1. Business Processes Chapter 4

2. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 2 1. Define Process.

3. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 3 Process  Process – A set of logically related tasks or activities performed to achieve a defined business outcome. © 2010 APICS Dictionary

4. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 4 2. What are the three elements of a business process?

5. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 5 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.

6. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 6 Improving Business Processes Figure 4.3

7. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 7 3. What are some process improvement tools?

8. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 8 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

9. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 9 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

10. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 10 VSM  Value Stream Mapping  A common “lean systems” tool  Examines entire value stream for waste

11. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 11 4- 11

12. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 12 Process Improvement Tools (continued)  Service Blueprints

13. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 13 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

14. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 14

15. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 15  Business Process Analysis  Focus on processes that cross functional boundaries and transitions between departments  Identified nonvalue-adding activities Other Process Improvement Tools

16. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 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

17. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 17 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.

18. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 18 Cause-and-Effect Diagram Figure 4.8 Commonly known as a fishbone or Ishikawa diagram Branches are organized around the Five Ms

19. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 19 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?”

20. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 20 Scatter Plot Figure 4.10

21. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 21 Check sheet - Example Table 4.9

22. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 22 Pareto Chart Figure 4.17

23. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 23 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

24. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 24 Bar Graph Figure 4.12

25. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 25 Run Chart Figure 4.12

26. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 26 Histogram Figure 4.12

27. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 27 4. Define process maps?

28. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 28 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.

29. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 29 Process Mapping Symbols Figure 4.4

30. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 30 Process Improvement Tools  Process Maps  A visual model of a process

31. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 31 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.

32. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 32 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?

33. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 33 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.

34. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 34 Swim Lane Process Example Figure 4.7

35. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 35 5. What are three important measures of business process performance?

36. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 36 Measuring Business Process  Productivity  Efficiency  Cycle Time

37. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 37 6. Define Productivity.

38. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 38 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

39. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 39 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.

40. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 40 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.

41. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 41 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)

42. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 42 7. What are the two general processes for manufacturing and service?

43. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 43 General Processes Product/Process matrix Service system design matrix

44. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 44 Process flow selection and the Product Process Matrix Tend to be product- oriented Can be either Tend to be process- oriented

45. 4- 45 Exhibit 4.7 Service System Design Matrix Choices for Service Providers: The Service System Design Matrix Customer contact & sales opportunity versus efficiency.

46. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 46 8. Define Concurrent Engineering.

47. 4- 47 A Closer Look at Concurrent Engineering Performing product and service development engineering functions in tandem to reduce time and improve communication.

48. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 48 9. Define Benchmarking.

49. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 49 Benchmarking  Benchmarking – The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance.

50. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 50 10. What are the two types of benchmarking?

51. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 51 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.

52. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 52 Competitive Benchmarking Table 4.7

53. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 53 11. Define Six Sigma Methodology.

54. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 54 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.

55. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 55 Six Sigma People  Champion  Master Black Belt  Black Belt  Green Belt  Team Members

56. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 56 12. What are the two Six Sigma processes?

57. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 57 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)

58. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 58 13. Define Reengineering.

59. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 59  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

60. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 60 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

61. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 61 14. What are the characteristics of a reengineered process?

62. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 62 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

63. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 63 The SCOR Model  Five core processes for Level 1  Source  Make  Deliver  Return  Plan

64. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 64 The SCOR Model  Level 2 Processes – Break down Level 1 processes into more detail.  Make to stock  Make to order  Engineer to order  Level 3 Processes – Describe in detail the actual steps required to execute level 2 processes.

65. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 65 The SCOR Model © Supply Chain Council, 2011 Figure 4.18