Supply Chain Mapping Using VSM

VSM or Value Stream Mapping is a tool originated by Toyota as part of Toyota Production
System, which is primarily used to improve performance in a shop floor environment. The
concept is very practical then supply chain management professionals adapt VSM as a
supply chain network mapping method.

However, a major constraint for VSM is that it requires extensive data. Then, this article will
explain how to simplify the analysis using an actual case study.

- Select Product: This project is an example of the customer who is the retailer in the UK who
offers skincare products to the international market. The product launch delay will cause lost
sales, bad customer service, bad brand image and brand's switching. Then, the product
included in the analysis should be strategically important because too many products mean
too many details on the map.

- Identify Distribution Channel: From the first step, we already know who are the members of
the supply chain at the upstream level. Then, we should know the distribution channel so we
can add downstream members in the value stream.

- Map Physical Location: At this stage, we should be ready to put the physical locations in a
value stream. After that, we should add the material flow into the map. Production cycle time
can be added to the map here.
From the above example, every supplier sends raw materials to a manufacturer for final
assembly.

- Identify Information Flow: According to this map, each supplier needs to send the samples
to a retailer for approval before the commercial production run. Information flow covers the
order status, product testing and purchasing info. There are 2 types of information flow
(manual and electronic information). At this stage, it's called a Current State Map.

- Develop Alternatives: At this point, a project team should try to identify 7 waste based on
the Lean Manufacturing Principle. After that, a brainstorming session should be conducted to
find a way to eliminate waste. More info for this example is as below,
1. Overproduction - producing one big batch can cause an idle time in the downstream
process. If raw material suppliers produce a smaller batch for assembling, a retailer in the UK
will get some finished goods earlier.

2. Defects - the defects from an upstream process can cause trouble to the downstream
process. Counting on an in-house inspection is not enough. It is useful to send a quality
inspector to conduct an on-site inspection to minimize defects and re-inspection at a
downstream process (as in six sigma initiative.)

3. Unnecessary Inventory - the cost of storage space in urban areas is very expensive. If
retail stores reduce the ordering frequency from weekly to 2 times a week or even daily
ordering, inventory holding costs and logistics cost will be significantly reduced.
4. Unnecessary Motion - retail stores usually have a limited storage space, then the pack
size of the product is usually smaller. If the concept of store-ready packaging is utilized, a
merchandiser's warehouse doesn't have to break carton of 24 units into a carton of 6 units,
this helps to save an unnecessary motion in pack process. 

5. Unnecessary Processing - also, a merchandiser's warehouse can make the drop-shipping

direct to retail stores. This eliminates Unnecessary Processing at a retailer's warehouse.

6. Unnecessary Transportation - many retailers in the UK use suppliers in more than one
country for similar products to spread supply risk. Anyway, suppliers in China and Thailand
have to ship products via feeder vessel to a bigger port in Malaysia or Singapore for the
vessel to Europe. The consolidation of cargo at the only one port may help to increase the
negotiation power with shipping lines. The result will be the possibility to use direct vessel
(less transit time) and decrease a cargo shut off in case of low space availability. 
7. Waiting - the retailer has to wait for the product samples from each supplier for approval,
this usually causes a production delay. In order to reduce waiting time at the retailer,
communication should be done through the centralized system (instead of communication
between the merchandiser and each supplier). Visibility to current project management
status will help a retailer to make a timely decision and each supplier will have to speed up
the process to catch up with others.

Lesson Learned from Supply Chain Mapping Case Study

As you can see, you can discover ways to improve supply chain operations through supply
chain network mapping exercise without the need for any special software or strategic
planning guru.

Many VSM books suggest that a production cycle time, inventory level, quality level,
capacity, non-value added activities should be on the map. This is pretty normal for the
automobile industry, but it's difficult to do in other industries. Anyway, the supply chain
network mapping with lower levels of details can also yield good results.