By Issa Bass

 The purpose of business operations is to produce goods and/or services that are destined to customers who determine the value of those goods and services through their desire to buy or not them and through the prices that they are willing to pay for them. Businesses respond to the customers' desires by putting in place a set of operations that enable them to produce and deliver their output.  The set of operations that they determine ranges from how orders are received, to how products are bought from suppliers, to how those products are transformed and delivered to the customers.

The transformation path that the products follow from raw materials to finished goods in the hands of customers is called value stream. The analysis of a company's Value Stream helps trace the flow of material transformation from when the customers place their orders to when they receive their products.
For a Lean oriented organization, the production process should be set in such a way that at every step of the process, value is expected to be added to the material being transformed. Waste occurs every time the material goes through a step without having value added to it and every time it is stored at a given stage of the process waiting to be further transformed.

Even though it is more obvious in manufacturing settings, this concept also applies to services. Business organizational structures are composed of several departments that put in place distinct processes and those departments operate in contingent sequences with different operations at different stages and areas of the organization being dependent on each other.  Because of this interdependence of the different operations, every time a process at a given department fails to operate to its full potential or conflicts with other departments, it becomes a constraint, a bottleneck for the business as an entity.

The good performance of each department only positively impacts the business as an entity when every department performs to its full potential and does not constitute a hindrance, a constraint for the rest of the company. The purpose of a six sigma project is to address the big picture, to impact the performance of the company as a whole. It is therefore necessary to select the right  project when attempting to improve a company's performance. Value stream mapping is a good starting point for that purpose.
 

The Theory Of Constraint (TOC) And Value Stream Analysis

Continuous improvement is a managerial concept that emphasizes the need to constantly identify the areas of a company that require special attention and proceed with the improvements required for the benefit of the business as an entity.

This concept is better embodied by the philosophy of the Theory Of Constraint (TOC) developed in the mid 1980s by Eliyahu Goldratt in his book The Goal (and further developed in his subsequent bestseller books such as The Critical Chain the Haystack Syndrome and the Theory Of Constraint). The TOC is founded on the notion that complex business operations are linked to one another like a chain and at any given time, the poorest performing operation acts as the weakest link and constitutes a constraint, an impediment that limits the ability of the system as an entity to achieve what it is meant for. The improvement of the system requires the focus on the weakest link. Disregarding the constraint, the weakest link and improving any other aspect of a business can eventually lead to an aggravation of the problems.

The improvement process itself requires some steps, the first of which is the identification of the constraint. Once the constraint is identified, it becomes necessary to determine what changes need to take place and how they are to be brought about.

The ideal production process that would eliminate the waste that comes under the form of excess inventory or idle machines would be the leveled production process based on the idea of one-piece flow. A process that does not build inventory and that uses both labor and machines to their full potential. In that case, every operation will take the same amount of time to process a given quantity of material.

Yet in the real world, this seldom does happen. Because of the complexity of manufacturing processes and the usually uneven process capabilities of the companies' resources, a one-piece flow process will make it hard to use all the factors of production to their full potential at the same time. The task of management becomes therefore to determine the optimal combination of eliminating clutters and at the same time making the best use of the resources.

For the sake of our argument let's consider the operations in a fictitious soap manufacturing company. The operations are simplified to the following steps.

• Reception and stocking of the raw materials
• Mixing the raw materials to produce the soap
• Cutting the bar soap and packing the pieces
• Stocking the products at outbound inventory
• Shipping the product to the customers

The time spent by the different operations to process 5 tons of material is:

1 hour for reception and inbound inventory, 4 hours for mixing, 5 hours for cutting and packing, 2 hours for outbound stocking and 2 hours for shipping.

This scenario clearly shows the "cutting and packing" operations to be the critical constraint for the company as a whole because no matter how well all the other departments perform it will be impossible for the business to process 5 tons of soap in less than 5 hours. The bottleneck caused by the "cutting and packing" operations appears in two forms: overproduction generated by the upstream operations because the "cutting and packing" operations cannot process all the output that comes from the "mixing" operation (if it operates at its full potential) and underused resources downstream.  

An improvement in any aspect of the company's operations other than the "cutting and packing" operations will lead to an increase in either excessive idle inventory after the mixing operations or more idle machines and higher cycle time.

This example applies to services as much as it does to manufacturing since bottlenecks do not always come under the form of excess inventory or idle resources. In the service industry, the materials are usually replaced by the flow of information which in our days, is managed by the Information Technology. Let's suppose that cellular phone service provider uses Oracle, Compass and a WMS (Warehouse Management System) as channels to process information. If these three Software packages process the information in a linear flow and one of them is slower than the other two, it will become a constraint for the IT department and improving the performance of any software other than the bottleneck will only lead to more problems.

How To Map Your Value Stream
Just as in the case of process mapping, the purpose of value stream mapping is to visualize the chain of events that leads to the generation of a throughput in order to pinpoint a bottleneck, a clutter or opportunities for improvement. Yet it is necessary to distinguish Value Stream mapping from Process mapping since a value stream is a chain of processes.

Mapping the Value Stream does not only help visualize the sequence of operations but it also makes it easy to assess the process capabilities and performance.

A company has as many value streams as it has products, so the first step in Value Stream Mapping should consist in separating the products before examining the chain of processes that lead to their production.

A Lean oriented organization usually uses Pull techniques which consist in subordinating production to the customers' actual orders, instead of a forecast driven production that consists in the building of a high volume of outbound inventory that would wait for probable customers. So the Value Stream Mapping of the current state for a Lean driven company should start with the customers' demand. The three main players in the production of the demanded products will be the Customer, the production operations and the suppliers of the raw materials.

The first step therefore will be the assessment of a periodic (weekly, monthly...) volume of orders from the customers that will later be subdivided to determine the daily production requirement.

The next step will be to evaluate the demand for raw materials that will be required to satisfy the customers' demand and last but not least the determination of the company's resources abilities to meet the demand along with their productivity and performance. How long does it take every operation to process a given number of orders?

The current state Value Stream Mapping is not intended to describe the ideal state of the company but to visualize what is happening now.

The following map is a simplified map of the Value Stream of our soap manufacturer.

About the author
Issa Bass is the managing editor of SixSigmaFirst. He can be reached at issa@sixsigmafirst.com

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