Unit 5A - Business Processes PDF

Unit 5A – Business Processes Chapter 5A - Business Processes Business Processes – Unit 5A Outcomes 5.1 Describe a business process and how the business process perspective differs from a traditional, functional perspective. 5.2 Create process maps for a business process...

Unit 5A – Business Processes Chapter 5A - Business Processes Business Processes – Unit 5A Outcomes 5.1 Describe a business process and how the business process perspective differs from a traditional, functional perspective. 5.2 Create process maps for a business process and use them to understand and diagnose a process. 5.3 - Examine the factors to consider when improving a business process. 5.4 Calculate and interpret efficiency and compare it to productivity. 5.5 - Calculate and interpret business process cycle time and percent value-added time. 5.6 - Discuss the importance of benchmarking and distinguish between competitive benchmarking and process benchmarking. Managing Flows Across the Supply Chain is Important!! Why? Majority of total operating budgets—75% high sometimes! 5.1 - Business Processes Process – A set of logically related tasks or activities performed to achieve a defined business outcome. © 2016 APICS Dictionary 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. Table 4.1 Examples of Business Processes Primary Processes (VA) Support Processes (NVA) Development Processes Providing a service Evaluating suppliers Developing new products Educating customers Recruiting new workers Performing basic research Manufacturing Developing a sales and Training new workers operations plan (S&OP)  Managing functions is NOT managing 5.1- Business Processes what a company does!! Figure 4.1 Examples of Business Processes That Cut across Functions and Organizations Auditing, fin. liability  5.2 - Mapping Business Processes Mapping – The process of developing graphic representations of the organizational relationships and/or activities that make up a business process. Purposes of Mapping It creates a common understanding of the content of the process: its activities, its results, and who performs the various steps. It defines the boundaries of the process. It provides a baseline against which to measure the impact of improvement efforts. Process Map – A detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flow of a process. Process Mapping Rules Identify the entity that will serve as the focal point. Identify clear boundaries and starting and ending points. Keep it simple 5.2 - Mapping Business Processes Figure 4.5 Process Map for the Bluebird Café Example – Business Process at Distribution Center (DC) Process Steps: Dealer emails an order to the DC which is automatically printed on the copier. One out of 25 orders are lost because the copier jams or an employee accidentally throws it away. Printed order sits in an inbox around 2 hours (0 to 4) until internal mail picks it up. Internal mail takes about one hour on average to deliver the order to the picking area. One out of 100 orders are delivered to the wrong place. Order sits in clerk’s inbox until it is processed for 0 to 2 hours (average 1 hour). Processing time takes 5 minutes. If item is in stock, worker picks and packs order. (Average = 20 minutes, with range from 10 to 45 minutes). Inspector takes 2 minutes to check order. Still, one out of 200 orders are completed incorrectly. Transport firm delivers order with average delivery time of 1 to 3 hours (average 2 hours). If the item is out of stock, the clerk notifies the dealer and passes the order along to the plant while arranging a special shipment directly to the dealer, usually within a week. Example – Distribution Center Figure 4.6 Order-Filling Process for In-stock Items Example – Performance Impact for Business Process at Distribution Center Average Time between Ordering and Delivery for an in-stock item is 6.4 hours (387 minutes) Can be as long as 11.3 hours (682 minutes) If an item is not in stock, it will take even longer. Of the 6.4 hours an order spends on average in the process, a full 3 hours is waiting time. 5 percent of the orders are “lost” before they even get to the picking area. For the orders that do survive to this point, 1 out of 200 will be shipped with the incorrect items or quantities.  5.3 - Measuring and Improving Business Processes Questions to ask: Measures of Process Performance How do we know if a business process is Quality meeting customers’ needs? Even if Performance quality, Conformance quality, customers’ needs are being met, how do Reliability we know whether the business process is being run efficiently and effectively? Cost Labour, Material, Quality-related costs How should we organize for business process improvement? What steps should Time we follow? What roles should people Delivery speed, Delivery reliability play? Flexibility What types of tools and analytical Mix flexibility, Changeover flexibility, Volume techniques can we use to rigorously flexibility evaluate business processes? How can we make sure we manage based on fact and not opinion? 5.4 - Efficiency Efficiency – A measure of process performance; the ratio of actual outputs to standard outputs. Usually expressed in percentage terms. Efficiency = 100% (actual outputs / standardoutputs) Standard output – An estimate of what should be produced, given a certain level of resources.  