Transcript Business Processes

Business Processes
Chapter 4
Text: Introduction to Operations and Supply Chain
Management
Custom edition for Farmingdale State College
Authors: Cecil Bozarth & Robert Handfield
Where appropriate reference text page numbers will be
on bottom of slides
OSC may be used as an abbreviation of Operations
and Supply Chain
Chapter Objectives
Be able to:
 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.
 Calculate and interpret some common measures of process
performance.
 Discuss the importance of benchmarking and distinguish
between competitive benchmarking and process
benchmarking.
 Describe the Six Sigma methodology, including the steps of the
DMAIC process.
 Use and interpret some common continuous improvement
tools.
 Explain what the Supply-Chain Operations Reference (SCOR)
model is and why it is important to businesses.
Procter & Gamble
Page 44
Business Processes
• Business processes defined
• Mapping business processes
• Managing and improving business
processes
– Measuring process performance
• The SCOR Model
Business Processes Defined
Logically related sets of tasks or activities
geared toward some business outcome
 Primary
the main value-added activities
 Support
necessary, but not value-added activities
 Development
activities that improve primary & support activities
What is the distinction? Examples of each? Are
the dividing lines always clear?
Pg 46
Examples of processes
Primary
Support
Development
• Providing a
service
• Educating
Customers
• Manufacturing
a product
• Evaluating
suppliers
• Recruiting new
workers
• Developing a
sales &
operating plan
•Developing
new products
•Performing
research on
improving
products
•Training new
workers
• Prior to 1990s, attention was on activities
within each business function (P&G)
• If focus was on individual functions and those
functions ran well, then the business should do well
• Managing functions is not the same as
managing what a business does
• The whole needs to be greater than the
sum of it’s parts
Versus the “functional”
Perspective
Suppliers Purchasing Engineering Operations
Finance
Marketing Customers
Developing new products/services (Chapter 6)
Evaluating suppliers (Chapter 10)
Developing sales & operations plans (Chapter 13)
What are some of the challenges in managing such processes?
To effectively manage, measure
and improve something, it must
first be understood
Mapping Business Processes
An effective, simple way to improve understanding
of the business process is by developing a graphic
representation of all the activities and relationships
with thin the process
• Creates common understanding of the activities, results
and who performs the steps
• Defines the boundaries of the process
• Can be a training tool
• Provides baseline to measure improvement
Pg 48
Mapping Business Processes
• Relationship maps
• Detailed process maps
• ‘Swim Lane’ process maps
Relationship Map Example
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
Family 2
Supplier
Family 3
Supplier
Family 10
Supplier
Tier 1
Supplier of
“Cockpits”
Physical and
Information
Flows
Automotive
OEM
Assembly
Plant
Detailed Process Map
Identifies the specific activities that make up the
process. Basic steps are:
1.
Identify the entity that will serve as your focal point:



2.
Customer?
Order?
Item?
Identify clear boundaries, starting and ending points

3.
Segment of the process?
Keep it simple


Does this detail add any insight?
Do we need to map every exception condition?
Detailed Process Map
• Document the process “as is”, not how it
should be or how it is remembered
• May be necessary to observe, monitor &/or follow
the process
• Need to map in manageable, logical
segments
• Keep the focus relatively small
• Only areas which you have managerial control
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
Move activity
Typical, but others may be used as appropriate
Detailed Process Map Example
Facts of the Case I
Process
1)
2)
3)
4)
Dealer faxes order to DC. One out of 25 orders lost
because of paper jams.
Fax sits in “In Box” around 2 hours (up to 4) until internal
mail picks it up.
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.
Order sits in clerk’s in-box until it is processed (0 to 2
hours). Processing time takes 5 minutes.
Facts of the Case II
5)
6)
7)
If item is in stock, worker picks and packs order (average
= 20 minutes, but up to 45 minutes).
Inspector takes 2 minutes to check order. Still, one out of
200 orders are completed incorrectly.
Transport firm delivers order (1 to 3 hours).
Let’s Map the Process
 What is the focal point of the mapping effort?
 What are the boundaries of the process map?
 What detail is missing from this simple example?
One Possible Solution
Dealer
Faxes
Order
Paper
Order
Created
4% of
orders lost
Order Sits
In Fax
In Box
0 to 4 hours
2 hours on average
Order Sits
In Clerk’s
In Box
Internal Mail
Delivers Fax
0 to 2 hours
1 hour on average
0.5 to 1.5 hours
1 hour on average
1% of orders lost
Clerk
Processes
Order
5 minutes
10 to 45 minutes
20 minutes on average
Dealer
Receives
Order
Transport Firm
Delivers Order
1 to 3 hours
2 hours on average
No history of lost,
damaged, or incorrect
deliveries
Inspector
Checks
Order
Worker
Picks
Order
2 minutes
0.5% of orders incorrect
YES
Is Item
In Stock?
