Managing business processes design and improvement
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Managing Business Processes: Design and Improvement. Cheng Li, Ph.D. California State University, Los Angeles January 2002. Contents. Basic Concepts Background, definitions, process structure, and generic approaches to process design Process Design & Improvement Approaches

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Managing Business Processes: Design and Improvement

Cheng Li, Ph.D.

California State University, Los Angeles

January 2002


Contents

  • Basic Concepts

    • Background, definitions, process structure, and generic approaches to process design

  • Process Design & Improvement Approaches

    • The four phases of process improvement projects, TQM, and Reengineering

  • Process Design & Improvement Techniques

    • Flowcharting, QFD, SPC, queuing, and information modeling


Basic Concepts


The Process Focus

  • The changing emphasis of management practices: from individual activities to process

  • Background:

    • Local optimization is not inadequate.

    • Activities are increasingly integrated.


What is the business process approach?

  • A work process: a set of related activities that adds value and provides a service to a customer.

  • The process focus:

    • integrative

    • cross-functional

    • customer orientation


What is business process improvement?

  • Process Improvement: how to do our work better in terms of customer satisfaction, cost reduction, and self-fulfillment, etc.

  • Related Process Management Theories:

    • Reengineering (Michael Hammer)

    • Continuous improvement or TQM

    • BPI: Business Process Improvement (James Harrington)


Strategic Positioning through Process Structure

  • Complexity:

    • e.g. preparation process:

      fast food vs. gourmet food

  • Divergence: degree of customization, the amount of discretion or freedom allowed

    • e.g. H&R Block vs. CPA firms

    • e.g. Options for Mercedes vs. for Camry


Competitive Advantages through Process Structure

  • Competitive Advantages

  • Competitive Strategies

  • e.g. Sam’s Club vs. Nordstrom

    • layout, selection, service process, personnel

  • Competitive Strategy and Structural Positioning


Example: Structural Alternatives for a Family Restaurant

Current

take reservation

seat guests, give menus

Serve water and bread

Take orders

Prepare orders:

salad (4), entrée (15)

Higher

specific table selection

recite menu, describe entrees and specials

assortment of hot breads

at table, taken personally

individually prepared

Lower

  • no reservations

  • self-seating, menu on board

  • customer fills out form

  • pre-prepared, no substitute, limited to 4 choices


Generic Approaches to Service System Design

  • Production Line Approach

    • limited Discretionary Action of Personnel

    • division of labor

    • substitution of technology for people

    • service standardization


Generic Approaches to Service System Design

  • Customer as Coproducer

    • substitution of customer labor for provider labor

    • smoothing service demand


Generic Approaches to Service System Design

  • Customer Contact Approach

    • Degree of customer contact

    • Separation of high- and low-contact operations


Process Design & Improvement Approaches


The Four Phases of Process Improvement

  • Description

  • Analysis

  • Design

  • Implementation


Process Description

  • Customers

  • Activities

    • Primary (value-adding) activities

    • Supporting (non-value-adding) activities

  • Work flow

  • Policies and constraints

  • Output: process flowcharts & description


Process Analysis

  • Identify potential improvement areas

    • sources of information: internal and external

    • problems and causes

  • Identify related work processes and prioritize improvement projects

  • Output: major problems, causes of the problems, targeted work processes


Process Design

  • Customer requirements

    • e.g. telephone repair: short down time, when it can be repaired, convenient hours, short waiting time

  • Design parameters

    • e.g. telephone repair: training of the operators, computer systems, # technicians

  • Relationships between requirements and parameters


Process Design (cont.)

  • Generating ideas

  • Evaluating alternatives

  • Designing the new process

  • Setting policies and controls

  • Other issues: feedback mechanism, justification of the new process


Implementation

  • Planning

  • Work process changes

  • Policy changes

  • Organizational changes

  • Training

  • Promotion and education


TQM/Continuous Improvement

  • The Concept of Total Quality

  • The Dynamics of Quality Improvement: continuous improvement vs. tradeoff balancing

  • Employee Involvement

  • Emphasis on Customer Satisfaction

  • Evolution


Reengineering

  • Redesign: “forget about what you know”

  • Application of new technology

  • Break the routine (“a revolution”):

    • habits

    • assumptions

    • values


Reengineering: Assumption Busting

  • Problem: a specific performance shortcoming of the process

  • Rule: A specific aspect of the process design that causes the problem

  • Assumption: a belief about the environment that gives rise to the rule


Reengineering: Assumption Busting

Example:

  • Problem: Customers don’t know when the repair can be done.

  • Rule: The operator does not have the authority to schedule technicians.

  • Assumption: The operator does not know where the problem is and does not have information about technicians’ schedules.


Overcoming Resistance to Change

  • Resistance is natural and inevitable: expect it

  • Resistance doesn’t always show its face: find it

  • Resistance has many motivations: understand it

  • Deal with people’s concerns rather than their arguments: confront it

  • There’s no one way to deal with resistance: manage it


The Key Mechanisms for Overcoming Resistance

  • Incentives: positive and negative

  • Information: dispel uncertainty and fear

  • Intervention: one-on-one connections

  • Indoctrination: make change seem inevitable

  • Involvement: make people part of the effort


The Ten Principles of Communications

  • Segment the audience

  • Use multiple channels

  • Use multiple voices

  • Be clear

  • Communicate, communicate, communicate


The Ten Principles of Communications (cont.)

