The All-New AIM: Intelligent Forecasting + Inventory Planning

The Concept of Value Stream

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When trying to create value to customers, you need to make a value stream.  A value stream looks at all the steps and processes used from the beginning of value creation until the delivery of your end result to a customer.

What is a value stream?

In essence, a value stream is an amalgamation of your value creation and value delivery process. As a reminder, value creation is a process that begins with raw materials and then finishes with the completed end product. In addition, value delivery encompasses everything to ensure that the paying customer is a happy customer. Value delivery can involve order processing, online inventory management, customer support, product delivery and even troubleshooting. At the end of the day, value delivery gives you business. If you deliver value that you’ve promised to a customer, it will invariably satisfy the customer.  

Now that we’ve refreshed value creation and value delivery, it’s time to focus on the combination of the two – the value stream. As mentioned, the value stream is a sequence of activities that happen in order to design, produce and provide a product or service from the beginning stage all the way through to the delivery of the end result to the customer. Throughout this sequence of activities information, material, and worth travel through this stream. Therefore, deciphering what a value stream looks like is imperative to ensure you can deliver value to customers in an efficient, reliable, and consistent fashion.

The Toyota Production System was the first big manufacturing company to inwardly look at their value stream on a regular basis. By looking at their value stream frequently, they could analyse their production system and identify small improvements that could be made and adapted for improvement. By making small changes, they are able to see improvements in the speed, accuracy and reliability in the production of their cars. Interestingly, Toyota engineers may make over 1 million changes and improvements every year to their production system that positively impact their value stream. This is not the first process Toyota has perfected – they’ve also got pioneered lean manufacturing and just-in-time inventory management.

Analysing your value stream

To analyse a value stream, a visual representation is helpful to break down the sequence of activities and to identify the steps your product or service goes through from start to finish. This diagram can highlight efficiencies or inefficiencies in the value delivery process. For example, you may find that you check inventory on the first of the month when materials arrive and mid-month to check inventory levels. However, because of staff numbers this means you have to stop parts of production on the days you are counting inventory. Instead, an online inventory management system could more accurately track inventory levels and effectively remove that second stock take, keeping the production line moving for another day. Therefore, an unnecessary step is removed from the process and more efficiency is gained.

Aiming for an efficient value stream

Of course, going through your value stream in its entirety can be a laborious task, but it can help streamline the process and enhance overall performance. You want a value stream to be small and very efficient. The longer the value stream is, the higher the chance of something going wrong. So finding ways to eliminate steps and shorten the process will help your value stream. In turn, adding efficient processes to make the value stream smaller, such as an online inventory management system, will take you one step closer to a more effective value stream. With a small and efficient value stream, you can manage it closely and deliver value to your customers.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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