NO
Clerk Notifies
Dealer and
Passes Order
On to Plant
Is there room for improvement?
Paper
Order
Created
Dealer
Faxes
Order
• Order spends 6.45
hrs in process
• 3 hrs is waiting
• 5% of orders are
lost before picking
• 1 out of 200 will be
shipped with wrong
items or amounts
4% of
orders lost
Order Sits
In Fax
In Box
Order Sits
In Clerk’s
In Box
Internal Mail
Delivers Fax
0 to 4 hours
2 hours on average0.5 to 1.5 hours
1 hour on average
1% of orders lost
Clerk
Processes
Order
0 to 2 hours
1 hour on average
5 minutes
10 to 45 minutes
20 minutes on average
Dealer
Receives
Order
Transport Firm
Delivers Order
1 to 3 hours
2 hours on average
No history of lost,
damaged, or incorrect
deliveries
Inspector
Checks
Order
Worker
Picks
Order
2 minutes
0.5% of orders incorrect
YES
Is Item
In Stock?
NO
Clerk Notifies
Dealer and
Passes Order
On to Plant
Detailed Process Map Example
Process mapping at a San Diego
distribution center (DC)
*Textbook, pages 50-52.
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?
More Guidelines
• Look for loops
– Why is this loop here?
– Would we need to loop if we didn’t have any failures
in quality, planning, etc?
• Process steps
– What is the value of this activity, relative to its cost?
– Is this a necessary activity (support or
developmental?), or something else?
Taking It Further ...
• All activities add costs and time
• Not all value-added activities provide “net”
value
– “Underperformers”
• Not all support and developmental activities
are necessary
– Necessary versus “symptomatic”
Symptomatic Activities ...
• Inspecting or reworking goods
• Expediting shipments or “fighting
fires”
• Overproducing, holding excessive
inventories
• Standard backorder process
…and Typical Causes
• Poor quality
• “Flying blind,” poor planning
• Poor controls, training, etc.
• Excessive demand variability
• Mismatches between an organization’s
capabilities and market requirements
Process Improvement
Value
++
Cost
+
Underperformer
+
Necessary
Symptomatic
Net ValueAdded Activity
Description
Action
Adds net value
Find ways to
increase value and
lower costs further
++
Potential valueadding activity
Change to valueadding activity or
eliminate
0
+
Necessary
business activity
Reduce cost of
performing activity
0
++
Activity caused
Eliminate practices
by poor business that cause the
practices
activity
Swim Lane Process Map
In some situations, we may need to understand not only
the process, but who, or which departments are involved
and how they need to interact
Swim Lane Process Maps graphically arrange the process
so that responsibility & interaction is clear.
Swim Lane Process Map
• Shows functional relationships versus time
• Can help in measuring loading on various
functional areas
• Illustrates cross-function communication
processes
• Other names: cross-functional flowchart,
Rummler-Brache diagram.
• Useful for mapping MIS support for processes
Swim Lane Process Map*
PATIENT
SURGICAL PROCEDURE
APPT
GENERAL
PRACTITIONER
PHYSICAL
APPT
CONSULT
MAMMOGRAM
RECEIVE
SURGEON
RADIOLOGY
CONSULT
APPT
DEVELOP
SEND
APPT
* Adapted from map by John Grout, Campbell School of Business, Berry College, Mount Berry, Georgia
Process Measures
There are countless ways of measuring
a process. To be effective, they
should be based upon some type of
measurable information or data
Four Performance Dimensions
• Quality (performance, conformance, reliability)
• Time (delivery speed and reliability, development
speed)
• Flexibility (mix, changeover, volume)
• Cost (labor, material, engineering, quality-related)
What does the customer value?
Process Measures
Productivity
Efficiency
Cycle Time
Benchmarking
Productivity Measures
Productivity =
Outputs
Inputs
Productivity is the ratio of outputs to inputs
Single-factor, Multifactor, and Total measures of productivity
Variations of Productivity
Single-factor
productivity ratio:
Batteries Produced
Direct Labor Hours
Measures output levels relative to a single input
Multifactor:
Batteries Produced
Machine Hours + Direct Labor Hours
Measures output levels relative to more than one input
Total multifactor:
Total Nightly Sales ($)
Total Nightly Costs ($)
Ratio of a total output factor to total input factor
Variations of Productivity
There are many common or standard
productivity measures, typically a
company will develop productivity ratios
which are suited to their specific needs
Consider the following data . . .
