Ac 2007-208: Utilizing Process Value Mapping in Lieu of Value Stream Mapping for Elimination of Waste in Business and Information Processes

An ex-Toyota internal consultant has expressed an opinion that companies are achieving only 10% of their potential for process improvement. In the consultant’s words, “most manufacturing seems to be focused on achieving a 35–40 percent productivity gain over three to five years, when they should actually be focusing on a 400 percent improvement.” Many manufacturing companies have exhausted gains that can be derived from the shop floor, and further productivity gain can only be captured by shifting attention to non-production business processes in administration and information flow. Lean practitioners have used value stream mapping (VSM) as a tool to analyze the entire value stream of a product moving through a manufacturing facility from raw material to the finished state for a long time now with considerable success. VSM allows the entire product flow to be captured in a graphical form to facilitate the application of lean manufacturing principles in a systematic manner. Although VSM aims to analyze and optimize both material and information flow for the product, improving information flow is left out in most VSM analysis as the percentage value-added time is calculated based solely on the material flow in the process. As most business processes are nothing more than information flow or a combination of information and material flow, VSM is therefore not best suited to optimize them. Another reason that classical VSM works for physical production but not for information flow is the fact that information flow backtracks, jumps around various operations, and at times is intermingled with the physical movement of material. In such cases, information flow is in the critical path for the completion of the entire process, and since VSM does not do any analysis on the combined flow of information and materials, it falls short in assisting to optimize the holistic process. Considering the above reasons, a modified version of process mapping named process-valuemapping (PVM) has been discussed in this paper for the simultaneous analysis of information and material flow to come up with the percentage value-added time for the entire process. A case study of a loan approval process found in most financial institutions has been utilized to demonstrate the concept. Introduction: Value stream mapping (VSM) has long been the preferred tool to analyze the value stream for a manufactured product. VSM allows us to see the entire product flow in a graphical form to facilitate the application of lean manufacturing principles in a systematic manner 1 . In VSM, the information and material flow for the value stream are both captured, but most of the analysis is carried out to pinpoint waste in terms of inventory in the system, and not in determining the value-added and non-value added information flows that happen in the process. Consequently, it might so happen that in many cases information flow is the stumbling block, which unless improved, cannot result in the overall reduction of lead-time for the process. Based on the authors’ experience in process improvement utilizing VSM, it is seen that improving information flow is mostly left out of the VSM analysis in a number of cases. No wonder an exToyota 2 consultant feels that companies are achieving only 10% of what they are capable of achieving in terms of improvement in their processes. One probable reason that many analysts inadvertently ignore information flow could be because of the invisible nature of information flow compared to the visible movement of material. It is easy to study physical movement of parts, and capture times associated with moving, storing, and processing products. However, when it comes to moving information from point to point, it is hard to identify information movement, and it is harder still to walk the flow, as is often done in understanding material flow in the creation of VSM maps. 2 Another reason classical VSM works well for physical production but not very well for information flow is the fact that product flow generally follows a linear path through a facility and hence is relatively easy to capture and analyze, which is not the case with information flow. Information flow backtracks, jumps around various operations, and at times is intermingled with the physical movement of material. Information flow can sometimes move parallel to the product flow, and at times move on a serial path with product/material flow. In such cases, information flow is in the critical path for the completion of the entire process, and might be a major bottleneck that is extending the lead-time for the completion of the process. As information flow does not get analyzed with the same scrutiny as material flow, it is difficult to optimize the process to the best possible extent 3 using VSM. Process Value Maps (PVM) 4 , which is a technique that has been created by extending the tool of process mapping that has been with us since the early part of the twentieth century, allows us to consider all events—including material flow and information flow—that are happening in a process. This allows optimization of material and information flow simultaneously. To demonstrate the technique of process value mapping, and contrast it with value stream mapping, we analyze a generic process of approving loan applications in a financial institution. The details of the loan approval process are shown in Figure 1. Four people are involved in the process: a clerk, a loan officer, a manager, and an underwriter. These four people complete ten distinct operations in the process. The process begins when an applicant puts in a loan application and ends when the application is either approved or disapproved, and the result is made known to the applicant. The times in minutes consumed by the four people involved in the process are also shown in Figure 1. As can be seen, the clerk takes a total of 53 minutes, the loan officer takes 22 minutes, the manager takes 15 minutes, and the underwriter takes a total of 15 minutes per application processed. The total processing time in the process adds up to 105 minutes. However, only 30% of the loan applications reach a stage wherein the manager and the underwriter have to get involved. The reason this process has come under scrutiny is that there have been several complaints from loan applicants that the loan approval process takes too long and is fraught with errors. A survey showed that half of the applicants felt the personnel involved in the process did not know what they were doing. On asking the four people regarding the accuracy of their work, the clerk and the loan officer said that they completed each operation with 90% accuracy; the manager said that her accuracy was 95%, and the underwriter said that her accuracy was 100%. Figure 1. Process Information and Times Current State Value Stream Map: Figure 2 shows how the actual process moves from person to person, which is captured as a process chart. Four horizontal swim lanes in the process chart enable easy understanding of how the process flows in terms of the four persons involved in the process. Utilizing this information, we can create a VSM to capture this process, and then proceed to view how we could have done it differently using a PVM. Figure 2. Process Map of Loan Process Figure 3 shows a current state VSM for the process. The four people in the process are shown in the most appropriate sequence, starting with the clerk, followed by the manager, the underwriter Opn 1 Opn 2