Value stream mapping is a component of lean thinking. All the evidence we have indicates that lean is the most effective way of preventing waste.

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3 The aim of this presentation is to provide you with all the tools that are necessary to implement a rigorous approach to waste identification and a prioritized action plan. The key tool is value stream mapping. It can be applied within companies but is most effective when applied in the supply chain. Value stream mapping is a component of lean thinking. All the evidence we have indicates that lean is the most effective way of preventing waste. We will also take you through the seven deadly sins different types of waste. If you can reduce or eliminate these then you are down the road to being resource efficient. We have developed a 5-step approach to value stream mapping which is explained later. 3

4 WRAP estimate that waste in the supply chain is costing food retailers and manufacturers 5bn annually. This estimate is based on the best available evidence that we have: - Cost of waste ( per tonne) Manufacturing = Cost of waste ( per tonne) Distribution = 1,088 - Cost of waste ( per tonne) Retail = 1,676 Like all efficiency improvements, waste prevention generates savings that drop straight to the bottom line. Savings go much deeper than disposal costs (which are increasing) like an iceberg, the true costs are hidden. For every of waste lost at least 20% more sales (assumes a gross margin of 25%) are required to generate this as profit not easy in the current economic climate. 4

5 It is about establishing change in the business. Follow change models such as plan-docheck-act. Start with the Board with a senior Director as the champion, someone who agrees that waste prevention is a priority. From the Board a policy should flow agreed internally with the senior management team and externally in collaboration with supply chain partners. The business case to the Board can be based on the financial benefits of waste prevention. Identify the metrics needed to make informed decisions and design a system to collect and collate the necessary information. Remember - what gets measured gets managed. Supporting structures individuals and departmental plans will be required to support the policy. Learn from others e.g. see Tesco s approach use Rapid Action Teams to solve problems and create improvements and in this way build confidence based on real results. 5

6 There are many ways of identifying waste. We have shown you some examples that are in popular use. You may be using other equally valid ways in your business. A Site Waste Management Plan (SWMP) can be used to plan, implement, monitor and review waste minimisation and management. They are a regulatory requirement in the construction sector (for certain developments). The approach can be readily adapted. Sainsbury s for example have based their approach on ISO14001 Environmental Management System standard. Reference documents on best available techniques (BAT) are prepared by the Environment Agency part of the Integrated Pollution Prevention and Control (IPPC) regulations. They are available for the food industry and though somewhat dated, provide a reference source across Europe of current and emerging techniques. Mass balance studies were popular 5 years ago and various reports are available on the food industry that help to identify waste. There are a growing number of business networks on sustainability that encourage 6

7 the exchange of best practices e.g. 2degrees 6

8 Lean is proven to help companies prevent waste. As shown in the chart lean production is the better method for delivering quick wins and other benefits. Other approaches are valid for example Environmental Management Systems are an important way of improving resource efficiency, and are widely used with positive results. Environmental management generally takes on a waste management approach, often concerned with the treatment and effective disposal of waste (materials, packaging and water) and dealing with the problem after it occurs. Lean, by its very definition, focuses on cost reduction by improving the inputs to the process and the process itself. This is why lean is better suited to waste prevention. 7

9 There are seven types of production waste identifying these and then reducing or eliminating them will help improve resource efficiency. The pictures show two production wastes poor ergonomics and inventory. Reducing these wastes will save space/time/energy by: Cutting out activities that don t add value. Focus on the customers needs. Make everyone s job simpler. Remove the stress and frustration of the day-job. Contribute to continuous improvement for the business. Lean is green it is not about cutting corners or about moving waste from one part of the supply chain to another. Nor is it about making the case for capital expenditure but making the best use of what you have got. We will look at the seven wastes in more detail. 8

10 The next two slides list seven common types of waste that lean works to eliminate and the environmental impacts often associated with each of them. Reducing these wastes through lean implementation will save you money and correspondingly decreases the environmental footprint of an organization's operations. It also leads to more job satisfaction and a better place to work. For example, reducing defects eliminates the environmental impacts associated with the materials and processing used to create the defective product, as well as the waste and emissions stemming from reworking or disposing of the defective products. Similarly, reducing inventory and converting to a cellular manufacturing layout ( small discrete manufacturing units) lessen the facility space requirements, along with water, energy, and material use associated with heating, cooling, lighting, and maintaining the building. 9

