2. Choose the ValueStream

What Is a ValueStream?

~Ianufacturingcompaniessurvivebecausetheytransform~""lWma-:"-;~:.;ntofinishedgoodsthattheircustomersvalue.Processestransformmaterialintoproducts;operationsaretheactions(cutting,heating,grinding,bending,etc.)thataccomplishthosetransfor-mations.Operationsareconsideredtheprocesselementsthatadd\"alue,butprocessesalsoincludenon-value-addingelements.A valuestreamconsistsofeverything-includ-ingnon-value-addingactivities-thatmakesthetransformationpossible:

~ Communicationa11alongthesupplychainregardingordersandorderforecasts.(Forexample,foravaluestreamatafirst-tierautomotivesupplier,communicationtakesplacebehveenthefirst-tiersupplierandoneormoresecond-tiersuppliers;andbetweenthefirst-tiersupplieranditscustomer-theoriginalequipmentmanufacturer.)

~ Materialtransportandconveyance.

~ Productionplanningandscheduling.~ Thenetworkofprocessesandoperationsthroughwhichmaterialandinfonnation

flowsin timeandspaceasit isbeingtransformed.

Therearemanyvaluestreamswithinanorganization,justastherearemanyriversflow-ingintoanocean.ValueStreamManagementhelpsyousystematica11yidentifyandelim-inatethenon-value-addingelementsfromyourvaluestreams.

Selecting Value Streams for Improvement

Yourcustomersoftendefineyourvaluestreams.If youmakesimilarpartsforavarietyofcustomers(forexample,rearviewmirrorsforToyota,Ford,andDaimler-Chrysler),eachhavinguniquespecifications,youwouldhavethreeproductfamilies,eachwithitsownvaluestream.

If \.ourcustomerhasnotdefinedthevaluestreamforvou,therearetworeliablemethods. Jyoucanemploytohelpyoudecidewhichvaluestream(s)totargetforimprovement:

O Product-quantity(PQ) analysis.StartwithPQ analysisfirsttoseeif somepartnumbersarerunin volumeshighenoughtomakethechoiceanobviousone.

O Product-routing(PR)analysis.Useproduct-routinganalysisif resultsfromPQanalysisareinconclusive.

27

28 Step2.ChoosetheValueStream

UsingPQ Analysis

PQ analysisisusedtodisplaytheproductmixasaParetochart.A Paretochartgraphi-callydemonstratestheParetoprinciple-alsoknownasthe20:80rule-and helpssepa-ratethe"criticalfew"fromthe"trivialmany."Thechartshowshowthetotalquantityofproductsisdistributedamongdifferentproducttypes,withtheassumptionthatthehigher-volumeproductsarethefirstthatshouldbetargetedforimprovement.

To performPQ analysis,followthesesteps:

1. Obtainthreetosixmonths'worthofdataonproductionoutput.2. Enteryourproductsbyquantity(fromgreatesttoleast)onaPQ analysislist(see

Figure2-1).

*Percentagesin"Cumulative%" columnhavebeenroundedoff.

Figure2-1.PQ analysislist

3. CreateaParetochart(seeFigure2-2)usingthedatafromthePQ analysissheet.

4. Analyzetheproductmix.

In theexampleshownin Figure2-2,thecombinedquantityoftwoproducts,W andR,togethermakeupcloseto80percentofthetotalquantityproduced.If theproducttoquantityratioisapproximately20:80(inotherwords,20percentoftheproducttypesaCCOl1ntfor80percentofthetotalquantityofpartsprodl1ced),;..ouhaveahigh-volume,low-varietyproductmixonwhichyoushouldfocusvaluestreamimprovementefforts.Inthisexample,thetargetedvaluestreamwouldbetheprocessorprocessesthatmakeproducts\V andR.

If yourPQ analysisshoweda40:60PQ ratio(40percentormoreoftheproducttypesaccountfor60percentofthetotalquantityofpartsproduced),thatwouldindicateahighvarietyofproducttypeswitharelativelylowvolumeofeachtype(seeFigure2-3).Underthesecircumstances,yourchoiceisnotasobvious,andadditionalanalysisisprob-ablynecessary.

