1. Understanding Value Stream Decision Making
Value Stream Capacity
Understanding Value Stream Decision Making

2. Understanding Value Stream Capacity
The production quantity that can be achieved at each step in the value stream or production process.
There are usually one or two production steps (cells, machines, or work centers) that constrain the flow through the value stream or business unit.
We need to identify the production capacity at each step in the value stream (or production flow) so that we can understand the flow through the entire process.
Where is the data required for this analysis?
On the Value Stream Maps 2

3. Analyzing the capacity
Productive capacity
Value added activities
Provides value to the customer
Comes directly from customer pull
Non-productive capacity
Non-value-added activities
Change-overs, unplanned maintenance, making for stock, defects/rework, etc. Also meetings, 5S, improvement activity
Available capacity
Capacity that is not currently being use for productive or non-productive activities. 3

4. OEM Value Stream Map Welding Shipping Supplier Supplier Customer
Purchase Forecasts
Demand Forecasts
S&OP
3,000
per Month
Order
Kanban
Machine
Shop
Welding
Assembly
Shipping
Shipping
Shipping
Qty = 30,000
C/T = 70s
Batch = 1500
Set Up = 10,800s
Scrap = 10%
Rework = 20%
Downtime = 15%
Inspection = 10%
Insp Time = 120s
# cells = 8
Crew Size = 4
# of people = 34
Shifts = 1
Qty = 15,000
C/T = 180s
Batch = 600
Set Up = 1200s
Scrap = 5%
Rework = 10%
Downtime = 5%
Inspection=100%
Insp Time = 30s
# cells = 5
Crew Size = 1
# of people = 10
Shifts = 2
Qty = 3,000
C/T = 210s
Batch = 20
Set Up = 600s
Scrap = 0%
Downtime = 0%
Insp Time = 60s
# cells = 2
Crew Size = 5
C/T = 120s
Batch = 1
Set Up = 0s
Rework = 2%
Inspection=0%
Insp Time = 0s
# cells = 1
# of people = 1
DATA BOXES

5. Standard Cycle Time C/T Cycle Time:
How often a part or product is completed by a process. (or: the time taken for an operator to go through all his/her work elements before repeating them.)
C/T
Cycle time includes all processes VA & NVA
Cycle time is measured by tracking it with a stop watch
We match the cycle time to the customer takt time
The process is “under control” if the cycle time is consistent

6. Crew size and number of cells
Crew size - the number of people in the cell or operation required to produce to the cycle time recorded on the Value Stream Map
# of cells = the number of cells running in parallel. Similar cells, working on the same products and performing the same process step.
Crew size = 5
# of cells = 1

7. Calculate the Capacity for the Machine Shop
Supplier
Supplier
Customer
Customer
Purchase Forecasts
Demand Forecasts
S&OP
3,000
per Month
Order
Kanban
Machine
Shop
Welding
Assembly
Shipping
Shipping
Shipping
Qty = 30,000
C/T = 70s
Batch = 1500
Set Up = 10,800s
Scrap = 10%
Rework = 20%
Downtime = 15%
Inspection = 10%
Insp Time = 120s
# cells = 8
Crew Size = 4
# of people = 34
Shifts = 1
Qty = 15,000
C/T = 180s
Batch = 600
Set Up = 1200s
Scrap = 5%
Rework = 10%
Downtime = 5%
Inspection=100%
Insp Time = 30s
# cells = 5
Crew Size = 1
# of people = 10
Shifts = 2
Qty = 3,000
C/T = 210s
Batch = 20
Set Up = 600s
Scrap = 0%
Downtime = 0%
Insp Time = 60s
# cells = 2
Crew Size = 5
C/T = 120s
Batch = 1
Set Up = 0s
Rework = 2%
Inspection=0%
Insp Time = 0s
# cells = 1
# of people = 1
DATA BOXES

