iSixSigma

Value Stream

Definition of Value Stream:

There are a number of ways you can present the steps, activities, and tasks that go on in your process. In this article, we will discuss one of them: the value stream. We will explain what it is, compare it with other approaches, and explore some best practices.

Overview: What is a value stream? 

If you were to list all the steps, activities, and tasks that occur from the time your process starts until it ends, that list would contain both value-added and non-valued elements. 

We can define value added as those steps or activities that add value in the eyes of the customer. Value added is often defined as those activities that change the nature and characteristic of the “thing” that is going through your process. It also is defined as those activities that your Customer is willing to pay for — and are done right the first time. 

An example might be the transformation of a raw material, such as a block of steel that is cut, welded, and joined with another component. The fit, form, and function has changed. Those activities are value-added to your customer, and they are willing to pay for them.

Non-value-added activities are those that are not important to your customer, nor are they willing to pay for them. If that block of steel had to be reworked because of a welding error or a cutting error, the customer would certainly not want to pay for that. Non-value-added activities can be thought of as waste and need to be mitigated or eliminated.

The value stream can be defined as the set of activities that occur to add value to your customer from the initiating step to the final realization of value by your customer. The value stream can begin as early as the development of the concept, run through various stages of development, and end with delivery and ongoing support. A value stream always begins and ends with your customer.

The value stream map (VSM) is the format in which the stream of value-added activities is represented. It begins with your customer and ends with your customer. While most VSMs include all the activities in the process, including material and information flow, the identification of both value-added and non-value-added activities is done. It is important to note that the value stream is concerned with how and where value is added rather than how the process itself is done.

3 benefits of the value stream

You don’t want to waste resources doing unnecessary work. Since your customer will only be willing to pay you for the work they value, you want to know where that occurs. Here are a few benefits of the value stream.

1. Identifies value added activities 

If much of your work efforts are non value added, you are wasting your resources. The value stream lets you identify and focus on those work elements that are important to your customer. 

2. Separate the wheat from the chaff 

By utilizing a graphical representation of your value stream, you’ll be able to quickly see where the value-added work is occurring — as well as where the waste is happening. 

3. Focuses on your customer 

Since the value stream starts and ends with your customer, you will, by default, be focusing on what’s important to them. 

Why is the value stream important to understand? 

To get the most out of your value stream description, you’ll want to understand its purpose and desired outcomes. 

Highlights where the “good” work is being done

Since your customer will only pay you for your value-added work, you need to understand where that is happening. 

Difference between value-added and non-value-added 

The distinction between what constitutes value-added and non-value-added work is important for you to understand. You should, with your customer’s input, have clear and agreed-upon definitions of what the value-added activities are that are important to your customer. 

Distinction between the value stream map and a customer journey map 

The value stream will deal with specific identifying activities and be supported by data. A customer journey map is concerned with what your customer experiences rather than what value is added to the “thing” that they are receiving, whether it be a product or service. 

An industry example of a value stream 

The marketing department of a consumer products company was getting a lot of negative feedback from their customers regarding the timely delivery of promotional materials for new product introductions and seasonal store promotions. A team of senior managers was created to address this issue.

Given the Lean Six Sigma training most of the managers had received, they decided to do a value stream to see where value was being added or not. 

Within a few hours, the team realized that much of the work, starting with the initial concept until delivery to the customer stores, was internally focused and not focused on things that were important to the customer. There was too much internal inspection and rework, which culminated in late deliveries of the promotional materials. It was so bad that a significant proportion of deliveries were made after the planned promotional date.

After surveying the customer as to what they valued, the team came to the conclusion that they had little idea what the customer felt was value-added. A team of both company managers and customer personnel was formed to deal with and resolve this discrepancy. In the end, the value stream was revised and the problem solved.

3 best practices when thinking about a value stream 

Given the power of this tool, be sure you’re executing it in the best way possible. Here are a few hints. 

1. Clear definitions 

Make sure both you and your customer have clear, operationally defined and measurable definitions of what value-added activities really mean. 

2. Involve people 

Do the value stream with a team of people. No single individual has a complete understanding of what is being done and whether any specific activity is truly value-added or not.

3. Utilize a graphical representation  

Describe your value stream in graphical terms rather than in a pure written format. It’s much easier and quicker for you to understand something visual than to read pages and pages of words.

Frequently Asked Questions (FAQ) about a value stream

1. Does a value stream focus internally or externally? 

The value stream starts and ends with your external customer. While you can use it for examining your internal value stream, it’s really more powerful and applicable to your external customers and stakeholders.

2. What is the definition of a value-added activity? 

A value-added activity should change the nature or characteristic of the “thing” you are producing (fit, form, or function). It should be important to your customer so they are willing to pay for it. The work should be done right the first time. Rework is not value-added to your customer, and they are seldom happy to pay for it. 

3. Who should do the value stream? 

Include all those who have sufficient knowledge of the steps, activities, and tasks from the initial concept stage with your customer to the final delivery — including any appropriate ongoing support.

Highlights of a value stream 

The value stream is a visualization of the steps, activities, and tasks that add value for your customer. The focus starts with the initial concept, or first customer contact and interaction, and it ends with the last customer contact and interaction. The question answered is, “Where in the process do you add value for your customer?”

While in the perfect world, you would like to see your process consisting of only value-added activities. Unfortunately, there are also waste, or non-value-added activities that occur. You need to mitigate and eliminate those as feasible. Be sure to have agreed-upon definitions between you and your customer as to what is value-added. 

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