Enterprise Value Stream

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by John Shook of Lean Enterprise Institute shown at the Lean Service Summit on 23rd June 2004 ran by the Lean Enterprise Academy

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Enterprise Value Stream

  1. 1. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 1 Enterprise Value Stream Mapping Case Study: Jax Taxes John Shook TWI Network, Inc. (jyshook@umich.edu)
  2. 2. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 2 Using the Value Stream Mapping Tool Value Stream Scope Determine the Value Stream to be improved Understand how things currently operate. This is the foundation for the future state Current State Drawing Implementation Plan Implementation of Improved Plan Design a lean flow through the application of Lean principles Future State Drawing PDCALoop Develop a detailed plan of implementation to support objectives (what, who, when) The aim of mapping!
  3. 3. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 3 Jax Taxes Jack is a Certified Public Accountant in the United States. His business consists of providing US federal income tax (IRS) preparation services for individuals who work for companies (salaried) and for self-employed people or small business. U.S. tax forms must be filed with the federal government on or before April 15 every year. During the busy tax season, self-employed returns require long hours because of the frequent waits, delays and errors. Jack and his employees work long hours during this period, and, as his business has grown in recent years, more clients are losing satisfaction with the timeliness and accuracy of his services.
  4. 4. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 4 Jax Taxes Generally, the sequence of work begins for each client sometime late January with Jack’s assistant sending documents to clients for them to fill out. Then, sometime before the first of April, the client must bring in all necessary forms and receipts. Regular clients drop off or send their box of receipts and tax forms from various income sources. Then, Ajck’s office must sort the receipts and documents, and, unfortunately, most of the time, there is something missing. The next step is to prepare worksheets for the client in the Tax Software (TS) system. Once Jack starts filling out the worksheets, he frequently needs to confirm deductions, such as what expenses qualify as business-related and details regarding retirement or insurance deductions. Once Jack has completed the worksheet, his assistant actually prints and collates the IRS forms. For self-employed clients, the assistant waits until Thursday to print all returns that have accumulated during the week from the TS system. Jack must review and sign each return. Finally, the process is completed by packaging and mailing the IRS forms with the necessary attachments to each client.
  5. 5. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 5 Data Set Send packet: P/T = FTQ = Send Reminder: P/T = FTQ = Sort receipts & documents: P/T = W/T = FTQ = Prepare Worksheet: Technology used: P/T = W/T = FTQ = Confirm deductions: P/T = W/T = FTQ = Print and Collate IRS tax forms: Technology used: P/T = W/T = FTQ = Review and sign forms: P/T = W/T = FTQ = Mail forms to client: P/T = W/T = FTQ =
  6. 6. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 6 Important Definitions • Process time: – Time to actually conduct the work of the process step (may incl. value and non-value added work) • ex – actually completing a form • Wait time: – During the process step - Time when the step is not yet complete, but is not being worked on by the operator • ex – waiting for a call back from the customer – Between process steps – Time between processes steps when the product or service is not being worked on • ex – queue time in an “inbox” • Lead time = Process time + wait time • First Time Quality (FTQ): – The percentage of the time that the task is able to be completed, accurately, the first time it is worked on
  7. 7. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 7 Metric Current Estimate From Current State Map Target from Future State Map Actual (post implementation) Process Time Lead Time First Time Quality Other(s) Measurable Metrics & Performance
  8. 8. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 8 Typical Steps for Current State Mapping • Document customer information & need • Who is it? What do they need? When do they need it? • Identify main processes (in order) • Select data attributes • P/T, W/T and FTQ • Perform “value stream walk” and fill in data boxes (how the process really works) • Pretend that you are the work / document / item being produced • Establish how each process knows what to process next (how work is prioritized) and document information flow • Calculate process time, wait time, lead time, first time quality, and any other metrics necessary to evaluate your Value Stream
