Value Stream Mapping: How to Visualize Work & Align Leadership for Organizational Transformation

Value Stream Mapping: How to Visualize Work & Align Leadership for Organizational Transformation Webinar October 3, 2013

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 Coach / Facilitator / Consultant / Trainer: Lead Lean transformations & develop people across all industries.  Teacher: University of California, San Diego  Author & Speaker: Karen Martin, President The Karen Martin Group, Inc. www.ksmartin.com 3 Preorder now! 2013 Shingo Prize winner!

© 2013 The Karen Martin Group, Inc. 4 Upcoming Webinars • TENTATIVE ‐ Improvement Facilitation & Coaching: An Open Forum – Tuesday, October 29, 2013 – 11:00 am‐12:15 pm PT – https://www2.gotomeeting.com/register/999232762 • Plan‐Do‐Study‐Adjust: A Deep Dive – Tuesday, December 3, 2013 – 11:00 am‐12:15 pm PT – https://www2.gotomeeting.com/register/893454842 • Hoshin Kanri: Creating a Strategy Deployment Plan That Gets Results – Thursday, December 5, 2013 – 11:00 am‐12:15 pm PT – https://www2.gotomeeting.com/register/943880106

© 2013 The Karen Martin Group, Inc. 5 After the webinar… • All recordings are available on: – www.vimeo.com/karenmartingroup – www.youtube.com/karenmartingroup – www.slideshare.net/karenmartingroup – www.ksmartin.com/webinars • The materials are available on – www.slideshare.net/karenmartingroup

Value Stream Defined Value Stream: All of the activities required to transform a customer request into a good or service. 6 Value Stream Process ProcessProcess Customer Request Customer Receipt First defined in The Machine That Changed the World, James Womack, Daniel Jones, & Daniel Roos, 1990. © 2013 The Karen Martin Group, Inc.

Value Stream Mapping’s Roots 7 Mike Rother & John Shook, 1999 Beau Keyte & Drew Locher, 2004 Whenever there is a product for a customer, there is a value stream. The challenge lies in seeing it. — Mike Rother & John Shook, Learning to See

© 2013 The Karen Martin Group, Inc. 8 “The new bible for value stream mapping and improving organizational performance." Art Byrne, former CEO, The Wiremold Company and author, The Lean Turnaround “Value Stream Mapping is an outstanding guide for practitioners engaged in the challenging work of improving the horizontal flow of value across organizations.” John Shook, Chairman & CEO, The Lean Enterprise Institute and author, Learning to See Jeffrey Liker, best‐selling author, The Toyota Way “Karen and Mike have put value stream mapping in its proper perspective as a methodology for seeing waste, sharing a future state vision, and building meaningful actions that are carried out with passion and purpose.” Our Journey… www.ksmartin.com/VSM

© 2013 The Karen Martin Group, Inc. 9 Book Structure • Introduction • Chapter 1 – Value Stream Management • Chapter 2 – Setting the Stage and Enabling Success • Chapter 3 – Understanding the Current State • Chapter 4 – Designing the Future State • Chapter 5 – Developing the Transformation Plan • Chapter 6 – Achieving Transformation • Appendices – Sample maps – Outpatient Imaging – Purchasing – Repair Services – Shelving Systems – Software Development

© 2013 The Karen Martin Group, Inc. 10 Value Stream Mapping is for… • Organizations who are unfamiliar with value stream mapping. • Organizations who have adopted value stream mapping but would like to reap greater rewards. • Organizations who are mis‐using value stream mapping. …leaders, practitioners, and consultants.

Work: Degrees of Granularity Value Stream Process Process Process Step StepStep Micro Perspective • Identify the tactical “how” • Heavy frontline involvement • Metrics‐Based Process Mapping Macro Perspective • Define strategic direction (“what”) • Heavy leadership involvement • Value Stream Mapping © 2013 The Karen Martin Group, Inc.

