Chapter 4: Business Process Management

Why be so concerned with processes?
Processes are how we work at the task level to build value
Inefficient or ineffective processes will result in poor performance and possible business failure
Excellence in processes will improve competitiveness and business performance
Business Processes
-Process
-Primary Process
-Support Process
-Development Process
Process
A set of logically related tasks or activities performed to achieve a defined business outcome
Primary process
o A process that addresses the main value-added activities of an organization
o Providing a service, educating customers, manufacturing
Support process
o A process that performs necessary, albeit not value-added activities
o Evaluating suppliers, recruiting new works, developing a sales and operations plan (S&OP)
Development process
o A process that seeks to improve the performance of primary and support processes
o Developing new products, performing basic research, training new workers
Mapping
The process of developing graphic representations of the organizational relationships and/or activities that make up a business process
Purposes of Mapping
o It creates a common understanding of the content of the process: its activities, its results, and who performs the various steps
o It defines the boundaries of the process
o It provides a baseline against which to measure the impact of improvement efforts
Process Map
A detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flow of a process
Process Mapping Rules
o Identify the entity that will serve as the focal point
o Identify clear boundaries and starting and ending points
o Keep it simple
Swim Lanes
Swim lane process map – A process map that graphically arranges the process steps so that the user can see who is responsible for each step
Measuring and Improving Business Process
Quality
o Performance quality, conformance quality, reliability
Cost
o Labor, material, quality-related costs
Time
o Delivery speed, delivery reliability
Flexibility
o Mix flexibility, changeover flexibility, volume flexibility
Value Stream Mapping
Associated with lean processes
Ties process activities to customer value
Identifies waste in process
Attention on material, information and people flows
Measuring and Improving Business Processes
Productivity Index – A measure of process performance
Productivity = outputs/inputs
Single-factor productivity
A productivity score that measures output levels relative to single input
Multifactor productivity
A productivity score that measures output levels relative to more than one input
Efficiency
A measure of process performance; the ratio of actual outputs to standard outputs. Usually expressed in percentage terms
o Efficiency = 100% (actual outputs / standard outputs)
Standard output
An estimate of what should be produced, given a certain level of resources
Cycle time
The total elapsed time needed to complete a business process also called throughput time (notice: slightly different definition than production line cycle time)
Percent Value-Added Time
The percentage of total cycle time that is spent on activities that actually provide value
Percent value-added time = 100% (value-added time) / (total cycle time)
Productivity Measurement
The productivity index is a relative measure.
It has to be compared with something else:
o Benchmarking
o Changes over time
o Normalized Data
The important thing is to be consistent with measurement
Benchmarking
The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance
Competitive benchmarking
o The comparison of an organization’s processes with those of competing organizations
Process benchmarking
o The comparison of an organization’s processes with those of noncompetitors that have been identified as having superior processes
Continuous Improvement
The philosophy that small, incremental improvements can add up to significant performance improvements over time
Continuous improvement functions best on a stable process. It’s very difficult to improve a process that is out of control!
Business Process Challenges
Business Process Reengineering
o A produce that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed
o Reengineering involves “heavy blasting” and is used when continuous improvement isn’t sufficient
Root Cause Analysis
A process by which organizations brainstorm about possible causes of problems and, through structed analyses and data gathering efforts, gradually narrow the focus to a single or several root causes
Tools used in Root Analysis
Cause-and-effect (Ishikawa) Diagram
Five whys
Scatter plot
Check sheet
Pareto Chart
Cause-and-effect (Ishikawa) Diagram
A graphical tool used to categorize the possible causes for particular results. AKA fishbone diagram
Five whys
An approach used during the narrow in root cause analysis to brainstorm successive answers to the question “Why is this cause of the original problem?” The name comes from the general observation that the questioning process can require up to five rounds
Scatter plot
A graphical representation of the relationship between two variables
Check sheet
A sheet used to record how frequently a certain event occurs
Pareto Chart
A special form of bar chart that shows frequency counts from highest to lowest
Six Sigma: DMAIC
Defines: the projects purpose, scope, and outputs, identifies the required process information keeping in mind the customer’s definition of quality
Measures: the process and collects data
Analyzes: the data ensuring repeatability and reproducibility
Improves: by modifying or redesigning existing process and procedures
Controls: the new process to make sure performance levels are maintained
Sigma
A measure of process capability calculated by identifying opportunities for defects in given product or process, counting the actual number of defects that occur per million opportunities for defect and translating that total into a Sigma rating using the Sigma table
Six Sigma People/Roles
Master Black Belt – Full-time Six Sigma expert
Black Belt – fully trained Six Sigma expert
Green Belt – individuals with basic Six Sigma training
Team members – Six Sigma project members
Champion – Senior-level executive – supporting