  • Honesty is the only policy

  • Use emotions, not just logic

  • Heal, console, encourage

  • Make the message tangible

  • Listen, listen, listen


Process Design & Improvement Techniques


Basic Techniques: Process Flowchart

  • e.g. student registration process

    • get a copy of class schedule

    • select classes, consult advisor if necessary

    • make payment

    • wait for authorization: pin number, time window

    • call the system

    • register, etc.


Process Flowchart: symbols

Action/Operation

Decision (If …)

Delay

Transportation


QFD: Quality Function Deployment

  • Example: a relationship matrix


Statistical Process Control

  • Emphasis on the process instead of the product/material

  • Focus on “prevention”


Abnormal variationdue to assignable sources

Out ofcontrol

UCL

Mean

Normal variationdue to chance

LCL

Abnormal variationdue to assignable sources

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Sample number

Control Chart


1

2

3

4

In-Control: random only

UCL

LCL

Sample number


Control Charts for Variables

  • Mean Chart: measuring sample means

  • Range Chart: measuring sample ranges

    i.e. max-min


UCL

x-Chart

LCL

UCL

LCL

Out-of-Control: assignable & randomshifted mean

process mean is

shifting upward

Sampling

Distribution

Detects shift

Does notdetect shift

R-chart


UCL

Does notreveal increase

x-Chart

LCL

UCL

Out-of-Control: assignable & randomincreased variability

Sampling

Distribution

(process variability is increasing)

R-chart

Reveals increase

LCL


a/2

a/2

Mean

LCL

UCL

a = Probabilityof Type I error

Type I Error:


Mean

Type II Error:

In-Control

Out-of-Control

LCL

UCL


Control Charts for Attributes

  • p-Chart - Control chart used to monitor the proportion of defectives in a process

  • c-Chart - Control chart used to monitor the number of defects per unit


Counting Above/Below Median Runs(7 runs)

B A A B A B B B A A B

Counting Up/Down Runs(8 runs)

U U D U D U D U U D

Counting Runs

Figure 10-11

Figure 10-12


LowerSpecification

UpperSpecification

Process variability matches specifications

LowerSpecification

UpperSpecification

Process variability well within specifications

LowerSpecification

UpperSpecification

Process variability exceeds specifications

Process Capability


Process Capability: 3-sigma & 6-sigma

Upperspecification

Lowerspecification

1350 ppm

1350 ppm

1.7 ppm

1.7 ppm

Processmean

+/- 3 Sigma

+/- 6 Sigma


Other Quality Management Tools

  • Check sheet

  • Scatter diagram

  • Histogram (frequency)

  • Pareto chart

  • Control chart

  • Cause-and-effect diagram


Processing

order

Arrivals

Waiting

line

Service

Exit

System

Queuing Systems: basic elements


Queuing Systems: multiple phases

Multiple channel

Multiple phase


Modeling with Queuing Theory

  • System Characteristics

    • Population source: finite, infinite

    • No. of servers

    • Arrival and service patterns: e.g. exponential distribution for inter-arrival time

    • Queue discipline: e.g. first-come-first-serve


Measuring Performance

  • Performance Measurement:

    • System utilization

    • Average no. of customers: in line and in system

    • Average waiting time: in line and in system

  • e.g. infinite source, single server, exponential inter-arrival and service times, first-come-first-serve: (see handout)


Basic Tradeoff

Total

cost

Customer

waiting cost

Capacity

cost

=

+

Total cost

Cost

Cost of service capacity

Cost of customers

waiting

Service capacity

Optimum


Basic Tradeoff (cont.)

Average number on time waiting in line

0

100%

System Utilization


Applying Queuing Theory

  • In Process Design:

    • Describe the process and establish a model

    • Collect data on incoming and service patterns

    • Find formulas and/or tables, software to calculate performance measures

    • Use performance measures to guide process design decisions


Applying Queuing Theory

  • In Operations:

    • Monitor performance measures

    • Use performance measures to guide process improvement and operations decisions


Process Modeling Languages

  • Process Modeling Languages

  • QPL: Quality Process Language by Gary Born


Process Modeling Languages

  • Process, input, output, the process owner, and authorities

list of bids

Evaluate Bids

----------------

Purchasing Officer

list of bids

Selected supplier


list of bids

Evaluate Bids

----------------

Purchasing Officer

list of bids

Selected supplier

Quality Process Language

  • Unchanged and Changed Output:

    • list of bids: unchanged

    • selected supplier: changed


list of bids

Evaluate Bids

----------------

Purchasing Officer

list of bids

Selected supplier

Quality Process Language

  • Process Owner: a person or a machine responsible for execution of processes


list of bids

Evaluate Bids

----------------

Purchasing Officer

list of bids

Choice of purchasing officer

Selected supplier

Quality Process Language

  • Process Owner: variable


Purchasing procedures

list of bids

Evaluate Bids

----------------

Purchasing Officer

list of bids

Selected supplier

Quality Process Language

  • Authorities: provide rules and guidance on how to process information


Modeling Information

  • Information is the link between processes.

  • Classifying information based on versions to keep.

  • Channel: temporary

  • Information Store: only the current version

  • Archive: current and previous versions


Modeling Information

  • Symbols:

    Ichannel

    Information Store

    Archive


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