Value stream mapping (VSM): An essential guide

Businesses use value stream maps to gain visibility predominantly over supply chain management and order management, by zooming in on the detail of each process step involved. Unfortunately, as we’ll discuss further down in this article, creating a value stream map the traditional way (using surveys, workshops, and stakeholder interviews) can be a time consuming effort that results in a subjective and potentially inaccurate map. This is why many companies are using Process Intelligence to get a data-driven, objective view of their end-to-end business operations, identify value opportunities hidden within their processes, and capture those opportunities with technologies like automation and AI.

But before we get to that, here’s more about value stream mapping, how to create a value stream map, and why you might want to.

What is value stream mapping (VSM)?

While other types of process maps are geared towards process documentation or high-level overviews of a business function, a value stream map is focused on the bottom line. They display all the individual processes and activities involved in delivering a product or service to a customer – door to door. That’s on the manufacturing process, product development, and production side, as well as accounts receivable and accounts payable processes such as dunning.

Value stream mapping brings together the business’s material flow and information flow. In other words, the materials flowing from the supplier to assemble the finished product, and ultimately to the customer when it’s distributed. Then the flow of information that goes with it, including scheduling, forecasting, and sending order details.

Businesses can encounter value stream mapping in Six Sigma methodology, and particularly the Lean Six Sigma approach, as they outline ways to identify process improvement opportunities and cut operations that aren’t adding value. Industries such as manufacturing will be particularly familiar with the technique since value stream maps display the operations within the production process. In fact, its emergence is commonly attributed to a large Japanese automotive manufacturer (they called it material and information flow map), which used the technique to control quality management and lean production processes. Healthcare companies also use value stream mapping to streamline operations and deliver greater patient outcomes.

How does value stream mapping (VSM) work?

Business process analysts can approach a value stream map as they would any process map. The bulk of the work is sourcing process information from stakeholder surveys, workshops or interviews, where supply chain teams will feature heavily. The main difference is there’s typically also some form of time study to capture the information needed for a timeline – another feature of value stream maps – that tracks lead times and process durations. All that information is then organized into diagram form.

What does that diagram look like? There are three main layers:

1. The supplier – the start of the process – is positioned in the top left corner of the process map, while the customer – the end point – goes in the top right. Production control is in between, orchestrating the entire process flow from one to the other, and all the steps and inputs required.
2. Beneath that row sits the process box layer which describes the actions that move the order along. There are often further smaller boxes underneath each process box, with metrics for each step.
3. Finally, at the bottom is the timeline (or time ladder).

Value stream mapping has its own set of symbols to designate customers and suppliers, logistics, and data, as well as the information-versus-material flow.

Any processes or steps that don’t add value shouldn’t be excluded at this stage. Scrutinizing and picking those out takes place later, when the value stream map is interpreted and acted on.

What is value stream mapping (VSM) good for?

Lean management can benefit from value stream mapping as the process map exposes redundant activities, waste and anything not directly contributing value. Likewise, the timeline helps clearly visualize delays, slow-moving inventory and any tasks that take longer than they should. The time data also provides some insight into supplier performance in terms of receiving materials on time.

Value stream mapping helps businesses spot instances of waste known by the Lean acronym TIM WOOD:

• Transportation: Moving materials between locations unnecessarily.
• Inventory: Overstocking parts, materials and products.
• Motion: Employees moving too much or over excessive distances to perform tasks or collect resources.
• Waiting: Delays and downtime while awaiting supplier delivery, or for a dependent process to be completed.
• Overproduction: Surplus stock from supply outweighing demand.
• Overprocessing: Overly complicated steps and processes that don’t benefit customer value, as well as overengineered “feature creeps”.
• Defects: Rework arising from substandard product quality.

Additional issues can arise from handoffs and task-switching, when personnel and process responsibility changes, and information is lost amidst disconnected processes. A value stream map can show a business where these handovers are best to take place within the wider process, any that are unnecessary, as well as breaks and blindspots in the information flow.

Because it’s focused explicitly on customer delivery, value stream mapping can directly benefit customer service by improving quality management and reducing order fulfillment cycle times. And, as mentioned earlier, there are potential bottom-line gains. Eliminating waste, bottlenecks and unnecessary delays can accelerate production times and stock turnaround, while lowering the chance of order cancellations due to overlong waiting times.