1. Business Processes and their Improvement

2. Session Objectives Develop an understanding of business processes
Review process modeling basics
Introduce process management concepts and best practices
Read objectives

3. Supply Chain Management: Key Activities and Processes
Corporate Strategy
Infrastructure, People, and Culture
Information and Technology
NEW PRODUCT INTRODUCTION
Supply Base
Design/Develop
Market
Customer
Requirements
Customer
Satisfaction
Procure
Produce
Distribute
Supply Base
ORDER FULFILLMENT
Forecasting
Supply/Demand Planning

4. Order Fulfillment: Key Supply Chain Processes
OPERATIONS
DEMAND
Supply Planning and Scheduling
Strategic Sourcing
Supplier Selection
Supplier Development
Invoicing/Payment
Inbound Logistics
Warehousing
Inventory Management
Operations Planning and Scheduling
Capacity Planning
Material Handling
Insourcing/ Outsourcing
Demand Planning and Forecasting
Sales
Order Entry
Outbound Logistics
Finished Goods Inventory Management

5. Why Focus On Business Processes?
Supports “systems view” of organization
Helps organizations to understand and effectively manage interrelationships, both internally and externally
Improves resource allocation decisions
Provides the basis for performance measurement system (Adapted from Harrington 1991)

6. Five Phases of Process Improvement
1. Establish process improvement team
2. Develop understanding of current process
3. Identify initial process improvement efforts
4. Establish measurements and controls
5. Monitor performance and seek continuous improvement (Adapted from Harrington 1991)

7. Selecting Processes For Improvement
Look for processes where:
Frequent problems/complaints (internal or external)
High-cost
High-variability of output
Long and/or variable cycle times
A known “best practice” exists
New and improved technologies are available (Adapted from Harrington 1991)

8. Selecting Processes For Improvement
In evaluating process candidates the following critical factors need to be considered:
Current performance of the process
Business impact
Supply chain impact
Suppliers and customers
Ability to change the process
Resources required for improvement (Adapted from Harrington 1991)

9. Process Modeling Basics

10. Modeling Model: A representation of reality Models can be
Physical
Mathematical
Schematic / graphical
We will focus on schematic or graphical modeling

11. Business Process Modeling
Important part of process improvement efforts
Tool for understanding business processes
Internal
Supply chain
Flowcharting is the most commonly used technique (also known as “process mapping”)

12. Types of Flowcharts Block diagrams Flow-process charts
Advantage: Simplicity
Flow-process charts
Advantage: Identifies both flow and activity types
American National Standard Institute (ANSI) flow charts
Advantage: Universal, flexible

13. Process Flow Charting - Considerations
First document the process as it IS, not as it’s supposed to be
Scope - how much of the process do you want to look at?
Detail - how finely do you want to break down the process?

14. Process Flow Charting - Considerations
Additional dimensions may be included in a flow chart:
Information flows
Time element
Operations, inspections, delays, transports
Average time required, range, etc.
Distance moved
Resources required
Capacity

15. Process Flow Chart: Stores Requisition
User
Completes
Requisition
Clerk
Enters
Order
Wait in
Internal Mail
avg.: 2 hrs
(0-4 hrs)
Deliver to
Stores
avg.: 1 hr
( hrs)
Wait in
Stores In-Box
avg.: 1 hr
(0-2 hrs)
(0.1 hrs) In
Stock?
Pick
Order Y
Deliver to
User
avg.: 2 hrs
(1-3 hrs)
File
Requisition
(0.1 hrs)
Check
Order
(0.1 hrs)
avg.: 0.4 hrs
( hrs) N
Notify
User

16. Process Flow Charting - Benefits
Gain a clear understanding of how the process actually works
Capacities
Cycle times
Highlight potential improvement opportunities
Unnecessary steps
Redundant steps
Inefficient sequencing of steps
Identification of bottlenecks

17. Process Management: Key Concepts and Best Practices

18. Process Management
Effective business processes can create a competitive advantage for the company and its supply chains
Effective business processes are not an accident
Processes do not improve on their own
Effective processes are processes that are effectively designed and managed

19. Process Management
Effective process management requires an understanding of:
The process itself
How and where the process fits into the organization and/or supply chain
Process performance requirements
Process resource requirements
Process capabilities
Process capacities
Process performance

20. Performance Requirements
What must the process accomplish in order to support organizational goals and objectives?
Need to establish specific targets in terms of:
Cost
Quality
Time
Customer service/support
Others

21. Customer Driven Process Requirements
REQUIRED PROCESS CAPACITY
REQUIRED PROCESS
CAPABILITIES
CUSTOMER
REQUIREMENTS
PROCESS
PERFORMANCE
TARGETS

22. Process Capabilities
Process capability addresses what a process can do and how well it can perform its function
All processes have a capability range
Upper and lower performance limits
Process management must insure that process performance requirements are feasible given process capability range

23. Process Capabilities
Example: Memphis-based customer requires airfreight services for product delivery to locations anywhere in Continental U.S. within four hours of shipper notification
Are standard FedEx transportation processes capable of meeting this requirement?

24. Process Capabilities
Example: UPS customer wants to be able to access precise minute-by-minute tracking information on her package (exactly where is the truck or plane my package is on, right now?)
Is existing UPS tracking process capable of meeting this requirement?

