Value Stream Map - Pizzaspread - Case Study Example

LEAN MANAGEMENT Name: Instructor: Date: Contents 1.0 Value Stream Map (VSM) 2 1.0 Defining the value. 2 1.2 Achieve flow. 3 1.3 Schedule production using Pull. 3 1.4 Seek perfection through continuous improvement. 3 2.0 outline of value stream map 4 2.1 Value. 4 2.2 Value stream. 5 2.3 Flow 5 2.4 Pull 5 2.5 Implementing the final plan to gain perfection. 5 3.0 Literature Review of Lean Management 5 3.1 Introduction 5 3.2 Theoretical Literature. 5 3.3 Authors; Daniel Roos, James Womack, and Daniel Jones 6 3.4 Conceptual Framework 6 3.4.1 Value Stream mapping 7 3.4 A Conceptual Framework. 7 3.5 Application in General Business; Putting Lean Thinking in Manufacturing Discipline. 9 3.6 Author Views on Lean Management. 10 4.0 Application of lean management concept to pizza making process. 11 4.1 Identify the value 11 4.2 Mapping the current state value stream map 11 4.3 Flow 12 4.4 Pull 12 4.5 Perfection 12 5.0 Cost Benefits Analysis 12 Table A 12 TABLE B 13 Reference 14 1.0 Value Stream Map (VSM) Pizzaspread is a food processing company producing a variety of food, including; chicken, potato chips, fish donuts and pizza. In a recent survey made by the restaurant manager, the analysis of sales shows a reduced consumption of the pizza dish due to customer dissatisfaction. Low sales have impacted negatively on company profit (Liker, 1997a). The management has opted to apply lean management principle to improve efficiency in pizza production and delivery to the end user customer. Value stream map is a framework of a product's production life cycle that categorizes each step in the manufacturing cycle. The main objective involves adding value to raw material and pulling the value along the value stream map, through designing and introduction of new techniques that maximizes production of the quality product. Value stream mapping is an enterprise technique for documenting, analyzing and improving the flow of resources needed to manufacture a finished good. It is a collection of value-added activities on one hand and non-value added activities on the other, that result to quality product required to meet customer need. Therefore, Value stream illustrates the flow of information and material in the process of product or service creation (Cusumano and Nobeoka, 1998). Value stream map shows state of the production system,both in present and the future, enabling the producer to detect and eliminate any waste. The producer will thus apply lean manufacturing principle to improve the quality of the product. Value stream map is a framework of manufacturing process that identifies any defect during production and suggests measures to be taken to correct them. Womack and Jones suggested, five steps of implementing lean management in an enterprise; 1.0 Defining the value. All tasks that are adding value and supplement product quality from its inception to delivery. It involves techniques of collecting information from the end user and methods of improving the quality of product on its way to the customer. 1.1 Identify the value stream. Value stream usually depends with the type of product or service provided. The value of stream map provides visibility of the entire process. 1.2 Achieve flow. In the value stream product, information and service flow the stream. For example, patients are what flow in hospital. In the office; the information is what flow. In services, for example, banking, customer needs flows through the value stream. In most cases, the item flowing in administration or service is a document, an order, or request. 1.3 Schedule production using Pull. The preference of the end user is identified from pulling information from the customer. 1.4 Seek perfection through continuous improvement. The perfectionist is sorted by eliminating any waste of time or resources through; Developing a common understanding of the current process. Creating a benchmark to measure the improvements against. Defining the mission of the future process. Setting up common leadership objectives. Clarifying opportunities and areas of improvement. Designing an implementation plan. Value stream map is simply a framework used to reduce waste, as well as creating an efficient flow in the production process (Bicheno, 2008). Value stream map can be drawn using a piece of paper and a pencil. Below is an example of basic value stream map. FIGURE 1.1 VALUE STREAM M A diagram showing a sketch of a value stream map Figure 1.1 shows that customer demand determines value. Application of the lean principle helps producer to forecast the daily order, and this prevents overproduction that could results to waste. Production controls illustrate how control measures take place through elimination of waste to ensure that the actual amount of demand is produced. It helps to avoid shortages in the process of minimizing waste in production. 2.0 outline of value stream map 2.1 Value. Identifying the product that customer need. This helps to identify the value to be added. It is the first set of value stream map; it involves choosing a specific product to focus on. 2.2 Value stream. Value stream is a framework of steps involved in production of a specific product in the production process. After choosing the product to be improved, an initial Value stream map of the current position is created. 