8. Calculate the employee capacity
Step 1. Calculate the Total Available Employee Time
(#employees x #days x Labor Hrs per shift)
Step 2. Calculate the Employee Productive Time
(Qty per Month x Cycle Time x Crew Size)
Step 3. Calculate the Emp. Productive Capacity Percentage.
(Employee Productive Time / Total Available Time)
Step 4. Calculate the change-over time, scrap & rework time, downtime, inspection time.
C/O = (quantity/batch size) x Change-over time
Scrap/rework = (Qty produced / (1- (scrap + rework %) ) * (scrap + rework%) x Cycle Time x Crew Size
D/T = Downtime% x Total Available Time
Inspection= (Total produced + scrap/rework) x Inspection % x Inspection time
Over-production = OP Qty x Cycle Time * Crew Size
5S & Clean-up = 5S Time x #Employees x #days
Meetings = Meeting Time x #Employees x #days
TPM = TPM Time per day * #days
Step 5. Calculate the Total Non-Productive Time
Sum of Step 4
Step 6. Calculate the Emp. Non-Productive Capacity Percentage
Total Non-Prod Time / Total Available Time
Step 7. Calculate the Emp. Available Capacity Percentage.
100% - (Prod. Capacity + Non-Prod Capacity)

9. Machine Shop Capacity - employees

10. Machine Shop Capacity Cell output is driven by Employee
Time rather than Machine Time.
There is more machine capacity
than employee capacity

11. Capacity Calculations when you have Multiple Product Families
Calculate the weighted average of the cycle time, change-over, etc.

12. Machine Shop can only make 30,000 parts
Value Stream Capacity
Value Stream demand = 3,000 units/month
Takt Time = 180 sec
Average product has 5 welded sub-assy
Average sub-assy has 2 machined components
Machine Shop makes 30,000 items
Welding Shop welds 15,000 sub-assy
Assembly assembles 3,000 units
Shipping ships 3,000 units
Maximum Capacity is
3,000 units because
Machine Shop can only make 30,000 parts

13. Decision Making

14. Decision Making Methodology
Does this decision make sense operationally?
Use the Value Stream Performance Measures to evaluate the effect on the operational measures in the Box Score
Do we have the capacity or can we do it?
Value Stream Capacity Analysis
Understand the flow of products through the Value Stream
Use Value Stream Maps to populate the capacity analysis
What is the cash flow impact?
Value Stream costing
What costs will actually be impacted?

15. Plant level consolidated value stream costing w/ inventory change
We will be focusing on the OEM Value Stream to show the impact of improvements and various decisions within the value stream

16. OEM Value Stream Map Welding Shipping DATA BOXES Supplier Supplier
Customer
Customer
Purchase Forecasts
Demand Forecasts
S&OP
3,000
per Month
Order
Kanban
Machine
Shop
Welding
Assembly
Shipping
Shipping
Shipping
Qty = 30,000
C/T = 70s
Batch = 1500
Set Up = 10,800s
Scrap = 10%
Rework = 20%
Downtime = 15%
Inspection = 10%
Insp Time = 120s
# cells = 8
Crew Size = 4
# of people = 34
Shifts = 1
Qty = 15,000
C/T = 180s
Batch = 600
Set Up = 1200s
Scrap = 5%
Rework = 10%
Downtime = 5%
Inspection=100%
Insp Time = 30s
# cells = 5
Crew Size = 1
# of people = 10
Shifts = 2
Qty = 3,000
C/T = 210s
Batch = 20
Set Up = 600s
Scrap = 0%
Downtime = 0%
Insp Time = 60s
# cells = 2
Crew Size = 5
Qty = 1,000
C/T = 120s
Batch = 1
Set Up = 0s
Rework = 2%
Inspection=0%
Insp Time = 0s
# cells = 1
# of people = 1
DATA BOXES

