Improving the Business Processes

Copyright 2009 Babineaux Educational Services and Training, Inc.

A presentation by:F. Michael Babineaux, CPSM. C.P.M.

President/CEOBabineaux Educational Services and Training, Inc.

www.BESTraining.com901.853.0539

Business Process Improvement – Today’s Source of Competitive

AdvantageHow Supply Management can Tap the Power of

Process Improvement

http://www.bestraining.com/


How Supply Management can Tap the Power of Business Process Improvements to

Reduce Cost


Who Am I?

• F. Michael “Mike” Babineaux, CPSM, C.P.M.• Experience

– 40 years Supply Management Experience– 30 year FedEx Veteran

• SCM Educator and Trainer– Babineaux Educational Services &Training, Inc.– www.BESTraining.com– 901.853.0539

http://www.bestraining.com/


Why’s Business Process Improvement Important Now?


Why Now?Recessions are a great time . . .

–to think about Business Process Improvements!

Recessions offer unique opportunity . . .–to take on projects that you would

(in normal and prosperous times) just throw more money at it!


Why’s Business Process Improvement

Important?Global Supply Chain: Balancing Cost Reduction and Performance Improvement

Ernst & Young | March 18, 2009

Working with the Economist Intelligence Unit, Ernst & Young surveyed more than 250 senior executives from the world's largest corporations to get a sense of how businesses are approaching cost reduction efforts, and what is expected of their supply chains.

Overwhelmingly, senior executives expect to achieve savings by improving the business processes of their operations.


Agenda and DirectionBusiness Process

Improvement

• Process Basics

• Process Management

• Modeling

• Process Improvement


• A business process consists of a group of logically related activities that use the resources of the organization to provide defined results in support of the organization’s objectives

Business Processes -Definition

InputsInputs Value-Adding Activities

Value-Adding Activities OutputsOutputs


Business Processes -Four Prime Objectives

1. Easy to Use

2. Optimize Resources

3. Eliminate Errors

4. Minimize delays


Business Processes -

Thirty Thousand foot level

CustomerRequirements

NEW PRODUCT INTRODUCTION

ORDER FULFILLMENT

Design/Develop Market

Demand Operations Supply

Supply Base

Supply Base

CustomerSatisfaction

Corporate Strategy

Infrastructure, People, and Culture

Forecasting

Supply/Demand Planning

Base business philosophy

Getting and keeping customers

Staying on the leading edge


SUPPLY

• Supply Planning and Scheduling

• Strategic Sourcing• Supplier Selection• Supplier

Development• Invoicing/Payment

Order Fulfillment Process Key Supply Chain

Management Processes

OPERATIONS

• Operations Planning and Scheduling

• Capacity Planning• Material Handling• Inbound Logistics• Warehousing• Inventory

Management

DEMAND

• Demand Planning and Forecasting

• Order Entry• Outbound

Logistics• Finished Goods

Inventory Management


Supplier Selection – Key Process Example

• Specification Development• Requirement Review• Source Identification• Source Qualification• Request Preparation• Source Solicitation• Response Evaluation• Source Selection


Business Process LevelsWhere do you start?

• Getting & Keeping Customers

– Order Fulfillment

• Supply Supplier Selection

oSource Identification


Business Process LevelsWhere do you start?

Getting&

KeepingCustomers

Getting&

KeepingCustomers

OrderFulfillment

OrderFulfillment

SupplySupply

SupplierSelection

SupplierSelection

SourceIdentification



SupplierSelection

Supply

OrderFulfillment

Getting &Keeping

Customers


Key Point – Process Basics

Focus on Business Processes

BECAUSETHAT’S HOW

THE WORK GETS DONE & COST IS

REDUCED!


Agenda and Direction

• Process Basics• Process Management

– The Need for Management– Performance Management– Performance Constraints


Business Processes- The Need for management

• Effective Processes -– are not an accident

– must be well designed and managed

– have no process autopilot


Performance Management Requirement

• Process performance should be

driven by customer requirements


Performance Management Required Process Capabilities

CUSTOMERREQUIREMENTS

PROCESSPERFORMANCE

TARGETS

REQUIRED PROCESS CAPACITY

REQUIRED PROCESS

CAPABILITIES


Process Capabilities Determines

• Capability determines . . .– what a process can do– how well it can perform– performance range

• Upper and lower performance limits

REQUIRED PROCESS

CAPABILITIES


Determinates of Process Capabilities

PROCESSCAPABILITY

People• Skills• Training

Methods• Work flow• Decision

making

Technology• Equipment• IS/IT

Inputs• Information• Materials


Process ManagementProcess Capability

• Process management must insure that . . .– process performance requirements are

feasible given process capability

– Or that process capability is adequate given performance requirements

PROCESSCapability

PROCESSPERFORMANCE

TARGETS


Performance Management Required Process Capacity

CUSTOMERREQUIREMENTS

PROCESSPERFORMANCE

TARGETS

REQUIRED PROCESS CAPACITY

REQUIRED PROCESS

CAPABILITIES


Process CapacityDefinitions

• 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 scheduling, quality factors, maintenance, etc.

