Christopher Irish
Head of Insight – Supply Chain Analysis

Six steps to reduce your supply chain cost

Did you know that 20% of all supply chain costs are non-value adding, according to some studies? You can identify these, and cut them out, with the help of value chain mapping.

Mapping the chain will show you where activities add value and where they don’t. It highlights obstacles to satisfying your customers and how best to improve your business performance.

Below, Chris outlines the six steps involved in this achievable process.

1.Spot value from the consumer’s perspective

Consumers are your ultimate customers. They’re the first to assign value, vote with their wallet and trigger upstream activities.

Consider what they need, what they want, and what would delight them. You can use a Kano plot diagram to identify and map these needs, wants and delighters.

Source: IGD research

2.Draw a simple, big-picture map of the supply chain

Your next step is to map the major processes that will help you meet consumers’ requirements and expectations. Start with the consumer’s view and work back up the value stream to the smallest tributaries – the sources of the raw materials. This simple macro-level map shouldn’t show the multiple individual processes behind each major process.

3.Translate consumer value into customer needs and metrics

You must translate consumers’ requirements into those of each major process’s customer.

Add post-its to your Kano plot created in step one, to show what each step requires of its supplying process. Use this map to plot redefined common goals and performance metrics and re-analyse the effectiveness of each major process step. For every step ask yourself – is this adding value or not?

4.Draw a detailed map of the current situation

This stage has multiple steps, but the golden rules are: to go out and visit; do it yourself; do it together; use fresh eyes; give it time.

Follow your product from start to finish, watching and recording each process. Visit the different parts of the process yourself and with colleagues. Make sure you capture what happens, not what’s supposed to happen.

Start drawing your value stream map at a relatively high level by carrying out a top-line walk through. Then choose areas to focus on in more detail in a second walk through. You can always go back and improve your map later if you need to.

Source: IGD research

5.Spot waste and improvement opportunities

The current-state map holds many clues to help you start looking for improvement opportunities.

Before you move to future-state mapping, you must validate your current-state map and correct discrepancies. Your team should review the information needs and the data gathered. You must identify gaps, the person who will collect any outstanding information, and when they will do it.

Use takt time – how often you should produce one part or product, based on the rate of sales, to meet customer requirements – to evaluate where there may be blockages to flow.

You should also carry out root cause analysis to understand the improvement opportunities available.

6.Draw the desired future map

Use the current-state and the ideal-state maps to create a future-state map showing where you want to go next. Principles like lean thinking and other methodologies can help here.

Take the improvement opportunities you identified in step five, bundle related ones into potential projects and establish priorities. Look at the year ahead and establish a plan of the projects to implement the future-state map, and measures to control any risks.

Need to know more about how to use value stream mapping to improve your performance?

This article is part of our cost-to-serve insight and is based on the presentation Six steps to reduce your supply chain cost.

The full deck contains much more detail and analysis on our guide to improving value stream mapping. Subscribers to Supply Chain Analysis can read the full presentation here.

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