Value Stream Map - Part 5: Value Add vs. Non-Value Add

One of the critical features of a Value Stream Map (VSM) is the sawtooth chart at the bottom of the map.  Many overlook this chart, as it seems superfluous when you’re first constructing the VSM, but it’s has two key uses:

1. The sawtooth gives you an immediate sense of how much of your customer’s time is spent waiting, rather than performing things for which they’re paying you.
2. It becomes a standard against which to judge future progress, what we call a "baseline."  

Let me take a quick sidebar.  I hope it's clear that YOU pay for all Waste (Non-Value Adding, or NVA Activities).  You might say, "It's just wait time and I'm not really adding labor or anything to my work, so what's the cost?"  The answer is that you are prematurely paying for all material and labor already invested in this product.  Since you aren't prepared to work on the product, you have your $$$ sitting in queue.  You are also delaying your own reimbursement.  

The longer you take to make a product, the longer you have your capital tied up and the longer your cash flow.  And then there's the cost of capital, the difference between what you are making while your product/service is being worked on (nothing), and what you could make if you invested that money.  Finally, there's the opportunity cost: the cost of losing opportunities you could have undertaken had your process not been clogged with things you aren't even working on.

Where do the data come from?

Let’s examine the chart above in greater detail. An example of this detailed exam is on the left.

The value on top of each tooth is the amount of inventory ahead of that operation.  As discussed in a previous post, Inventory is measured in units of time.  This value is a rough gauge of how long the customer waits before you perform your next operation for them.

The value on the bottom of each tooth is the cycle time (CT) to perform that operation for one item.  See the example to the left.  It says that your customer waits nine days for you to perform 25 seconds of value adding on the first part in this lot.

NOTE:  Some would have you post the value of the cumulative CT to process the whole lot, and not just one piece.  That will create problems later, when we perform a CT vs. TT comparison.  That comparison is critical, since it informs us whether we can meet customer demand  It's also used in calculating the number of employees needed to meet customer demand.  As a result, I put individual CT in this space.

Finally, at the far right side of the sawtooth (pictured on your left) you can see a rectangle with two boxes within it.  These boxes contain the sum of all the Inventory and Cycle Times respectively.  This ratio gives us a rough idea of our Value Add vs. Non-Value Add for the value stream.  That ratio is important for the reasons stated above.

In the example at the top of the page, the sum of Inventory time is 13 days.  The sum of Cycle Time is 63 seconds.  From here on, this becomes a math problem.  First, we need to convert everything to common units of measure.  13 days x 24 hours/day x 3,600 seconds/hour = 1,123,200 seconds.  Since waiting is a form of waste, we can accurately say that this time is NVA.

63 seconds / 1,123,200 seconds = .00005608974….  We then multiply that value times 100, to calculate the percent of total wait time that is spent working on the client’s product.  The resultant value is .00560897%.  In short, this organization works on their client’s product less than one percent of the time they make that client wait.  The message?  We have lots of room for improvement!  

This value now becomes part of our data baseline.  Every time we improve the flow of this value stream we should also be diminishing the amount of wait time.  As a consequence, the percent of Value Adding time should constantly increase.  Because we baselined, we can tell if we're improving.

As Taiichi Ohno stated: "Where there is not standard, there can be no Kaizen."  If you don't know where you started, you can't tell if you're changing for the better.

Next up: the value of the VSM in decision-making.