Best Practices -- See The Big Picture

Dec. 21, 2004
Extended Value Stream Mapping offers a practical approach to developing customer and supplier partnerships.

Ostensibly a guide for mapping the extended value stream, "Seeing the Whole," a workbook published by the Lean Enterprise Institute, offers a good starting point for manufacturers struggling to develop more collaborative relationships with their customers and suppliers. The idea is that by getting together and observing the flow of information and materials, manufacturers and their business partners can begin to work together to eliminate wasteful activities. "When we get managers to change their focal plane from their assets and their organization to look at the product itself and what is actually happening on its long journey, they immediately realize that the performance of the entire value stream is abysmally sub-optimal," state the authors, Dan Jones and Jim Womack. The book outlines a detailed methodology for establishing cross-organizational teams, examining and illustrating current material flows, extracting information flows and developing incremental "future state" maps as business partners work together to eliminate excess inventory and reduce transportation. The ideal approach would be to depict the entire flow, from the raw materials in the ground all the way to the ultimate customer. But that's typically not practical, says Dave LaHote, general manager of Parker Hannifin's Climate System Division in New Haven, Ind. The place to start is with immediate customers and suppliers. "One time we sat in a room with a customer and a supplier. Within 15 minutes on a whiteboard we had mapped a value stream just by memory," he recalls. "We discovered that each of us was holding inventory in that product, and in many cases, at multiple points." LaHote's division supplies valves and copper assemblies -- control devices for residential and light industrial air conditioners -- that require tubing to be cut, bent and brazed. Through the mapping exercise they also uncovered a great deal of redundant capacity and equipment. "It's very typical that a customer would have a copper assembly shop supplying copper assemblies to their assembly lines, while buying copper assemblies from us that we're supplying to the assembly lines and buying copper assemblies from our copper supplier that they're sending to the assembly line," he says. Total capacity utilization might be only 50%. Mapping the value stream draws attention to such inefficiencies and identifies potential economies of scale. It's "really simple, but just because it's simple doesn't mean it's easy. It's really hard to get people to sit together and have the trust to talk through this. The reason why is that you might be the place where the waste is," LaHote adds. And when there are savings, you have to figure out who benefits and how much. But that's a good problem to have. Like most business managers, LaHote says he would much rather negotiate with a customer over how they're going to divvy up cost savings than over how much he has to reduce his price.The mapping exercise forces users to recognize key competencies and abandon activities that someone else should be doing. "It's a lot easier for me to rationalize my business than to be forced to rationalize my business," LaHote says. "It helps you focus on what really makes you competitive in this value stream. Get focused on it. Do it well." Send submissions for Best Practices to Editorial Research Director David Drickhamer at [email protected].

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