With lean thinking, the value stream can best be understood from the standpoint of the customer. After all, as we previously discussed, it’s the customer that defines value. Thus, it’s the customer that defines the value stream.
The value stream is everything the combines together to make the product or service the customer pays money for. It spans multiple companies and nearly always multiple countries as well.
For a physical good, the value stream extends from the physical product back to the manufacturer of that product to the sources of physical material that make up that product and all the way back to the physical extraction of that resource from the Earth. Each component has its own stream of production.
You pay for the entire stream when you buy a product.
For example, I’m currently reading Womack and Jones’ seminal book Lean Thinking. The book itself represents a value stream.
I bought the book from a retailer (Amazon). The retailer bought the book from a publisher (Free Press). The book itself was printed by a third party somewhere in the United States. The paper was supplied by a distributor. The distributor got the paper from a paper mill. The paper mill bought the various components (wood, water, etc.) from others. The wood was likely purchased from a distributor. The distributor bought it from a lumber yard. The lumber yard bought it from a tree farm. The tree farm plants and harvests trees for consumption.
That’s the physical composition of the book.
The words on the book were licensed by a publisher, copyrighted by the authors, written by the authors, and so on. The ink has a similarly long value stream.
Thus, any object represents dozens of value streams. With any product or service, the value streams come together at a finite point in time.
The price you pay ultimately pays each organization and person along the value stream.
The problem with most value streams is that they are filled with waste, resulting in higher costs. At each one of the stages above, going all the way back to the forest the trees were harvested from, you have excessive waiting, transport, and processing. Each one of these uses money and resources. Ultimately, they cost you when you pay for it.
The focus of a lean enterprise is on viewing the entire value stream. Then, you pick the value stream with the longest leadtime, and you work upstream to minimize the waste.
A truly lean enterprise will never involve a single department, function or area. It will never involve a single company. It will involve the full cooperation of the entire supply chain from each supplier. It requires a partnership across companies, countries, and cultures to implement (and thus is quite hard).
All of this results in a less costly product, but it’s also better for each individual person along the path. The efficiency results in less waste (wasted movement, processing, storage, scrap, etc.) and ensures true value and wealth can be created within an organization in a manner that’s more sustainable.
Plus, it would result in me getting my book cheaper and faster. And who wouldn’t love that?