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Chapter 7Chapter 7Chapter 7Chapter 7

ProcessProcess

ManagementManagement

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Wisdom from Texas Wisdom from Texas InstrumentsInstruments

““Unless you change the process, Unless you change the process, why would you expect the results why would you expect the results to change”to change”

Key IdeaKey Idea

Process management involves planning and administering the activities necessary to achieve a high level of performance in key business processes, and identifying opportunities for improving quality and operational performance, and ultimately, customer satisfaction.

Competitive PrioritiesCompetitive Priorities

CostCost QualityQuality

– High-performance High-performance designdesign

– Consistent qualityConsistent quality

FlexibilityFlexibility– CustomizationCustomization– VarietyVariety– Volume flexibilityVolume flexibility

TimeTime– Fast deliveryFast delivery– On-time deliveryOn-time delivery– Development Development

speedspeed

What Is a Process?What Is a Process?

Any group of activities that takes Any group of activities that takes one or more inputs, transforms one or more inputs, transforms them, and provides one or more them, and provides one or more outputs for its customers. outputs for its customers.

It has to add value.It has to add value.

Traditional Organizational Traditional Organizational ChartChart(How traditional organizations are (How traditional organizations are managed)managed)

CEO

Sales Marketing Engineering Manufacturing Distribution Customer service

Information flows upward

Policy and decisions are deployed downward

Process viewProcess view (How process-focused organizations work)(How process-focused organizations work)

Orderplaced

ProductDelivered

Chain of events is horizontal

Core Process MapCore Process Map

Customer

Sales

Marketing

Finance

Distribution

Fieldengineering&Customerservice

CustomerOrder

1.1 Order placement

1.2 Order entry

1.3 Credit check

1.4 Pick and Pack

1.5 Schedule 1.7 Ship

1.6 Site prep

1.9 Invoice

1.8 Install

Deliveryacceptance

Key IdeaKey IdeaThe Scope of Process The Scope of Process ManagementManagement

Leading companies identify important business processes throughout the value chain that affect customer satisfaction. These processes typically fall into two categories: value-creation processes and support processes.

Types of ProcessesTypes of Processes

Value-creation processesValue-creation processes – those – those most important to “running the most important to “running the business”business”– Design processesDesign processes – activities that – activities that

develop functional product specificationsdevelop functional product specifications– Production/delivery processesProduction/delivery processes – those – those

that create or deliver productsthat create or deliver products Support processesSupport processes – those most – those most

important to an organization’s value important to an organization’s value creation processes, employees, and creation processes, employees, and daily operationsdaily operations

Internal Value-Chain Linkages Internal Value-Chain Linkages Showing Work and Information Showing Work and Information FlowsFlows

Ext

ern

al s

up

pli

ers

Extern

al custo

mers

Support processes

Supplier relationship process

Order fulfillment process

New service/ product development process

Customer relationship process

Support ProcessesSupport Processes

Capital AcquisitionCapital Acquisition The provision of financial resources for the organization to do its The provision of financial resources for the organization to do its work and to execute its strategywork and to execute its strategy

BudgetingBudgeting The process of deciding how funds will be allocated over a period The process of deciding how funds will be allocated over a period of timeof time

Recruitment and Recruitment and HiringHiring

The acquisition of people to do the work of the organizationThe acquisition of people to do the work of the organization

Evaluation and Evaluation and CompensationCompensation

The assessment and payment of the people for the work and The assessment and payment of the people for the work and value they provide to the companyvalue they provide to the company

Human Resource Human Resource Support and Support and DevelopmentDevelopment

The preparation of the people for their current jobs and future The preparation of the people for their current jobs and future skill and knowledge needsskill and knowledge needs

Regulatory Regulatory ComplianceCompliance

The process that insure the company if meeting all laws and legal The process that insure the company if meeting all laws and legal obligationsobligations

Information Information SystemsSystems

The movement and processing of data and information to The movement and processing of data and information to expedite business operations and decisionsexpedite business operations and decisions

Enterprise and Enterprise and Functional Functional ManagementManagement

The systems and activities that provide strategic direction and The systems and activities that provide strategic direction and ensure effective execution of the work of the businessensure effective execution of the work of the business

Examples of Support ProcessesExamples of Support Processes

International Benchmarking International Benchmarking Clearinghouse’s Standard Process Clearinghouse’s Standard Process ClassificationClassification

1.1. Understand markets Understand markets and customersand customers

2.2. Develop vision and Develop vision and strategystrategy

3.3. Design products and Design products and servicesservices

4.4. Produce and deliverProduce and deliver

5.5. Manage Manage improvement and improvement and changechange

6.6. Develop and manage Develop and manage human resourceshuman resources

7.7. Manage informationManage information8.8. Market and sellMarket and sell9.9. Invoice and service Invoice and service

customerscustomers10.10. Execute environmental Execute environmental

management programmanagement program11.11. Manage financial and Manage financial and

physical resourcesphysical resources12.12. Manage external Manage external

relationshipsrelationships13.13. Manage improvement Manage improvement

and changeand change

Process ManagementProcess Management

Process management consists of Process management consists of three key activities: three key activities: design, design, control, and improvement.control, and improvement.