11 Lean also fosters a continuous-improvement focus and waste-elimination culture. Lean systems establish and reinforce clear procedures for: the proper performance of jobs and tasks, cross-functional teams of employees to identify and eliminate waste, tap worker creativity to develop innovative process and product designs that improve efficiency and effectiveness, empower workers to maintain and improve operations and equipment in their work areas, preventing breakdowns, malfunctions, and accidents. When you have mapped your value chain look at each step and find where one or more of the seven wastes occur. We guarantee there will be some quick wins. From there it is a small step to deploy lean improvement tools such as standard work, visual controls, kaizen events, 5S, six sigma, etc. and total productive maintenance. These lean improvement tools can be part of your journey but first comes the measure and understand phase. 10

12 A value stream map is simply a chart that captures two flows: orders travelling back from customers and the product travelling forwards from the raw materials. These charts can be very detailed as they capture key information on the: Flow of physical goods. Flow of information. Defect / loss rate. Value adding time. Total elapsed time / Distance travelled. Note value stream maps do not measure costs rather their focus is time and how long each process takes. We will show an example but lets now look at the 5-stage approach to creating a value stream map. 11

13 It is not possible to tackle all the supply chain in one go. You have to be selective and the best way to do this is on a product (or product family) basis. By selecting products you can also better understand what your customer wants - the specification, on-shelf availability, delivery requirements, shelf-life and so forth. 50% of SKUs* may account for 95% of sales; these represent the biggest opportunity for improving performance by reducing batch size/change over and making every product every cycle 70% of SKUs may account for 99% of sales; these can be made to flow in the cycle by harmonising things like raw materials and packaging. The remaining 30% of SKUs may account for just 1% of sales, may be the cause of most short term planning changes. Fire fighting may be best done in separate low volume customised job-shop operations. Alternatively they may be candidates for de-listing because they cause waste. (*Stock Keeping Unit) 12

14 Supply chains or networks - are inherently complicated - too complicated for a value stream map. You have to focus by finding a specific value stream: which store which depot which manufacturing plant which processor which supplier(s) Setting boundaries, the start and end points are critical. The chart shows how this was done for own label cheese right back to the farmers that supplied the milk. 13

15 You will need support from the top because mapping is not a trivial exercise. It will take time, consume resources and in all likelihood lead to changes in the way that work is organised. Do not limit yourself only to those parts that you control; much efficiency and effectiveness can be lost by: Deciding that I must get my house in order first. Trying to optimise the whole by optimising the parts. For each site in the selected value stream: Engage the top manager of the site to join a group of Sponsors. Assign responsibility for value stream mapping, progress reporting and implementation to a manager capable of making changes happen. Involve all the beneficiary groups of value stream mapping: Process owners, designers, workers, supply chain, procurement and information technology managers. Aim for a core team of 5 to 7 covering the disciplines involved in the process with a facilitator/mentor. 14

16 Its essential to map activities where they take place there is no substitute to observing what happens in the work-place For each step in the value stream: Identify and record the time required, waiting time, how long it takes to deplete the inventory, transport time, time to changeover from one product to another for example. All the time you record is either value adding or non-value added time: Value-added (VA) time adds value customers are willing to pay for, transforms the product in some way and is done correctly first time. Any time that doesn t meet all three of these criteria in non-value added. Non-value adding activity may happen for more than 95% of the time. This is not unusual! All non-value adding activity should be examined some may be essential but others could be reduced or even eliminated. Start making your value stream map at a relatively high level before choosing particular areas of focus to map in more detail. 15

17 This is to avoid mapping paralysis caused when teams get caught up perfecting the map and don t leave time for the improvement stage. There will always be the opportunity to go back and improve your map later, if required. 15

18 The spread-sheet shows all the processes you observe and how these are classified into value or non-value adding steps. You can use this as a guide or make up your own remember identifying the seven wastes is critical. Time is used as a common metric. 16

19 The chart we have shown is from a case study involving a small dairy: It might look complicated but is easy to read. The aim of showing you this is not to get too much into the detail but to illustrate the principles behind its construction. The symbols and boxes you use are up to you. (The chart has been constructed using Microsoft Visio.) The chart has three critical components: product flow and KPI data in black along the bottom; information flow in red along the top and a timeline showing the total time in the supply chain divided into value and non-value adding. Along the bottom of the map draw the steps in sequential order; the first step on the left and the final step on the right. Use the outside icon to put the immediate customer outside the team on the right hand side of the map with a finished goods connector pointing up to it from the final step; bottom right. Use the appropriate arrows to connect steps; indicating whether material is being pushed or pulled through the system. Identify where inventory is stored in the process clearly indicating the type and amount of inventory. Identify information flows such as orders, instructions, schedules, approvals and more what ever is used to support the process using rectangular information 17

