Value Stream Mapping - Adapting Lean Management Principle in the ESO

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June 2010 of 12

Value St ream Mappi ng – Adapt ing Lean Management Pr incip le in the ESO

Larsen & Toubro Limited

Integrated Engineering Services (IES)Chennai

The contents of this document are the excerpts collected from various sources with the perseverance of how such concepts/ ideas could be viewed with respect to the Engineering service industry and howeffectively could get implemented solely from the author’s point of view. This may enlighten the thinking

process and trigger the direction that can be considered.

VALUE STREAM MAPPING

- Adapting Lean Management Principle in the ESO

Kannan Jayaraman Manager L&T Integrated Engineering Services



June 2010 of 12


Abstract:

In the recent years the word “Lean” has become a corporate buzzword. We could hear from every walls

of the forum that getting lean is a must in this competitive market. Lean is a systematic approach in

identifying and eliminating waste (“muda” in Japanese meaning non-value added activities) through

continuous improvement by flow of the product / service at the pull of the customer. Simply lean means

creating more value for customer with the optimum resources.

“All we are doing is looking at the time line from the moment the customer gives us

an order to the point when we collect the cash. And we are reducing that time line by

removing the non-value-added wastes.”

- Taichi Ohno

A lean organization understands customer value and focuses its key processes to continuouslyincrease it. The ultimate goal is to provide the best value to the customer through a value creation

process that has reduced waste. A popular misconception is that lean is suited only for manufacturing.

Not true. Lean is applicable in every business and in every process. It is not a tactic or a cost reduction

program, but a way of thinking and acting for an entire organization. Of course, Lean usage has been

primarily focused on the production floor because of its tangible benefits that could be directly visualized

in the production floor, and little consideration has been given to use it in other areas. Many companies

from Banking & Financial Services, Healthcare, Retail, Hospitality, BPOs, Call Centre & ESO and

Software Industries have already embarked on a Lean Programme or are evaluating and seriously

considering one.

The challenge is to develop a systematic method of continuously identifying and eliminating waste. A

sporadic removal will yield pockets of improvement, but the system wide benefits are achieved by

following a cyclical method of continuous improvement.

Value stream mapping is a visualization tool used to analyze the flow of materials and information

required to bring a product or service to a customer. This is basically a communication tool, but is also

used as a strategic planning tool and a change management tool.

This needs a complete transformation on how the organization conducts business. This takes a long

term perspective and perseverance. This paper briefly explains the lean management principles and the

concept of value stream mapping. Also it briefs about the challenges beings faced by the typical

Engineering Service Organization (ESO) Project Management Process and thinking process on the

need of lean and the benefits that could get resulted by the adaptation of lean from the author’s view.

Keywords:

Value Stream mapping, Lean, Process mapping, Toyota, and Non-Value added activities



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Introduction:

Lean Management is

- defining the purpose of the organization in terms of the customer value.

- designing and executing the right value streams and processes for achieving the purpose.

- and aligning the people touching the process and building problem solving capability in them.

Developed by Toyota over 40 years ago to help standardize on a methodology for continuous

improvement (established as Toyota Production System) with an objective of “making the vehicles

ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly

as possible”. This was established based on two concepts. The first is called ‘jidoka’ (automation with a

human touch) which means that when a problem occurs, the equipment stops immediately preventing

defective products from being produced. The second is called ‘Just-in-Time’ in which each process

produces only what is needed by the next process in a continuous flow.

The same concept could be perceived with respect to the service industry as “meeting the services

required by the customers in the quickest and most efficient way, in order to deliver the services as

quickly as possible”. Again the same could be established by ‘jidoka’ (establishing systems and

processes such that when a problem occurs, the flow stops immediately preventing unintended services

being delivered) and ‘Just-in-Time’ (utilization of right resources & delivering of right services just at the

right time).

Lean Principles:

The lean principles can be briefly distilled down as

- Solving the customer problem completely.

- Not wasting the customer’s time.

Fig .1



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- Providing exactly what the customer wants.

- Delivering it where it is wanted.

- Supplying it when it is wanted.

- Continually aggregating the solutions to reduce the customer’s time and hassle.

The goal of value stream mapping is to identify, demonstrate and decrease waste in the process. Waste

being any activity that does not add value to the final service.

Value Stream Mapping:

The foundation of the Toyota way is based upon identifying and eliminating waste in all work activities.

If we look each and every process as a time line of activities, material and information flows and chart

the process from start to end, we will find a depressing amount of waste – usually far more waste than

value-added activity. Apparently these reductions of waste are being handled with a short term strategy

called the kaizen. A well executed kaizen workshop can be a step in teaching people what is possible.

But this has to be handled as a longer term strategy for developing lean value systems and ultimately a

lean enterprise.

Value stream mapping is one such long term philosophy lean technique used to analyze the flow of

activities and information currently required to bring a service to a consumer.

Process – series of activities for a desired outcome

Value added time – Actual time spent on the activity with an intended contribution / value addition.

Non-Value added time – Any time spent on the activity with an unintended contribution.