To apply techniques for process To apply techniques for process management the processes must management the processes must be be repeatable repeatable andand measurable measurable..

Process ownersProcess owners are accountable are accountable for process performance.for process performance.

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Control vs. ImprovementControl vs. ImprovementControl vs. ImprovementControl vs. Improvement

Controlled process

Improvement

Time

New zoneof control

Out-of-control

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Leading Practices Leading Practices (1 of 2)(1 of 2)Leading Practices Leading Practices (1 of 2)(1 of 2)

Define, documentDefine, document, and , and managemanage important important value creation and support processesvalue creation and support processes

Translate Translate customer requirementscustomer requirements and and internal capabilities into product and service internal capabilities into product and service design requirements early in the processdesign requirements early in the process

Ensure that Ensure that quality is built into productsquality is built into products and and services and use appropriate tools during services and use appropriate tools during developmentdevelopment

Manage Manage product developmentproduct development process to process to enhance communication, reduce time, and enhance communication, reduce time, and ensure qualityensure quality

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Leading Practices Leading Practices (2 of 2)(2 of 2)Leading Practices Leading Practices (2 of 2)(2 of 2)

Define Define performance requirements for performance requirements for supplierssuppliers and ensure that they are met and ensure that they are met

Control the qualityControl the quality and operational and operational performance of key processes and use performance of key processes and use systematic methods to systematic methods to identify variationsidentify variations, , determine root causes, and determine root causes, and make correctionsmake corrections

Continuously improveContinuously improve processes to achieve processes to achieve better quality, cycle time, and overall better quality, cycle time, and overall operational performanceoperational performance

Innovate to achieveInnovate to achieve breakthrough breakthrough performance using benchmarking and performance using benchmarking and reengineeringreengineering

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Product Development Product Development ProcessProcessProduct Development Product Development ProcessProcess

Ideageneration

Ideageneration

Conceptdevelopment

Conceptdevelopment

Product &process design

Full-scaleproduction

Full-scaleproduction

Productintroduction

Productintroduction

Marketevaluation

Marketevaluation

Key IdeaKey IdeaProduct Design ProcessProduct Design Process

Product design can significantly affect the cost of manufacturing (direct and indirect labor, materials, and overhead), redesign, warranty, and field repair; the efficiency by which the product can be manufactured, and the quality of the output.

Design for Design for ManufacturabilityManufacturability

DFMDFM – the process of designing a – the process of designing a product for efficient production at product for efficient production at the highest level of qualitythe highest level of quality

Key IdeaKey IdeaDFMDFM

DFM is intended to prevent product designs that simplify assembly operations but require more complex and expensive components, designs that simplify component manufacture while complicating the assembly process, and designs that are simple and inexpensive to produce but difficult or expensive to service or support.

Design Quality and Social Design Quality and Social ResponsibilityResponsibility

Product liability issuesProduct liability issues Environmental issuesEnvironmental issues

– Design for Environment (DfE)Design for Environment (DfE) - - is the explicit consideration of environmental concerns during the design of products and processes, and includes such practices as designing for recyclability and disassembly.

– Design for disassembly– Reverse logistics

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Streamlining Product Streamlining Product DevelopmentDevelopmentStreamlining Product Streamlining Product DevelopmentDevelopment

Competitive need for rapid product Competitive need for rapid product developmentdevelopment

Concurrent (simultaneous) Concurrent (simultaneous) engineeringengineering - a process in which all - a process in which all major functions involved with bringing major functions involved with bringing a product to market are continuously a product to market are continuously involved with the product involved with the product development from conception through development from conception through salessales

Design reviews Design reviews

Designing Processes for Designing Processes for QualityQuality

1. Identify the product or service: What work do I do?

2. Identify the customer: Who is the work for?3. Identify the supplier: What do I need and from

whom do I get it?4. Identify the process: What steps or tasks are

performed? What are the inputs and outputs for each step?

5. Mistake-proof the process: How can I eliminate or simplify tasks? What “poka-yoke” (i.e., mistake-proofing) devices (see Chapter 13) can I use?

6. Develop measurements and controls, and improvement goals: How do I evaluate the process? How can I improve further?

Process ControlProcess Control

ControlControl – the activity of ensuring – the activity of ensuring conformance to requirements and conformance to requirements and taking corrective action when taking corrective action when necessary to correct problems necessary to correct problems and maintain stable performanceand maintain stable performance

Key IdeaKey IdeaProcess ControlProcess Control

Process control is important for two reasons. First, process control methods are the basis for effective daily management of processes. Second, long-term improvements cannot be made to a process unless the process is first brought under control.

