Value stream mapping provides a waste reduction framework that enhances Lean management practices. The VSM framework distinguishes between processes that add value for customers, add value for the business, or add no value at all to your organization — even in digital environments.

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In brief:

• Value stream mapping adds specificity, accuracy, and actionability to Lean workflow optimization.
• The VSM framework identifies which processes add value for customers, which add value for the business, and which add no value.
• To succeed, you need to set clear expectations for what to expect from VSM — it’s designed to document processes at a high level. Wait until after the VSM to gather more details of system improvement.
• In digital environments, VSM can help identify data quality issues and time-consuming decision-making processes while finding and mitigating risk.

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Despite how hard employees and managers work, much of their effort is wasted by inefficient processes. A recent survey of 1,450 finance, tech, and professional services employees in the U.S. and U.K. found that 25 percent of the respondents admit inefficiency is hurting outcomes. Likely, many employees surveyed have been introduced to — or maybe even practice — Lean management techniques. But the efficiency disparity still exists. That’s where value stream mapping (VSM) comes in. VSM involves visualizing each process to identify wastefulness and improve efficiency. In other words, Lean asks, “How can we deliver value to our customers while reducing waste?” Value stream mapping takes this high-level question and gives it a tangible, measurable form. The VSM process provides a framework for getting actionable information to guide your Lean workflow optimization. Before exploring the VSM framework, let’s look more closely at the relationship between Lean and VSM.

Foundations: Where Lean Management Meets Value Stream Mapping

VSM helps you more effectively apply Lean management strategies, such as Lean Six Sigma and DMAIC (which stands for define, measure, analyze, improve, and control). A Lean approach to management is a mandate to identify more efficient ways of doing things. Value stream mapping is a key step to that approach because VSM identifies specific areas where these inefficiencies may exist. Consider Kaizen, a Lean methodology, as an example. First, VSM tells you where the waste is. Next, Kaizen tells you how to remove it. For example, suppose a utility provider wants to use Lean to improve efficiency. Specifically, the team needs to find ways to restore power to customers faster without compromising safety. The team would use VSM early in the Lean optimization process. While value stream mapping, they would produce a high-level map of the entire process, including elements such as:

• Staging the crews’ materials
• Detecting the incident
• Dispatching and mobilizing repair crews
• Performing repairs
• Inspecting repair work
• Notifying customers about the repair’s progress or completion

Next, the utility would assign time frames to each phase. The team may also factor in other metrics, such as the ratio of time per phase to the time required for overall completion. In this way, value stream mapping adds specificity, accuracy, and actionability to your optimization strategies. VSM is an ideal tool for clarifying exactly where waste occurs. For example, before performing a VSM on the repair process, the utility may assume that long repair times are due to undertrained or underperforming repair workers. But VSM may reveal that crews have to wait 45 minutes or more for each repair to be inspected. It may also show that assigning crews to trucks and getting each one gassed up takes an average of 20 minutes — far too long. Using process optimization techniques, such as Kaizen, the Lean team can take this data and implement a few simple changes to shave precious minutes off the process. For instance, they may decide to require inspectors to respond to texts with repair images within 5 minutes. The team would then measure this adjustment’s impact and use that data to inform their next steps. The sequential relationship between VSM and optimization needs to be underscored: The optimization step always occurs after VSM, while VSM highlights where the team can improve efficiency. We can now consider the three types of value add that VSM identifies.

The VSM Framework for Waste Reduction

The value stream mapping framework categorizes value into three groups:

• Customer Value Add. A process element adds value to the customer if it directly correlates with something the customer values. For instance, when a repair person provides updates to the customer, the customer can make decisions about how to handle their food in the freezer, which adds value to them.
• Business Value Add. Some activities only add value for the business, but the customer wouldn’t be willing to pay for them if asked. For example, a utility placing advertisements on a local TV station may have business value, but it may not be a customer value add.
• No Value Add. Some elements of a process don’t add any value at all to the customer or the business. The time that power line insulators are stored on a shelf before being used has no immediate value to anyone.

You can make better decisions about which process elements to optimize when you know what type of value they add.

How VSM Enhances Value

VSM enhances value by minimizing elements labeled “business value add” and eliminating activities labeled “no value add.” For example, if a utility is spending $10,000 a month on advertising, it may be worth taking a second look at:

• The effectiveness of TV, radio, print, and online ads
• The utility’s localization optimization for online and social media ads
• The cost of outsourcing ad creation and deployment

For VSM to succeed, it must be broad and horizontal. The goal is to identify as many issues as possible. This makes value stream mapping a powerful Lean optimization tool because it gives the team several good options for boosting efficiency. Ultimately, VSM is about strategy. “This is really about looking at gaps, disconnects, and redundancies at a macro level, and rethinking the order in which work occurs and rethinking the people who are best suited to do work in particular areas,” says VSM expert Karen Martin. “Those kinds of discussions are strategic.”

