The "pacemaker process" is a series of production steps, frequently at the downstream (customer) end of the value stream in a facility, that are dedicated to a particular product family or services that responds directly to orders from external customers. The pacemaker is the most important process in a facility because how you operate here determines how well you can serve the customer, and what the demand pattern is like for upstream fabrication processes.
Lean activity should begin at the pacemaker process (usually shipping or final assembly), as it is most vulnerable with direct impacts on the customer. The pacemaker process usually is near the customer end of the value stream, often the final assembly cell. However, if products flow from an upstream process to the end of the stream in a FIFO sequence, the pacemaker may be at this upstream process.
When drawing a map, lean thinkers create a data box underneath each step to record information on these attributes. Sometimes additional information is needed, depending on the situation, and an important reality of mapping is that every map for every value stream will be slightly different. With all of the steps identified and characterized, it’s time for a harder task, which is to map the movement of product and the information flow that regulates the value stream. Mappers are looking to capture three critical attributes of each value stream. A final step in mapping the current state is to summarize the most critical feature of the value stream, and this is usually throughput time. Therefore, capturing the total time from the start of work on a product until it is ready for the customer is often the most helpful way to characterize the performance of the entire stream. With a completed current-state map in hand, it’s time to think about a better future state that will help both the customer and the provider organization. Getting there may involve a number of actions. One is to challenge each step as to whether it really creates value. Rework and storage of items are rarely of any value to the customer, and need to be eliminated whenever possible. Increasing the capability of individual steps so there is no rework, and organizing many process steps in a continuous flow, are excellent ways to eliminate waste while making the customer happier because of better quality and more rapid delivery.
A second step is to place as many actions as possible in continuous flow. This can dramatically reduce throughput time, and almost always reduces costs substantially. Achieving continuous flow frequently requires the relocation of processing equipment employing different technologies into a tight process sequence. And it may require the introduction or even the invention of new processing technologies that can be right-sized to the specific value stream, and which are inherently more capable, available, and flexible.
A problem we often note is a rush by an organization to relocate and tightly link process technologies that are neither capable nor available. In the absence of basic stability (which is capability times availability), it is more likely that there will be no flow rather than continuous flow. Although it seems to be against the spirit of rapid kaizen, we find that it is often better to attack capability and availability problems before tightly linking process steps. Once these attributes of the process steps are improved, progress toward continuous flow can be both rapid and sustainable.
A third step on the path to an improved future state is to level the output of the value stream and, when necessary, to divide what was originally one value stream into two or three value streams suited to processing products with different challenges.
The idea of levelling is very simple: Identify one spot along the value stream—the pacemaker step—where orders from the customer are transformed into production instructions. Then create a standard inventory at this point to permit every step upstream and downstream to operate in a level, smoothed manner, using first-in/first-out scheduling downstream from the pacemaker and pull signals upstream.
The pacemaker point is almost always that point at which the final specification of the product is set. For a make-to-stock product, this will be at the assembly point at the downstream end of the value stream. For a make-to-order product, it will often be at a point far up the value stream.
For Example in Retail / Manufacturing warehouses:
By creating a standard inventory large enough to buffer the value stream from gyrations in demand while still responding to customer needs in a timely manner, it’s possible to remove most of the mura and muri in the value stream. Doing so always leads to lower costs and higher quality.
As organizations try to level and smooth production, they will often discover that a major cause of muda and muri is the attempt to run very dissimilar products down the value stream. In both cases, the introduction of continuous flow at the pull of the downstream customer with levelled production will in a dramatic reduction in throughput time, a dramatic reduction in costs, and a substantial improvement in quality. This, rather than simply drawing maps, is the objective of value stream mapping.
Once the future state is achieved, it’s time for the lean thinker to start over by specifying the value desired by the customer, the gaps in the performance of the value stream from the standpoint of customer and producing organisation, and the needs of the employees operating the process.
The above explanation is taken from reference of SME.org.