Quantity
$/Unit
Car X
4000 cars
$8,000/car
Car Y
6000 cars
$9,500/car
Total labor for
building X
Total labor for
building Y
20,000 hours
$12/hour
30,000 hours
$14/hour
What is the Labor Productivity
in hours for Each Car?
Car X:
(4,000 cars / 20,000 hrs) = ?
0.2
Car Y:
(6,000 cars / 30,000 hrs) = ?
0.2
What is the Labor Productivity
in dollars for Each Car?
Car X:
(4,000 × $8,000) =
(20,000 × $12)
?
Car Y:
(6,000 × $9,500) =
(30,000 × $14)
?
Impact of wage, price changes?
Results
(What are the Benefits? Caveats?)
Productivity (hours)
Car X:
(4,000 units / 20,000 hrs.) = 0.2 units / hr
Productivity ($)
Car X:
(4,000 × $8,000)
(20,000 × $12)
=
133.33
Values for Car Y?
Efficiency
A comparison of a company’s actual
performance to some standard output
 Usually expressed as a percentage
 Standard is an estimate of what should be produced
based on studies or historical results
 Efficiency = 100%(actual rate / standard rate)
OR: Efficiency = 100%(standard time/actual time) for
one unit
Standard output – an estimate of what should be produced,
given a certain level of resources
Efficiency
Measuring Efficiency at BMA Software
Text pages 56 thru 59
Cycle Time
(throughput time)
Total time required to complete a
process from start to finish.
• To reduce cycle time, organizations must
perform well on other performance
dimensions
• It is a straight forward measure; can be
measured in absolute terms, no estimates
Percent Value Added Time – the percentage of
cycle time which is spent on value-added
activities
Cycle Time Drivers
Causes that increase cycle time are:
Waiting times
Unneeded steps
Rework
Unnecessary controls or testing
Outmoded technology
Lack of information or training
Benchmarking
A comparison of a company’s
performance to the performance of:
Other firms in its industry
(strategic or competitive)
Firms identified as “world-class”
(process)
Benchmarking Data from
“The Machine That Changed The World”
Number of assembly defects per 100 vehicles (1989):
Average Japanese plant:
34.0
Average US plant:
64.6
Average European plant:
76.8
Is this strategic or process benchmarking?
More Benchmarking Data ...
Labor and machine hours per vehicle (1989):
Average Japanese plant:
16.9
Average US plant:
35.7
Average European plant:
57
What is the benefit of having both sets of figures?
So what’s happened since?
Some new productivity figures.
From “The Harbour Report”,
July 1998
“Labor hours needed for stamping, power
train, and assembly operations”:
(100%)
(168%)
(126%)
Nissan 27.6 hours
GM
46.5 hours
Ford
34.7 hours
"If GM could operate at Nissan's level of productivity, they'd
save themselves about $4.4 billion a year," Measured
another way, the report shows GM has about 55,000 more
workers than it needs.
Other Measures I
Costs
•
•
•
•
Quality
• Defects per million (ppm)
• Number of returns
• Time between failures (MTBF,
reliability)
Materials
Labor
Shipping
etc.
Other Measures II
Speed
Flexibility
• Lead time to customer
• Percent orders late
• Changeover time
• Volume to meet changes in
demand
Measurement Key Points
• Can be situation-specific
• Should be relative to past performance and
future goals
• Potential for conflicts. Consider:
# of Students Taught
Professor hours
versus
% of Satisfied
Students
Supply-Chain Operations
Reference (SCOR) Model
A comprehensive model of the core
management processes and individual
processes that define the domain of
SCM
• Reference model which provides a common
language
• Provides a template to guide the design &
implementation of SC processes
• Provides mechanism for better understanding of
SCM
Supply-Chain Operations
Reference (SCOR) Model
Five core processes for Level 1
• Source
• Make
• Deliver
• Return
• Plan
Three expanded processes for Level 2
• Planning
• Execution
• Enable
Supply-Chain Operations Reference
(SCOR) Model
Five core processes for Level 1
• Source
• Procure goods & services to meet planned or actual
demand
• Make
• Transform source material into finished good
• Deliver
• Provides goods & services
• Return
• Returning & receiving returned product
• Plan
• Balance resources with requirements
Pg 72
Supply-Chain Operations Reference
(SCOR) Model
Three expanded processes for Level 2
• Planning
• Aligns expected resources to meet expected
demand.
• Execution
• Process triggered by planned or actual demand
requirements
• Enable
• Prepares, maintains or manages information or
relationships on which planning & execution rely
SCOR
Model
www.supply-chain.org
Business Processes Case
Study
Zephtrex Fabric