© 2013 The Karen Martin Group, Inc. 15 Metrics‐Based Process Mapping: Improving Tactically; Defining Standard Work 0 1 0 15 6 -1 0 Activity PT LT %C&A Activity PT LT %C&A Activity PT LT %C&A Activity PT LT %C&A Activity PT LT %C&A 1 Fax PO to Sales Rep 0 0 45% 2 Review PO; clarify with customer as needed 20 2 90% Fax PO to warehouse 10 4 90% 5 6 Check inventory levels; notify Sales Rep re: status 5 4 95% Fax PO to Sales Rep 5 0.33 90% 0 20 10 5 5 0 2 4 4 0.33 45% 90% 90% 95% 90% 0 20 10 5 5 Rolled %C&A Critical Path LT Total PT Critical Path PT 5431 2 Mary Townsend Hours Worked per Day Sally Dampier Occurrences per Year Sam Parks Current State Metrics-Based Process Map Dave Morgan25-Jun-08 8 Facilitator Process Details Michael Prichard Order FulfillmentProcess Name Specific Conditions Domestic orders through sales force 37,500 Date Mapped Sean Michaels Sales Rep Ryan AustinDiane O'Shea Mapping Team LT Units Function / Department PT Units Step # ► Customer Finance Warehouse / Shipping Seconds Minutes Hours Days Seconds Minutes Hours Days Excel documentation tool available on the CD that accompanies Metrics‐Based Process Mapping (Martin & Osterling, 2012, Productivity Press), www.ksmartin.com/MBPM

VSM Enables Systems Thinking 17 Individual Efficiency = Sub‐optimization System Efficiency = Optimal Value Stream Performance

18 Value Stream Maps Serve as Visual “Storyboards” Makes the disconnects and obstacles to flow visible at a macro level Shows the linkage between material and information flow © 2013 The Karen Martin Group, Inc.

© 2013 The Karen Martin Group, Inc. 21 Value Stream Mapping Benefits • Visual unification tool • Connection to the customer • Holistic systems‐thinking methodology • Simplification tool • Practical means to drive continuous improvement • Effective means to orient new hires

© 2013 The Karen Martin Group, Inc. 23 Value Stream Mapping: Common Failings • Using the mapping process solely as a work design exercise • Using the map to make tactical improvements • Creating maps but taking no action • Mapping with an inappropriate team—or no team at all • Creating value stream maps during a kaizen event • Creating maps with no metrics • Mapping without a team charter or not socializing it

© 2013 The Karen Martin Group, Inc. 27 Key Metrics: Time • Process time (PT) – The time it takes to actually perform the work, if one is able to work on it uninterrupted – Includes task‐specific doing, talking, and thinking – aka “touch time,” work time, cycle time • Lead time (LT) – The elapsed time from the time work is made available until it’s completed and passed on to the next person or department in the chain – aka throughput time, turnaround time, elapsed time – Includes Process Time, not merely waiting time.

© 2013 The Karen Martin Group, Inc. 29 Key Metrics: Quality • %Complete and Accurate (%C&A) – % of incoming work that’s “usable as is”; the downstream customer can perform task without having to “CAC”: • Correct information or material that was supplied • Add information that should have been supplied • Clarify information that should have or could have been clearer – Determined by the person receiving the input; metric goes on the output block. – Measured by the immediate downstream customer and all subsequent downstream customers. – Similar to first pass yield in manufacturing.

© 2013 The Karen Martin Group, Inc. 31 Summary Metrics: Time • Activity Ratio (AR) – The percentage of time anything is being done to the work passing through the system (whether value‐adding or non‐ value‐adding) – AR = (∑PT ÷ ∑LT) × 100 – 100 – AR = % Time Work is Idle – Common current state finding = 1‐10% (across value stream) – Could also calculate %VA to show proportion of value‐adding time (often significantly lower than AR).