5.4 - Productivity Vs Efficiency Productivity – Unit # 1 # of HW ??s/ student work hr = Outputs / Inputs # of items produced/machine hrs Efficiency = (actual output / standard)(100%) Remember: Efficiency refers to the amount of effort and resources people put into work. Productivity refers specifically to the amount of work done over a specific period of time. One of my favourite sayings….If you can’t measure it you can’t manage it!!  Example – Efficiency with Standard Output At a car manufacturing plant, suppose each welder on an assembly line is expected to weld 30 units an hour. Lloyd welds 27 units an hour, while Doug welds 33 units an hour. The efficiency of each welder is calculated as follows: Efficiency = (actual output / standard)(100%) Lloyd = (27/30)(100%) = 90% Doug = (33/30)(100%) = 110% What do you conclude about each welder, considering that they have the same level of experience and use the same tools? 5.5 - Cycle Time & Percent Value-Added Time Cycle Time Time required to complete a process =elapsed time /# cycles % Value added Time = time spent on value added activities (Value added time/ Total cycle time) x 100% Next…what is % VA time? What are Non-VA steps?????  IMPROVING CYCLE TIME -WITH STEPS DONE IN PARALLEL What is the total Cycle Time? What is the total Cycle Time with 2 steps completed at the same time (in parallel)?  Measuring Business Process Efficiency – Sample Problem In our spare time in class (at work), we make paper airplanes. We produce 12 paper airplanes in 8 hours. The standard is 15 paper airplanes in 8 hours. A) Calculate the productivity per labour hour. B) Calculate the standard cycle time in minutes. C) Calculate the efficiency D) If the value added time is 24 minutes in each cycle, calculate the % value added time.  Measuring Business Process Efficiency – Sample Problem We produce 12 paper airplanes in 8 hours. The standard is 15 paper airplanes in 8 hours. A) Calculate the productivity per labour hour. 12/8 hrs = 1.5 planes/hr B) Calculate the standard cycle time in minutes. C) Calculate the efficiency D) If the value added time is 24 minutes in each cycle, calculate the % value added time.  Measuring Business Process Efficiency – Sample Problem We produce 12 paper airplanes in 8 hours. The standard is 15 paper airplanes in 8 hours. A) Calculate the productivity per labour hour. 12/8 hrs = 1.5 planes/hr B) Calculate the standard cycle time in minutes. 8hrs = 480 mins 480/15 = 32 mins C) Calculate the efficiency D) If the value added time is 24 minutes in each cycle, calculate the % value added time.  Measuring Business Process Efficiency – Sample Problem We produce 12 paper airplanes in 8 hours. The standard is 15 paper airplanes in 8 hours. A) Calculate the productivity per labour hour. 12/8 hrs = 1.5 planes/hr B) Calculate the standard cycle time in minutes. 8hrs = 480 mins 480/15 = 32 mins C) Calculate the efficiency 12/15 = 80% D) If the value added time is 24 minutes in each cycle, calculate the % value added time  Measuring Business Process Efficiency – Sample Problem We produce 12 paper airplanes in 8 hours. The standard is 15 paper airplanes in 8 hours. A) Calculate the productivity per labour hour. 12/8 hrs = 1.5 planes/hr B) Calculate the standard cycle time in minutes. 8hrs = 480 mins 480/15 = 32 mins C) Calculate the efficiency 12/15 = 80% D) If the value added time is 24 minutes in each cycle, calculate the % value added time. 24/32 x 100% = 75% value added  Measuring Business Process Efficiency – Sample Problem We produce 12 paper airplanes in 8 hours. The standard is 15 paper airplanes in 8 hours. A) Calculate the productivity per labour hour. 12/8 hrs = 1.5 planes/hr B) Calculate the standard cycle time in minutes. 8hrs = 480 mins 480/15 = 32 mins C) Calculate the efficiency 12/15 = 80% D) If the value added time is 24 minutes in each cycle, calculate the % value added time. 24/32 x 100% = 75% value added Why be careful of just doing it faster???  5.6 - Benchmarking – Competitive vs Process Benchmarking – The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance. TWO kinds: A comparison of a company’s performance to the performance of: Other firms in its industry -competitive or strategic benchmarking Firms with processes identified as “world-class” but in unrelated firms - process benchmarking 5.6 - Benchmarking – Competitive vs Process Table 4.7 Competitive Benchmarking Data for Selected U.S. Airline Carriers Percentage of Flights Percentage of Mishandled Baggage Airline Arriving on Time, 12 Months Flights Cancelled, Reports Per 1,000 Carrier Ending March 2016 March 2016 Passengers, March 2016 American 81.3% 0.5% 3.19 Delta 86.7% 0.1% 1.57 Frontier 77.5% 2.6% 2.62 Hawaiian 89.9% 0.1% 2.78 JetBlue 76.7% 0.5% 1.60 Southwest 81.0% 1.1% 2.65 United 79.9% 1.1% 2.58 Virgin America 79.4% 1.2% 0.82 Source: Based on U.S. Department of Transportation, “Air Travel Consumer Report,” May 2016, www.dot.gov/sites/dot.gov/files/docs/2016MayATCR.pdf. 5.6 - Competitive or Process Benchmarking? 1. Comparing your grade in OPER1160 to your classmates? 2. Comparing your overall Grade Point Average (GPA) with students in Fanshawe Business programs? 3. Canadian Tire comparing their supply chain with Dell computers 4. Home Hardware warehouse comparing their pick rates with Canadian Tire warehouse Review Although cycle time is an important measure of process performance, it is not the only measure to be considered. Give an example where focusing exclusively on reducing cycle times might hurt other, equally important, measures of process performance. How does efficiency compare to productivity?