How VSM Delivers Customer Value

VSM results in more value for the customer by making the business’s offering:

• Less expensive
• Faster
• Higher quality
• More consistent

For example, a bank may use VSM to identify the time spent during each phase of the loan process to improve overall financial performance. The VSM team sees that the underwriting process often takes between a week and two weeks because the underwriter has to keep requesting documentation. The bank may then decide to rebuild their online customer self-service form by adding validation codes to more fields. This requires the customer to enter more information up-front so the underwriter can make a more informed decision faster. This adds value for the customer in a few different ways:

• They get their loan decision faster.
• Their chances of default shrink because the underwriting company has more information to base its decision on.
• They may qualify for larger loans by disclosing additional income or a more accurate picture of their debt-to-income ratio, thereby increasing loan limits.

In some cases, VSM can identify staffing inefficiencies. This can free up the organization to give staff members responsibilities that bring more value to the customer, such as:

• Service representative roles
• Innovation projects for designing better solutions
• Sales support roles, such as holding face-to-face or live meetings

Now that we understand the theory behind VSM, we can look at how VSM works in practice.

How to Start High-Impact Value Stream Mapping Exercises

People erroneously expect value stream mapping to involve detailed, granular breakdowns of nuanced elements of each process. In some cases, people may assume VSM’s scope includes redesigning time-consuming or expensive processes. But that’s beyond the scope of VSM, which only focuses on surfacing areas where the organization can be more efficient. To overcome this common challenge, start your VSM exercise by aligning stakeholders on the process and its scope. As Martin notes, if you spend too much time in the weeds, “some of that work may have been completely unnecessary and just be a time sucker that keeps you from making improvements.” However, if you focus at a higher level, “the value stream map does allow you to get above the work and look at it from a macro perspective so you can figure out where you need to do the deep dive. It’s a much more effective use of people's time.” To overcome this challenge, your leaders need to:

1. Set clear expectations for what to expect from VSM.
2. Dedicate enough time after VSM to get into more detail around how to improve systems.

For instance, you could dedicate one hour to VSM and then allocate four hours to fixing the problem VSM revealed. A real-life example will help illustrate the process.

A Real-Life Example of How VSM Works

Here’s a simple example of how Centric Consulting does value stream mapping and the impact of thoughtful scoping. Suppose a manufacturer already has a detailed process map that outlines each phase of their production and fulfillment cycle. But the process map doesn’t outline details, such as the time spent during each phase and its associated costs. This is where VSM comes into play. Leadership sets aside an hour for VSM and three hours for asking a series of 5 Whys. During the VSM, the management team realizes several things. One is that after an item is built, it sits on a shelf for two days. For the next three hours, the team asks, “Why?” This may involve examining several processes in the building phase. It could also bring into question the shipping system or processes around customer order management. Since the manufacturer set aside adequate time to ask the 5 Whys, the team can emerge with actionable plans to reduce the time each product spends on a shelf before shipping. This example has addressed VSM in a manufacturing workflow. Now, let’s discuss how you can apply it in a digital environment.

Applying VSM and Lean in a Digital World

In digital transactions, VSM plays an equal, if not more powerful, role. VSM can surface:

• The Accuracy of Data That Enables Decisions. Sifting through inaccurate, outlier, or dirty data takes time. So does grabbing disparate data from different siloes. VSM can identify these time sinks.
• The Time Needed to Make a Data-Based Decision. VSM can highlight how long it takes decision-makers to give the go-ahead once presented with data. In some cases, data analysis can cut that time down by giving a human more insights into which way to decide.
• Time and Money Savings by Identifying and Mitigating Risk. VSM can demonstrate the impact of a system outage so the team can mitigate it using solutions like redundant or parallel systems or upgraded solutions with stricter SLAs.

Additionally, in a digital environment, “inventory” may not seem as straightforward as axles, nuts, bolts, and tires. But digital inventory is just as important as its physical counterpart. Some common examples include:

• Backlogged requests, such as issue tickets for the IT team
• Unreviewed applications, such as those for loans or prospects, that must be reviewed for decision-making
• Queued transactions or reports, such as wire transfers that need to be reviewed or imaging from X-rays
• Unresolved alerts, such as those from Internet of Things (IoT) devices in a healthcare facility or voltage fluctuations that could indicate an imminent power line failure for a utility

As you can see, VSM has a wide range of applications for traditional manufacturing environments and more digital, data-dependent settings. With this understanding of VSM basics, you can evaluate your organization for areas where VSM can help you prepare for Lean strategies that will drive out inefficiency and waste.

Your Next Steps Toward Lean Excellence

VSM enhances Lean management by outlining individual elements of a process and surfacing the time and/or money spent on them. You can maximize your VSM’s value by clarifying the exercise’s scope and allocating sufficient time to address the issues your VSM reveals.

Centric’s operational excellence experts can guide you through Lean value stream mapping for process improvement. Schedule an assessment or a consultation to learn more.