© 2013 The Karen Martin Group, Inc. 32 Summary Metrics: Quality • Rolled Percent Complete & Accurate (Rolled %C&A) – The percent of value stream output that passes through the process “clean,” with no “hiccups,” no rework required. – Rolled %C&A = (%C&A x %C&A x %C&A…) x 100 – Example: (0.80 x 0.50 x 0.99 x 0.75) x 100 = 29.7% – Common current state finding = 0‐15%

Summary Metrics: Labor Requirements • Total PT – Sum of all activities, not just critical path • Labor Requirements 33 Total PT (in hrs) X # occurrences/year # FTEs Available work hrs/year = * FTE = Full‐time Equivalent (2 half time employees = 1 FTE) Freed Capacity = Current State FTEs – Future State FTEs © 2013 The Karen Martin Group, Inc.

© 2013 The Karen Martin Group, Inc. 35 Customer 1 Process 3 Function E LT = 0.5 days PT = 30 mins. %C&A = 95% 4 4 10 mins. 1 days 120 mins. 2 days 30 mins. 0.5 days Total LT = 3.5 days Total PT = 160 mins. Activity Ratio = 9.5% Rolled %C&A = 89.3% Process 2 Function C LT = 2 days PT = 120 mins. %C&A = 95% 3 3 ABC Technology, Inc. Future State Value Stream Map Name of Value Stream Being Mapped Demand Rate = XX / Year Name of Value Stream Champion Mapping Date IT-1 IT-2 5 items Process 1 Function A LT = 1 days PT = 10 mins. %C&A = 99% 5 2 1 items 10 items Standard work Modified approvals IT interface Cross- train Cross- train Standard work Error proof

© 2013 The Karen Martin Group, Inc. 36 Time & Quality Value Stream Performance Metrics Metric Current State Projected Future State Projected % Improvement Total Lead Time 9.5 days 3.5 days 63.2% Total Process Time 180 minutes 160 minutes 11.1% Activity Ratio 3.9% 9.5% 143.6% Rolled % Complete & Accurate 30.0% 89.3% 197.7% Other Other

© 2013 The Karen Martin Group, Inc. 37 Acceptable branching on a Value Stream Map Process 5 Function E 5 Process 2 Function B 2 Process 4 Function D 4 Process 1 Function A 1 Process 3 Function A 3 50% 50%

© 2013 The Karen Martin Group, Inc. 38 Parallel steps on the timeline Process 4 Function E LT = 2 days PT = 25 mins. %C&A = 90% 5 mins. 2 days 20 mins. 0.5 days 5 mins. 3 days 25 mins. 2 days Total LT = 7.5 days Total PT = 55 mins. Activity Ratio = 1.5% Process 2b Function B LT = 1 days PT = 10 mins. %C&A = 75% Process 3b Function D LT = 1.5 days PT = 15 mins. %C&A = 99% 45 items Process 1 Function A LT = 2 days PT = 5 mins. %C&A = 90% Process 2a Function A LT = 0.5 days PT = 20 mins. %C&A = 50% Process 3a Function C LT = 3 days PT = 5 mins. %C&A = 67% 10 items Rolled %C&A = 9.1%

© 2013 The Karen Martin Group, Inc. 39 Multiple timelines Customer 1 Perform repair Service LT = 3 days PT = 4 hrs. %C&A = 99% 24 5 Prep site Foreman LT = 1 days PT = 1 hrs. %C&A = 80% 2 4 Schedule service Customer service LT = 5 days PT = 15 mins. %C&A = 90% 11 3 Create quote Sales LT = 10 days PT = 30 mins. %C&A = 67% 4 2 60 mins. 1 days 240 mins. 3 days 30 mins. 1 days Total LT = 5 days Total PT = 330 mins. Activity Ratio = 13.7% Rolled %C&A = 78.4% Approve repair Inspector LT = 1 days PT = 0.5 hrs. %C&A = 99% 3 6 Scheduler Excel

Prepare Understand Current State Design Future State Develop Transformation Plan Execute Transformation Plan Three Consecutive Days 4 Weeks Prior to Mapping 3 to 6 Months After Mapping Repeat Value Stream Mapping Activity Phases and Timing © 2013 The Karen Martin Group, Inc.