  9. 9. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 9 Icons Electronic Information Flow Weekly Schedule Worker In Box (Queue) INMRP Wait-Time Conversation Information Flow Data Box P/T W/T FTQ Movement by Push Supermarket Movement of “physical” property Reminder post-card Customer Process Box Technology Used MRP Iterations Withdrawal (Pull) Changeover Kaizen Lightning Burst XOXO Leveling, Mix and/or Volume F I F O First-In First-Out Flow
  10. 10. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 10 Tips for Identifying Waste Following are things to look for to help identify waste in a value stream: • Low FTQ • Long wait times as compared to process times • Process steps requiring multiple iterations/reviews & rework • Excessive handoffs between people/organizations • Multiple systems/computer tools used – may point to redundant data entry & “translations” • Starting too early – Does the process start earlier than it needs to, with preliminary data, driving multiple updates/reworks as “real” data becomes available? • Look at the “system” level for opportunities to make bold moves – Look for potential to eliminate entire process steps before focusing on eliminating waste from unnecessary processes
  11. 11. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 11 Metric Current Estimate From Current State Map Target from Future State Map Actual (post implementation) Process Time Lead Time First Time Quality Other(s) Measurable Metrics & Performance
  12. 12. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 12 Now, with our completed Current State Map, we have a new lens to the Value Stream. The next challenge is to analyze the current state to create a vision for a better future state.
  13. 13. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 13 The Core Value Streams •Fulfillment from order to delivery •Product development from concept to launch •Maintenance and service from delivery through the life cycle of a product (These processes create value directly for an external customer)
  14. 14. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 14 Support Process Examples: •Hiring employees •Checking customer credit •Collecting receivables •Closing the accounting books •Building prototypes •Identifying new suppliers (These processes only create value for internal customers, but are currently necessary to run the business.)
  15. 15. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 15 TOYOTA PRODUCTION SYSTEM Eliminate Waste cost and profit What is Value? What is Waste ? Anything that adds cost without adding value Defined by the customer
  16. 16. The Three M’s • Muri – Waste of unreasonableness or overburden to a person or a machine • Mura – Waste of inconsistency; Waste of unevenness • Muda – The seven types of waste Employee on temporary leave or special assignment causing someone else to do two jobs - End of month deadline causing overtime - All projects scheduled in 1Q with none in 2Q - Process Variation COMMWIP TWI Neetwork, Inc. all rights reserved Jax Taxes p. 16
  17. 17. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 17 CATEGORIESCATEGORIES OFOF ACTIONACTION Waste “Non-Value Creating Work” Value Creating Work “Secondary” processes •Credit check •Hiring employees •Developing budgets Action “Primary” processes •Design products •Enter orders •Service products Examples: •Reviews •Waiting •Rework
  18. 18. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 18 Waste Points to Remember About Waste: • It is important to consider waste in the context of the value that the process provides to the customer • Waste is really a symptom rather than a root cause of the problem • Waste points to problems within the system • We need to find and address causes of waste to improve flow • In non-manufacturing processes, waste is often most prevalent in the information flow • A rule of thumb is to expect that 40% of what we do adds no value Any element of production, processing, or distribution that adds no value to the final product: waste only adds cost & time
  19. 19. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 19 TYPESTYPES OFOF WASTEWASTE II CC OO MMWW PP MM Conventional Thinking •WASTE NOT DEFINED, NOT EASY TO SEE •REACTIVE IMPROVEMENT •CAN’T DISCERN SOURCES OF WASTE •PROBLEMS REPEAT More useful Thinking CorrectionCorrection Over Production Over Production MotionMotion Material Movement Material Movement WaitingWaiting InventoryInventory ProcessingProcessing •WASTE IS "TANGIBLE" •IDENTIFY MANY SMALL OPPORTUNITIES •LEADS TO LARGE OVERALL CHANGE •CONTINUOUS IMPROVEMENT Learning to See Waste WASTEWASTE Unreasonable -ness Unreasonable -ness UnevennessUnevenness
