3 Value streams within Plan-to-Pay cycle


3 colour-coded Value streams within Plan-2-Pay cycle

The definition of a value stream

Modern agile enterprise frameworks actively employ Lean concepts and tools and are organized around value streams. 

A value stream is all the process steps the customer is willing to pay for to bring a product or service through the main production flows. 

Perhaps, one of the main problems with our processes and governance is that our end-users are not aligned. We simply force them into the adoption of the rules we created.

In fact, our end-users should not only see value in what we do but be prepared to pay to get that value. If they're not willing to pay for that, then they can simply live without us.

Two dimensions of value streams: value analysis and flow analysis

Value Streams could be studied from two perspectives:
  1. The Value Analysis differentiates steps that add value in the customer's eyes from those that do not.
  2. The Flow Analysis calculates the time spent on each step.
The Value Analysis defines a non-value-added activity as an action taken that does not increase the customer's worth. 

On the contrary, to be a value-added activity, it must meet all three of the following criteria:
  • The customer is willing to pay for it.
  • It must be done right the first time.
  • The action must somehow change the product or service in some manner.

Value streams by groups of internal customers

We attempted to analyze the main procurement cycle – Plan-2-Pay - and concluded a couple of argumentative observations with this short introduction.

Within this cycle, we identified three "customers": 
  1. end-users, 
  2. finance, 
  3. shareholders. 
End-users want to have a healthy budget to spend, effective buying channels, and levers to manage supplier performance. They would not pay for most category management and strategic sourcing gizmos procurement is so proud of. 

Finance wants procurement to 
They are prepared to pay for procurement help to plan, spend, and control the cash. 

Shareholders want to rest assured that the company money is spent transparently and sustainably. Hence, they would pay to control the sourcing process and be random ones who read category strategies, at least with auditing. 

Most category management, strategic sourcing, and contracting activities are conducted to satisfy shareholders' expectations.

The relationship strategy based on the value streams

This overview suggests that procurement needs to channel its stakeholder relationship efforts according to value streams. E.g., we should not expect to satisfy end-users with our RFPs or savings – they prefer punch-out catalogs and P-cards, i.e., speed and efficiency. 

Perhaps, our strategy should be mainly about balancing (without sacrificing) the interests of these three groups and becoming equally efficient, cash-minded, and transparent with the overarching importance of timely value delivery. 

We might even consider rebuilding our operational model, not around categories but value streams. Most importantly, our efforts should be justified by the preparedness of customers to pay for it.    


More information on this and other exciting topics could be found in "The Technology Procurement Handbook." It represents 23 years of experience, billions of dollars worth of sourcing projects, and 1000s of hours spent on research, analysis, and content creation for the most demanding professional readers. 

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