© 2013 The Karen Martin Group, Inc. 41 1 2 1 3 2 4 3 5 4 5 1 6 2 7 3 8 4 9 5 10 1 2 1 3 2 4 3 5 4 1 2 3 4 Date: Date: Name Name FacilitatorValue Stream Champion Contact Information Contact Information Demand Rate Trigger How many times is this done per wk, qtr, mo, or yr? What initiates the process? Value Stream Mapping Charter Scope Accountable Parties Logistics Required: typically VP or C-level If needed—often director or manager level Specific Conditions What circumstances are included and excluded? (e.g., type of customer, geographic location, etc.) Value Stream Champion Value stream being improved Executive Sponsor Value Stream Event Dates & Times 3 days typically; consecutive is best; 6 hrs per day minimum; 7 or 8 hrs is best Required: skilled, objective person leading the activity Base-camp Location Facilitator Current State Problems & Business Needs Mapping Team Boundaries & Limitations Improvement Time Frame What is the team NOT authorized to change? Typically 3-6 months Last Step Activity on the last process block Logistics Coordinator Not always needed Aids in consensus building and organizational learning. Typically the last hour of the day. First Step Activity on the first process block Briefing Dates & Times Meals Provided Briefing Attendees ** required *optional List the the people that are required to attend the briefings (**) and those whose attendance is optional (*). Measurable Target Condition What's driving the need for improvement? Function Leadership-heavy Increase <defined metric> from X to X (XX% improvement). Reduce <defined metric> from X to X (XX% improvement). How will internal and/or external customers benefit as a result of Function improvements to the value stream? SMEs that may not be needed full time Always a nice touch; keeps the team from wandering On-site, ample wall space, quiet/private location Benefits to Customers On-Call Support Signature: Date: Benefits to Business Agreement as a result of improvements to the value stream? Executive SponsorWhat other direct and/pr indirect benefits will the business realize Signature: Signature: Download at www.ksmartin.com/VSM

© 2013 The Karen Martin Group, Inc. 42 1 2 1 3 2 4 3 5 4 5 1 6 2 7 3 8 4 9 5 10 1 2 1 3 2 4 3 5 4 1 2 3 4 Date: Date: Name Name Lourdes Dwyer Diana Marie Dave Gerald Ryan Austin FacilitatorValue Stream Champion Sean Michaels Contact Information Contact Information Demand Rate Trigger 1,000 per year Customer submits RFQ Value Stream Mapping Charter Scope Accountable Parties Logistics Allen Ward Nancy LittleSpecific Conditions Engineer to order, requires both hardware & software Value Stream Champion Capital equipment Executive Sponsor Value Stream Event Dates & Times July 24-26, 2013 Dave Parks Base-camp Location Facilitator Current State Problems & Business Needs Mapping Team Boundaries & Limitations Improvement Time Frame No new software; only minor changes to existing IT systems; no additional staff; no budget changes Future state design is fully realized by December 31, 2013. Last Step Production ships product Logistics Coordinator Dave Parks July 24, 25, & 26 4:00-5:00 pm First Step Sales reviews the RFQ Briefing Dates & Times Meals Provided Briefing Attendees ** required *optional ** Joe M (CIO), Sal T (VP Sales) * Bruce R (VP Ops), Carlos P (HR), Su T (CFO), Bill M (VP CS) Scrum Master Goals & Measurable Target Conditions Engineering, Vice President Unclear & incorrect information flowing through value stream. IT, Director Lead time for RFQ turnaround = 2 weeks; PO to SW dev = 5 weeks Finance, Controller Desire to stay ahead of the competition & deepen customer loyalty. Function / Title Forecasted growth of 15% for next fiscal year. Sales, Director Reduce PO to SW dev by a minimum of 50%. Customer Service, Manager Ambreen Motiwala Danny Tran Michael O'Shea Reduce RFQ lead time by a minimum of 50%. Manufacturing, Director Higher confidence in Golden State's products and staff. Production Supervisor Faster delivery. Function Less hassle (back and forth re: RFQ, design and code). Planning / Purchasing, Planner Continential breakfast & lunch Surf's Up - A Tom St. James Benefits to Customers On-Call Support JR HuntImprove quality of information flowing throughout value stream. Customer (contract manufacturer) Freed capacity to absorb additional business w/o increasing staff. Signature: Date: Benefits to Business Agreement Better working relationships between sales, estimating & engineering. Executive SponsorHigher margins. Signature: Signature:

Service order Existing customer New construction Repair Warranty Non‐ warranty Planned maintenance New customer New construction Repair Warranty Non‐ warranty Planned maintenance Proper Scoping is Essential Inclusion criteria: • Highest volume? • Highest margin? • Most painful? • Most supportive leadership? © 2013 The Karen Martin Group, Inc.

