Value-stream mapping (VSM): how to identify inefficiencies in the warehouse

Value-stream mapping (VSM) is a technique for visualizing a product’s manufacturing process, from the receipt of raw materials to the production, storage, and delivery of the item to the customer.

Mainly used in production centers and warehouses, this tool facilitates the analysis of the different manufacturing stages in order to improve processes.

VSM: what’s value-stream mapping?

VSM, also known as material- and information-flow mapping, is a visual tool designed to identify inefficiencies and detect improvement opportunities in production processes and in the logistics management of a product. This tool became popular in the 1990s in methodologies such as Lean and Six Sigma, which share the same goal: to eliminate cost overruns and promote efficient manufacturing systems.

VSM consists of a flow diagram representing the different activities and phases a product goes through across the production process, from the purchase of the raw material to delivery to the end customer. The tool allows you to view the movement of raw materials and analyze the efficiency of the manufacturing processes.

Value-stream mapping records each of the activities and tasks required for the creation and distribution of a product, so the production manager can single out the processes that don’t add value for the customer. VSM employs a system of symbols that reproduce the flows of information, work, and movements generated along the supply chain.

To find errors and deficiencies in the manufacture of a product, the team in charge can draw up and compare different versions of the value-stream map. For example, one diagram could reflect the current flow, while the other could illustrate the future (ideal) state. With this comparison, it’s easier to see where improvement opportunities lie and what specific stage of the production process they can be implemented in.

Benefits of VSM

Preparing a value-stream map enables people in charge of supervising manufacturing processes, e.g., logistics managers, to:

• Have a comprehensive overview of production: the diagram includes information on all the processes involved in manufacturing, allowing managers to be better informed when making decisions.
• Identify deficiencies, cost overruns, and errors: this Lean manufacturing tool helps to detect processes that drive up costs or that don’t add value to the product. The analysis is beneficial for both manufacturers and customers because, in the end, it results in an improved good or service.
• Foster efficient logistics and production strategies: value-stream mapping entails a current analysis and an analysis of the ideal state of the manufacturing process. Equipped with this information managers can define the ideal actions for optimizing the company’s production flows.

Ultimately, applying value-stream mapping to a manufacturing process involves the implementation of Lean logistics techniques to the production lines. The goal? To determine inefficiencies to thus eliminate errors and cost overruns.

How to implement VSM in 5 steps

In value-stream mapping, these are the steps to follow to analyze the level of efficiency of your manufacturing process:

1) Establish the process to be mapped

Prior to the analysis, define and narrow down the stages to be included in the study. To do this, the company needs to have already designated the product or service to be improved.

2) Identify the objective and scope of the study

Once the process to be enhanced is selected, you have to specify the scope of the study, determining the current state and the ideal future state of the manufacturing process. For instance, one objective could be to optimize the supply of raw material to a production line. In this case, the analysis would focus on the throughput of the work and handling equipment involved in this operation to detect improvement opportunities

3) Designate the people involved

Value-stream mapping requires selecting the experts who will analyze the manufacturing process phases. At this point, it’s important to determine the role of each person and to establish their level of responsibility according to their knowledge in each area.

4) Perform the analysis

The execution phase is one of the most complex, as the study of each task calls, in turn, for three different analyses of the manufacturing process:

• How you think it is
• How it really is
• How it should be

These three analyses give the logistics manager a comparison between the ideal production process, its actual state, and, most importantly, how the company views its manufacturing operations.

5) Prepare an action plan

After doing the three analyses, the participants should draw up an action plan to upgrade the production process from version 2 (how it really is) to version 3 (how it should be).

The improvement plan should be devised in line with the standards of value-stream mapping: the actions should be specific, measurable, achievable, relevant, and time-bound (SMART).

Value-stream mapping applied to logistics

Although VSM is directly related to Lean manufacturing, this quality tool also has an impact on the logistics management of a product. Why? The VSM analysis takes into account logistics operations such as the supply of raw materials, storage conditions, and order distribution.

The application of this visual technique might also task the logistics manager with identifying errors and stages that fail to add value in the product’s journey through the warehouse. Value-stream mapping spots cost overruns or wasted time that could be corrected with the installation of automated storage and retrieval systems (AS/RS), the deployment of warehouse management software, and/or the implementation of a new order processing method.

According to the study Value Stream Mapping in Ordering Process — A Case of Retail Chain published by the University of Belgrade (Serbia), VSM can serve to detect deficiencies and improve processes in warehousing: “It is crucial to minimize steps that do not add value to the warehouse and improve speed and throughput. Since the warehouse includes many different materials and information flows, this can be achieved by using VSM.” According to the researchers, applying value-stream mapping in logistics improves deliveries and optimizes logistics costs. “The aim is to deliver products quickly, with a low price and good quality. One of the most frequently used methods for time- and cost-reducing is VSM.”

This visual tool shows where there are opportunities for improvement and analyzes the ideal state of the manufacturing process. To increase productivity, the authors conclude with several solutions to mitigate warehouse inefficiencies: “Proposals for improvement are making a free space, the introduction of a new packaging room, the introduction of a new allocation process, the improvement of the information system, as well as the definition of key performance indicators.”

The value-stream mapping technique is also employed in the e-commerce sector. In the publication Application of Value Stream Mapping in E-Commerce: A Case Study on an Amazon Retailer, academics from San José State University (CA) describe how VSM can boost the supply chain efficiency of an e-commerce company: “The parties and activities involved, the links in-between, and the flow of information and products in the supply chain process are visualized through the construction of the VSM. The entire supply chain process flow is better understood, and the potential waste is easily identified.”

The study, published in the academic journal Sustainability, confirms that the value-stream mapping methodology can help to lower costs and enhance supply chain efficiency as well as customer satisfaction.

VSM: eliminating cost overruns in logistics and production

Value-stream mapping is a tool commonly used to determine improvement opportunities in manufacturing processes. In the field of logistics and warehousing, VSM could detect inefficiencies in, e.g., the goods receipt, product slotting, and order dispatch processes.

Efficient logistics planning requires a prior analysis of the workflows in the warehouse and the production center to maximize productivity. This tool lets managers visualize errors in the manufacturing process that prevent maximum efficiency. Once the analysis is performed, Interlake Mecalux has an extensive catalog of intralogistics solutions to ramp up warehouse productivity and eliminate the risk of error in logistics operations. Be sure to get in touch. One of our expert consultants will advise you on the best solution for your facility.