The use of waste removal to drive competitive advantage inside organizations is oriented fundamentally

to productivity rather than to quality. The reason for this is thought to be that improved productivity leads

to leaner operations which help to expose further wastes and quality problems in the system.

Typical Product Development Process:

A typical Product Development process being followed by the Engineering organization is depicted

below in Fig.2 indicating the major flow of activities involves in the process. It starts with the capturing of

customer voice, benchmarking, QFD, Product design, DFMEA, Design Verification, Validation, Process

design , Sample development till it getting released for Mass production. Every organization will be

having their own set of process with the inclusion of various Gates for review and decision analysis.



June 2010 of 12


Typical ESO Project Management Process:

A typical ESO Project Management processes is depicted below in Fig.3 indicating the major flow of

activities evolved from the product development process that are being considered for outsourcing.

These processes can be further split into various sub-processes under each major activity. Lean

methodology could be applied for each of these processes by conducting value stream mapping

exercise to identify and eliminate the non-value added activities involved in that process which is

unintended for that particular service.

Major Challenges:

1. Demand on Significant reduction in product development cost and time - It is believed that

a well defined engineering outsourcing initiative could reduce the product development cost

significantly and the customers are demanding the ESO’s to give a quick solution at a reduced

time. Companies do also demand design productivity improvements from the established

engineering outsourcing organizations.

Fig .2



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2. Constant Engagement of the Flexible pool of Talent resources – It is understood that by

outsourcing, the parent company can have a flexible re-sourcing arrangement to meet the cyclic

nature of engineering and product development activities. At the same time, ESO’s needs to

keep engaging their flexible pool of talent resources and strike a balance between better

utilization as well as to reduce the product development cost of the Customer.

The challenges could be better handled only with a long term systematic approach such as Value

Stream mapping (VSM) in which we could frame the map of existing flow of activities, identify the non-

value added activities and develop a plan to eliminate the unproductive effort and time which are

unintended for the target product or service.

Implementation Approach:

1. Identify the target product or service.

2. Draw a current state value stream map, which shows the current steps, delays and information

flows required to deliver the target product or service.

3. Assess the current state value stream map in terms of waste elimination.

4. Draw a future state value stream map.

5. Make a plan, and Implement the future state.

“Mapping is the key in identifying the potential improvement”

VSM is a system focused, or big-picture, tool designed to identify every step in the process across the

company from the moment an order is taken to when the delivery is done.

Fig .3



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Lean for non-manufacturing organizations begins with training in VSM and the basics of lean

manufacturing. A first step is the choice of the cross-functional team with members that represent all

areas to be mapped. The team creates a current map by following an order’s path from customer

(business enquiry and order) all the way to delivery of service. The current state map is created by

capturing, with pencil on paper, the existing flow of data /information within the system. This visual map

provides a real picture of the system that the organization uses to deliver the intended service to the

Customer. This helps in analyzing the actual sources of waste so that that can be targeted for the

improvement efforts. The current state map tends to be an eye opener for the team. By this one can

understand the value added time and non-value added time in the process involved.

Subsequent to this a future state map is developed. The team then identifies the ways to improve the

process flow that will eliminate waste and utilize time, talent and resource more efficiently. This

invariably results in a better understanding of the entire process. The team can set a time frame for

implementing the new future state map with the consent of the management.

The potential opportunities for improvement include:

- Eliminating redundant approvals.

- Efficient utilization of time and talent.

- Restructuring the process flow.

The best strategy for implementing improvements is to start with a small project (process), record the

progress the team made, share the success, and then move on – and always maintain momentum.

Communicating the team’s progress and successes is very important, as is alerting people who will be

affected by the changes.

Typical Non-Value Adding Activities identified by Toyota related to an ESO:

Toyota has identified seven major types of non-value adding activities in any business / processes. This

could be broadly related to the Engineering Service organization.

Sl.noWastes (Non-ValueAdded activities)

Toyota’s definition Relation with respect to ESO

1 Overproduction- Producing items earlier or ingreater quantities than needed bythe Customer.

- Producing unintended servicesfor the target service. (Non-valueadded efforts). This should notget confused with Customer’sdelight.



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Refer Fig.4. The objective of the activity is to generate 3D model and detail the 2D drawing in a

particular software from the given hard copy 2D drawing input. The above table shows a side-by-side

comparison of value added and non-value added activities of a typical situation. There will generally be

few items on the value added side and many on non-value added side. This provides a large selection

to capture lost time opportunity by shifting from the non-value added to the value added side. Of course,

some of the activities identified on the right side are ‘necessary’ but they do not help in achieving the

end objective. From the non-value added list we first focused on in-cycle losses – those occurring

during the execution. By giving proper practice / procedure and responsibility some of the activities

could be eliminated from the non-value added side.

Specific Tools and Methodologies for waste reduction in the Value Stream:

Value Stream mapping gives us a picture on how the individual value added items get together to have

a connected value stream. The creation of lean processes requires a methodical, step-by-step

approach. The first step is to create a stable process capable of meeting customer requirements. The

subsequent step is to create a flow, standardize and do incremental leveling of the process.

