Value Stream Mapping Adapting Lean Management Principle in the ESO

VALUE STREAM MAPPING - Adapting Lean Management Principle in the ESO

Kannan Jayaraman Manager L&T Integrated Engineering Services

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 how effectively could get implemented solely from the authors point of view. This may enlighten the thinking process and trigger the direction that can be considered.

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Value Stream Mapping Adapting Lean Management Principle in the ESO

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 continuously increase 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 authors view.

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

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Value Stream Mapping Adapting Lean Management Principle in the ESO

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).

Fig .1

Lean Principles:
The lean principles can be briefly distilled down as - Solving the customer problem completely. - Not wasting the customers time. June 2010 Page 3 of 12

Value Stream Mapping Adapting Lean Management Principle in the ESO

- 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 customers 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.

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Fig .2

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 ESOs to give a quick solution at a reduced time. Companies do also demand design productivity improvements from the established engineering outsourcing organizations.

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Value Stream Mapping Adapting Lean Management Principle in the ESO

Fig .3

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, ESOs 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 nonvalue 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. June 2010 Page 6 of 12

Value Stream Mapping Adapting Lean Management Principle in the ESO

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 orders 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 teams 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.no

Wastes (Non-Value Added activities)

Toyotas definition

Relation with respect to ESO

Overproduction

- Producing items earlier or in greater quantities than needed by the Customer.

- Producing unintended services for the target service. (Non-value added efforts). This should not get confused with Customers delight.

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Sl.no

Wastes (Non-Value Added activities)

Toyotas definition

Relation with respect to ESO

Waiting (time on hand)

- Workers merely serving as watch persons for an automated machine, or having to stand around waiting for the next processing step.

- Waiting for data / information from the Customer. - Waiting for approvals or direction from leadership.

Transportation or Conveyance

- Moving work in process (WIP) from place to place in a process even if it is only a short distance.

- Complicated internal systems for the for the accomplishment of data storage, retrieval, resource allocation etc. - Internal waiting for the receipt of required information. -Lack of standardization for the highly repetitive tasks. Lot of similar activities being done through different processes. - Re-inventing the desired state of process across the teams. - Imbalances of work between individuals which results in high cost. - Waiting for the decision from the superiors / Customers.

Over processing or incorrect processing

- Taking unneeded steps to process the parts.

Excess inventory

- Excess raw material, WIP or finished goods causing longer lead times, obsolescence, damaged goods, transportation and storage costs, and delay.

Unnecessary movement

- Any motion employees have to perform during the course of their work other than adding value to the part, such as reaching for, looking for, or stacking parts, tools etc.

- Unnecessary flow of data and movement of individuals. - Lack of automation tools / systems for the repetitive tasks.

Defects

- Production of defective parts or correction. Repairing of rework, scrap, replacement production, and inspection means wasteful handling, time and effort.

- Errors in the drawing, design, calculation, executing something different that of the customer requirements which results in rework.

Apart from the basic seven types, we could include the following other waste also for our consideration which may be more appropriate particular for the service industry.

Unused Employee creativity

- Losing time, ideas, skills, improvements and learning opportunities by not engaging or listening of employees. - Not utilizing right resources for the right job.

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Fig .4

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. June 2010 Page 9 of 12

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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 ESOs 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. June 2010 Page 11 of 12

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(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 organizations 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 Toyotas 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

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