Components of Control Components of Control SystemsSystems

Any control system has three components:

1. a standard or goal, 2. a means of measuring

accomplishment, and 3. comparison of actual results with

the standard, along with feedback to form the basis for corrective action.

Key IdeaKey IdeaProcess ControlProcess Control

In manufacturing, control is usually applied to incoming materials, key processes, and final products and services.

After Action ReviewAfter Action Review

1.1. What was supposed to What was supposed to happen?happen?

2.2. What actually happened?What actually happened?

3.3. Why was there a difference?Why was there a difference?

4.4. What can we learn?What can we learn?

Importance of Process Importance of Process ImprovementImprovement Customer loyalty is driven by delivered

value. Delivered value is created by business

processes. Sustained success in competitive

markets requires a business to continuously improve delivered value.

To continuously improve value creation ability, a business must continuously improve its value creation processes.

Key IdeaKey IdeaProcess ImprovementProcess Improvement

Improvement should be a proactive task of management and be viewed as an opportunity, not simply as a reaction to problems and competitive threats.

Process AnalysisProcess Analysis Process analysisProcess analysis is the documentation is the documentation

and detailed understanding of how work is and detailed understanding of how work is performed and how it can be redesigned.performed and how it can be redesigned.

1Identify

Opportunity

1Identify

Opportunity

2Define Scope

2Define Scope

3DocumentProcess

3DocumentProcess

5RedesignProcess

5RedesignProcess

6ImplementChanges

6ImplementChanges

4Evaluate

Performance

4Evaluate

Performance

KaizenKaizen

KaizenKaizen – a Japanese word that – a Japanese word that means gradual and orderly means gradual and orderly continuous improvementcontinuous improvement

Focus on small, gradual, and Focus on small, gradual, and frequent improvements over the frequent improvements over the long term with minimum financial long term with minimum financial investment, and participation by investment, and participation by everyone in the organization.everyone in the organization.

FlexibilityFlexibility

Flexibility – the ability to adapt quickly and effectively to changing requirements. – rapid changeover from one product to

another, – rapid response to changing demands, – the ability to produce a wide range of

customized services.

Types of FlexibilityTypes of Flexibility

VolumeVolume VarietyVariety CustomizationCustomization

Cycle TimeCycle Time

Cycle time – the time it takes to accomplish one cycle of a process

Reductions in cycle time serve two purposes– First, they speed up work processes so

that customer response is improved. – Second, reductions in cycle time can

only be accomplished by streamlining and simplifying processes to eliminate non-value-added steps such as rework.

Breakthrough Breakthrough Improvement Improvement

Discontinuous change resulting Discontinuous change resulting from innovative and creative from innovative and creative thinking, motivated by stretch thinking, motivated by stretch goals, and facilitated by goals, and facilitated by benchmarking and reengineeringbenchmarking and reengineering

Key IdeaKey IdeaBreakthrough ImprovementBreakthrough Improvement

Stretch goals force an organization to think in a radically different way, and to encourage major improvements as well as incremental ones.

BenchmarkingBenchmarking

Benchmarking – “the search of industry best practices that lead to superior performance.”

Best practices – approaches that produce exceptional results, are usually innovative in terms of the use of technology or human resources, and are recognized by customers or industry experts.

Types of BenchmarkingTypes of Benchmarking

Competitive benchmarkingCompetitive benchmarking - studying - studying products, processes, or business performance products, processes, or business performance of competitors in the same industry to of competitors in the same industry to compare pricing, technical quality, features, compare pricing, technical quality, features, and other quality or performance and other quality or performance characteristics of products and services. characteristics of products and services.

Process benchmarkingProcess benchmarking – focus on key work – focus on key work processesprocesses

Strategic benchmarkingStrategic benchmarking – focus on how – focus on how companies compete and strategies that lead companies compete and strategies that lead to competitive advantage to competitive advantage

ReengineeringReengineering

ReengineeringReengineering – the fundamental – the fundamental rethinking and radical redesign of rethinking and radical redesign of business processes to achieve business processes to achieve dramatic improvements in critical, dramatic improvements in critical, contemporary measures of contemporary measures of performance, such as cost, quality, performance, such as cost, quality, service, and speed.service, and speed.

Key IdeaKey IdeaReengineeringReengineering

Reengineering involves asking basic questions about business processes: Why do we do it? and Why is it done this way?

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Process Management in the Process Management in the Baldrige Award CriteriaBaldrige Award Criteria

The Process Management Category examines the key aspects of an organization’s process management, including key product, service, and business processes for creating customer and organizational value and key support processes, encompassing all key processes and work units.

6.1 Value Creation Processes 6.2 Support Processes