1. Create Initial Process Stability – The primary objective in developing stable processes is to

reach a consistent level of capability by removing the random activities thus establishing a

foundation for true improvement. A simple indicator would be the ability to meet the customer

requirements with quality service the first time through on time.

Fig .4



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2. Create Connected Process flow – Products / Services that move continuously through the

processing steps with minimal waiting time in between, and the shortest distance traveled will

be produced / delivered with the highest efficiency. Flowing reduces throughput time, which

shortens the cost to cash cycle and can lead to quality improvements.

3. Establish Standardized processes and procedures – The establishment of standardized

processes and procedures is the greatest key in creating consistent performance. It is only

when the process is stable that one can begin the creative progression of continuous

improvement. The creation of standardized processes is based on defining, clarifying (making

visual) and consistently utilizing the methods that will ensure the best possible results.

4. Leveling of resources – This could be termed as ‘heijunka’ meaning to deliver the product /

service aligned inline with the Customer requirement. Constantly changing demand creates

many issues within the value stream, namely the alignment of resources to the constantly

changing need. The resources need to be utilized in balance at the definite pace in anticipation

of the changing demand.

5. Build a Culture that stops to fix problems – A system has to be built that provides the long

term benefits of stopping the process, and minimize the negative effect by building a support

structure to quickly identify, respond and correct problems. Toyota core philosophy has to be

developed which begins with the thinking to focus on waste elimination (in this case waste of

correction), the natural extension of that philosophy is to develop a system in getting Quality

right for the first time.

Benefits of the Value Stream Mapping Approach:

1. It helps us to visualize more than just the single process level that one can see on the flow.

2. It helps to see the flow of the value stream, wastes, and sources of waste in the flow

3. It helps us to understand both material and information flow of a value stream.

4. It helps us to draw a blueprint for Lean transformation – the future state map.

5. It helps us to prioritize activities needed to achieve the future state.

6. It is focused on no cost or expense able improvements.7. It is based on objective information.

8. It provides a common language to talk about the process.

Limitations of the Value Stream Mapping Approach:

1. Unrealistic expectations and excess prevailed over-hype about the value stream mapping divert

the attention from important aspects of complex problems.



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2. Value Stream mapping is a technical tool that examines the physical system processes. But

organizations are complex socio-technical systems that require an integrated approach.

Moreover ESO’s are demand fluctuating orient and this needs a complex and integrated

approach to address the issue as an enterprise wide.

3. This requires high teamwork for motivation, coordination and problem solving. It requires an

effective mobilization of the collective intelligence of the organization.

Expected Operational Improvements arriving out on Implementation of Lean:

1. Giving more value to the Customer with the lesser resources.

2. Increased Customer Satisfaction.

3. Reduced Cycle time between project start and completion.

4. On-time delivery performance can be increased.

5. Cost of Quality of products and services can be reduced.

6. Increased Employee Satisfaction.

7. Better utilization of the resources.

8. By doing Quality right at the first time, customer gets delighted.

Summary:

In the early days, Lean practice has begun in the manufacturing industries involving huge assembly

lines and interchangeable parts. In the recent past, every type of organization irrespective of the

business started practicing lean across various disciplines within their organization.

Lean methods and tools could be applied in any process where

• An employee is constantly interrupted when trying to complete a task.

• An employee chases information in order to complete a task.

• He/she must jump though multiple decision loops.

Value Stream mapping helps in understanding how a current process operates with a openness in

uncovering the steps that contribute value to the customer and the one that does not give value.

Application of Lean practice need not get restricted to project management per say rather it can be

applied to any process either external or internal, back office processes such as accounting and

finance, human resources, facilities management or records management.

The essential steps to conduct a value stream mapping exercise include:

(a) Observe and document the flow of material.

(b) Understand and capture the flow of information.

(c) Observe the trouble points.



J 2010 P 12 f 12


(d) Identify the areas for improvement.

(e) Create the vision of how the net flow will operate.

(f) Conduct workshop on specific parts of the processes.

(g) Simulate the new processes.

Lean is a business philosophy centered on reducing waste and focusing on value in the business. Lean

creates an environment where the organization is committed to continuous improvement. Lean also

shifts the organization’s thinking from ‘Push’ to’ Pull’’ where the customers can retrieve or request

products / services on their time schedule based on their needs.

References:

1. “The Toyota Way Field book” – A Practical guide for implementing Toyota’s 4P by Jeffrey

K.Liner and David Meier.

2. “Lean Six Sigma for Service” – by George Michael L.

3. www.lean.org - The Lean Enterprise Institute

4. “Lean Thinking” – by Womack James P. and Daniel T.Jones.

5. ‘Learning to See” – Value Stream mapping by Mike Rother and John Shook.

6. “The Seven value stream mapping tools” – White paper from Lean Enterprise Research Centre,

Cardiff Business School, Cardiff, UK

Value Stream Mapping - Adapting Lean Management Principle in the ESO

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