At the heart of the Lean methodology are the 7 classic wastes (8 or 9 if you subscribe to evolved methods). Waste is the enemy of Lean. Strategies such as pull systems, first-in-first-out prioritization, takt time management, and kaizen are methods we use to minimize and eliminate waste in our productivity.
At the heart of waste management is the value stream. The value stream is the means by which we identify, track, and understand the business advantage and the cost savings of the war on waste. A proper value stream structure enables ready and easy focus on value-added work and waste activity. It also provides a metrics structure to measure our waste.
If we choose to use cost trade-offs as justification for the expense, the time, the effort, or the long-term decisions that support the Lean strategy and methodology, then we must have a solid value stream structure. Without our production and business systems aligned to the value stream, we cannot correctly and accurately assign cost or account the true cost of production and waste. This is a very important understanding that is very often missed or ignored.
Unfortunately, for most of us, aligning fundamentally to the value stream is difficult. I believe that the difficulty of the task is the reason that most of us choose not to adhere to the intent and rule of the value stream strategy. Let me describe a real scenario from my own experience to try to explain the importance of the value stream for accounting for Lean costs and the danger of not following through.
There are dozens of ways I have witnessed an incomplete value stream structure drive waste instead of eliminate it, but here is one that is both common and huge in total business impact. I’ll even go so far as to say that this behavior has affected U.S. economy.
For a true-to-strategy value stream structure, everything necessary to support or facilitate the development and production of a product or service must be aligned and singularly assigned to that product or service. The supply chain is singular to that product, the production equipment exists to serve only that product, the personnel only work on that product, and even the business overhead elements such as engineering, quality, management, and human resources are allocated only to that single product. Such is the purest alignment of value stream.
Given the above understanding of a value stream structure we can easily see why very few businesses actually fulfill that vision. First, the rules may be bent slightly if a suite of products work together to fulfill the needs or expectations of a specific customer base. They may share the same supply or engineering and quality resources for example.
The problem is that as soon as we start making those common sense concessions, it becomes difficult to perceive where we are breaking the rules instead of simply flexing them and we violate the value stream strategy. Most of us, unfortunately, break the rules.
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