  20. 20. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 20 DO IT AGAIN!! Correction: Rework – work done because of errors in the previous process
  21. 21. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 21 Overproduction: Making more than is necessary or making things faster than necessary, working ahead
  22. 22. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 22 Motion: Unnecessary people motions, travel, walking, searching
  23. 23. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 23 M&I Movement: Unnecessary or ineffective handoffs, transfers of material or information (communication)
  24. 24. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 24 Waiting: People waiting for machines or M&I; Machines waiting for people or M&I
  25. 25. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 25 Inventory: Information or material waiting unnecessarily in queue
  26. 26. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 26 Processing: Redundant or unnecessary processing, work that provides the customer more than he/she requires or is willing to pay for Long Report # 100
  27. 27. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 27 Tips for Identifying Waste Following are things to look for to help identify waste in a value stream: • Low FTQ • Long wait times as compared to process times • Process steps requiring multiple iterations/reviews & rework • Excessive handoffs between people/organizations • Multiple systems/computer tools used – may point to redundant data entry & “translations” • Starting too early – Does the process start earlier than it needs to, with preliminary data, driving multiple updates/reworks as “real” data becomes available? • Look at the “system” level for opportunities to make bold moves – Look for potential to eliminate entire process steps before focusing on eliminating waste from unnecessary processes
  28. 28. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 28 Root Cause Identification for Effective Problem Solving Waste is a symptom • We need to identify the root causes of waste • We must get to actionable, measurable, processes in the future state that: – Eliminate root causes of waste/problems – Prevent similar problems from reoccurring – Make future reoccurrences visible
  29. 29. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 29 Waste & Root Cause Exercise • Document WASTE on Jax Taxes current state map – COMMWIP • Determine the root cause for one identified Waste Area – Use the Problem Definition Tree and “5 Whys” to determine the root cause of the waste
  30. 30. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 30 The Power Behind Value Stream Mapping
  31. 31. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 31 Philosophy Process Thinking at Toyota “Brilliant process management is our strategy…” “We get brilliant results from average people managing brilliant processes while our competitors often get average (or worse) results from brilliant people managing broken processes.”
  32. 32. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 32 LEAN IMPLEMENTATIONLEAN IMPLEMENTATION Some Lessons LearnedSome Lessons Learned cartoon copyright © U of M •Cherry-picking the tools is not enough •The tools comprise a system Focus on the flow of value to create a system •A way of thinking underlies the tools and system Learn the thinking through doing TechniquesTechniques SystemSystem ThinkingThinking
  33. 33. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 33 Individual Efficiency vs. System Efficiency Philosophy Individual Efficiency vs. System Efficiency
  34. 34. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 34 Using the Value Stream Mapping Tool Value Stream Scope Determine the Value Stream to be improved Understand how things currently operate. This is the foundation for the future state Current State Drawing Implementation Plan Implementation of Improved Plan Future State Drawing PDCALoop Design a lean flow through the application of Lean principles Develop a detailed plan of implementation to support objectives (what, who, when) The goal of mapping!
  35. 35. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 35
  36. 36. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 36 Future State Questions for the Office • What are the customer requirements? • How will you make work flow smoothly? • Where and how will you trigger or sequence work? • How will you establish rhythm or milestones to pace the work and surface problems? • How will you make work progress and delays visible? • What process improvements are necessary to achieve your Value Stream vision?
  37. 37. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 37 – How can we ensure that the customer gets what they need, when they need it? – Can the timing of the customer requirements be used to establish a pace of work (takt time) for the value stream? What are the customer requirements?
