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An Application of Value Stream Mapping in Internat

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An Application of Value Stream Mapping in International Logistics System
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Rafael Silviano Gutierrez
University of Texas at El Paso
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An Application of Value Stream Mapping in International
Logistics System
Rafael S. Gutierrez, Ph.D., Haydee Barajas, Maria E. Galaviz, and Luis C. Martinez
Department of Mechanical and Industrial Engineering
University of Texas at El Paso
500 West University Avenue
El Paso, Texas 79968-0521
This paper describes the application of a lean logistics approach for the part procurement and customer
shipping network for an international manufacturing organization. The objective is to improve Company’s
logistics system by identifying current problems in transportation and inventory using Lean Manufacturing
Principles. This study includes the mapping of the entire logistics system to identify the problems of the
company, and logistics concepts to improve inventory and transportation resource utilization and customer
Value stream mapping, logistics
1. Introduction
The authors developed this study as a Senior Project course requirement in the Industrial Engineering
program at the University of Texas at El Paso, the industrial project study was focused in the analysis of the
international logistics system for a major manufacturer of industrial gloves in El Paso-Juarez area to
provide potential areas of improvement and recommendations.
The Company has grown into a global operation organization with manufacturing plants in Asia, Europe,
Mexico, and the United States with distribution centers in the United Kingdom, France, Germany, Belgium,
India, Southeast Asia and North America. This project was focused on their two manufacturing operations
in El Paso- Juarez area. The trucks that move finished goods to Europe and Charlotte have to be fully
loaded and trucks used to transport product to Canada and Asia may transport partial carrier loads (LTL). A
methodology was developed to improve customer service, resource utilization, and finished goods and raw
materials transportation. The toolkit applied consisted of the use of value stream mapping, inventory
analyses, and simulation tools, prior implementation with the objective to validate recommendations
2. Literature Review
The most important step in implementing lean manufacturing is the Value Stream Mapping as Womack and
Jones [7] said “Identifying the value stream for each product line is the next step in lean thinking.” In the
book called “Learning to See”, Rother and Shook [6] gave a better definition of “value stream mapping”
which is known as “Material and Information Flow Mapping”. A value stream map basically is a drawing
that represents the total supply chain. A supply chain is a global network that is used to deliver products
and services from raw materials to end customers through and engineered flow of information and physical
distribution [1].
Transportation and inventory play vital roles in supply chain management. As Bertazzi and Speranza [3]
indicated that the total transportation cost can be drastically reduced if the frequencies of transportation are
reduced or minimized. In most practical systems, the transportation costs are volume dependant because of
this, by utilizing efficiently the trucks capacities, transportation costs are minimized. Mahmoud [5]
considered that the creation of a central stocking point by consolidating is a powerful economic force in the
strategic planning of logistics systems. Substantial economies of scale result from the necessary aggregate
safety stock being reduced whenever decentralized inventories are centralized into fewer points. Inventory
levels are often the cause of increased costs in companies. Exchange curves are tools that provide an
optimal range for operation of the inventories. These curves provide a range of optimal A/r ratio of values
that will result in different options for the number of replenishments per year (N) and the total dollar value
of inventory (TCS). Exchange curves can be used by upper management to decide on backorder policy.
Specifically, the exchange curve shows the trade-off between average dollar value of aggregate inventory
versus the maximum allowed backorder delay [2].
3. Methodology
3.1 Survey of Existing Operations
A survey of existing operations to map and document the current process flows for finished goods and raw
material was developed to identify problems, resource utilization levels and current practices of doing
business. Likewise, future needs were identify to assess the space and equipment requirements. Overall
process and material flow charts are required to identify the complexity of the manufacturing operations.
This information was gathered through observation and direct interviews with employees in the facility.
Total Value Stream Maps were created for the manufacturing and distribution facilities including, Current
State Map, Problem Identification Map and Future State Map. Two major problems were identified:
inventory levels and transportation problems. Based on the information gathered, raw materials were
transported in trucks which they were loaded to 50% of their capacity. The finished goods inventory stayed
in their facility up to three days for customers shipments.
3.2 Analysis of shipping and storage consolidation
The first problem analyzed was the transportation and storage consolidation for finished goods and raw
materials. The rationale considered for this analysis was based on that manufacturing facilities share a raw
materials warehouse, close located to their manufacturing facilities, trucks were not loaded at full capacity,
and manufacturing facilities were required of daily shipments of raw materials. The rationale for
consolidation of finished goods inventory was based on commonality of customers, proximity between
facilities, production facilities share shipping criteria: full trailers for Europe and USA, and make-to-order
shipments for Canada and Asia.