POAnalysisListPerformedby:O.Arroyo&O.Herrera Oate:11/16

Item Cumulative

I Cumulative*# (part#) Ouantity Ouantity % %

1 W 29,000 29,000 41 41

2 R 26,500 55,500 37 I 793 Y 3,000 58,500 4 834 I 3,000 61,500 4 I 875 P 2,000 63,500 3 906 A 2,000 65,500 3 937 O 1,500 67,000 2 958 G 1,500 68,500 2 979 J 1000 69500 1 99

10 L 1,000 71,500 1 100

~,'

Selecting Value Streams for Improvement 29

w R P A OProductPart#

G

30000

5000

25000

200001::eaa.....Q); 15000~ea=o 10000

oy

~i".."...~\tjJQuantity.-- Cumulative%

Figure2-2.Paretochart-PQ analysisshowinga20:80ratio

Figure2-3.Paretochart-PQ analysisshowinga40:60ratio

100%

90%

80%

70%

High-volume,low-varietyproduction:

rO% >f'20percentofproducttypesaccountforabout80percentoftotalquantity 50% 1;:;

40% E=(..)30%

20%

10%

0%J L

1,200;.t

100%;,;;

,';"

90%

1,000 4--.

180%

---

(~

30 Step2. ChoosetheValueStream

UsingProduct-RoutingAnalysis

If yourPQ analysisindicatesa40:60PQ ratio,useproduct-routinganalysistohelpyouchooseyourtargetvaluestream.In product-routinganalysis,youmakeachartthatshowswhichproductsorpartshavesimilarprocessroutes.Productsthatareprocessedthroughthesamemachinesoroperationsin thesamesequencearegoodcandidatesforgroupingintoproductfamilies.

To performPR analysis,followthesesteps:

:1..Startbyshowingtheprocesssequence-thesequenceofoperations-foreachprod-ucttypelistedbyvolume,asshownin Figure2-4.

Sequenced byVolume

Maehine#:1DA 31 32 70B 34 A-10

rc=roughcut c=cut m=mill d=drill od=outsidediameter g=gauge Hnspect

Figure 2-4. Sequence ofoperationsb~'volume

2. Next,grollptogethertheprodllCtSthathavethesameprocessroutes(Figure2-5).3. Analyzethemixofprocessrolltes.

Asthematrixin Figure2-5shows,prodllctSD, G, andL h;:l\"ethesameprocessroute.BecallsetheseprodllCtssharethesameoperations,YOllmight\\"anttofocusonimprovingavaluestreamdedicatedtoproducingD, G,andL. However,thereareotherconsiderations.

NotethatproductsW and1havethesameprocessroute;sodoproductsY and1.EachcombinationoftheseprodllCtSisproducedin highervolllmethanthecombinedvolllmeofproductsD, G, andL.

Volume Product

20,000 W re e m d od 912,000 R re e d od

10,000 Y e m d

3,600 I re e m d od 93,300 P e d I 93,100 A re e m od

2,600 O re e m d od

2,300 G re e m d od 2,100 J I e m d II1,000 L . re e m d od I i

Productswiththesameprocessroute(te.valuestream) TotalvolumerequiredW&I 23,600Y&J 12,100

O,G,&L 5,900

-AdditionalConsiderationsforValueStreamSelection 31

GroupedbyProcess

Maehine#:10A 31 32 708 34 A-10

rc=roughcut c=cut m=mill d=drill od=outsidediameter g=gauge i-inspect

Figure2-5.Sequenceofoperationsbyprocessin identi~'ing\'aluestream

vVhichproductmixrepresentsthevaluestreamthatyouwouldtargetforimprovement?J\Iostlikelyyouwouldhavetoconsiderseveralfactors.Forexample.productsD, G, andL representthelowest-volumeproductmix.Butwhatif theseproductsaremanufacturedforacustomerthathaspromisedyouadditionalbusiness-pro\'idedthatyoucanachievea :;percentpricereductionand100percenton-timedeliveryandzerodefectsoverthenextyearonthepartsyoucurrentlysupply?Underthesecircumstances,youmightchoosetofocusimprovementeffortsonthelow-volumevaluestreamamongthethreebeingconsidered.

AdditionalConsiderationsforValueStreamSelection

In general,whenjustgettingstarted\vithValueStream;\,'Ianagement,youmaynotneedtousePQ analysisorproduct-routinganalysis.Anotheroptionisusingasimplifiedver-sionofPQ analysis(Figure2-6).

