Chapter 4 Business Processes

1. Define Process.

Process  Process – A set of logically related tasks or activities performed to achieve a defined business outcome. © 2010 APICS Dictionary

2. What are the three elements of a business process?

Elements of Business Process  Primary process – A process that addresses the main value-added activities of an organization.  Support process – A process that performs necessary, albeit not value added activities.  Development process – A process that seeks to improve the performance of primary and support processes.

Improving Business Processes Figure 4.3

3. What are some process improvement tools?

Processes Improvement Tools (1 of 2)  Lean production  Value Steam Mapping (VSM)  Six Sigma  Business Process Analysis (BPA)  Reengineering  Poka-yoke and mistake-proofing  Process flow charts  Service Blueprinting  Business Process Reengineering

Process Improvement Tools (2 of 2)  Root cause analysis  Cause-and-effect diagrams  Five Whys  Scatter plot  Check sheet  Pareto Chart  Run Chart  Bar Chart  Histogram

4-10 VSM  Value Stream Mapping  A common “lean systems” tool  Examines entire value stream for waste

4-12 Process Improvement Tools (continued)  Service Blueprints

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4-14 Other Process Improvement Tools  Poka-Yoke  Mistake-proofing products and services  Preventing errors, reducing costs and improving quality  Design to prevent doing it any but the correct way McDonald’s wrapping of burger Car won’t start unless transmission is in “Park” “Deadman switch” on lawn mower

 Business Process Analysis  Focus on processes that cross functional boundaries and transitions between departments  Identified nonvalue-adding activities Other Process Improvement Tools

4-16 Broad Improvement Frameworks  Lean Systems  Organization-wide waste elimination  Evolved from JIT  Six Sigma  Structured quality improvement process  Training intensive  Elimination of variability is focus

Root Cause Analysis  Root cause analysis – A process by which organizations brainstorm about possible causes of problems and then narrow the focus to a root case.

Cause-and-Effect Diagram Figure 4.8 Commonly known as a fishbone or Ishikawa diagram Branches are organized around the Five Ms

Five Whys  Five Whys - An approach used in root cause analysis to brainstorm successive answers to the question “why is this a cause of the original problem?”

Scatter Plot Figure 4.10

Check sheet - Example Table 4.9

Pareto Chart Figure 4.17

Business Process Reengineering (BPR)  Business Process Reengineering – A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in cost, quality, service, and speed. © 2010 APICS Dictionary

Bar Graph Figure 4.12

Run Chart Figure 4.12

Histogram Figure 4.12

4. Define process maps?

Mapping Business Processes  Process Map – A detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flow of a process.  Mapping – The process of developing graphic representations of the organizational relationships and/or activities that make up a business process.

Process Mapping Symbols Figure 4.4

Mapping Business Processes Copyright © 2016 Pearson Education, Inc Process Map for the Bluebird Café Figure 4.5

Example 4.1 – Distribution Center  San Diego Distribution Center (DC)  Process:  Dealer s an order to the DC which is automatically printed on the copier. One out of 25 orders are lost because the copier jams or an employee accidentally throws it away.  Printed order sits in an inbox around 2 hours (0 to 4) until internal mail picks it up.  Internal mail takes about one hour on average to deliver the order to the picking area. One out of 100 orders are delivered to the wrong place.  Order sits in clerk’s inbox until it is processed for 0 to 2 hours (average 1 hour). Processing time takes 5 minutes. Copyright © 2016 Pearson Education, Inc. 4-31

Example 4.1 – Distribution Center  San Diego Distribution Center (DC)  Process:  If item is in stock, worker picks and packs order (Average = 20 minutes, with range from 10 to 45 minutes).  Inspector takes 2 minutes to check order. Still, one out of 200 orders are completed incorrectly.  Transport firm delivers order with average delivery time of 1 to 3 hours (average 2 hours).  If the item is out of stock, the clerk notifies the dealer and passes the order along to the plant while arranging a special shipment directly to the dealer, usually without a week. Copyright © 2016 Pearson Education, Inc. 4-32

Example 4.1 – Distribution Center Figure 4.6 Copyright © 2016 Pearson Education, Inc. 4-33

4-34 Process Improvement Tools  Process Maps  A visual model of a process

Purposes of Mapping  Create a common understanding of the processes, activities, and results.  Define the boundary of the process.  Provide a baseline to measure the impact of improvement efforts.

