold to be used as they were originally intended, and when they are, the quality is
not as good as a remanufactured product.
In addition, a remanufactured product should not be confused with a repaired one. Usually
when a product is repaired, the whole remanufacturing process is disregarded and only
defective parts are investigated and replaced. Likewise, restored and reconditioned products
are ones that are brought back to their original condition, but these changes are usually
cosmetic and apply to things like antiques, rather than mass market consumer products. In
addition, remanufactured products should not be classified as "used." A used product is one
that has not been repaired and therefore has no guarantees regarding its performance. Finally,
demanufacturing and remanufacturing should not be confused with each other.
Demanufacturing is simply the disassembly step that all products that are going to be
remanufactured must go through.
REMANUFACTURING VS. RECYCLING
Although remanufacturing and recycling are two different things, many environmental
groups are embracing the concept of remanufacturing over recycling because it cuts down on
the use of energy and resources used for processing. While recycled goods are consumed,
then returned to their original raw material form to be used again, remanufacturing "recycles"
the value originally added to the raw material.
In the book The American Edge: Leveraging Manufacturing's Hidden Assets , Professor
Robert T. Lund explained that "Remanufacturing differs from recycling also, most
importantly because it makes a much greater economic contribution per unit of product than
does recycling. The essential difference arises in the recapture of value added. Value added is
the cost of labor, energy, and manufacturing operations that are added to the basic cost of raw
materials in the manufacture of a product. For all but the most simple durable goods, value
added is by far the largest element of cost. Even in a product as simple as a beer bottle, the
cost of the basic raw materials (sand, soda, and lime) is much less than 5 percent of the cost
of a finished bottle. The rest is value added. For a product such as an automobile, the value of
the raw materials that can be recovered by recycling is only in the order of 1.5 percent of the
market value of the new car. Value added is embodied in the product. Recycling destroys that
value added, reducing a product to its elemental value—its recoverable raw material
constituents. Further, recycling requires added labor, energy, and processing capital to
recover the raw materials. When all of the costs of segregation, collection, processing, and
refining are taken into account, recycling has significant societal cost. Society undertakes
recycling only because, for all nondurable and many durable products, the societal cost of any
other disposal alternative is even greater."
REMANUFACTURING AND SMALL BUSINESSES
Aside from environmental benefits, there are many other reasons why remanufactured goods
exist. Like many good business decisions, remanufacturing simply saves money by
prolonging the economic life of a product. A small business with a tight budget can save
money by using remanufactured products because they often cost less (anywhere between 40
and 60 percent less) and come with warranties and extra services that guarantee their
performance.
In recent years, remanufacturing has grown into a big business. Recent studies suggest that
there are over 70,000 remanufacturing firms employing close to a half million people in the
United States. Together, these firms make over $50 billion a year, proving that
remanufacturing is a force to be reckoned with in today's economy. Because of this trend, it
would seem that there are many opportunities for small businesses to get in on the action
provided by the remanufacturing industry. For example, an auto repair business can easily
branch out and start offering remanufactured goods as part of their services, or a small
business that repairs office machines will gain the necessary knowledge to remanufacture
related products at the same time as it conducts its normal business activities.
If a small business decides to get into the remanufacturing industry, it must first and foremost
study and understand the market. Despite the recent success of remanufacturing, there is still
a negative perception among consumers regarding products that contain used parts. Many
consumers feel that a remanufactured product is not durable as a brand new one and may
require additional maintenance in the future. This is a serious issue that must be addressed
before a small business decides whether it is worth it to pursue remanufacturing as a
vocation.
Like any business venture, remanufactured products must be properly marketed in order for
the company producing them to ultimately succeed. Management must target consumers who
will appreciate the fact that remanufactured goods are a great financial alternative to new
ones, but educate them enough so that they understand they are not sacrificing quality for
price. A sound warranty plan and follow-up calls that gauge the product's performance are
also suggested. Like any product or service, a remanufactured product will benefit from
positive word of mouth and grow into a solid business because of it.
Inexperienced remanufacturing firms must also be careful not to compete against themselves
when marketing remanufactured and new goods at the same time. In addition, management
must work with their own employees so that they understand the many benefits of the
remanufacturing process. Many employees may be hesitant to offer remanufactured goods to
their customers for fear of potential prejudices regarding the performance of the product.
Most importantly, a small business must have the means at its disposal to locate and recover
the products and resources that will be used in the remanufacturing project and ultimately
perform the task at hand. Once these products are found, they must be transported to the
destination where disassembly will take place. After that, they will most likely be transported
to another location that specializes in reassembly. Finally, any unusable parts and products
must be collected and transported to recycling centers or other places that specialize in their
disposal.
There are many legal and regulatory issues that affect the remanufacturing industry that
businesses must be aware of. Intellectual property and anti-trust matters; federal, state and
local recycling procedures; and government economic incentives are just a few of these
issues. The Remanufacturing Institute is the watchdog organization for the entire industry and
they are constantly monitoring these issues and representing the views of the businesses that
are involved in remanufacturing. In addition, the federal government requires that all
remanufactured goods must be labeled as such so that they cannot be passed off as new
products.

Read more: Remanufacturing - benefits, cost, Misconceptions about remanufacturing,

Remanufacturing vs. recycling, Remanufacturing and small businesses
http://www.referenceforbusiness.com/small/Qu-Sm/Remanufacturing.html#ixzz10sr2TEWO