The simplifiedversionofPQ analysisissimilartothetraditionalversionin thatyoulistyourproductsalongthebottomaxisofabargraphbyquantity(fromgreatesttoleast).Thenyouchooseaselectionindicator.Forexample,youmightdecidethatanyvaluestreamproducingaproductquantitycloseto20percentofthetotalvolumeisaworthycandidateonwhichtofocusimprovementefforts.In Figure2-6,therearetwoproducts,\V andR, thatmeet-roughly-the20percentcriteria.Product\\.Trepresents24percentoftotalvolume;productR represents19percentoftotalvolume.

Howeveryoudecidetochooseyourtargetvaluestream,werecommendselectingonethatisneithertoosimplenortoocomplex.Of course,theappropriateselectiondependsonyourplantandoncustomerdemandoHowever,\Vecanoffera fewrulesofthumb:

::t Chooseavaluestreamthatincludesnomorethanonemachiningoperatiol1.

Volume Product

20,000 W re e m d od '9 i3,600 I re e m d od 9 i

10,000 Y e m d ! i2,100 J e m d i

2,600 O re e m d I od i- .- 1--2,300 G re e m d aa I 1,000 L re e m d od i

12,000 R re e d od i

3,300 P e d 9 i

3.100 A rd e m ! od i

SelectionLevel

+

32 Step2. ChoosetheValueStream

250

200

'elID

g 150'elo;,

==o 100~

50

.

1

'-..

~~. -1I I , r~ :J . ~I1 r,~ I,

20%200is20percentofthetotalvolumeproduced

~... J.

.

.. .~

ow R y P A O

ProductPart#G J L

Figure2-6.Example:PQ analysissimplifiedversion

o Choosea\'aluestreamthatincludesnomorethanthreerawmaterialsuppliers.O Chooseavaluestreamthatincludesnomorethantwelveoperationsor

processstations.

If youhaveahigh-variety,low-volumeproductmix,thenyou,,"illneedtousethemoresophisticatedmethodsofvaluestreamselectiondiscussedin thischapter.

PREMIERE MANUFACTURING CASE STUDY, STEP 2

Thelang-termagreementthatPremierehasmadewithCordcommitsPremieretoImprovingon-timedeliveryandcuttingcostsassaciatedwiththe manut~ctureot#4,#Q,#8,and#10coolanthoses.Inettect,this /11eansthatCarahasselectedthe 'targetvaluestreamon whichPremiereneedsto tocus. Nevertheless,thecoreteampertormsa product-routinganalysista tarma clearerpictureat theprocessroutestoreachproducttype.

Theproduct-routinganalysisrevealssomeimportanttacts:

Praducts#4and#6sharethesameprocessrollte,whileproducts#8and#10sharea slightlyditterentprocessraute.

Theprocessroutetorproducts#4and#6is slightlyless complexthantheprocessroutetorproducts#8and#10.

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PremiereManufacturingCase Study,Step2 33

Thetotalvolumeof products#4and#6is 80 percentof the totalquantityproducedforCord.

PremierManufacturing,product-routinganalysis(groupedbyprocess)

Inaddition,analysisoforderingpatternsoverthepastthreemonthsshowsthatdemandfor#4and#6hosesisnearlyconstant,whereasdemandfor#8and#10hosesis moresporadic.Giventhesefacts,theteamreasonsthatit is besttofocusfirstonimprovingtheprocessformaking#4and#6hoses,thentackletheprocessformaking#8and#10hoses.

Theteammembersmeetwiththevaluestreamchampionto showhimtheresultsoftheiranalysis.Thechampionagreeswiththeproductfamilytheteamhasselected,andtheteamrecordstheproductfamilyinthevaluestreamboxonthestoryboard.

Storyboardexcerpt

Volume' Part !MachlnlngDeburrlngCrimping: Weldlng Testing I Marking20,160 #4 "i '9 G 1)

10,080 #6 I Et O C) , O4,360 #8 I.i $ )3,200 #10 . tt 3 1) e

Dateoriginated 10ValueStream Cusomerl/l/Ol #'1eS.#6hoses orsupplierChampion 1