6.3 Value Stream Thinking and Management

Recall in Topic 2 that we described a lean system as one that seeks to minimize waste (i.e., non-value added activities) and achieve single-piece continuous flow (i.e., creation of an uninhibited process flow). Value stream thinking incorporates these two ideas at the process level. A true value stream maximizes the efficiency of a given process. The removal of waste, including inventory, from the process increases productivity and makes quality problems easier to identify.

Value stream thinking is a unique way of approaching organizational management. Think of the way most organizations are structured: the company consists of different departments (e.g., Marketing, Finance, Accounting, and Operations), each focusing on a different aspect of organizational activity. For example, Marketing seeks to boost sales through activities like pricing, promotions, and placement of products and services that are deemed valuable by the end consumer. Operations seeks to produce goods and provide services in a way that maximizes efficiency and effectiveness. Accounting manages the receivables and payables of the organization. Structuring activities by department makes sense in that people who do similar tasks are grouped together. They can be managed efficiently and share best practices. They are even physically located together to facilitate communications and teamwork on projects.

Yet, processes are not bound by departments. In fact, organizational processes transcend departments and even the organization with its suppliers and customers. The Procurement department is responsible for sourcing the raw materials from outside suppliers. Receiving checks in the materials that were ordered by Procurement and works with Production Control to ensure their prompt delivery to the production line in Operations. Logistics needs to coordinate their outbound activities with Operations, so that goods can be shipped out as soon as they are ready and not create unnecessary inventory accumulation at the shipping docks or risk late delivery to end consumers. The point is that the inputs and outputs of departmental work are often outside the bounds of that department. What this means is that an inter-disciplinary process view is imperative to organizational improvement.