Process-Flow Analysis Chapter 7 INTRODUCTION to Operation Management 4e, Schroeder McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc., All Rights Reserved.

Outline of Chapter 7 Process Thinking The Process View of Business Measuring Process Flows Flowchart Analysis Materials-Flow Analysis Information-Flow Analysis Service Blue Printing Business Process Reengineering (BPR)

Process Thinking Definition of a “system” Whole > sum of parts Application of systems thinking to businesses “Can’t sell from an empty wagon.” Defining system boundaries Role of “cross functional” teams in systems analysis Systems thinking requires cross-functional teams to include all affected functions.

Figure 7.1: Process View of Business

Measuring Process Flows Little’s Law Relates number of items in the system to arrival rate and length of time in the system. Formula: I = T x R I = average number in the system T = average throughput time R = average flow rate into the process Assumes system is in a ‘steady state’

Applications of Little’s Law Manufacturing Waiting lines Invoice processing Legal office transactions Accounts receivable processing Etc.

Measuring Process Flows Capacity of a system = capacity of the most constraining resource. This resource is called a ‘bottleneck.’ The flow rate of a process is the minimum of Supply Demand Capacity

Flow-Process Chart Analysis Purpose: to describe a process visually to find ways of improving the current process. Find repetitive operations Identify bottlenecks Describe directions and distances of flows (people, material and information) Reduce waste Required for certifications such as ISO9000.

Process Flow Analysis Might Change: Raw materials Product (output) design Job design Processing steps used Management control information Equipment or tools Suppliers i.e. Anything but customers may be changed!!

Steps in process flowchart analysis using the systems approach Select a process to study Form a team to analyze & improve the system Decide on the objectives of the analysis Define customers and suppliers Flowchart the existing transformation process Develop improved process design Gain management approval of the improved design Implement the new process design

Materials-Flow Analysis One of first applications of process-flow analysis ideas Emphasis on reducing total throughput time Seek to reduce waste Describes flow of materials in great detail

Symbols for Flow-Process Chart Operation (a task or work activity) Inspection (an inspection of the product for quantity or quality) Transportation (a movement of material from one point to another) Storage (an inventory or storage of materials awaiting the next operation) Delay (a delay in the sequence of operations)

Questions to Ask in FPA What does the customer need?, operations are necessary? Can some operations be eliminated, combined, or simplified?…. Who is performing the job? Can the operation be redesigned to use less skill or less labor? Can operations be combined to enrich jobs? …. Where is each operation conducted? Can layout be improved? …. When is each operation performed? Is there excessive delay or storage? Are some operations creating bottlenecks? ….. How is the operation done? Can better methods, procedures, or equipment be used? ….

Information Flow Analysis Purpose: to improve the efficiency and effectiveness of the process. Types of information flow: Information is the product of operation Information is used for management control

Symbols for Information Processing Flow Chart Origin of record (used to identify an operation that involves the addition of significant data to a blank form) Subsequent writing (a step in which significant data is added to an existing record) Handling operations (any nonproductive step, such as sorting, stapling, or folding) Move (a step in which the record is transported from one person, department, or work place to another) Inspection (used when the step involves examination of the quality or clearness of a record) Delay, file, and destroy (identifies a point or time at which the record is inactive

Service Blue Printing Flow charting of a service operation Shows the ‘cycle of service.’ Points on SBP are “moments of truth” Ask the same questions as in PFA (what, who, where, when, and how)

Business Process Reengineering (BPR) BPR defined (Hammer and Champy, 1993) BPR Philosophy Principles of BPR Success of BPR

BPR Defined BPR is “the fundamental rethinking and radical redesign of business [or organizational] processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.”

BPR Defined This is in contrast to incremental change or continuous improvement of an existing process. “If I were recreating this company today, given what I know and given current technology, what would it look like?”

BPR Philosophy Neither. Does the reengineering consultant see the glass as half full or half empty? Neither. It’s the wrong size of glass! Or, should it be a glass? …or a liquid?

Principles of BPR Organize around outcomes Have the people who do the work, process their own information Put the decision point where work is performed and build control into the process Eliminate unnecessary steps in the process

The Success of BPR According to Hammer & Champy, 50-70 percent of the organizations attempting BPR do not achieve the results they expected. Why? Because they make one or more of the 17 common mistakes:

BPR Mistakes Trying to fix a process instead of changing it Not focusing on business processes Focusing only on the process redesign Neglecting people’s values & beliefs Settling for minor results Quitting too early Constraining the scope of the problem & effort Letting corporate culture & mgmt attitudes get in the way Trying to reengineer from the bottom up

BPR Mistakes (cont.) Assigning a leader who doesn’t understand BPR Skimping on the resources Not making BPR a top corporate priority Trying to do too much at once & dissipating resources. Concentrating only on design & not implementation. Trying to keep everyone happy. Pulling back if people resist. Dragging out the effort & taking too long. Source: Hammer & Champy, Reengineering the Corporation, chapter 14.

Summary Systems Thinking The Process View of Business Measuring Process Flows Flowchart Analysis Materials-Flow Analysis Information-Flow Analysis Service Blue Printing Business Process Reengineering (BPR)

End of Chapter Seven