Value Stream Analysis: Beyond the
Mechanics (Part 2 of 3) Webinar January 21, 2014

Welcome! • • • •
• • • • • Argentina Australia Belgium Bermuda Brunei Darussalam Canada Denmark Great Britain India • • • • • • • • Jamaica Lithuania Latvia Netherlands New Zealand Russia Saudi Arabia United States www.ksmartin.com/subscribe © 2014 The Karen Martin Group, Inc.

 Coach / Facilitator / Consultant / Trainer: Lean transformation & business performance improvement in all industries. 
Teacher: University of California, San Diego  Author & Speaker: Karen Martin, President The Karen Martin Group, Inc. www.ksmartin.com 2013 Shingo Prize winner! www.ksmartin.com/subscribe 3

Before the webinar… • The materials are available on: – www.ksmartin.com/files/webinarmaterials/01‐21‐
2014_slides.pdf (or _handout.pdf) After the webinar… • Recordings: – – – – www.vimeo.com/karenmartingroup www.youtube.com/karenmartingroup www.slideshare.net/karenmartingroup www.ksmartin.com/webinars • Materials: – www.slideshare.net/karenmartingroup © 2014 The Karen Martin Group, Inc. 4

More VSM Webinars! 11:00 am‐12:15 pm PT • Tuesday, February 18, 2014 –
Value Stream Analysis: Beyond the Mechanics – Part 3 of 3 (Executing the Transformation Plan) – https://www2.gotomeeting.com/register/154959186 • Thursday, March 27, 2014 – Value Stream Mapping: Case Studies – https://www2.gotomeeting.com/register/288652530 If you missed Part 1: www.ksmartin.com/webinars or www.vimeo.com/karenmartingroup © 2014 The Karen Martin Group, Inc. 5

www.ksmartin.com/VSM
© 2014 The Karen Martin Group, Inc.
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You will learn… • How to facilitate a two‐stage mapping process. • The importance of walking the value stream—
even if you can't "see" the work. • Facilitation tips for constructing the current state map and designing the future state map. • Tips for successful briefings. © 2014 The Karen Martin Group, Inc. 7

Value Stream Defined Value Stream: All of the activities required to transform a customer request into a good or service. Value Stream Process
Customer Request Process Process Customer Receipt First defined in The Machine That Changed the World, James Womack, Daniel Jones, & Daniel Roos, 1990. © 2014 The Karen Martin Group, Inc. 8

Work: Degrees of Granularity Value Stream Macro Perspective
• • • Define strategic direction (“what”) Heavy leadership involvement Value Stream Mapping Process Process Micro Perspective Process • • Step © 2014 The Karen Martin Group, Inc. Step Step • Identify the tactical “how” Heavy frontline involvement Metrics‐Based Process Mapping 9

Value Stream Mapping Benefit: Seeing the Whole Value Stream Mapping enables a mapping team to get ABOVE the work © 2014 The Karen Martin Group, Inc.
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Basic Current State Value Stream Map: 3 Sections 1 2 3
© 2014 The Karen Martin Group, Inc. 11

Basic Value Stream Map: Future State 1 Customer IT interface
Standard work Error proof IT-1 Crosstrain Modified approvals 2 Process 1 3 Crosstrain Process 2 Function A 1 items IT-2 LT = 1 days PT = 10 mins. %C&A = 99% Process 3 Function C 5 items 5 4 Standard work Function E 10 items 3 LT = 2 days PT = 120 mins. %C&A = 95% 4 LT = 0.5 days PT = 30 mins. %C&A = 95% 1 days 2 days 0.5 days Total LT = 3.5 days 10 mins. 120 mins. 30 mins. Total PT = 160 mins. Activity Ratio = 9.5% Rolled %C&A = 89.3% © 2014 The Karen Martin Group, Inc. 12

Basic Value Stream Future State Performance Metrics Current State Projected Future State
Projected % Improvement 9.5 days 3.5 days 63.2% 180 minutes 160 minutes 11.1% Activity Ratio 3.9% 9.5% 143.6% Rolled % Complete & Accurate 30.0% 89.3% 197.7% Metric Total Lead Time Total Process Time Other? Other? © 2014 The Karen Martin Group, Inc. 13

Value Stream Mapping:
Visualize the delivery of customer value on a single sheet of paper
© 2014 The Karen Martin Group, Inc.
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Value Stream Mapping Activity Phases and Timing Repeat Prepare Understand
Current State Design Future State Develop Transformation Plan Execute Transformation Plan 4 Weeks Prior to Mapping Three Consecutive Days Following Mapping Tuesday January 7, 2014 Tuesday January 21, 2014 Tuesday February 18, 2014 © 2014 The Karen Martin Group, Inc. 15

Create the Current State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. Value stream walk #1 2. Layout the map 3. Value stream walk #2 4. Add map details 5. Add timeline; calculate summary metrics 16

Value Stream Walk #1 • Purpose – To identify: –
What? (Processes) • High level description of the work accomplished • Work received; work passed on • Aim for 5‐15 process blocks across the value stream – Who? (Functions involved) – When? (Sequence and handoffs) • • • • Avoid getting into the details Approach from a place of humility and curiosity Capture thoughts, but avoid problem solving Entire team walks & stays together © 2014 The Karen Martin Group, Inc. 17

