Key Metrics of the Extended Value Stream
Many organizations have mapped their door-to-door or internal value streams. These show material and information flow for a given facility. Taking the door-to-door concept up one unit of analysis, the extended value stream stretches across several organizations and facilities from raw materials to the end user. A lean extended value stream has the following characteristics:
Everyone in the value stream knows the takt time and rate of customer demand.
There is little inventory in the system, and there is a standard amount of inventory in the system based on the variability and availability of processes.
Lead-time is minimized.
Transportation is minimized.
There are several key metrics that will set a baseline and assist in developing goals and an action plan to reach the goals. This article attempts to help the reader gain an overview of some of these key metrics:
Value-Creating Time: Within a value stream, the time the material/product is physically being changed in such a way that value is added to the product.
In-Plant Time: Within the extended value stream, the time the material/product is in the factories/plants (but not necessarily being physically worked on).
Transport Time: Within the extended value stream, the time the material/product is moving between facilities.
Total Time: The total lead-time from raw materials to the end user.
Total Time = In-Plant Time + Transport Time
Value % of Time: % of Total Time that is value-creating.
Value % of Time = Value-Creating Time/Total Time X 100%
Value % of Steps: % of total steps in a lean extended value stream that are value-creating.
Inventory Turnover: The ratio of annual sales to average inventory, which measures the speed, that inventory is produced and sold.
Inventory Turnover = Annual Sales / Average Inventory
Product Travel Distance: The total physical distance that product travels in a lean extended value stream (between facilities).
About the Author
Darren Dolcemascolo is an internationally recognized lecturer, author, and consultant. As Sr. Partner and co-founder of EMS Consulting Group, he specializes in productivity and quality improvement through lean manufacturing. Mr. Dolcemascolo has written the book Improving the Extended Value Stream: Lean for the Entire Supply Chain, published by Productivity Press in 2006. He has also been published in several manufacturing publications and has spoken at such venues as the Lean Management Solutions Conference, Outsourcing World Summit, Biophex, APICS, and ASQ. He has a BS in Industrial Engineering from Columbia University and an MBA with Graduate Honors from San Diego State University.