– Demonstrated capacity -- the rate of output actually achieved


Determinates of Process Capacity

PROCESSCapacity

People• Skills• Training

Downtime• Planned• Unplanned

Product/Service Mix

Technology• Equipment• IT/IS


Process CapacityVolume Determinates

• Capacity determines . . .– the upper bound of the rate of output and– the volume of work that can be performed

by a process during a specified time period


Process CapacityTime Constraint

• 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


“Bottlenecks” Limit System Capacity

Step 1 Step 2 Step 3

Capacity:250 units/day



If Customer requirements are 210 units per day, is the process capacity adequate?


Parallel Operations

Step 1

Step 2a

Step 3


Capacity (each):105 units/day

Capacity:300 units/dayStep 2b-210 90

-210 40


Process ManagementProcess Capacity

• Process management must insure that . . .– process performance requirements are

feasible given process capacity

– Or that process capacity is adequate given performance requirements

PROCESSCapacity

PROCESSPERFORMANCE

TARGETS


3 Key Points – Process Management

• Processes must be managed to remain effective and efficient

–Processes do not improve on their own

• Process Performance must be customer driven

• Process Capabilities and Capacities must fit with performance requirements


Agenda and DirectionBusiness Process

Improvement

• Process Basics


• Modeling– Alternative Models– Design Concepts


Modeling

• Reality Representation• Models Types

– Physical– Mathematical– Schematic / graphical

• We will focus on schematic or graphical modeling


Business Process Modeling

• Important part of process improvement efforts

• Tool for understanding– individual business process– relationships between business processes

• Flowcharting is the most commonly used


FlowchartsFlowcharts

A graphical model of an existing process or proposed new process that uses simple symbols, lines, and words to pictorially display the activities and their sequence in a process.


Types of Flowcharts

• Block diagrams– Advantage: Simplicity

(only two activity types - action and flow)

Action Action

Action

Action


Block Diagram: Stores Requisition Process

User completes requisition

Requisition waits in

internal mail

Deliver requisition to

Stores

Requisition waits in Stores

in-box

Clerk enters order

If in stock, pick order

Check order for

correctness

File the requisition

Deliver order to user


Flow Process Chart:Stores Requisition Process

Stores Requisition: Details of method

Op

erat

ion

T

ran

spo

rt

Insp

ecti

on

Del

ay

Sto

rag

e

1. User completes requisition

2. Wait in internal mail

3. Deliver requisition to Stores

4. Wait in Stores in-box

5. Clerk enters order

6. If in stock, pick order

7. Check order

8. File requisition

9. Deliver to user


Types of Flowcharts

• Block diagrams

• Flow-process charts

• American National Standard Institute (ANSI) flow– Six activity types

UserCompletesRequisition

Wait inInternal Mail

ClerkEntersOrder

InStock?

NotifyUser

N

Y


Standard ANSI Process Flow Chart

Activity Types

Operation

Transport

Storage

DecisionInspection/Approval

Delay


ANSI Process Flow Chart:Stores Requisition Process


Wait inInternal Mail

Deliver toStores

Wait inStores In-Box

ClerkEntersOrder

InStock?

NotifyUser

N

YPickOrder

FileRequisition

CheckOrder

Deliver toUser

Operation Delay DelayTransport Operation

OperationInspectionStorageTransport


ANSI Process Flow Charting –

Additional Dimensions• Time element

– Operations & Delays• Average and range

• Transport– Distance moved

• Resources required & Capacity


Process Flow Chart:Stores Requisition


Wait inInternal Mailave: 2 hrs (0-4 hrs)

Deliver toStores

ave: 1 hr(0.5-1.5 hrs)

Wait inStores In-Box

ave: 1 hr(0-2 hrs)

ClerkEntersOrder

InStock?

NotifyUser

N

YPickOrder

FileRequisition

(0.1 hrs)

CheckOrder

(0.1 hrs)

Deliver toUser

ave: 2 hrs(1-3 hrs)

(0.1 hrs)

ave: 0.4 hrs(0.2 - 1.5 hrs)


Process Flow Charting – 3 Considerations

• Document – how the process 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?


