Chapter 6, Process-Flow Analysis INTRODUCTION to Operations Management Chapter 6, Process-Flow Analysis 5e, Schroeder McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Outline of Chapter 6 Process Thinking The Process View of Business Measuring Process Flows Measuring Process Flows at Pizza U.S.A. Process Flowcharting Process-Flow Analysis as Asking Questions Business Process Reengineering (BPR)

Process Thinking Process Thinking: all work can be seen as a process Definition of a “system” Whole > sum of parts Application of systems thinking to businesses Defining system boundaries Role of “cross-functional” teams in systems analysis Systems thinking requires cross-functional teams to include all affected functions

Figure 6.1: 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 of things 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

Process Flowcharting Process Flowcharting: creation of a visual diagram to describe a transformation process Also known as: Process mapping Flow-process charting Service blueprinting Value stream mapping

Process Flowcharting 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 Specify the boundaries of the transformation process Identify and sequence the operational steps Identify the performance metrics Draw the flowchart

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 Process-Flow Analysis & Improvement What does the customer need? What 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?

Questions to Ask in Process-Flow Analysis & Improvement Flow Balanced? Where is the bottleneck? Are all steps necessary? How jumbled is the flow? Time How long to produce one unit? Can it be reduced? Cycle time? Excessive set-up time? Excessive waiting time? Quantity Theoretical production amount? How easy to change? How many units actually produced? Quality Historical defect rate? Which step contributes to defect rate? Where do errors occur? Cost Cost to produce one unit? What are cost buckets for one unit? Can some of the buckets be reduced or eliminated?

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, not tasks 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% of organizations attempting BPR do not achieve the results they expected. Why? Because they make one or more of the 17 common mistakes (see next 2 slides):

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 Process Thinking The Process View of Business Measuring Process Flows Measuring Process Flows at Pizza U.S.A. Process Flowcharting Process-Flow Analysis as Asking Questions Business Process Reengineering (BPR)

End of Chapter Six