20 boxes indicating frequency of flow. Use the appropriate arrows to show information transmission method. 17

21 You don t need financial data for a current state map. Financial data is in any case after the event like driving a car through the rear view mirror only. Start with the performance data you have to hand for example yields or customer complaints, then consider what would be helpful in light of your customers requirements. Some measures that others have found to be very useful include: delivery schedule achievement. OEE overall effective efficiency. stock turns. You may have to conduct specific exercises to gather these data but they might show you where problems arise. 18

22 Value stream mapping is a non-value adding activity unless you do something with it! The aim is to develop an action plan. Waste prevention projects will vary in their nature some easy to do, others more difficult, some with high benefits, others with lower. The framework suggested in the slide is a useful way of moving from identification to implementation. So the easy to implement/low benefit projects are just do its. Assign responsibilities and timescales and keep under review. How do you derive the Action Plan from the value stream map? a) By examining the current state map looking for the seven wastes. b) Identify where KPI s are not meeting expectations. c) Investigate inventory levels: Stock that caters for demand variability adds value for end-customers but can generate more waste by going out of date. Inventory to make up for poor process control, lack of demand visibility or batch / lead time issues doesn t add value and should be eliminated d) Think radically and identify breakthrough opportunities by envisioning an ideal-state when: The process is in perfect balance you make one as the customer takes one and each of the steps take the same amount of time. There is no inventory and the process only contains value-adding activities. All process steps produce perfectly with the correct capacity and staff. 19

23 The process produces the highest quality, in the shortest lead time, and at the lowest cost. 19

24 The slide summarises the 5-steps we advocate. When you are creating the value stream map do ask questions - here are some good ones to ask: Do products flow through the chain as quickly as possible or are there unnecessary holdups? Do some activities add more cost than value? In which case what can be done about it? In particular, are there activities that add absolutely no value to the consumer that can just be eliminated? Have people learned to live with errors, treating them as inevitable or are they constantly striving to eliminate them? Are the right quality tests in the right place in the chain and are they working effectively? Are the right performance measures in place? How timely are these measures do they allow problems to be identified and solved immediately or do they lag too far behind? When problems are identified, are they traced back to their source and dealt with or do the same faults keep re-occurring? Is the right information shared along the chain? Is it accurate and passed on quickly? How good are the sales forecasts? Do they help suppliers plan their operations efficiently in advance? Are there any ordering and stock holding policies that impose heavy costs on suppliers? For example, is a smooth pattern of customer demand converted into a very lumpy pattern of orders? 20

25 The above is an example from a WRAP-funded structured performance improvement programme using third party facilitation provided by IGD. A team drawn from Musgrave and UB identified significant opportunities to reduce food waste by collecting existing KPI s which enabled them to prioritise and undertake more detailed process mapping. The slide shows how they focused on value and non-value adding activity starting first at a workshop then observing actual practices at the workplace. Improving promotions management was one of three key opportunities identified. Promotional lines represented over half (56%) of wastage ( ). Cakes and Crisps/Snacks/Nuts were the key priority areas. New ways of working were developed collaboratively: Improved joint business planning. Budget forecasting and assumptions more visible. Better alignment of timelines. 21

26 Main conclusions are in the slide. Learning to see where waste exists in the supply chain is the first step on the waste prevention journey. If you know where waste exists you can identify its root causes and start to put in place solutions. What next follow our 5-step approach - try it for yourself (but if needs be there are plenty of experts out there who could help including from WRAP). 22

27 Waste Prevention Reviews WRAP funded bespoke and confidential to your company. Other reviews are available covering food, products and packaging, e.g. the Ten Pack Review. Information WRAP projects looking at resource efficiency across the grocery retail supply chain, from factory in-gate to final disposal by the householder. Key issues - WRAP has brought together a working group of food and drink manufacturers for example which is seeking to review Production Ready Packaging to reduce the waste arising in their factories. Case studies WRAP has case studies drawn from the grocery sector and access to many others. Research WRAP funded technical projects to facilitate break- throughs and innovation. 23

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