Process Flow Charting - Benefits

• Gain a clear understanding of how the process actually works– Capacities & Capabilities– Cycle times

• Highlight potential improvement opportunities– Unnecessary steps– Redundant steps– Inefficient sequencing of steps– Identification of bottlenecks


Key Points – Process Modeling

• Important part of process improvement efforts

• Tool for understanding– individual business process– relationships between business processes


Agenda and Direction

• Process Basics


• Process Modeling

• Process Improvement– Selection– Process Improvement Process– “Best Practices”


Process Improvement Selection

Critical Factors

• Customer impact– High makes the list

• Ability to change– High makes the list

• Business or supply chain impact– High makes the list

• Current performance– Low makes the list


• Frequent customer problems/complaints– internal or external

• High-cost processes– More opportunity to reduce cost

• High-variability processes– Consistency Opportunity

• Long cycle time processes– Quicker can be beneficial


Opportunity Keys


Process Improvement Process

Five steps and a map

1. Establish process improvement team

– You can’t do it all yourself– Two heads are better than one– Ownership– Elephant and the Blind Men


Process Improvement Team Selection

• Expertise of Process

• Customer of Outputs

• Supplier of Inputs

• Information Systems

• What Others?




•Map process•Collect andanalyze data





2. Understand current process– As Is – Not as should be– You can’t change what you don’t

understand






DevelopProcess

Knowledge

DevelopProcess

Knowledge




3. Identify initial improvement efforts

– Cost/Benefits Analysis – Big, quick gains first



Where are the Cost?

• Delays• Duplications• Transports• Inspections• Approvals• Where else?

• Every step in a process could have hidden costs




Map processAnd

analyze data

Map processAnd

analyze data

DevelopProcess

Knowledge

DevelopProcess

Knowledge

SelectProcess

Improvementtargets

SelectProcess

Improvementtargets




4. Understand how people deal with change


"It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things.“

N. Machiavelli -- The Prince.


Stability Focus Involvement Focus

Results FocusAnalytical Focus

Observable Behavior of People Dealing with

Change

Quick to Change Fun Loving

Slow to Change Relationships

Quick to Change In Control

Slow to Change Details

Facts

Feelings

Ask

Ass

erti

veT

ell Assertive




4. Understand how people deal with change– Analytical Focus

• Give them Details

As long as they know the facts




4. Understand how people deal with change

– Stability Focus• Give them security

As long as everybody gets along




4. Understand how people deal with change– Involvement Focus

• Get them involved

As long as they are part of the solution




4. Understand how people deal with change– Results Focus

• Give them control

A few dead bodies won’t hurt anything




ChangeProcess

ChangeProcessMap process

Andanalyze data

Map processAnd

analyze data

DevelopProcess

Knowledge

DevelopProcess

Knowledge

SelectProcess

Improvementtargets

SelectProcess

Improvementtargets




5. Establish Controls and Measurements

– Prior• Budgets

– During• Reports

– Post• Audits

“One Person’s Control is Another’s Bureaucracy”




5. Establish Controls and Measurements

– Provides manageability and adaptability– “You can’t manage what you don’t

measure”




Controls&

Measurements

Controls&

Measurements

ChangeProcess

ChangeProcessMap process

Andanalyze data

Map processAnd

analyze data

DevelopProcess

Knowledge

DevelopProcess

Knowledge

SelectProcess

Improvementtargets

SelectProcess

Improvementtargets




Map processAnd

analyze data

Map processAnd

analyze data

DevelopProcess

Knowledge

DevelopProcess

Knowledge

ChangeProcess

ChangeProcess

ImprovedPerformance

ImprovedPerformance

SatisfiedCustomers

ShareholdersEtc.

SatisfiedCustomers

ShareholdersEtc.

InputsActivities

Outputs

SelectProcess

Improvementtargets

SelectProcess

Improvementtargets

Controls&

Measurements

Controls&

Measurements


• Frequent customer problems/complaints• High-cost processes• High-variability processes• Long cycle time processes• A known “best practice” exists


Opportunity Keys


Process Management“10 Best Practices”

1. Achieved 4 Prime Objectives Easy to Use Processes Optimized Resources Eliminated Errors Minimized delays



2. Accountability for process performance– Need a “Process Owner” – Who to go to if the process doesn’t work– There must be accountability


3. Well-defined process boundaries – Not walls– Boundaries established or defined– Scope Definition




4. Well-defined interfaces and responsibilities– Must know how our process interfaces with

others– For accountability

• Responsible for a package delivered to the dock and then lost inside the building?



5. Documentation– Policies– Procedures – Training requirements

• SKA’s



6. Formal performance measurement– Universally compelling metrics– Scorecards

• Internal• External



7. Formal feedback controls that includes . . . – Monitoring– Reporting– Evaluating



8. Known cycle times– Benchmark– Survey– Observation



9. Formal change procedures– Introduces process discipline– Maintain currency

• Keeping up with changing Customer requirements



10.Performance that is customer driven– The only way to ensure successful

results• Customer, Stakeholder, etc. Satisfaction


Key Point – Process Improvement

Where best practices have been established, don’t try to

reinvent the wheel….copy them

70 – 80

Improving the Business Processes

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