  38. 38. Right Product Right Time! Understanding Customer Requirements Right Price!! • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements? TWI Neetwork, Inc. all rights reserved Jax Taxes p. 38
  39. 39. TAKT TIME •Defines the process step duration within which standardized work must be completed to meet customer demand • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements? Available Time Takt Time = Customer Requirement or Demand Synchronizes Pace of Production to Match Pace of Demand Rate for producing a product, and its components, based on rate of delivery. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 39
  40. 40. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 40 Rule of Thumb for Takt Time • In order to meet deadlines and help balance workloads, calculate takt time to establish the pace of work • Determining takt time allows you to see the waste of overproduction, as well as delays • Note: Determining takt time will also highlight that many current state processes are incapable of meeting the takt time (customer demand) • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements?
  41. 41. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 41 How will you make work flow smoothly? – How can we get information to the customer with few/no handoffs? – How can we get information to the customer with no correction or rework required? – How will multiple or parallel flows be synchronized? – Is there backflow (repeat or rework) loops that can be eliminated? – Can a person complete the activity in one sitting? – Can you touch each piece of paper only once, or go to each screen only once, for each activity? – What steps could be combined or eliminated to simplify flow?
  42. 42. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 42 • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements? Rule of Thumb for Flow • Look at the possibility of combining processes where there are long wait times between short process times • Look for the presence of numerous information arrows/loops. These could indicate correction, rework and interrupted flow.
  43. 43. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 43 Simple Process Flow All process steps occur in tight sequence (continuous flow), with little or no waiting • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements?
  44. 44. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 44
  45. 45. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 45 gas station • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements? Then 1. Park at Pump 2. Walk in to Store 3. Wait in Line 4. Leave Credit Card 5. Walk Back to Pump 6. Fill Your Tank 7. Walk Back in to Store 8. Get Receipt and Credit Card 9. Walk Back to Car 10. Drive Off Now 1. Park at Pump 2. Insert Credit Card in Pump 3. Fill Your Tank 4. Take Receipt 5. Drive Off
  46. 46. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 46 Where and how will you trigger or sequence work? – Can you have one trigger point with uninterrupted process flow?
  47. 47. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 47 Rule of Thumb for Triggering Work • Where you have interrupted process flow, use supermarkets/buffers or otherwise organize handoffs to create “internal pull” • Where you have smooth continuous flow, establish one trigger point at the point where continuous flow begins • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements?
  48. 48. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 48 • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements? ONCE YOU TRIGGER, FLOW WHERE YOU CAN, PULL WHERE YOU CAN’T Supermarket Interrupted Process Flow Continuous Flow PullPullPull Trigger FLOW Trigger FLOW
  49. 49. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 49 How will you establish rhythm or milestones to pace the overall flow of work and surface problems? – How will you use milestones to create an internal pull to establish cadence/rhythm? – What can be done to level the workload and eliminate the frustrating “peaks” and “valleys”?
  50. 50. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 50 Rule of Thumb for Rhythm & Milestones • Use milestones to create internal pull and establish cadence • Level demand at each process so that variation is removed from flow • Establish “Heijunka” – using a Heijunka Box or Leveling In-Box – to levelize imbalance between parallel processes • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements?
  51. 51. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 51 • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements? Leveling Jax Taxes Example Schedule Monday…….3 Self Employed, 3 Personal Tuesday……2 Self Employed, 4 Personal Wednesday.. 8 Personal Thursday…. .5 Small Business Friday……….5 Small Business Weekly Batch Daily: 1 Self Employed, 3 Personal, 2 Small Business Daily: Every Type Every Day Level: Every Type Every “Ship Window” (AM & PM) 1 Self Employed, 1 Personal, 0 Self Employed, 2 Personal, 1 Small Business 1 Small Business
  52. 52. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 52 How will you make work progress and delays visible? • How will you be sure that you know the progress of the work? • What visual management tools will you use to make progress & delays visible?
  53. 53. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 53 Rule of Thumb for Making Progress & Delays Visible • Establish checks for quality, timing, and output to make progress and problems visible • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements?