2.3 Flow Its progressive achievement of tasks along the value streams during the production process. It involves evaluating the current map and identifying problem areas. A team of lean managers evaluates the current position completed, the process and the steps involved. The information is then compiled on a map and analysis is performed to enhance the flow. 2.4 Pull It is the Creating an efficient state of a value stream from the current state by pulling ideas from the customer to identify the value. Value stream map identifies where value can be added in the manufacturing process. It will show all other steps where there is non-added value (Plenert, 2010). After evaluating the current process, the problem areas are identified. Thus, a future state of a value stream map is created to minimize problem area completely. 2.5 Implementing the final plan to gain perfection. Implementation is the last step of value stream mapping. New ideas are incorporated to bring more efficiency and perfection in the lean manufacturing process. 3.0 Literature Review of Lean Management 3.1 Introduction The report provides a brief background on the lean management, describing the concepts, applications and frameworks available in business and organizations. The report will discuss the theoretical literature highlighting the author, their concept view, framework and application in general business (Liker, 1998 b). 3.2 Theoretical Literature. Authors have different ideas and views on the concept of lean management. 3.3 Authors; Daniel Roos, James Womack, and Daniel Jones Lean manufacturing has its background tied to the Toyota Production system (TPS). The term lean manufacturing arose when International Vehicle program researchers Womack P., Daniel T., and Daniel R., came up with the book, “The Machine that changed the world.” According to James P. Womack, lean manufacturing targets on methodologies that maximize on the value and reduces waste of resources in the production process. Lean manufacturing focuses on enhancing quality, delivery and reducing costs by elimination of waste and making continuous improvement (Womack & Jones, 1996). Most basic concepts and ideas are based on the Toyota production system. Lean management is a tool for producing more products with fewer materials by removal of waste, hence creating a value stream. It is considered as an efficient way to manage and organize the supply chain, customer relations, product development and production process (Womack& Jones, 1996; Ohno1988). Lean principle considers a company as just one part of an extended enterprise functioning beyond its boundaries. Value streams flow across different department with different functions within an organization. The organization has to be managed around its key value streams. Value is added by elimination of waste of overproduction, excess stock, transportation, defective product, wait time and excess production time. (Ohno, 1988) Several tools and technique have been developed to support the lean principle and enable organizations to apply the idea and implement change. Examples include: Five S’s; applied to create a workplace suited for lean production and visual control. Five S are followed in lean management to reduce waste and optimize productivity through use of visual signs and to maintain an orderly workplace in order to achieve consistent operational results. (Nicholas & soni, 2006). Five S stands for the sorting, setting order, shinning, standardizing and sustaining. Kaizen; a process to plan and support a set of breakthrough activities. Just-in-time; technique used to plan on how to produce the right item and deliver it on the right time. 3.4 Conceptual Framework Womack & Jones (1996) pointed out lean thinking commence by creating value and summarizes lean thinking in terms of value in five steps; Accurately specifying the value of a specific product. Pinpoint the value stream of the desired product. Setting the value to flow with ease. Customer, pull of value from the producer. Perfecting perfectionism in production. 3.4.1 Value Stream mapping It is the framework of designing, ordering, and delivering a desired product. However, in this concept, question should be asked of what creates and adds value for the customer. Value stream mapping involves analyzing all activities from initial customer who supplies inventory, through manufacturing and shipment to the final consumer. Value adding involves changing the character of the product which would benefit the final customer (Womack et.al, 1996). Value is created by redesigning all these process steps to maximize on product flow rather than optimizing the department of the company through which it flows from raw material to the end user. Hence, lean is not just applied in one company. It is passed across the entire supply chain. Therefore, a group of companies that collaborate to map the entire value chain and eliminate the entire non-value added item acts as an enterprise, hence called lean enterprise (Henderson et al., 1999). 3.4 A Conceptual Framework. A diagram showing a sketch of a value stream map FIGURE 1.2 Conceptual Framework of lean Principle. Value; according to Womack, P. Value is the utility that caters customers need provided by the supplier at the right time and at a fair price. Understanding product value set the starting point for lean management and can precisely be defined by the end user. The end user must be differentiated from sales personnel and suppliers (Myerson, 2012). Value is utility got by the customer, and it is only meaningful when it consumed from a specific product. Value stream; in lean thinking, value stream is a framework of procedures taken in manufacturing of quality product. It commences from time when the product is introduced in the market to the time when it is delivered to the final consumer. To design a value stream, we describe what happens to a product at each step of production; from a time when it is designed up to the time of order delivery to end user. There are three activities in the value