Value stream mapping

Value stream mapping (VSM) reveals information about the process steps that a business uses to create value. It can be used to streamline process flows, thereby reducing non-value-added activities. Depending upon the format used, it can point out such information as:

  • The work time and wait time required for each step in a process

  • The amount of labor needed for a work step, including the identification of overtime

  • The error rate by work step

  • Downtime by work step

VSM can be applied to the various accounting processes. The resulting charts can be used to pinpoint areas needing improvement, such as reductions in errors, automation to eliminate staff time, and altered controls to shorten process flows.

The VSM concept is best explained with an example. In the following sample of the timekeeping process, we see that the accounting staff requires only a small amount of staffing and time to process two steps, which are issuing reminders to employees and verifying supervisory approval of time cards. However, the VSM indicates that the controller must allocate more staff to the tasks of reviewing received time cards and summarizing hours worked. These latter two tasks are so time-sensitive that they routinely require the use of overtime to be completed on time. The map also shows a high error rate. Further, the VSM reveals that a total of 25.5 hours are needed to complete this step, which is the lengthiest part of the payroll process.

Given the issues shown in the map, it would be reasonable for a controller to implement a more automated method of time tracking, such as a computerized time clock. By doing so, the two bottlenecks in the process can be eliminated, along with overtime and the high error rate. Automation will also likely reduce the total processing time by a substantial amount. The controller might not have realized the severity of the problems with timekeeping without a VSM to clarify the issues.

Value stream mapping is an especially effective tool when used to break down the elements of high-volume processes; these processes are completed many times in a typical year, so even small changes can yield large cumulative benefits. Conversely, there is little point in using VSM to analyze tasks that require little time and are only rarely completed, since there is only a modest opportunity for improvement.

Related Courses

Activity-Based Management
Lean Accounting Guidebook