25. Determinants of Process Capability
People
Skills
Experience
Training
Management
Methods
Work flow
Decision making
PROCESS
CAPABILITY
Inputs
Information
Materials
Technology
Equipment
IS/IT

26. Process Capacity
Process capacity addresses the volume of work or product that can be performed by a process during a specified time period
Often viewed as the upper bound on the rate of output

27. Process Capacity
There are different ways of defining the capacity of a process:
Design capacity -- maximum output that can possibly be attained
Effective capacity -- maximum output given practical issues of product mix, scheduling, maintenance, quality factors, etc.
Demonstrated capacity -- the rate of output actually achieved

28. Determinants of Process Capacity
Quantity and type of resources available:
Human
Equipment
Product/service mix
Planned down time (e.g., breaks, preventive maintenance, etc.)
Unplanned down time (e.g., equipment breakdowns, absenteeism, quality problems, etc.)

29. Process Capacity
Process management must insure that process performance requirements are feasible given process capacity
From a time perspective, overall process capacity is determined by the slowest activity or step in the process
Need to focus improvement efforts on these “bottleneck” activities

30. Process Performance
Effective process management requires objective view of process performance for key performance areas
The performance measurement system should consider both effectiveness and efficiency measures
Effectiveness - “doing the right thing”
Efficiency - “doing things right”

31. Process Management “Best Practices”
Clear accountability for process performance
Need a “process owner”
Well-defined process boundaries
Manageable scope
Clearly defined interfaces and responsibilities
Documented procedures, work tasks, and training requirements (Adapted from Harrington 1991)

32. Process Management “Best Practices”
Formal performance measurement
If you can’t measure it…
Benchmark
Formal feedback controls
Includes monitoring, evaluating, and adapting
Formal change procedures
Introduces process discipline
Customer-related objectives (Adapted from Harrington 1991)

33. It’s About Time

34. Cycle Time Definition
Cycle Time -- The total elapsed time required to complete an organizational process or activity

35. Why Focus on Time?
Superior performance in cost, quality, delivery, and technology is not enough
Increasingly organizations are competing on the basis of time

36. Why Focus on Time?
The Three Percent Rule -- When examining organizational processes typically less than three percent of the total elapsed time is actually needed to complete the process

37. Why Focus on Time?
Organizations that have focused on improving performance from a time perspective also see significant improvements in other critical performance areas including:
Cost
Quality
Delivery
Customer service
A matter of focus -- not just time for the sake of time

38. Why Focus on Time?
Provides an excellent opportunity to be better than the competition
Time has not been a high priority for many organizations
A basic, but highly effective achieve a competitive advantage

39. Critical Success Factors For Time-Based Competitors
Top management support
Aggressive cycle time reduction goals
Cross-functional teams
Team members must have thorough process knowledge
Training in key cycle time reduction concepts and tools
Application of TQM tools
Performance measurement system
Collaborate with supply chain members (Sources: Nichols 1995, Hendrick 1994)

40. Causes Of Long Process Cycle Times

41. Causes Of Long Process Cycle Times
Waiting
Serial versus parallel operations
Performing an activity twice (or more)
Batching
Excessive controls / bureaucracy
Poorly designed procedures / forms

42. Causes Of Long Process Cycle Times
Unnecessary movement / travel of product or people
Long travel distances for products or people
Ambiguous goals and objectives
Non-value-added processing steps
Antiquated processes or technology

43. Causes Of Long Process Cycle Times
Process variability
Lack of information
Poor communication
Limited coordination
Lack of cooperation
Lack of training

44. Summary Many causes of long cycle times are present
Processes often have a combination of “causes” at work
Must have a thorough understanding of the process to determine the “causes”

45. Reducing Process Cycle Times

46. Techniques for Reducing Process Cycle Times
Developed over last 8 years
Observed both “best” and “worst” practices
Critical success factors
Understand current process
Process mapping
Commitment to improve
Open communication

47. Points of Leverage
Main idea: Identify areas where small changes have big impact
Consider the airplane...
Where are the points of leverage in your processes?

48. Opportunities are Everywhere
Management and organizational opportunities
Human resource opportunities
Product management opportunities
Operational opportunities
Interorganizational opportunities
Source: “Principles of Cycle Time Reduction: You Can Have Your Cake and Eat It Too,” by Jim Wetherbe in Cycle Time Research 1995

49. Management and Organizational Opportunities
Visioning
Front-ending
Aligning
Transforming
Flattening
Balancing
Investing
Consolidating
Distributing
Implementing
Benchmarking
Learning

50. Human Resource Opportunities
Empowering
JIT-Training
Modeling
Self-Directed Teaming
Cross-Functioning
Case Working
Co-Locating
Teleworking
Measuring
Rewarding

51. Product Management Identifying Innovating Prototyping Time-Boxing
Mass-Customizing
Platforming
Deriving
Postponing

52. Operations Conceptualizing Challenging Eliminating Integrating
Paralleling
Anticipatory-Scheduling
Informating
Simplifying
Standardizing
Automating

53. Interorganizational Networking Partnering Virtualizing Risk-Sharing
Outsourcing

54. Summary Opportunities for cycle time reduction are everywhere:
Management and organizational
Human resources
Product management
Operations
Interorganizational
Look for the “points of leverage”