Key Metrics of the Extended Value Stream


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.

    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).

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