3.3 Simulation Modeling for What-If Scenario Assessment
Based on the raw material and finished goods consolidation analysis, simulations were created using the
simulation software Arena 5.0™ [4]. The simulations were created with the purpose of providing the
company with a useful instrument to effectively apply proposed consolidation schemas. These simulations
can be used as tools for transportation planning and cost estimations since the number of orders, order sizes
and delivery dates can be input in the models. The program would then deliver an estimate of the number
of trucks needed as well as the transportation cost for the consolidation of materials.
3.4 Validation using Simulation of the Overall Transportation and Storage Consolidation
The analysis consisted of developing dynamic conditions for the recommendations of transportation and
storage consolidation. These simulations were proposed as tools for transportation planning and cost
estimations. The simulation modeling tool provided an estimate of the number of trucks needed as well as
the transportation cost for the consolidation of finished goods and raw materials. The simulation effort
provided us that 3 days is the lowest cost value for the number of days waiting to consolidate a truck load.
3.5 Analysis of Future Total Value Streams
Once the results from the consolidation schemas, simulations, and Exchange Curves were obtained, there
was necessary to construct the Future Total Value Stream Maps of both facilities to demonstrate the
improvements made with respect to the original Current Total Value Stream Maps. The most important
improvement was in raw material inventory, days in inventory were reduced from 4 days to 1 day. The
finished goods inventory remained the same given that both manufacturing facilities are shipping at the
same rate that they are producing.
Regarding the transportation problem, the number of days that a truck waits to comply with the customers’
shipping requirements was reduced from 3 days to only 1 due to the use of consolidation of finished goods
orders. As a consequence of the results mentioned above, the total time in plant was significantly reduced
from 13 to 9 days.
The main improvement in facility B was reflected in the raw material inventory. The inventory time in
storage was reduced from 30 days to only 1day. The finished goods inventory decreased from a range of 2
to 3 days to one day. As in the facility A, facility B produces at the same rate that is shipping. However,
this facility did have a reduction of inventory due to the fact that the transportation issue was forcing to
delay finished goods shipments from the warehouse, was resolved with the consolidation. Pertaining to the
number of days that a truck waits to comply with customers’ shipping requirements, it remained the same,
since unlike facility A, facility B does keep its finished goods in the warehouse while waiting to
consolidate a truck load. All these improvements led to a decrease of the in facility time from 44 days to
only 14. Table 1 is shown a comparison between current and future state.
Table 1. Comparison between Current and Future Total Value Stream Maps.
Company Facility Performance Measure
Facility A
Facility B
RM Time in Storage
FG Time in Storage
Waiting Time
In-Plant Time
RM Time in Storage
FG Time in Storage
Waiting Time
In-Plant Time
Total Value Stream Maps
Current (Days)
Future (Days)
4. Project Suggestions from Employees
After the completion of this initial effort, company employees participate in group discussions to review,
analyze and identify the impact of these changes in the current transportation and methods for all the
operating procedures of the logistics operations. Flow diagrams and lean manufacturing concepts were used
as a basis of understanding these operating procedures. Furthermore, recommendations and new ideas were
discussed and approved to improve the value stream maps and current organization practices.
5. Conclusions
The use of value stream mapping was required to state a clear understanding and awareness of the
Organization’s dynamics. The toolkit applied in this study was proposed to the organization and was
selected from a variety range of tools. The use of simulation tools with value stream mapping offers
opportunities to reduce gaps between practitioner’s expectations and potential outcomes before
implementation. Currently, the organization is applied the recommendations of this study in their practices
in transportation and consolidation of shipments.
1. Alber, K.L. and W. T. Walker, 1997, “Supply Chain Management: A Practitioner’s
Approach, ” The Educational Society for Resource Management, pp.203-210.
2. Aucamp, D.C., 1997, Aggregate backorder exchange curve, IIE Transactions, v 22. pp. 281-287.
3. Bertazzi, L, and M. Speranza, 1996, Minimization of Logistic Costs with given Frequencies, Pergamon,
vol. 31. No. 4 pp. 327-340.
4. Kelton, D. W., Sadowski, R.P., and D. A. Sadowski, 1998, Simulation with Arena, New York: McGraw
5. Mahmoud, M. M, 1992, Optimal Inventory Schemes: A Portfolio Effect Analysis, Journal of Business
Logistics, v 13.No. 1, pp.193- 213.
6. Rother, M., and J. Shook, 1998, Learning to See, Lean Enterprise Institute, MA.
7. Womack, J P., Jones, D. T., and D. Roos, 1990, The machine that Changed the World: The story of Lean
Production,,New York: Harper Perennial.
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