What is Value Chain and How work on that to reduce the cost in manufacturing environment.

By Sumudu Rajaguru

When consider the product life cycle, it means from design to production and distribution there are lot of activities and processes involving. So, value chain means all those activities. Organizations want profit to sustain in the competitive market. So, if organization want to increase their profits, they have to consider about all the activities and want to reduce the cost and inefficient activities to improve the production efficiencies. That is usually called vale chain analysis.

When discussed about the history, 1985 Michael Porter who worked as a professor in Harvard Business School introduced the value chain mechanism in first time. According to his descriptions, there are two types of activities in every value chains. Such as primary and supporting activities. Simply value offered to the customer exceeds the cost of creating that vale mean that organization earn the profit.

Usually, primary activities define to convert in put in to output and output deliver into the customers. The support activities play an auxiliary role in to the primary activities. However, for the highest efficiencies both activities have to combinedly work in proper manner.

There are two competitive advantages when consider about the value chain related improvements.

-??????? Low-cost provider – organization need to think about how can reduce the cost through their value chain.

-??????? Specialization – need to focus the activities on value chain to produce unique product or more competitive product or service.

According to the concept introduced by Michael Porter, it has ability to breakdown total processes into several activities and based on that management can take decision easily what are the value adding activities and what are the non-value adding activities also.

In this work base project, most of the time consider reducing the operating cost and it will be supported by value Chain analysis to identify each process and activities which can consider reducing the costs to get reduction of overall cost.

Other important concept is reduction of waste in each process. Because it will help to reduce the throughput time of the process and it will lead to reduce to lead time of overall manufacturing organization. So, it is important to study about the waste in manufacturing also. Definition of waste is any action or step in a process that does not add value to the customer while using resources like man, machineries, raw material, space, etc. simply it can express like waste is something which customer does not willing to pay.

Originally Taiichi Ohno, who is the chief engineer at Toyota motor company introduced the 07-waste concept and currently another new adding also. So, now a days management introduced that concept as 08 wastages. The 08 waste is “non utilize human potential” and it introduced at the year 1990 s when the Toyota production system was adopted in the western world.

Transport

Excessive moment of raw material, Semi finish products and finish products undergoes to the transport waste. Transport method can be different. Because of the excessive movement material can be damaged. And also, people and equipment also lead into the unnecessary work, and it will lead for the wear and tear, and exhaustion. So, during the layout designing itself need to address the minimum transport-oriented layouts.

Inventory

Because of the unnecessary inventories, below problem can be occur. Damages in the material as well as in the finished products, lead time increasements, inefficient capital allocations, problem not come to the surface, because of the below points inventory can create. Over purchasing of the items, overproducing, producing more than the customer required.

Very important point is excess inventories prevents detecting the production related problems and it will take huge time to again re correct those. Because of the inventories in offices also there are some huge issues can be occurred. As example waiting for works, customers waiting for the services, etc.

Motion

According to the motion, it is explained about the unnecessary movements of people, equipment, and the machineries. Those includes walking, lifting, reaching, bending, stretching, and moving. When consider the manufacturing all above points are very critical, because in manufacturing all most all activities are repetitive activities, and it will create repetitive unnecessary motions. Those are not adding value to the customers. Countermeasures for the unnecessary motions are create the well-organized workplace, equipment’s and tools placements should address properly to workers can easily reach. Raw material can keep based on the ergonomics way.

Waiting?????

Waiting can be happened because of the material delays as well as instruction, decisions also. When consider the material delays most of the time issue is unevenness of the production. Other than that, sometime people wait to receive the proper instruction and decisions to conduct the production activities.

When come to the office environment, sometime people have to wait for the e-mail related responses, ineffective meetings, slowness of the computer system, etc. there are few countermeasures can implement to reduce the waiting like, designing processes by ensuring continues flow, workload levelling through the standard work instructions, upgrade the workers multiskilling ability.

Overproduction

If anyplace produce more than the customer demand, then overproduction happen. So, it has to apply Just in time concept as well as just in case concept. Then all over production activities can be eliminated. When come to the office environment overproduction can include making extra copies of the reports, creating reports which no one read, providing more information that required, provide service before customer ready. In manufacturing most of the time producing more than the customer required those happened because of practicing push system. There are mainly 03 countermeasures to reduce the overproduction. Such as, Takt time introduction. It will create proper flow rate. Secondly need to reduce the setup time and it will create flexibility to run the small batch sizes. And finally, can create KANBAN mechanism to create the customer demand properly.

Over Processing

This included doing more works, adding more components, or having more steps in to the product or service than the customer requirement. When come to the office environment, it can be producing reports with more information than required, unnecessary process steps in the purchasing process, double entry of data, etc. only method is to reduce the over processing is understanding the actual requirement and satisfy only the customer demand with their requirements.

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Defects

Defects is one of the major issues in the organization and it is directly link with the customers. Usual counter measures are identified most frequent defects and close focusing.? Create system to detect the abnormalities, redesign the process to eliminate the defects, create standard work to consistent production without defects.

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Non utilize human potential

This is not a part of Toyota production system. However, most of the people talking about this. This waste occurs when organization separate the role of management from employees. Organization think, workers responsibility is only to follow the orders. Because of that worker does not have any opportunity to engage with management. When consider about the office, non-utilized talent may include insufficient trainings, poor incentives, not asking for employees’ feedback, allocating tasks without considering the employees knowledge and talents.

First step should be recognized the waste in the organization value chain. Value stream mapping is one of the best concepts in the lean manufacturing concept to reduce the waste in the processes. Because it supports to identify the status and create future state maps also. VSM is one of the good tools to mapping all production process steps and it will help to find out the relationships between processes and support to identify value adding and non-value adding activities.?

Yamasumi is one of the Japanese words, that means stack up. This concept usually uses to production line balancing when several members work in one work cell. Basically, this gives some information regarding the times. If too much process time is spent on wasteful activities, it will reduce the productivity. Other point is wasteful activities increase the cost as well as reduce the employee satisfactions also. And also, it will negatively impact to the customers also. So, Yamasumi concept provide some support to reduce the unwanted process steps.

A Yamasumi chart is a graph, and it shows the cycle time of each operation in the work cell or work layout like a bar chart. That is visual of the operators cycle time to assess the performance. And also, Yamasumi charts visualized the takt time of the work unit that has to be maintained. Based on the takt time it is simply can identify what are the operations perform under the takt time and what do the operation exceed the takt time. If any operation exceeds the takt time mean those operations are bottle neck operations and if organization want to achieve more definitely need to find out the solution for bottle neck operations.

There are lot of benefits can achieve through the Yamasumi charts and below briefly explain few of them.

Reduce costs due to time wastages

This is visual tool to clearly identify value adding and non-value adding activities. So, it will guide to reduce the non-value adding activities and because of that cost reduction happen as well as enhance the value adding activities.

Supported to the line balancing activities

From the Yamasumi charts clearly can identify where the places can perform under the takt time and where the places which exceed the takt time. So, based on that line balancing activities can address in proper way.

Help to stabilize the Kaizen mind set

Because of this visual tool, workers every day observing their performance. So, automatically create some environment to enhance their performance. So, it is converted in to the continues improvements like Kaizen.

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Waste Elimination with Yamazumi Chart

Yamasumi charts provide some warning signal to the business process team regarding the wastages. It is also tool to compare the business performance with the target. And also, it will provide constructive pressure on the operation team to enhance the efficiency level of the process.

when organizations apply above discuss all theories and concepts, they can enhance their value chain and reduce the cost through stream line the production activities.