Business Processes Chapter 4 PDF

Chapter BUSINESS Four PROCES S  CHAPTER OBJECTIVES  Explain what a business process is and how the business perspective differs from a traditional functional perspective.  Create process maps for a business process and use these to understand and d...

Chapter BUSINESS Four PROCES S  CHAPTER OBJECTIVES  Explain what a business process is and how the business perspective differs from a traditional functional perspective.  Create process maps for a business process and use these to understand and diagnose a process.  OPENING STORY Procter & Gamble – Streamlined Logistics Initiative  INTRODUCTION In recent years, corporate executives have recognized the importance of putting in place business processes that effectively manage the flow of information, products and money across the supply chain. WHY?  INTRODUCTION 1. The dollars involved! Total supply chain costs represent the majority of the total operating budget for most organizations (75%). 2. The increased emphasis on providing value to the customer.  BUSINESS PROCESSES Business process: a set of logically related tasks or activities performed to achieve a defined business outcome. These outcomes can be: physical, informational or monetary.  THREE TYPES OF BUSINESS PROCESSES  Primary processes: address the main value-added activities of an organization. They include activities such as delivering a service and manufacturing a product.  Support processes: perform necessary but not value-added activities ex:HR, IT, finance.  Development processes: are those that improve the performance of primary and  EXAMPLE OF THE 3 TYPES OF BUSINESS PROCESSES Primary process: Manufacturing Support process: Developing a sales & operations plan Development processes: Training new workers  SO WHAT’S THE PROBLEM? For many business processes, no ! single functional area or supply chain partner has a complete view or complete control of the situation.  SOLUTION?! IMPROVING THE BUSINESS PROCESSES  EXAMPLE: ENROLLING IN CLASSES Students interact with 3 functions to register: 1. College or department (which grant permission to take classes). 2. The registrar’s office (which manage the actual enrollment process). 3. The cashier’s office/bank (which handled tuition payment). A student would first visit his department to pick up the proper permission forms then schedule his classes, and finally pay tuition. Of course any problem in the system could force the student to  WHAT’S WRONG WITH THIS PROCESS? It is convenient for everyone BUT THE STUDENTS! Many universities reorganized these activities into a single process with a focus on speed, accuracy and convenience to the students (e.g. online registration and payment).  THE KEY POINT?! Improving the enrollment process required the different functional areas to look beyond their own activities and see the process through the customers’ (i.e. students’) eyes.  PROCESS IMPROVEMENT Improving business process is at the very core of operations and supply chain management. The performance level of most processes tends to decrease over time unless forces are exerted to maintain it. Even if an organization does not feel a need to improve its business process, it may be forced to due to competitive pressures.  MAPPING BUSINESS PROCESSES Before firms can effectively manage and improve a business process, they must understand it. One way to improve is by understanding developing graphic of the representations organizational activitie s relationships that make up aand/or the business process. {MAPPING}.  MAPPING BUSINESS PROCESSES Mapping serves several purposes: It creates a common understanding of the content of the process: its activities, results and who performs each step. It defines the boundaries of the process. It provides a baseline against which to measure the impact of improvement efforts.  MAPPING BUSINESS PROCESSES Two approaches to mapping business processes: 1. Relationship maps. 2. Process maps.  RELATIONSHIP MAPS It is a high level map that shows the major organizational entities involved in a business process and how they are connected to one another. Relationship mapping is most helpful when the participants are still trying to determine the scope of the process.  EXAMPLE: RELATIONSHIP MAPS Automotive OEM wanted to understand how the company’s needs were communicated to suppliers.  First-tier supplier responsible for entire cockpit (all interior pieces)  Second-tier suppliers provide “families” of parts to first- tier supplier (e.g., plastic trim, gauges and wiring, etc.)  FINDINGS 1) OEM provided first-tier supplier with weekly demand forecast for next 10 weeks 2) First-tier supplier sent its ‘own’ demand forecasts to 10 second-tier suppliers 3) Second-tier suppliers delivered the requirements to first-tier supplier  RELATIONSHIP MAP Tier 2 Family 1 Supplier Automotive Family 2 Tier 1 OEM Supplier Supplier of Assembly Family 3 “Cockpits” Plant Supplier   Physical and Family 10 Information Supplier Flows  PROCESS MAP A detailed map that identifies the specific activities that make up the informational, physical and/or monetary flow of a process. Process flowcharts often give managers their first complete picture of how the process works.  PROCESS MAP 1. Identify the entity that will serve as your focal point:  Customer?  Order?  Item? 2. Identify clear boundaries, starting and ending points 3. Keep it simple  Does this detail add any insight?  Do we need to map every exception condition?  MAPPING SYMBOLS Start or finishing point Step or activity in the process Decision point (typically requires a “yes” or “no”) Input or output (typically data or materials) Document created Delay Inspection Mov e acti vity  EXAMPLE ON PROCESS MAPPING AT SAN DIEGO DC This DC has responsibility for supplying products to dealers located within a 30 mile radius. Lately the DC has been receiving a lot of complaints from dealers regarding lost orders and the time required to process orders for items that are already in stock at the DC.  EXAMPLE ON PROCESS MAPPING AT SAN DIEGO DC A process improvement team has decided to study the process in more detail by tracing the flow of adealer order through the DC, starting from when the dealer faxes in the order and ending with the order’s delivery to the dealer. The team has collected the following  FACTS OF THE CASE I 1) Dealer faxes order to DC. One out of 25 orders lost because of paper jams. 2) Fax sits in “In Box” around 2 hours (up to 4) until internal mail picks it up. 3) Internal mail takes about one hour (up to 1.5 hours) to deliver to the picking area. One out of 100 faxes are delivered to the wrong place. 4) Order sits in clerk’s in-box until it is processed (0 to 2 hours). Processing time takes 5 minutes. 5) If item is in stock, worker picks and packs order (average = 20 minutes, but up to 45 minutes).  FACTS OF THE CASE I 5) Inspector takes 2 minutes to check order. Still, one out of 200 orders are completed incorrectly. 6) Transport firm delivers order (1 to 3 hours).  PROCESS MAPPING Dealer Paper Order Order Clerk Order Internal Mail Faxes Sits In Sits In Processes Created Delivers Order Fax In Clerk’s In Order Fax Box Box 4% of 0 to 4 hours 1 to 2 hours 5 orders 2 hours on 0.5 to 1.5 hours 2 hour on minutes lost average 1 hour on average average 1% of orders lost 10 to 45 minutes 20 minutes on average Dealer Inspector Worker YES Transport Firm Is Item Receives Checks Picks Delivers In Order Order Order Order Stock? NO 2 minutes 1 to 3 hours 0.5% of orders 2hours on incorrect Clerk Notifies average No history Dealer and of lost, damaged, or incorrect Passes deliveries Order On to Plant  IMPROVING BUSINESS PROCESSES: GUIDELINES Attack each delay What causes it? How long is it? How could we reduce its impact? Examine each decision point Is this a real decision or just a checking activity? If the latter, can we automate or eliminate it? Dematerialize documentation. Can we do it electronically? Eliminate multiple copies? Share a common database?