Post‐it Note Convention after Value Stream Walk #1 Process (verb/noun) Function(s)
© 2014 The Karen Martin Group, Inc. 18

Create the Current State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. Value stream walk #1 2. Layout the map 3. Value stream walk #2 4. Add map details 5. Add timeline; calculate summary metrics 19

Value Stream Map Process Block Placement Map what happens 80% of
the time Narrow the scope if needed

Place Post‐its serially or in parallel as appropriate 100% 100% Serial
processes Parallel processes

Minimal branching is acceptable on a
Value Stream Map

Create the Current State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. Value stream walk #1 2. Layout the map 3. Value stream walk #2 4. Add map details 5. Add timeline; calculate summary metrics 23

2nd Walk ‐ Gain a Deeper Understanding • Work input & output; trigger; prioritization
• 3 key metrics for each process block: – Process Time (PT) – Lead Time (LT) – Percent Complete & Accurate (%C&A) • WIP – quantity of work‐in‐process (queued work) • Information flow; IT Systems used • Significant barriers to flow – Batching, system downtime, inaccessible resources, long setup, etc. • # of people who do the work (if relevant) 24

Lead Time vs. Process Time Lead Time (LT) Work is Idle Work Received
Process Time (PT) Work is Idle Work passed to next process or department Lead Time = Elapsed time; Throughput time; turnaround time Process Time = Touch time; work time; cycle time © 2014 The Karen Martin Group, Inc. 25

Measuring Process Quality Customer Process 1 © 2014 The Karen Martin Group, Inc.
Process 2 Process 3 Process 4

Multiple downstream customers reporting different %C&As from the same supplier Block 5 reported that they rework Block 4’s output 25% of
the time Block 7 reported that they, too, rework Block 4’s output 50% of the time. (0.75 x 0.50) x 100 = 37.5% © 2014 The Karen Martin Group, Inc. 27

Value Stream Walk #2: Which systems/applications and other means are used to convey information?
Emailing work Hand carrying work

Post‐it Note Convention after Value Stream Walk #2 Significant barriers to flow
# People who typically do the work %C&A PT LT 29

Quantifying WIP:
3 Places Work Can Accumulate

Create the Current State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. Value stream walk #1 2. Layout the map 3. Value stream walk #2 4. Add map details 5. Add timeline; calculate summary metrics 31

Value Stream Map: Map Details

Create the Current State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. Value stream walk #1 2. Layout the map 3. Value stream walk #2 4. Add map details 5. Add timeline; calculate summary metrics 33

Value Stream Map
Summary Timeline

Golden State Equipment, Inc. Capital Equipment Value Stream Metric Current State
Timeline PT Projected % Improvement 46.0 hours* Timeline LT Projected Future State 44.0 days* LT – RFQ (CS blocks 2-4) LT – PO-Dev (CS blocks 6-10) Activity Ratio (full value stream) Rolled %C&A 11 days 27 days 13.1% 4.8% * Specify whether business hours or clock hours; whether business days or calendar days. ** Based on 1,000 orders per year and 1,950 available work hours per employee per year. © 2014 The Karen Martin Group, Inc. 35

Briefing #1
Purpose: Reduce resistance to future state design
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Briefing #2
Purpose: Build consensus around future state design
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Briefing #3
Purpose: Gain commitment re: improvement priorities,
ownership, resources needed, and timeline.
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Value Stream Mapping Charter Scope
Accountable Parties Logistics Executive Allen Ward Sponsor Value Stream Capital equipment Specific Engineer to order, requires both hardware & Conditions software customization Event Dates July 24-26, 2013 & Times 8:00 am - 5:00 pm Value Stream Nancy Little Champion Demand Rate 1,000 per year Base-camp Surf's Up - Room A Location Facilitator Dave Parks Trigger Customer submits RFQ First Step Sales reviews the RFQ Logistics Dave Parks Coordinator Last Step Production ships product Boundaries & No new software; only minor changes to existing IT Limitations systems; no additional staff; no budget changes Meals Continential breakfast & lunch Provided Briefing ** Allen W (COO), Joe M (CIO), Attendees Sal T (VP Sales) ** required * Bruce R (VP Ops), Carlos P *optional (HR), Su T (CFO), Bill M (VP CS) Improvement Time Future state design is fully realized by Frame December 31, 2013. Current State Problems & Business Needs Briefing July 24, 25, & 26 Dates & 4:00-5:00 pm Times Mapping Team 1 Desire to stay ahead of the competition & deepen customer loyalty. Function / Title Name 2 Forecasted growth of 15% for next fiscal year. 1 Sales, Director Sean Michaels 3 Unclear & incorrect information flowing through value stream. 2 IT, Director Diana Marie 4 Lead time for RFQ turnaround = 2 weeks; PO to software dev = 5 weeks 3 Finance, Controller Dave Gerald 5 (Competition's RFQ LT is 1 wk and PO to delivery is 4 wks) 4 Scrum Master Ryan Austin 5 Engineering, Vice President Nancy Little 1 Reduce RFQ lead time by a minimum of 50%. 6 Manufacturing, Director Ambreen Motiwala 2 Reduce PO to software development lead time by a minimum of 50%. 7 Customer Service, Manager Danny Tran 3 Improve quality of information flowing throughout value stream. 8 Customer (contract manufacturer) Contact Information JR Hunt Goals & Measurable Target Conditions 4 9 5 10 Benefits to Customers & Business On-Call Support 1 Faster delivery; less hassle; less cost. Function Name 2 Better working relationships between sales, estimating & engineering. 1 Planning / Purchasing, Planner Lourdes Dwyer 3 Freed capacity to absorb additional business w/o increasing staff. 2 Production Supervisor 4 Contact Information 3 5 Tom St. James 4 Relevant Data Agreement 1 Sales effectiveness: RFQ conversion rate. Executive Sponsor Value Stream Champion Facilitator 2 Financial: Estimate-to-actual cost comparison. 3 Operational: LT in segments (RFQ to quote; PO to development). Signature: Signature: Signature: 4 Date: Date: Date: © 2014 The Karen Martin Group, Inc. 39

