Lean Value Stream Mapping for distributors

BY STUART MAXEL
Special to The Wholesaler

The history of lean management philosophy is rooted in manufacturing, with companies like Toyota, Honda, John Deere, Nike, Caterpillar and Illinois Tool Works leading the way. Fundamentally, lean is centered on preserving customer value with less work. Lean principles started in distribution as manufacturers demanded lean supply chains. Distributors quickly discovered that lean tools applied directly to their business could generate not only savings, but also increased customer satisfaction and employee morale.

Intro to VSM

Lean has many tools that are directly beneficial to the distribution industry, but one of the most effective is “Value Stream Mapping” (VSM). The primary goals of value stream maps are to eliminate waste and allow distributors to spend more process time and resources driving additional value for customers. The effective use of the value stream map tool easily identifies waste that can be transformed into customer value and profit.

VSM measures many powerful attributes to be used in the process transformation. The most important is the percentage of time spent on adding customer value. The most common way to determine if a step is value-added is to think about whether a customer would be willing to pay for that step. If not, it is not value-added; therefore, if possible, that step should be eliminated or streamlined.

Value stream maps are more than just process maps with time studies. They measure and improve defects, distances, inventory and many other critical process outputs. They have the power to transform inefficient distribution processes into efficient, defect-free, customer-driven processes.

How do they work?

Viewing the entire end-to-end process from a customer’s perspective, with a goal of driving more customer value and less waste, Value Stream Mapping captures all of the actions required to bring a product to the customer. VSM helps to visualize the flow, showing the clear linkages — or lack thereof — between information flows and product flows.

The two major phases of VSM are “present state” and “future state.” The “present state” value stream map is simply how the process is currently performed. Once a present state value stream map is complete with all of the necessary measures (i.e., defects, time, distance), it is normally very intuitive as to how the process should be improved. Lean teaches to look for seven types of waste in processes:

• Inventory
• Motion
• Defects
• Extra processing
• Waiting
• Transportation
• Over-production/purchasing.

After as much waste as possible is eliminated from the “present state” value stream map, the “future state” value stream map is drawn. Measurements are then calculated to determine the actual improvement in terms of cycle time, value-added time, defects, and many other key attributes.
There are different styles and nomenclature when developing value stream maps. The graphic below is a simple example. Each step in the process identifies key information (see process step below). At the very top of the step is a description, with the individual tasks in the white box below. The icon (right) shows that this is an administrative job, and the “1” next to the underlined circle means that one person does this process step. Directly below the white portion, “Eclipse” is the name of the system used, and C/T indicates that the cycle time is 2 minutes. The color green indicates a non-value added step that could be streamlined, automated or eliminated. The step described was eliminated through system automation, thus saving 2 minutes per order on every warranty allowance.

Below is a “present state” value stream map filled with valuable data about a process. The map includes key measurements for cycle time, number of steps, value-added time, systems used, functional responsibility and many other important features. A value analysis performed on the map is indicated by color, with green indicating that the step can be eliminated and yellow indicating that the step can be streamlined.

The future state map shows the actual results of the new process, including reducing cycle time from 58 to 21 minutes, achieving a 63% increase in value-added time, and decreasing the number of process steps from 17 to 10. The more important part is the simplicity of the new process, which is easier for employees and positively impacts their morale and productivity. This single process improvement saved over 2,000 hours per year, which is greater than one FTE (Person). That FTE can be freed up to increase customer value in another part of the supply chain, such as sales, delivery or marketing.

Where to start?

Value Stream Mapping is a simple tool that, when used properly, can convert any inefficient process into a customer-driven, efficient, defect-free process. Value stream maps are most beneficial in distribution processes repeated hundreds or thousands of times per day. Driving even a small amount of waste out of order entry, picking or shipping processes will yield huge savings. Distributors regularly realize over 30% reductions in cycle time, defects and percentage of non-value-added customer value time with VSM. If you are interested in learning more about Value Stream Mapping or lean for distribution, consider investing in training from a lean expert.

Stuart Maxel, Continuous Improvement Manager with Activant Solutions, is a certified Lean Master and Six Sigma Master black belt. Maxel has been actively leading Lean and Six Sigma activities for over 15 years, specializing in inventory and operational activities. Savings from these activities have exceeded $50 million. He is part of Activant Solution’s business consulting team focused on distribution process design.