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Value Stream Mapping

Making Improvements That Add Value

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

For example, you may know that you need to improve your production process, becauseproducts are coming back with defects. In that situation, what do you need to do to improvequality? 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 usefulway of improving processes successfully is to use a lean manufacturing technique calledValue 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 industriesas a way of identifying improvement projects.

The basic idea behind Value Stream Mapping is this: if the underlying process is right, theoutcome 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 andmaterials flow through all of the activities that occur from the time an order is placed, to thetime the product or service is delivered. The start is with customer needs, where the mapshows how and when information is received. The end is when the product or service isdelivered 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 ordistributing the product), you can clearly identify steps where no real value is added, orwhere there's a bottleneck and thus, you can eliminate these types of waste. Your originalValue 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 enoughinformation about the flow of information and physical products to help you identify

problems and potential improvements, but no more than this.

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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 askyou to evaluate whether your final product can be improved, so that you add more value foryour customers, and thus increase your appeal. By contrast, VSM looks at how the product ismade 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 atprocesses at a higher level than typical process flow maps or flow charts. Traditional processflow charts are typically used to examine one specific process in detail (for example, how acustomer complaint is handled). Producing a VSM helps you identify what the key value-addactivities 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 inputsthrough to the customer's end product.

Value Stream Mapping is best applied to processes that are reasonably routine andstandardized. Manufacturing companies are obvious examples of these, however, anyorganization that delivers a standard set of products or services is likely to benefit fromapplying VSM. Value Stream Mapping is unlikely to be useful where work processes changecontinuously or where bespoke products are delivered, because the flow may change witheach 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 efficientpractices.

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 cansee 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 youmay 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 themanufacture of one product, you might want to look at manufacturing as a wholesystem.

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.

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Step Two Draw the Current Value Stream Map

To help you draw the map, gather a team of people representing the stakeholders inthe process. Include people who both manage and support the various parts of thevalue 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 thatshows 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 todeliver the product or fulfill the customer need; and the tasks or activities thatgo into producing the products.

Put these tasks in order, as much as possible, and include costs and actualworking 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 ownValue Stream Map that's why defining scope is so important.

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

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There are software programs available to draw ValueStream Maps, and there's a set of shapes typically usedto represent various parts of the process. You may ormay not want to use these, however it's important tomap your process clearly, and it's also important to

ensure that everyone understands what the symbols youuse mean.

Step Three Assess the Current Value Stream

In this step, you analyze whether each activity in the process is adding value. This iswhere 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 perfectexample: as the car body moves along the productionline, more and more pieces or assemblies are added,making it more complete. Eventually, it becomes afully operational vehicle that people will buy. Each stepadds value (although clearly the most value is addedwhen 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).

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Determine which no-value-add points are still necessary (for example, for meetingregulatory requirements, addressing other compliance issues, and ensuring workersafety).

Step Four Create a 'Future State' Value Stream Map

Map how you want your improved process to look in the future. How will the processwork after you've eliminated the waste you identified in the previous step? Followthese 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 preventunnecessary 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 thispoint, many organizations also begin other lean processes likeKaizen,Kanban, andJust In Time. Remember, though, that the time you invest in VSM will pay off only ifyou 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. Thishelps increase buy-in.

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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.

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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 valueits 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."

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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

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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

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