Create the Future State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. Determine the “right work” 2. Make the right work flow 3. Manage the right work 40

Create the Future State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. Determine the “right work” 2. Make the right work flow 3. Manage the right work 41

Golden State Equipment, Inc. Capital Equipment Value Stream Current State Projected
Future State Projected % Improvement Timeline PT 46.0 hours 34.3 hrs 25.4% Timeline LT 44.0 days 23.0 days 47.7% 11 days 7 days 36% 27 days 9 days 67% 13.1% 18.6% 42% 4.8% 53.4% 1,013% Metric LT – RFQ (CS blocks 2-4) LT – PO-Dev (CS blocks 6-10) Activity Ratio (full value stream) Rolled %C&A © 2014 The Karen Martin Group, Inc. 42

Create the Future State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. Determine the “right work” 2. Make the right work flow 3. Manage the right work Ownership KPIs (Key Performance Indicators) Visual Management Frequency of Improvement 43

Create the Future State Map: 5 Steps Prepare Understand Current State Design
Future State Develop Transformation Plan Execute Transformation Plan 1. What? 2. How? 3. Who? 4. When? 44

Prioritization Grid
Creating the Transformation Plan
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Value Stream Transformation Plan Value
Stream Outpatient Imaging Scheduled Review Dates Executive Sponsor Allen Ward Value Stream Champion Paul Scanner Value Stream Mapping Facilitator Dave Parks 1-Nov-12 21-Nov-12 13-Dec-12 Date Created 10/18/2012 FS VSM Block # Measurable Target 10-Jan-13 Proposed Countermeasure Exec. Method* Owner Improve quality of referral to 85% Implement standard work for referral process KE Cross-train and co-locate work teams Proj Only one check in per patient Collect copays in Imaging KE Reduce wait time in waiting area by 50% Balance work / level demand KE Eliminate 6 hour lead time associated with transcription step Implement voice recognition technology Proj Eliminate redundant data entry Auto populate between PACS and Meditech Proj Visually managed inventory; no outages or expired items 5S CT supplies area; implement kanban KE Reduce imaging LT to one hour Value-stream specific radiologists Proj Reduce report delivery LT to 30 minutes Increase % of physicians receiving electronic delivery Proj Reduce LT at image review to 1 day Visual metrics and indicators JDI 9 10 11 12 Status Martha Allen 7 8 Martha Allen 8 7 Michael O'Shea 6 6 Dave Gerald 5 5 Dave Gerald 7 4 Dianne Marie 6 3 Ryan Austin 4 2 Dianne Marie 4 1 Sean Michaels Reduce lead time between scheduling and preregistration step to 45 minutes Planned Timeline for Execution Dave Gerald 2 3,4 Agreement Executive Sponsor Value Stream Champion Value Stream Mapping Facilitator Signature: Signature: Signature: Date: Date: Date: * Execution Method = JDI (Just-do-it), KE (Kaizen Event), or Proj (Project) © 2014 The Karen Martin Group, Inc. 46

Value Stream Mapping Execution: Key Success Factors • • •
• Whenever possible, walk the value stream. Use “the big 3” key metrics. Hold daily briefings. Facilitation techniques: – The fine line between letting the team go “off script” and sticking with a rigid agenda. – Use “count down” technique. – Stimulate innovation – Why? Why not? What if? – Refer back to the charter to keep the team focused. – Teach in the moment as needed. – Allow and/or stimulate “spirited conversation.” © 2014 The Karen Martin Group, Inc. 47

“The new bible for value stream mapping.” —Art Byrne, author, The Lean Turnaround Amazon: www.bitly.com/VSMbk More info: www.ksmartin.com/VSM © 2014 The Karen Martin Group, Inc.
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For Further Questions Karen Martin, President 7770 Regents Road #635 San Diego, CA 92122 858.677.6799
ksm@ksmartin.com Blog & newsletter: www.ksmartin.com/subscribe © 2014 The Karen Martin Group, Inc. 49 49