Value Stream Mapping

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Value Stream Mapping (VSM) focuses on the identification of waste across an entire process. Once waste has been identified with this tool, you can focus on the elimination of the waste. A VSM chart identifies all of the actions required to complete a process, while also identifying key information about each action item. Key information will vary by the process under review, but can include total hours worked, overtime hours, cycle time to complete a transaction, error rates, and absenteeism.

The following value stream chart addresses the entire procurement cycle, from the initial placement of a requisition through processing of the resulting supplier invoice. Under each processing step, the VSM chart itemizes the amount of overtime, staffing, work shifts, process uptime, and transaction error rate. The chart then shows the total time required for each processing step, as well as the time required between steps, and also identifies the types of time spent between steps (e.g., outbound batching, transit time, and inbound queue time).

The chart reveals that most of the procurement cycle time is used between processing steps, especially in the transit time of orders from suppliers to the company. If total cycle time is an issue, then a reasonable conclusion would be to either source locally or expend more for faster delivery services. However, if the emphasis is on speedier in-house processing, then the chart shows that the purchase order processing stage is the most time-consuming; it is also probably a bottleneck operation, given the amount of overtime incurred. Likely conclusions would be to reduce the error rate in the purchasing area by working on a reduction of errors in the upstream requisitioning area (note how the two error rates are identical, since the purchasing staff is likely copying errors from requisitions directly onto their purchase orders), offloading purchasing work with procurement cards, or bolstering capacity by adding purchasing staff.

Another option for shrinking the total cycle time is to have the receiving staff send receiving documents to the payables department more frequently than once every four hours; cutting the outbound batch time in half would eliminate two hours from the total cycle time, though this would require two more trips to the payables department per day by the receiving staff.

Value stream mapping works best in highly focused, high volume processes where it makes sense to spend time wringing a few seconds out of repetitive processes. Conversely, the analysis effort would be wasted in low-volume areas where the staff constantly switches between multiple tasks.

Podcast

A discussion of value stream mapping is available on Episode 67 of the Accounting Best Practices podcast. Listen Now.