"Costed" Value Stream Maps - Focussing Value Stream Improvements

• A method of creating a "one page picture" of all processes from the time a customer places an order for a product or service until the customer has received the product or service.
• A visual representation of the flow of information and materials/services across all of the processes - both value adding and non-value adding.

While Lean is not a cost reduction program as previously noted, the rapidly changing global economy can present challenges to our "costs are reduced as an outcome of doing Lean" model. For example: a foreign manufacturer introduces a lower priced competitive product to our main product line, or as recently occurred with the new healthcare law, healthcare reimbursements are being reduced.    

For organizations that are threatened by these changes and feel the need to take action, a Costed VSM may be the answer.

As with any Kaizen Event, preparation starts 3 weeks out using a VSM Event checklist (contact kelly@wcmfg.com if you do not have this checklist). It is a requirement to have an accounting or finance person on this team from a costing and recosting standpoint.

The Costed VSM follows the normal VSM with several exceptions that will be pointed out. It starts with the regular four steps to VSM as shown below.

Ideally, we VSM to achieve a goal as stated in Policy Deployment, but as noted, the Costed VSM may be needed as a result of changes in markets or Policy Deployment strategies. In the Costed VSM, the goal is a cost or price.

The map is created in the standard VSM format except that we now add "costs" for each of the processes/process boxes as shown below. Note that during the creation of the Current State Value Stream Map (CSVSM), all participants are asked to write down improvement ideas as they think of them on the "starburst/clouds" sticky notes that were handed out when the session started. When the CSVSM is completed, all participants post their notes on the map while explaining their ideas to everyone else. This is the start of the "advanced 2-step" brainstorming process. This posting of the notes is shown below.

The next stage in the Costed VSM varies from the standard VSM process. Just like in Change-Over/Setup Reduction, where we concentrate on the longest time setup elements because they have the largest opportunity to improve, the Costed VSM concentrates on the highest cost processes/process boxes because they present the largest opportunity for savings.

So that we can focus the second stage of brainstorming on these items, we separate these high cost items on a separate sheet as shown below.

The next step in the advanced 2-step brainstorming process is to write down all the ideas on flip charts (the standard brainstorming process most organizations use) as shown below. It is important to encourage participants to make sure that all starburst/cloud ideas are included on the flip charts. There is normally some "idea fallout" of the starburst/cloud ideas as the participants elevate the value of their own ideas as a result of hearing ideas during the flip chart brainstorming step.

After the flip chart ideas are affinitized (grouped by like idea), the Costed VSM adds another extra stage. The remaining eligible (for voting) ideas, and there might be 50 - 100, are then evaluated by the participants from a cost savings and implementation risk standpoint. This allows the participants to more easily identify the best ideas by adding the ratings together. The scale looks like this:

Cost Savings

1 = Low

3 = Medium

5 = High

Risk to Achieving Idea Implementation

1 = High

3 = Medium

5 = Low

The next step in the brainstorming is to complete a secret ballot vote for the best ideas by the participants (typically the participants/teams are given between 5-10 votes depending on the number of eligible ideas).

After the votes are posted, the top ten ideas (by votes) are listed. At this point in a normal VSM process, the team create the Future State Value Stream Map (FSVSM). For a Costed VSM, the participants do a process/reality check. If all ten ideas are implemented, will the cost/price goal be achieved?

If the answer is yes, the team creates the FSVSM.

If the answer is no, the team goes further down on the "voted for" list or rebrainstorms for more ideas, and then does the reality check again. This activity continues until the goals are met.

For three day VSM Events, the next step is to choose a team leader and then develop the Kaizen Newspaper with the "actions items" required to turn the FSVSM into the CSVSM, followed by the management report out.

For five day events, the team breaks into sub-teams on day three and begins the "voted for idea" implementations. The team leader selection and Kaizen Newspaper is then accomplished at the end of day five, followed by the management report out.