Question

1. why should the incremental cost of a risk response alternative be considered when deciding how best to respond to an important risk?

2. what is a focused value stream?

3. why are units shipped used to calculate the value stream?

4. when will the average unit cost be used for value stream?

Answer 1

1. Increment costs are the cost incurred on a particular risk. Incremental cost is subtracted from response benefit to obtain net response benefits. For important risk, organisations identify various alternatives to reduce that risk. To select a particular alternative, organisations calculate net response benefit.Net response benefit is calculated by subtracting incremental cost from response benefit.

2. Focused Value stream is a flowchart method to illustrate, analyze and improve the steps required to deliver a product or service. A key part of lean methodology, VSM reviews the flow of process steps and information from origin to delivery to the customer. Value stream mapping maintains that focus. A typical process is to draw a current state VSM and then model a better way with a future state and/or ideal state VSM. You can start off sketching by hand and then move to VSM software for better communication, analysis and collaboration.

3. Units shipped used to calculate the value stream of the product to reduce excessive production.

4. Average unit cost is used for value stream in case of normal distribution.