The VSM tells leaders* what is obstructing flow within the value stream. Trust me, there’s always something, but suppose this is the first time they’re reviewing the VSM. What are they looking for?
- CT > TT. The number one obstruction to flow is any Cycle Time that is greater than Takt Time. You’ll want to correct that post haste.
- Large amounts of Inventory. Inventory is one of the original seven wastes. The more you have, the more of your money is tied up and the slower your cash flows. Reduce inventory as much as possible and still be able to meet your customer’s demand. Notice: I didn’t say reduce to zero.
- High Defects. Defects are also a waste. Defects automatically engender additional cost. Defects must be winnowed down to zero. Yes, zero.
- Low Uptime. Low uptime speaks to undependable equipment and that will adversely affect your ability to consistently meet customer demand. Equipment should be available 100% of the time it s needed.
- Low Available Time (AT). Recall that Available Time is the numerator in the calculation for TT. The less AT you have, the faster you need to make products to meet customer demand. Excessive speed can lead to defects; so, you want to increase AT whenever possible.
- High Changeover time (CO). As we all know, CO time has a direct and inverse impact on Inventory: i.e. the longer the CO time, the higher the Inventory. You’ll want to be ruthless in driving CO time as low as possible.
- Large supplier deliveries, especially if made infrequently. This is a signal that you aren’t using Kanbans or some other JIT methodology. The result is excess inventory. See #2 above. Drive supplier delivery size and frequency to the best mix of small size and high frequency.
- Large, infrequent deliveries to the customer. This condition leads the customer to have excess money tied up in inventory (they have to warehouse what you ship until consumed), but it also means you have to warehouse it before you ship. The consequence is that, unless you’ve made provisions to be paid for work in progress, you have your money tied up while you wait to ship. Drive delivery size and frequency to the best mix of small size and high frequency (taking into account transportation costs).
- Unrealistic forecasts are useless. An annual, or rolling six month forecast has value as it conveys trends, but you want data on which you can hang your hat. Work with suppliers and customers to develop reports that give “actionable data.”
- MRP & Scheduling need to be addressed. MRP systems should be used, almost exclusively, to develop material forecasts and costs. If used to schedule your operation, choose only a few “pacemaker” operations (one is preferable) to schedule.
Once you know where flow is obstructed and what those obstructions are, you can plan your Lean events. Typically, these are Kaizen events. What events will you plan? Here’s a list you’ll want to review.
- For CT > TT you’ll generally choose a Standard Work event.
- Since inventory is generally directly proportional to changeover time, you’ll want to conduct a SMED event to reduce CO time. You may also want to implement Kanbans or supermarkets while you’re at it.
- High defects are frequently the result of variation (executing the process differently from time to time), so you’ll want to conduct either a Standard Work or Total Quality Control event. Since poorly maintained equipment can also lead to defects, you’ll need to use your judgement whether you’ll need to conduct a Total Productive Maintenance event.
- Low uptime is generally indicative of poor maintenance practices and should lead to a Total Productive Maintenance event.
- Low available time can result from a number of concerns, but its remedy should begin with Standard work.
Once you’ve completed a Standard Work event, the sum of CTs divided by TT for the operation gives a great indicator of the number of workers needed. REMEMBER: you can’t have fractions of workers, but you can flex workers or hire part-time help. You’ll also want to reduce that fraction to zero in that operation’s next Kaizen event.
- As discussed above, high Changeover Time is addressed by a SMED event.
- Large supplier deliveries point to a number of concerns:
- Inability of supplier to deliver on time
- Inability of supplier to deliver reliable quality
- Wild fluctuations in customer orders (Acme’s +/- 50% variation is a good example)
- Excessive transportation costs
The first two and last item need to be addressed by your procurement group. The third needs to be addressed by the sales organization.
- Large customer deliveries are often the result of customers not being able to trust your delivery or quality (or their own forecasts). You need to address these first, then work a new schedule with your customer.
- Unrealistic forecasts (on your part) probably need to be addressed using a Kaikaku. This isn’t a week-long event. More likely, it will take weeks or months. It will have representatives from all the internal stakeholders and, if you’re smart, will include representatives from both your customer and supplier(s). This event will take time to identify the root cause(s) of your inability to forecast more realistically and then develop reliable solutions.
- MRP & Scheduling should be de-coupled, as much as possible, from your day-to-day operations. Use your MRP system to schedule and track incoming raw materials and customer orders. Identify the “pacemaker” operation(s) that can “pull” product to them and, if you use your MRP system in production, schedule only those operations. The “pacemaker” is where you’ll indicate what version of your product you want, and in what frequency. Once the “pacemaker” is scheduled, it cascades a “pull” signal back upstream causing the production of the indicated product. This results in both “flow” and “pull.”
I welcome your insights and feedback. You can contact me at: [email protected]
* In my last post, I explained why only the most senior leader or the Value Stream Manager should use the VSM to make improvements.
