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1 Business Processes and their Improvement. 2 Session Objectives n Develop an understanding of business processes n Review process modeling basics n Introduce.

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Presentation on theme: "1 Business Processes and their Improvement. 2 Session Objectives n Develop an understanding of business processes n Review process modeling basics n Introduce."— Presentation transcript:

1 1 Business Processes and their Improvement

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

3 3 Supply Chain Management: Key Activities and Processes NEW PRODUCT INTRODUCTION ORDER FULFILLMENT Design/DevelopMarket ProcureProduceDistribute Supply Base Customer Requirements Customer Satisfaction Corporate Strategy Infrastructure, People, and Culture Information and Technology Forecasting Supply/Demand Planning

4 4 Order Fulfillment: Key Supply Chain Processes SUPPLYOPERATIONSDEMAND 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 5 Why Focus On Business Processes? n Supports “systems view” of organization n Helps organizations to understand and effectively manage interrelationships, both internally and externally n Improves resource allocation decisions n Provides the basis for performance measurement system (Adapted from Harrington 1991)

6 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 7 Selecting Processes For Improvement n Look for processes where: l Frequent problems/complaints (internal or external) l High-cost l High-variability of output l Long and/or variable cycle times l A known “best practice” exists l New and improved technologies are available (Adapted from Harrington 1991)

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

9 9 Process Modeling Basics

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

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

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

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

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

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

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

17 17 Process Management: Key Concepts and Best Practices

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

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

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

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

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

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

24 24 Process Capabilities n 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?) n Is existing UPS tracking process capable of meeting this requirement?

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

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

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

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

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

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

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

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

33 33 It’s About Time

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

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

36 36 Why Focus on Time? n 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 37 Why Focus on Time? n Organizations that have focused on improving performance from a time perspective also see significant improvements in other critical performance areas including: l Cost l Quality l Delivery l Customer service n A matter of focus -- not just time for the sake of time

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

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

40 40 Causes Of Long Process Cycle Times

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

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

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

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

45 45 Reducing Process Cycle Times

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

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

48 48 Opportunities are Everywhere n Management and organizational opportunities n Human resource opportunities n Product management opportunities n Operational opportunities n 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 49 Management and Organizational Opportunities n Visioning n Front-ending n Aligning n Transforming n Flattening n Balancing n Investing n Consolidating n Distributing n Implementing n Benchmarking n Learning

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

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

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

53 53Interorganizational n Networking n Partnering n Virtualizing n Risk-Sharing n Outsourcing

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


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