17. Value Stream Costing & Box Score
Value Stream Performance Measures / Costing & Capacity feed the Box Score

18. Scenario: Should the company outsource production vs
Scenario: Should the company outsource production vs. improve the value stream?
The OEM Value Stream is expecting to receive a 20% production rate increase within the next 2-3 months
We have received a quote from a supplier for a group of sub-assemblies we currently produce in-house for $ per unit due to the Machine Shop constraint.
We have a Future State Map with planned improvement projects that we have identified.
Decision:
Compare the two options

19. Impact of 20% Production Rate Increase to the Machine Shop
The constraint is overloaded with the projected rate increase
Current State
Rate increase

20. Compare the options - Capacity
Outsource sub-assembly to handle 20% increase in production rate
Outsource sub-assembly
Current State
Rate increase

21. Look to the Box Score
3 Dimensional view of the impact to the Value Stream

22. Using Value Stream Costing
Decisions using simple Value Stream Costing
Outsource sub-assembly
Current State

23. Another Option: Improve the Value Stream
We have calculated the impact to the OEM Value Stream of outsourcing the sub-assemblies
Now we will look at the impact of our planned improvements so that we can compare the two options.
Value Stream Mapping and Value Stream Performance Measures are key tools used to improve the Value Stream
We will target non-productive activities to eliminate waste and generate capacity

24. Understanding the Benefits of Lean Improvement
Planned improvement - Did we free-up enough capacity for the production rate increase?

25. Rate Increase after Continuous Improvement
Continuous Improvement has generated enough capacity, but what about the Box Score?
Kaizen results
20% Increase

26. In-house with Improvements
Box Score - Decisions
Using the Box Score to show the impact of lean improvements – What looks best?
In-house with Improvements
20% Rate
Increase 51
95%
80%
12.00
$400.25
55%
29%
16%
$995,802
$445,092
$1,440,894
$2,244 49

27. Targeting More Improvement
Value Stream performance measures drive continuous improvement.

28. Box Score showing results of improvement
On-going improvement creates more capacity and frees-up people

29. New Value Stream Capacity
Improvements free up 2 people from Machine Shop. 1 person added to Welding

30. Scenario: Should the company insource production that was previously outsourced?
Assuming we have the capabilities, now we need to know if we have the capacity
We are considering bringing an outside process in-house due to the capacity we have generated in the Machine Shop
There are 394 units per month that go for outside processing and the cost is $91.38 / pc.
The machine shop has the capacity to handle this increase.
Calculate the impact to the Value Stream if we bring this process in-house.

31. Box Score – Impact of Outside Process being brought in-house
Current State
Future State
Outside Proc. /
In-house 53
99%
90%
7.87
$387.02
59%
15%
26%
$994,145
$399,120
$1,393,265 $0 37

32. Value Stream Costing showing Decision to bring in-house
What are the costs that will change?

33. Scenario: Should the Value Stream transfer work from Value Stream to Final Assembly?
It has been determined that one of the sub-assemblies could be welded directly in Final assembly during installation.
This will lead to better quality and less rework
Final Assembly is part of the Systems Value Stream

34. Work Transfer to another Value Stream
OEM Current State Capacity

35. Two OEM processes to be impacted
Production rate was reduced by work transfer from the OEM Value Stream
Welding & Assembly each freed-up 1 employee to be part of the Final Assembly cell in the Systems Value Stream

36. Work Transfer Impact
Box Scores / Decisions

37. Overall Work Transfer Effect
Costs that actually were affected in the OEM Value Stream
2 employees
2 machines

38. Overall Work Transfer Effect
Before and after – no overall cost impact – budget only

39. What have we learned?
You must understand the production quantity that can be achieved at each step in the value stream or production process .
You must understand the one or two production steps (cells, machines, or work centers) that constrain the flow through the value stream or business unit.
To understand the impact of planned changes, you must analyze the impact on flow.
Where do you find this? On the Value Stream map. 39

40. What have we learned?
Making the best decisions demands the best possible analysis of value stream
Use the value stream maps as your source.