© BMA Inc All rights reserved. The Value Stream Managing by value stream

© BMA Inc All rights reserved. Value stream management Organize by Value Stream Planning the Value Streams Controlling the Value Streams Improving the Value Streams Managing the Value Stream Teams

© BMA Inc All rights reserved. What is a value stream? “All of the actions, both value creating and non- value creating, required to bring a product from concept to launch and from order to cash collection. These include actions to process information from the customer and actions to transform the product on its way to the customer.”

© BMA Inc All rights reserved. Why do we focus on the value stream? Where the value is created. Identify value and waste. Focus on creating value for the customer. Identify flow and obstacles to flow. “See” the issues and make improvement. Create value, growth, & profit.

© BMA Inc All rights reserved. Why do we organize by value stream? Focus on creating customer value. Accountability. Departments can be “optimized” but we need to optimize the flow through the value stream. Develop lean thinking managers & specialists. “As you get the kinks out of your physical production, order-taking, and product development, it will become obvious that reorganizing by value stream is the best way to sustain your achievement.” Lean Thinking, Womack & Jones

© BMA Inc All rights reserved. Kinds of value streams Current Customers New Customers Current Products New Products Order Fulfillment Acquiring New Customers Customer Development New Product Development

© BMA Inc All rights reserved. Steps in value stream definition 1.Identify product families with similar production flow. 2.Staple yourself to a customer order. 3.Identify and minimize “monuments”. 4.For design or configure-to- order products include the design/configuration in the production flow. 5.Create a production flow matrix –Product families on the Y- axis –Machines or work centers on the X-axis 6.Make sure the value streams you select include significant business. 7.Move forward and backwards through the value streams –Value added services –Purchasing and Sales & Marketing –Administrative tasks

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Product-process matrix

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Product-process matrix sorted for value streams

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Criteria for value streams Family of products with similar production flow. Include all the people & processes that support the value stream production process. The value stream team a reasonable size Minimize monuments –Machine/departments shared by more than one value stream Extend value stream as close to the customer as possible and as close to the suppliers.

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Here’s a typical value stream These are steps included in the value stream –Sales & Marketing* –Customer Service* –Purchasing –Materials handling –Parts fabrication –Machining –Anodizing –Assembly –Shipping –Maintenance –Production engineering –Quality assurance –Cost accounting Most value streams contain monuments. Machines or processes that are shared by more than one value stream. –Short term: Work around them –Long term: Eliminate monuments & “right size” the equipment In the early stages of value stream management you may find there are not enough people with the right skills –Short term: Have them work in more than one value stream –Long term: Cross-train people to do different kinds of tasks.

© BMA Inc All rights reserved. There are some people or departments outside the value streams Examples: –Plant or division manager –Financial accounting –Human resources –Information systems –Facilities management These people support the value streams but are not part of them.

© BMA Inc All rights reserved. There are very few “perfect” value streams. A perfect (order fulfillment) value stream –Includes everyone from sales & marketing through to operations, distribution, purchasing, and all the people that are required to support this operation. –There are no monuments. –Everyone in the value stream is dedicated to that one value stream. –The sales & marketing people are actively involved in the value stream operations. –New product development is actively involved in the value stream operations. –The value stream manager has complete control of every aspect of the value stream operation. There are very few perfect value streams. Many companies restrict their value stream to production operations only.

© BMA Inc All rights reserved. When there are discontinuities in the value streams… We must have effective methods for bringing together the “true” value stream for planning, problem resolution, new products, and for routine management. Methods to bring the “true” value stream together –Incorporating marketing into the value stream –The Chief Engineer approach –Box Score meeting –Sales, Operations, & Financial Planning –Target Costing

© BMA Inc All rights reserved. Bringing the “true” value stream together Incorporating Marketing into the Value Stream –Establish the marketing people by product families that match to the product families within the value streams –Include the marketing people organizationally as members of the production value streams. The Chief Engineer Approach –Assign “chief engineers” who are responsible for the entire flow of a product family from design through production, purchasing materials, manufacturing, and marketing the product family. –Chief engineer has no direct authority but has a lot of power. –Chief engineer has no employees but reports to the President. –Chief engineers work together to create ideal flows.

© BMA Inc All rights reserved. Bringing the “true” value stream together Box Score Meeting –Weekly management review of the value stream box scores. –Sales, marketing, new products, etc. attend the meetings. –Opportunity to work cooperatively to grow the business, solve problems, create more value, eliminate waste, etc.. Sales, Operations, & Financial Planning –Done by value streams. –Starts with demand forecasts and finishes with supplier forecasts. –Requires the active involvement of all the parties from purchasing through production, distribution, and sales/marketing. –Establishing the game plan each month.

© BMA Inc All rights reserved. What if we can not achieve the “perfect” value stream? Many lean organizations can not practically achieve “perfect” lean value streams. –Customer & marketing issues may clash with product flow –Production processes may not flow perfectly Don’t wait for perfection. –The lean approach is to move ahead with the best you can do now. –60% is good enough –As you move ahead you will learn how to do it better Provide methods to make sure the “true” value streams work together cross-functionally

© BMA Inc All rights reserved. Key questions: What business organization best supports our value streams? How well do different organizational methods support these Lean Objectives? –Departmental organization –Departmental matrixed with “dotted line” to the Value Stream –Value Stream organization matrixed with dotted line to Departmental Managers –Value stream organization with specialist coaches supporting the value streams. –Value Stream organization

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Example of value stream organization assessment

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Working in Value Streams Parker Hannifin Quick Coupling Division Minneapolis, MN (5 locations) Power Curbers Inc. Salisbury, NC Watlow Controls Winona, MN

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Value stream management Organize by Value Stream Planning the Value Streams Controlling the Value Streams Improving the Value Streams Managing the Value Stream Teams