stream; one activity involves value adding and the other two involves “muda” (waste) elimination. Some examples of “muda” are blunders which require rectification. For instance, a group of employees with waiting time and goods which do not meet the needs of the customer (Radnor et al., 2006). Flow; principle of flow ensure there is successive addition of value along the value stream as the product moves from design to delivery without stoppage. Technique to foster flow requires rapid changes of tools in manufacturing as well as right-sizing machine and location sequential adjacent to one another. Pull; the fourth principle of lean thinking. According to Womack P., It is a system where decision to produce begin from getting information from the end user. (Henderson et al., 1999). This prevents pushing products through a system, which does not cater needs of customers resulting in unnecessary inventory buildup. Perfection is the final principle of lean management. According to Womack P., It is a complete removal of any waste from production to improve the product quality. Perfection principle makes the pursuit of lean a never-ending process because there will always be defects in the value stream which need to be eliminated. Once activities which are adding value are removed, the next step in value creation involves setting flow. Flow is enhanced through the elimination of barriers and delay in the production process. In routine work of the company, orderliness maintains a smooth flow of activities. Thus, lean methods lay emphasis on how to improve working conditions, reduce waste and production time. This result in high efficiency due to ability to identify waste in the factory. 3.5 Application in General Business; Putting Lean Thinking in Manufacturing Discipline. Lean thinking represents a new school of thought in manufacturing. In the past manufacturing began as craft production. One person could make an entire single product. With production technology, mass product started. However, lean production is different with mass production For instance, mass production way technique can be illustrated by looking at automotive painting factories. This factory would have large paint color change over time, resulting to painting white cars one week, blue cars the following week and black cars in another week. Thus, there would be only one time when a customer could obtain the specific color needed. Application of the lean system has enabled this factory to upgrade and get the right equipment so that color change of times are very fast, enabling rapid response to the customer need. This response to the customers’ need is a good example of the application of lean management. The application of lean management principle has been used in; “six sigma” methods; a method of controlling production process to eliminate waste. This provides a way to minimize defect in the value stream and increases efficiency in production. Today organization are constantly evaluating themselves and learning through their mistakes through a Continuous improvement (CI) which is much of the lean concept of perfection. Total quality management (TQM) is a technique to involve employee in quality management through problem solving. Total Quality Management helps to enhance flow in the value stream (Liker, 1997a). 3.6 Author Views on Lean Management. James Womack P., and Daniel Jones T., argues that a lean way of thinking allows organizations to determine the customer value, methods of value creation and right sequence to deliver an order without interruption. To perform this effectively and efficiently there are five steps of lean principles to follow; value, value stream, flow, pull and perfection. In lean management, value is defined by the customer and created in a lean enterprise through elimination of waste. In lean production, producer's existence is supported by their success in value creation. Therefore, lean managements start by defining customer value. Jones and Womack & Jones (1996) suggest that; Lean management must start with an attempt to define what adds value to a specific product, leaving the customer with the capability to afford the product. Every organization should understand what their customer value and need. To conclude on the context of a lean system in production discipline and what differentiates it from other management tools, Womack and Jones provide their opinion on how lean principles are different from the previous technique on the subject of manufacturing. We are setting the entire value stream for a specific product in the ground and re-examining every function of the firm in order to specify a value and enable flow in production as pulled by the customer in the pursuit of perfection. 3.7 Benefits of Lean Principle Lean can provide an organization with a strong competitive advantage. Correct application of the lean principle will lead to substantial benefits that include; Greater output. Improved quality and fewer defects. Smooth and efficient operation. Reduced operational cost. Enhances overall manufacturing flexibility. 3.8 Development of Lean Principle in the Next Five Years. Organizations are trying to apply lean principles outside manufacturing. For example; • Product development process; Cusumano and Nobeoka look at applying lean principles to product development process. • Service organizations; for example, banking and insurance can adopt lean principles. • Administrative process; at past administrative organizations within manufacturing companies had a problem to apply, but major development is underway. 