value-stream-mapping

Value Stream Mapping And Why It Matters In Business

Value stream mapping uses flowcharts to analyze and then improve on the delivery of products and services. Value stream mapping (VSM) is based on the concept of value streams – which are a series of sequential steps that explain how a product or service is delivered to consumers.

Understanding value stream mapping

Value stream mapping enables businesses to analyze each step and whether it is adding value. Importantly, value stream mapping also allows intelligent, holistic refinement of the whole process. In other words, it assigns value to a step on the condition that the value it obtains does not come at the expense of another step.

All VSM initiatives have start and end points known as fenceposts, which differ according to predetermined goals and objectives. As a result, VSM can be utilized for any individual product or service for any type of business.

For example, the process of a car dealership delivering a new car to a customer might have 35 steps. After mapping out the process using VSM, company executives found that only 10 added any real value to the consumer. By focusing on the 10 steps in more deal, the dealership was able to streamline its delivery process and reduce consumer wait times.

Three components of every value stream map

Each map typically consists of three sections:

  1. Information flow. This component illustrates the communication of information or the transmission of data crucial to the process. In the case of the car dealership, a sales manager may accept applications for financing and then forward approved requests to the finance company.
  2. Product flow. This component documents the steps required to take a product or service from concept to delivery. However, value stream mapping can also be used to “zoom in” on particular steps of the product development process. Indeed, there is no limit on the level of detail that can be analyzed for each step.
  3. Time ladder. Although rather simplistic, the time ladder provides a visual representation of the value stream timeline. Time ladders denote the time that a product spends on each step, known as the process time. They also denote waiting time, or the amount of time a product has to wait before proceeding to the next step. Ultimately, both are used in the calculation of lead time – or the total amount of time it takes between receiving a consumer order and the fulfillment of that order.

Advantages and disadvantages of value stream mapping

Advantages

Value stream mapping is still relatively new in the business world, so there is potential that early adopters gain a competitive advantage. 

It’s also a powerful method for identifying wastage in a process. Wastage often refers to manufacturing, but in VSM it more generally refers to any step that does not add value to the consumer. With a focus on providing consumer value, the business can align with its core values and brand identity. Value is of course something that consumers are willing to pay for, so businesses should utilize the incremental improvement capability of VSM wherever possible.

Disadvantages

There is somewhat of a learning curve to creating a VSM framework. It often requires a substantial investment of time and money initially, and if not prepared correctly can become a source of wastage in itself.

As with most things, the potential rewards of virtual stream mapping must outweigh the risks. Smaller businesses with less capital and less complicated processes may derive little to no benefit from using VSM principles.

Key takeaways:

  • Value stream mapping is a visual flowchart strategy that provides a thorough analysis of the steps leading to the delivery of a product or service.
  • Value stream mapping is a holistic evaluation of delivery processes with a focus on consumer value and a reduction of time or resource wastage.
  • With its focus on value, VSM encourages businesses to channel their efforts toward serving their customers. This increases consumer satisfaction, brand loyalty, and company profitability.

Other strategy frameworks:

Additional resources:

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here