Process Mapping Guidelines  Identify the entity that will serve as your focal point.  Customer?  Order?  Item?  Identify clear boundaries and starting and ending points.  Keep it simple  Does this detail add any insight?  Do we need to map every exception condition?

Swim Lane Process Maps  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.

Swim Lane Process Example Figure 4.7

5. What are three important measures of business process performance?

Measuring Business Process  Productivity  Efficiency  Cycle Time

Measuring and Improving Business Processes Table 4.7 Copyright © 2016 Pearson Education, Inc Competitive Benchmarking Data for Selected U.S. Airline Carries, 12 Months Ending March 2014

6. Define Productivity.

Productivity  Productivity – a measure of how well inputs are used by a business, typically the ratio of an output to the input of interest/A measure of process performance  Productivity = Outputs Inputs

Productivity  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  Efficiency – A measure of process performance; the ratio of actual outputs to standard outputs.  Standard output – An estimate of what should be produced, given a certain level of resources.

Cycle Time  Cycle Time – The total elapsed time needed to complete a business process.  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)

7. What are the two general processes for manufacturing and service?

4-48 General Processes Product/Process matrix Service system design matrix

Process flow selection and the Product Process Matrix Tend to be product- oriented Can be either Tend to be process- oriented

4-50 Exhibit 4.7 Service System Design Matrix Choices for Service Providers: The Service System Design Matrix Customer contact & sales opportunity versus efficiency.

8. Define Concurrent Engineering.

4-52 A Closer Look at Concurrent Engineering Performing product and service development engineering functions in tandem to reduce time and improve communication.

9. Define Benchmarking.

Benchmarking  Benchmarking – The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance.

10. What are the two types of benchmarking?

Benchmarking  Competitive Benchmarking – The comparison of an organization’s processes with those of competing organizations.  Process Benchmarking – The comparison of an organization’s processes with those of non-competitors that have been identified as having superior processes.

Competitive Benchmarking Table 4.7

11. Define Six Sigma Methodology.

The Six Sigma Methodology  Six Sigma – A business improvement methodology that focuses an organization on:  Understanding and managing customer requirements  Aligning key business processes to achieve those requirements  Utilizing rigorous data analysis to understand and ultimately minimize variation in those processes  Driving rapid and sustainable improvement to the business processes.

Six Sigma People  Champion  Master Black Belt  Black Belt  Green Belt  Team Members

12. What are the two Six Sigma processes?

Six Sigma Methodology  DMAIC  Define the goals of the improvement activity  Measure the existing process  Analyze the process  Improve the process  Control the new process  DMADV  Define, Measure, Analyze, Design, Verify (Ch 15)

13. Define Reengineering.

4-64  Reengineering – the design of processes starting from a clean slate rather than incrementally improving the process.  Clean slate  Focus on behind-the-scenes activities  High use of technology  High rate of use in the service sector Other Process Improvement Tools

4-65 Process selection –Identify potential areas for improvement based on need and likelihood of success Description of current process –Using process flow diagram techniques, describe, precisely, the current process Process improvement –Identify new ways to accomplish the process goals –Technology is often used as a catalyst for improvement “Technology-enabled reengineering” Process verification –Identify problems with the proposed changes and ensure that they can be eliminated Implementing and monitoring –Make the changes and monitor the results for effectiveness Reengineering steps

14. What are the characteristics of a reengineered process?

4-67 Several jobs are combined into one Workers make decisions The steps in the process are performed in a natural order Processes have multiple versions Work is performed where it makes the most sense Reengineered Process