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Is Your Value Stream Leaking?

Value stream mapping (thank you, Wikipedia) "is a lean manufacturing technique used to analyze and design the flow of materials and information required to bring a product or service to a consumer. At Toyota, where the technique originated, it is known as "material and information flow mapping." It can be applied to nearly any value chain."

And it's a powerful tool for systems design for sustainability, one which Natural Logic has been applying to great effect with a growing number of clients -- and one which can uncover the massive potential economic value of well-design sustainability strategies.

A typical value stream map "shows the current steps, delays, and information flows required to deliver the target product or service." A sustainability focused Value Stream Map also shows the energy and materials that flow into and out of each process along the way.

(Some of you may recognize here the "metabolic atom" that's been the kernel in our approach to ecometrics and sustainability indicators and our seminal sustainability dashboard software. I'll dive into that in more detail next time.)

A typical value stream map looks at which processes add value, and which don't. In our maps, we identify the value leakage at each stage -- the loss of physical materials and energy quality, as well as economic value, at each stage. These could include, for example, excess energy use and spend, insufficient product yield and excess non-product output, hazardous products or non-products, lost sales, unrecovered resources, and more -- anything that doesn't add value to customers, shareholders, stakeholders and/or the earth's living systems.
 
Then we quantify, prioritize and look for synergies -- the strategies and tactics, spanning everything from product design and manufacture to sales offerings and contract terms that can reduce or eliminate value leakage and, if the wind is right, generate substantial new value.

It's a new level of life cycle thinking that in conjunction with footprinting, life cycle assessment and appropriate querying of accounting and ERP systems can start to identify the scale of opportunity that could be represented by stopping those leaks. (In one instance, the value leakage was the same order of magnitude as the company's current revenues. Nothing quite like that to focus the executive mind! (Even without considering the unmonetized externalities that Puma and others are starting to capture with their ecological P&Ls.)

The value stream exercise also supports the selection of relevant performance metrics, and the development a of comprehensive strategic roadmap to guide your organization to capture all that potential value.

Of course this is easier said than done. It takes inspired leadership, an engaged multi-stakeholder team, and the experienced, integrative and, yes, provocative approach that we bring to all our engagements. I'll go into metabolic atoms in more detail next time. Meanwhile, call me if you'd like to explore how these approaches can help your company find out how much value you're leaking, and chart a course to capturing that value.

[This post originally appeared in News From Natural Logic, a more or less monthly newsletter from Natural Logic, Inc. You can subscribe to News From Natural Logic here, and subscribe to this blog using the RSS link at the upper right of this page.]

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Comments (1)

Kim [TypeKey Profile Page]:

Great article! It truly has enlighten me.

Kim
Contemporary VA

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This page contains a single entry from the blog posted on August 20, 2012 9:53 PM.

The previous post in this blog was My Summer Reading List.

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