What is Value Stream Mapping and How Can it Help Me Increase Profits?
You are probably asking what is a Value Stream Map and how does that help me increase profits? Do you have a good idea what you are wasting time, money and resources on? If you are like most business owners probably not.
Businesses do not start out as a multimillion dollar organization but an entrepreneur who has a great idea or service. If their hard work pays off they will grow and add services, staff and maybe even locations. What ends up happening is administrative processes that are disjointed and do not flow from one task and department to another. When you ask someone in a company why they do something the answer is usually “because we always did it that way”. Guess what, that does not mean it is the best way. One very valuable tool in taking a look at your process is by creating a Value Stream Map.
“A value stream encompasses all the actions (both value-added and non-value added) that are necessary to bring a product or service from the original concept through the development and/or manufacturing processes to the receipt of payment. For any organization there are three product families that overlap and flow together:
- The concept to launch (administrative) area
- The raw materials to finished product (manufacturing) area
- The order to cash (administrative) area”
For our discussion in this article I am going to focus on the order to cash family. Think about all the things that take you from getting a lead to getting paid. That is your order to cash process. Some of the departments or areas that would fall under this value stream are: pre-sales, sales, delivery of product or service, accounting and customer service. Ideally you want the information to flow like a straight river from one area to another.
To map your workflow you can do it two ways. The first is creating what looks like swim lanes for each of the above areas and then writing each action step on its own sticky note in the corresponding lane. For example, putting first phone call, first email, follow up call 2 days later, etc. in the pre-sales lane. Once they are qualified as a real potential customer they could then be moved into the sales lane. Your sales action steps would go in that lane. Make sure to draw a line from one swim lane to another so you see that is where it moved. You can use a decision flowchart box like we did when we were back in school.
The second way of doing this is using different colors for the pre-sales, sales, delivery, accounting and customer service. With this map you would go across and if necessary up or down, in a straight line and use the different colors to distinguish what phase the workflow is in. Use what would work best for you and your organization’s structure.
For multiple people you can use either method just assign a color or put an initial on the person’s sticky notes to distinguish who is who. If you Google workflow diagram or value stream mapping you can find some great examples.
Then the next step is to track much time it is taking for each process and why. When you analyze the map you are looking for what is called waste. In an office environment these include: “information waste, process waste, waste in the physical environment and people waste which includes inefficiencies in how people work”
With all of this in mind, examine what are your trouble areas. How can you improve what you are doing? You will most likely see patterns emerge. If you have employees who work in those areas they should be part of making your map along with the managers who oversee the area. The people performing the tasks daily are the experts in what is or is not working. If you do not have a team to work with and are a sole proprietor or micro-business then have a business associate you trust look at the map with you. Sometimes it takes a set of outside eyes to see what those who are intimately involved can not. Eliminating waste and cutting costs all while providing more value to the customer helps create industry leaders in any business arena.
Written by: Charen Smith
We also suggest this relevant article if you have time: Pdca Cycle
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Tagged as business planning, management, PDCA, process optimization, quality management, strategic management, value stream mapping + Categorized as Business, Economy articles, Ladership & Management