December 1, 2004
By Darren Dolcemascolo
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.
: 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).
Click here to subscribe to our free e-newsletter Learning to Lean and receive three articles like this one each month.