  54. 54. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 54 Management Time Frame: With what frequency do you know your performance to customer requirements? • 1 WEEK • 1 DAY • 1 SHIFT • 1 HOUR • 1 PITCH • 1 TAKT
  55. 55. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 55 • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements? Heijunka Box Example Current Day This Heijunka box: •Allows management to check work in progress & ensure that teams are not overburdened •Guides management in assigning future projects to teams not fully utilized •Serves to level the customer demand based on available resources -The customer’s requirements/due dates drive the entire work process Work In process Days of the Month Work Teams
  56. 56. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 56 What process improvements are necessary to achieve your Value Stream Vision? • Are resources adequate? • Standardized Work • Human Resources - # People, Skills, Knowledge Level • Other – Computers, Software, Outsourced Resources • Is quality produced at each step? (FTQ) • Is quality defined and measured? • Is there a process to identify and respond to quality problems? • Are resources available? • Are resources working on other (the wrong?) jobs? • Are resources waiting at times and too busy at other times?
  57. 57. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 57 Rule of Thumb for Process Improvements • To Improve the Performance of a Value Stream, plan at the “System Level” and implement at the “Process Step Level” • Ensure adequate and available resources to implement improvements in the future state Value Stream • Process improvements must be standardized and documented to “take hold” in the organization • Customer requirements? • Work flow smoothly? • Trigger & sequence work? • Rhythm (leveling)? • Progress & delays visible? • Process improvements?
  58. 58. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 58 Future State Questions – Supplemental Questions • What are the customer requirements? – How can we ensure that the customer gets what they need, when they need it? – Can the timing of the customer requirements be used to establish a pace of work (takt time) for the value stream? • How will you make work flow smoothly? – How can we get information to the customer with few/no handoffs? – How can we get information to the customer with no correction or rework required? – How will multiple or parallel flows be synchronized? – Is there backflow (repeat or rework) loops that can be eliminated? – Can a person complete the activity in one sitting? – Can you touch each piece of paper only once, or go to each screen only once, for each activity? – What steps could be combined or eliminated to simplify flow? • Where and how will you trigger or sequence work? – Can you have one trigger point with uninterrupted process flow? • How will you establish rhythm or milestones to pace the work and surface problems? – How will you use milestones to create an internal pull to establish cadence / rhythm? – What can be done to level the workload and eliminate the frustrating “peaks” and “valleys”? • How will you make work progress and delays visible? – What visual management tools will you use to make progress & delays visible? – How will you be sure you know the progress of the work? • What process improvements are necessary to achieve your Value Stream vision? – How will you ensure adequate and available resources to improve First Time Quality at each process step in the value stream?
  59. 59. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 59 Icons Electronic Information Flow Weekly Schedule Worker In Box (Queue) INMRP Wait-Time Conversation Information Flow Data Box P/T W/T FTQ Movement by Push Supermarket Movement of “physical” property Reminder post-card Customer Process Box Technology Used MRP Iterations Withdrawal (Pull) Changeover Kaizen Lightning Burst XOXO Leveling, Mix and/or Volume F I F O First-In First-Out Flow
  60. 60. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 60 Metric Current Estimate From Current State Map Target from Future State Map Actual (post implementation) Process Time Lead Time First Time Quality Other(s) Measurable Metrics & Performance
  61. 61. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 61 Using the Value Stream Mapping Tool Value Stream Scope Determine the Value Stream to be improved Understand how things currently operate. This is the foundation for the future state Current State Drawing Implementation Plan Implementation of Improved Plan Design a lean flow through the application of Lean principles Future State Drawing PDCALoop Develop a detailed plan of implementation to support objectives (what, who, when) The aim of mapping!
  62. 62. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 62 Value of Value-Stream Mapping • Helps you visualize more than the single process level • Links work flow with “control information” flow • Enables “System Kaizen”, a focus on lead time and total system optimization • Provides a new, common, language • Provides a blueprint for change • Ties together Lean concepts and tools
  63. 63. TWI Neetwork, Inc. all rights reserved Jax Taxes p. 63 Leadership is the Key!

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