4.0 Application of lean management concept to pizza making process. Pizzspread, a food processing company, noted a sub-standard in pizza production and delivery, which have impacted negatively in company product. A research conduct reveals that customer dis-satisfaction is as a result of poor quality of the pizza and the time taken to be served. Lean management principle can provide a solution to improve the value stream through elimination of any defect and elimination of the time wasted in the process of pizza production (Womack et al., 2008).The following are processes that can be involved in value stream map to standardize the production; 4.1 Identify the value Pizzaspread should identify the customer value; they should understand the preference of the end user, and ensure they are in capability to provide quality pizza to the customer at the right time. 4.2 Mapping the current state value stream map Current state value stream map will identify “muda” (waste) and help to target an improved future state. A project team at pizza spread should create a current -state value stream map to improve pizza-making process. The project team should ensure that they have incorporated all the value-added activities and removed all non-value adding activities in pizza production process to produce a pizza that meets the customer’s need (Bicheno, 2008). The value stream map should be used in the waiting period and a defect in the production. The team comprising of wait staff, kitchen staff and management should be involved to create a value map to check where the waste is coming from in the production process. 4.3 Flow The team should map the end- to-end flow of the pizza –making process. They should create value in the production process; from making dough, adding cheese, cooking and deliver, and ensure successive achievement of this task along the value stream (Plenert, 2010). 4.4 Pull To reduce the waiting time, the waiting staff should deliver the pizza immediately the customer request. The flow should be initiated by the customer and a quick response from the wait staff to deliver a hot pizza. 4.5 Perfection The project team should ensure complete elimination of any waste in pizza production so that all activities along a value stream create value. Time waits after customer request should be eliminated, and a quality pizza should be the end product. 5.0 Cost Benefits Analysis 5.1 Cost Benefits Analysis for Pizzaspread Company Table A Cost and benefits analysis of the pizzaspread Food Company in the current situation. Benefits In dollars($) sales per week 20000 Total Benefits 20000 Cost Fixed cost Rent 5000 Electricity 3000 Variable cost Inventory cost(flour, yeast, cheese) 7000 General labor 4000 Supply chain cost 6000 Total cost 25000 Profit/loss (5000) Table A From Table A above, it is clear that the pizza production process is coupled with waste that results to a potential loss of $ 5000. The company loss is as a result of lower sales compared to the high cost incurred in the production of the pizza. The possible cause of low sales might be customer dis-satisfaction with the quality of pizza produced, and on the other hand the possible cause of the high cost is the waste incurred in the process of pizza production. If the problem of “muda” (waste) persist, the company will incur a loss $5000 per week. However, there is an opportunity for income improvement if value is added and waste is eliminated in production of pizza. Value addition and elimination of waste can be possible through application of lean principle in the production process (Womack and Jones, 2009). The application of lean principle in production will lead to improved value, elimination of defects and waste resulting in high revenue. TABLE B Cost benefit analysis of the pizzaspread Food Company after application of lean principle. Benefits In dollars($) Sales per week (increased output) 30000 Total benefit 30000 cost Fixed cost Rent 5000 Electricity 3000 Variable cost Reduced Inventory cost(flour, yeast, cheese) 5000 Reduced General labor 2500 Reduced Supply chain cost 3000 Total cost 18500 Profit/loss 11500 Table B shows cost and benefit analysis of pizza production after application of lean principles in production. It’s clear that the incorporation of lean principles reduces inventory cost, labor cost, supply chain cost and the time taken in the production of pizza. In addition, elimination of the defect in the production process improves the quality of pizza produced, hence more pizza is consumed per week increasing sales per week. As a result, there is profit increase. 5.2 Operational Benefits after Introduction of Lean Management in Pizza Production Process. Increased output; elimination of defects in the production process increases the quantity of pizza produced. Production increase because there is no wait time or waste of inventory during production. In addition, there will be reduced inventory cost because application of lean principle will minimize wastage of stock. Moreover, supply chain cost will reduce due to efficiency in production of pizza (Womack and Jones, 2010). Reference Bicheno, J., 2008. The lean toolbox for service systems. PICSIE books. Cusumano, M.A., Nobeoka, K., 1998. Thinking beyond lean: how multi-project management is transforming product development at Toyota and other companies. Simon and Schuster. Henderson, B.A., Larco, J.L., Martin, S., 1999. Lean transformation: how to change your business into a lean enterprise. Oaklea Press Richmond, VA. Liker, J.K., 1997a. Becoming lean: Inside stories of US manufacturers. Productivity Press. Liker, J.K., 1997b. Becoming lean: Inside stories of US manufacturers. Productivity Press. Myerson, P., 2012. Lean supply chain and logistics management. McGraw-Hill. Plenert, G., 2010. 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