Demand Flow Technology And Vsm

Demand Flow® Technology and Value-Stream Mapping

Shanghai, February 2005

The principles of Demand Flow® Technology are a close complement to those of Value-Stream Mapping. Value Stream Mapping shows how product and information flow across all the process steps in the supply-chain. It compares the current state with the future state to provide a visual description of the target objectives that need to be achieved. Demand Flow® Technology provides a complete set of tools for all of the manufacturing process changes that need to be made to meet these objectives. There is a precise step-by-step methodology to establish the ideal product flow starting within manufacturing and a comprehensive set of planning tools to extend across the entire supply-chain.

DFT is able to extend beyond the natural boundaries of Value-Stream Mapping and uses specific tools to drive product flow right through the manufacturing process.

Key areas of synergy and enhancement are:

* Together Value Stream Mapping and Demand Flow Technology provide a common language to drive all parts of the manufacturing enterprise to changes in value at the customer.

* Demand Flow Technology delivers quantitative actions to execute on the qualitative visualizations of Value Stream Mapping.

* Demand Flow Technology provides the mathematical tools to implement One-Piece Product Flow right across the manufacturing processes.

* Value-Stream Mapping defines a break-though by comparing Current and Future states. Demand Flow Technology realizes the breakthrough by reducing the production cycle time down to the levels of total work-content time.

* Demand Flow Technology applies its mathematical tools to Value Stream Mapping's summary data to implement the changes at the plant floor level.

* Value Stream Mapping starts with a product family and identifies optimum flows across a fixed process infrastructure. Demand Flow Technology beyond the product family to flow a mixed model or multi-family product sequence at a single, stable takt-time.

* Both Demand Flow Technology and Value-Stream Mapping provide a new set of KPIs that encourage and reward behaviour that aligns the manufacturing enterprise more closely with the way the customer defines value.

Demand Flow Technology

Demand Flow Technology is a mathematically-based business strategy that drives all parts the manufacturing business towards customer demand. It strives to identify the true value-added work steps, link them together in a flow that points towards the customer.

DFT provides a complete set of tools to define the work processes, quantify the tasks, calculate a target takt time and balance the work to the time target. A typical DFT implementation will reduce production cycle-times down to levels of total work content time or lower. This greatly improves the speed and response to changes in customer demand. The performance result is reduced inventory, shortened lead-times, improved on-time deliveries and a break-through to a new level of inventory turns. The financial result is a reduced working capital from savings made in WIP and Finished Goods Inventory. By turning inventory over quicker and compressing the order-to-cash cycle, the business generates a stronger cash-flow and a quicker return on invested capital.

Demand Flow® Technology aims at transforming conventional manufacturing into a truly demand driven enterprise. Conventional scheduled manufacturing lays out the factory by functional departments. Production is done to a forecast and most of the cycle time is taken up with scheduling and queuing activity. In the Demand Flow factory, the scheduling and queuing is eliminated and all of the value added processes are connected together in a flow. This creates a demand-pull which builds the right products at the right volume every day according to customer demand.

Value Stream Mapping

Value Stream Mapping is a visual portrayal of how value is created across the entire set of business processes. It works with a single product family to show what happens at each step and the time taken to move throughout the entire system.

The first Value Stream Map is a current state. This is a graphical representation of how the product flows across the process infrastructure. It asks questions like: What is the total lead time? How much of that lead time is spent adding value? How does material and information move across the enterprise in response to a sales order?

The current state value map contains summary data that quantifies the existing operations. It can clearly communicate the how value is created and highlight the areas where bottlenecks, inventory and process inefficiency are creating waste.

The Value Stream Analyst will then draw up a Future State Map. This enables planners to create a vision of how the processes can be redesigned to eliminate waste, reduce lead-time down towards value-added work time and respond more quickly. So the Value Stream Future Map presents the "Grand Vision" and defines the break-through to a new optimized state.

A Common, Consistent, Positive Language

It is crucial for management to be able to communicate the need for change across the entire enterprise. All parts of the business need to be focused on the same set of objectives across sales and marketing, design and development, operations and production, process engineering, logistics and finance. VSM and DFT together establish a common language that ties all parts of the business towards delivering value at the customer.

It is the effective and efficient creation of value that should be at the heart of every business strategy. Any initiative that emphasizes cost reduction at the expense of value creation will usually fail in secure a winning company performance. "Lean Manufacturing" initiatives often run the risk of getting tied up in the journey of waste elimination without a defined and quantifiable strategy based on value at the customer.

How to Achieve the Future State

It is for this reason that Value-Stream Mapping is one of the more important tools within lean manufacturing. The Kaizen process tends to focus on specific issues within a narrowly defined area of production. Without the guidance of the Value Stream