Patient care Inpatient Medical/Surgical Intensive Care Pediatric Outpatient Vaccine Clinic Imaging X‐Rays CT Scans MRI Mammography OB/GYN Services Proper Scoping is Essential Inclusion criteria: • Highest volume? • Highest margin? • Most painful? • Most supportive leadership? © 2013 The Karen Martin Group, Inc.

© 2013 The Karen Martin Group, Inc. 46 Value Stream Mapping Activity Steps 1. Kick‐off 2. Understand the Current State – Value stream walk #1 (determine process blocks; aim for 5‐15 blocks) – Layout the map (paper and Post‐its) – Value stream walk #2 (gather process metrics, WIP, and barriers to flow) – Add details to map – BRIEFING 3. Design the Future State (40 questions) – “Define Right work” – Make right work flow – Manage the right work – BRIEFING 4. Develop the Transformation Plan – BRIEFING

© 2013 The Karen Martin Group, Inc. 51 1 2 3 4 5 6 7 8 9 10 11 12 2 Improve quality of referral to 85% KE Sean Michaels 100% 3,4 Reduce lead time between scheduling and preregistration step to 45 minutes Proj Dianne Marie 75% 4 Only one check in per patient KE Ryan Austin 50% 4 Reduce wait time in waiting area by 50% KE Dianne Marie 50% 6 Eliminate 6 hour lead time associated with transcription step Proj Dave Gerald 50% 7 Eliminate redundant data entry Proj Dave Gerald 25% 5 Visually managed inventory; no outages or expired items KE Michael O'Shea 100% 6 Reduce imaging LT to one hour Proj Martha Allen 25% 8 Reduce report delivery LT to 30 minutes Proj Martha Allen 0% 7 Reduce LT at image review to 1 day JDI Dave Gerald 100% Value Stream Transformation Plan Value Stream Value Stream Champion Value Stream Mapping Facilitator Allen Ward 1-Nov-12Executive Sponsor Scheduled Review Dates 21-Nov-12 Outpatient Imaging Paul Scanner Dave Parks 13-Dec-12 10/18/2012 10-Jan-13Date Created Value Stream Mapping Facilitator Increase % of physicians receiving electronic delivery Planned Timeline for Execution Status Signature: Agreement Signature: Signature: FS VSM Block # Measurable Target Proposed Countermeasure Implement standard work for referral process Exec. Method* Owner * Execution Method = JDI (Just-do-it), KE (Kaizen Event), or Proj (Project) Cross-train and co-locate work teams Value-stream specific radiologists Implement voice recognition technology Auto populate between PACS and Meditech 5S CT supplies area; implement kanban Collect copays in Imaging Balance work / level demand Visual metrics and indicators Date: Date: Executive Sponsor Value Stream Champion Date:

© 2013 The Karen Martin Group, Inc. 53 Related Webinars • Metrics based process mapping – www.ksmartin.com/MBPM • Kaizen Events – www.ksmartin.com/TKEP • A3 – http://vimeo.com/33260580 (part 1) – http://vimeo.com/33407948 (part 2) • Strategy deployment – http://vimeo.com/35748971 – Upcoming webinar – Thursday, December 5 – www.ksmartin.com/webinars

© 2013 The Karen Martin Group, Inc. 54 Karen Martin, President 7770 Regents Road #635 San Diego, CA 92122 858.677.6799 ksm@ksmartin.com For Further Questions Blog & newsletter: www.ksmartin.com/subscribe