Enterprise VSMExpanding Horizons

September 12th, 2018

By

Arvind Srivastava, Corporate MBB/IE, IATF Lead Auditor

Agenda

Why EVSM?

What is EVSM?

How does EVSM Benefit?

Source: 50-50-20 Lean Management Book

Turkish Russian French

Coming Soon!!

What is VSM?

• Practical application of SIPOC.

• Material and Information Flow.

Sample Lean Tools to Support VSMs

VSMs leverage different types of “time” in their analysis. It is important to clarify the concepts

of these terms:

1. Lead Time (LT): The total amount of time between the recognition of a required task,

operation or process and its completion. Elements can include order entry, material

purchase, setup, queue, processing, shipment and other activities.

2. Cycle Time (CT): The total time needed to complete a transformation from one status to

another. The time it takes from one finished unit to the completion of the next finished

unit. One of the most frequently observed errors with CT is that people think that the CTs

can be added up to equal the total LT; it almost never will. There are three key reasons:

1. Parallel processing,

2. Queue or Inventory Time and

3. Rework processing

3. Takt Time: This is the pace or beat that is needed to match the process output to the

customer demand. Takt is very different from CT because it is the calculation of what is

needed where the CT is the measure of what it is. The goal is to balance the CT to achieve

the Takt.

What is the relevance of EVSM?

• How do we know that we have an optimum Lean system in place with full visibility to the

processes of our internal customers and suppliers

• to ensure we are able to get the best value out of our inbound supply chain and

• then deliver that best value throughout the outbound supply chain?

• How do we know that New Product Development (NPD) is effective and efficient?

• How do we know that we have the necessary advance information about our markets so

that we are able to respond to changing market conditions in an optimal timeframe?

• How do we ensure that billing processes are aligned to receive payment from the

customers on time?

• How do we know that the Supplier or Outside Service Provider (OSP) development

processes are efficient so that we are able to both receive and deliver products and services

on time?

What does EVSM cover?

How does EVSM look?

How do I start?

• At a glance it can look overwhelming. However, when stepped through logically, it is

powerfully revealing.

• It follows the same logic of a regular VSM with the customer at the top right corner,

suppliers at the left, operations in the middle and OSPs (if there are any) at the right.

• The key difference is that all of the plants are now treated as one entity. The impact of the

slowest or highest cost producing site becomes glaringly obvious.

• We found it critical that each of the site’s internal VSMs be as optimized as possible prior to

completion of the enterprise level review. For simplicity, we have partitioned the E-VSM

into five key sections:

1. Customer order placement within the organization and its communication to the plants.

2. Inbound supply chain (suppliers) delivering raw materials to the plants.

3. Plants producing the products.

4. Plants providing semi-finished products to be processed by OSPs.

5. Plants delivering to the customers directly or via warehouse/final processing center.

1. Customer Order Processing and

Communication to Plant

• Customer orders are received from the production planning function through various

channels, such as Electronic Data Interface (EDI), email or fax and are consolidated via an

internal sales function.

• The output of this process is fed into all the plants. An internal sales function consolidates

the orders . The data box for internal sales function contains the following information:

1. P/T: Min (Process Time)

2. L/T: Days (Lead Time)

3. %C&A: Percent Complete &

Accurate)

4. Quantity of Associates

5. IT Systems: PLEX

2. Inbound Supply Chain Delivering Raw

Materials to the Plants

• Adjacent figure illustrates the

concept of delivery of supply

chain components; from raw

materials to and through sub-

assembled goods.

• This model shows the supply of

raw materials and key

components to differing sites.

• The data in the box for suppliers

might detail:

1. Daily Production

2. Daily Shipment in Units

shipped

3. DIOH Days

3. Plants Planning and Producing to Meet

Customer Requirements• The producing sites are the center of the E-VSM in Figure.

• Material planning notes may be included at the top of

each box for each site. This planning is fed from the inside

sales, customer kanbans (as applicable) and the sales

forecast (based on product type).

• Inside the data box, each plant describes the following

information:

1. Daily Production (Takt): Seconds

2. Daily Shipment:

a. Each Warehouse Identified

b. Customers (By Type)

a. Production Leadtime: Days

1. Days for Key Component Streams: Days

2. Days for Finished Goods: Days

• The data box for each of the plants is supported by its own VSM.

4. Plants Getting the Semi-finished Products

Processed by OSPs

• OSPs are a critical aspect of process flow as they can

significantly impact LT due to their own location and

internal process efficiencies.

• They may also be customer directed for sub-assembly

processes.

• Sometimes OSPs can act as a buffer to accommodate

significant fluctuations in the customer demand; such as

products coming from overseas.

• An OSP data box might include the following information:

1. Daily Production

2. Daily Shipment Units shipped

3. DIOH Days

• The value of including OSPs in the E-VSM is similar to that of including suppliers in the VSM;

5. Plants Delivering to the Customers Directly

or via Warehouse/Final Processing Center

• Depending upon the nature of the product, they are

generally either directly shipped to a customer or to a

warehouse for short term storage and subsequent shipment.

• At Accuride, one of the warehouses acts as a vertically

integrated OSP and provides further value add for a

dedicated customer. This is common in the OEM world

where product is requested in a specified sequence.

• Ultimately all the products end up at the customer’s

locations via their receiving teams.

• In a VSM or E-VSM, this is at the other end of the customer’s

data box and completes the loop, which started at the left

side of the production planning box.

• For warehouses, DIOH is the most important metric directly

linked to the plant lead times via the PFEP (Discussed later in

this section).

Tying all together

• The scope of this E-VSM is to cover all the processes involved from the customer order entry to

the customer delivery.

• The E-VSM cross-functional team needs to have the necessary decision making team members

involved in the process for it to be effective.

• The team needs to have permission to try things to see if they will work; this approach is

conservative and has not adversely affected customers even though we’ve had an occasional

upward inventory tick.

• Critical team members include those who have ownership and decision making authority for:

a. Plants: Production Control/Supply Chain; Operations; Lean

b. Warehouse: Director/Management

c. Corporate

a. Master Black Belt/Industrial Engineer/Facilitator

b. Supply Chain

c. QLMS

d. Engineering

d. Sales/Marketing

e. Inside Sales

Results

• Even though the sites had

independently reduced their lead

times by an average of ~50 percent,

the E-VSM evaluation added onto the

entire organization another layer of

lead time reductions ranging from ~40

percent in the Warehouse to 3-25

percent across the various product

lines.

• The warehouse saw the largest impact

due to the transparency at the sites.

• This was achieved by just managing

the transactional flows at the

enterprise level. Remember, very little

to no value add is being performed

across these processes.

Questions?