Value stream classification

In the twenty‐first century business scenario, most organisations supply a range of products to multiple markets, so participate in several often quite different supply chains. Just as the linear chain is a simplification of a supply network, the single channel is a simplification of the true complexity many organisations face. When all products are pushed down a single channel, they are paced by the slowest and customers are charged an average price resulting in many being underserved. Manifestly, for most businesses “one size fits all” is not a viable option in delivery pipeline design and operation. This paper aims to address these issues.

Traditionally, the requisite number of delivery pipelines operated by a business is determined by “hunch”, as is the range of products flowing down each channel to the marketplace. The information technology (IT) revolution, which in turn has spawned the “analytic corporation” enables pipeline selection and product matching to be placed on a more formal footing. In order to enable the tailoring of value stream pipelines to markets five classification variables are proposed. These are duration of product life cycle (D), delivery window (W), annual volume (or value) (V₁), product variety (V₂) and demand variability (V₃).

Through the use of case studies drawn from real‐world situations, the authors are able to highlight the practical value of using appropriate taxonomies to identify appropriate supply chain design strategies. A framework for the implementation of a scheme for value stream classification is proposed.

The proposed analysis, design, and implementation methodology is summarised in flow diagram format. Emphasis is placed on the formation of a “natural group” task force to execute this programme. Production, sales, logistics, and marketing are all essential “players” therein.

It is established that the DWV³ classification system is suitable for framing pipeline performance improvement programmes. By exploiting the “analytic corporation” IT capability, the system has a dynamic role in determination of channel switching as products progress through their individual life cycle phases.