A01 chaf6542 06 se fm indd

  1 

Mine bauxite.

  2 

Reduction mill.

  3 

Smelter.

  4 

Hot rolling mill.

  5 

Cold rolling mill.

  6 

Can maker.

  7 

Bottler.

  8 

Regional distribution centre (RDC).

  9 

Retail unit storage.

 10 

Home storage.

In value stream analysis, efficiency for each of the stages above will be calculated. For 

example, at stage 7, the bottler (adding the drink to the can), Womack and Jones (1998) 

give times of incoming storage four days, processing time one minute, finished storage five 

weeks. The need for such analysis is shown by the delays in the whole process which give 

incoming storage of five months, finished storage of six months, but processing time of only 

three hours. This gives a total cycle time of nearly a year from mine to home. Clearly, if infor‑

mation management can be used to reduce these storage times, it can create large savings 

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Part 2  Strategy and applications

in terms of reduced storage capacities. The benefits are evident for a retailer such as Tesco 

that has already undertaken value stream analysis and deployed e‑commerce in the Tesco 

Information Exchange to reduce its storage in the RDC and in‑store to only two and three 

days respectively. It has also been able to move to a system of continuous replenishment in 

24 hours. Orders made by a Tesco store on a Monday night are delivered from suppliers via 

the RDCs to arrive before the store opens Wednesday morning!

At a practical level, improvements in the value chain are implemented through itera‑

tive improvements planning implemented through Sales and Operations Planning (S& OP) 

systems. Kjellsdotter and Jonsson (2010) have identified these benefits of digital business 

throughout the stages of an iterative planning cycle: