The value stream represents the steps taken to deliver the specific product or service. (In this way it is different from a value chain, which is usually defined over broad functional areas rather than a specific product). Value Stream Analysis (VSA) is a key tool of Lean Thinking.
Value streams may be generated a number of ways. A Process Map is a useful tool for displaying the value streams, particularly when movement into functional departments and cycle times are shown.
Once the processes are mapped out, each process step will be evaluated to determine is it creates value, or is a form of waste. The implementation of the Lean thinking model results in a departure from batch scheduling and a movement to continuous flow of single units of product. Lean Thinking seeks to eliminate waste with application of the following five steps (Lean Thinking, Jones & Womack, 1996, Simon & Schuster):
1. Specify Value
2. Identify Value Stream
3. Make the Value Stream Flow
4. Replace Push Scheduling with Pull Scheduling
5. Achieve Perfection
Although it may be your initial tendency, do not limit your value stream to the walls of your organization. Fantastic sums of money have been saved by evaluating value streams as they move from supplier to customer, often because of mistaken concepts of value or attempts to achieve operational savings that diminish the customer value.
Once the non-value added, unnecessary steps (the Type 2 muda) have been eliminated, we can look for flow of the remaining steps. In this step, we seek to eliminate wait times and the compartmentalization of the workflow.
As ironic as it may seem, a major reason our processes contain waste is because of our historical attempts to make them more efficient. The fallacy we have accepted is that we can make processes more efficient by creating specialized departments that process work in batches. These departments become efficient at what they do from a process standpoint, with economic lot quantities designed to minimize set-up time or material delivery costs, but they lack efficiency relative to specific product value streams. Waste is created in waiting for the batch to begin its departmental processing, and waste is additionally created when particular units of product, for which customers are waiting, must wait for the remainder of the batch to be processed. See also: Level Load Balancing and Setup Reduction
The attempts to improve the departmental efficiency can create additional waste in the product value stream if the departmental efficiency produces outcomes that do not serve the customer needs, or requires inputs that increase costs for suppliers without adding value. While standardization of product components make the individual processes more efficient, this efficiency can come at the cost of customer value. Think about the usual new car purchase experience. You buy 'the package' which includes things you are paying for but do not need, because it is more efficient for the production and delivery processes.
This batch-imposed waste is compounded if changes occur in design or customer needs, as the WIP or final good inventories require rework or become scrap. Note that these concepts are not limited to manufacturing; businesses in the service sector can also generate muda. Think of the hamburgers cooked in advance, waiting for an order, or checking account statements that come at the end of the month, long after you could possibly prevent an overdraw. Transparency helps to increase the awareness of these types of waste.
Pull ensures that resources are used only when a customer makes an actual demand for the product or service. Pull moves the organization from producing for inventory to producing for customers, resulting in inventory cost reductions and reduced muda from making product that the market may not want, now or in the future.
The final step in Lean implementation is Perfection, which is not the endpoint that you might think, but rather a call to continuously repeat the Lean cycle. In practice, it has been found that subsequent Lean improvements, sometimes called kaizen, can reap additional benefits of the same magnitudes discovered in earlier applications of the Lean methodology.
Learn more about the Lean Six Sigma principles and tools for process excellence in Six Sigma Demystified (2011, McGraw-Hill) by Paul Keller, in his online Lean Six Sigma DMAIC short course ($249), or his online Green Belt certification course ($499).