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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
Managing Business Processes: Design and Improvement

Cheng Li, Ph.D.

California State University, Los Angeles

January 2002


Contents
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



The process focus
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
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
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
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 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
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
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 design1
Generic Approaches to Service System Design

  • Customer as Coproducer

    • substitution of customer labor for provider labor

    • smoothing service demand


Generic approaches to service system design2
Generic Approaches to Service System Design

  • Customer Contact Approach

    • Degree of customer contact

    • Separation of high- and low-contact operations



The four phases of process improvement
The Four Phases of Process Improvement

  • Description

  • Analysis

  • Design

  • Implementation


Process description
Process Description

  • Customers

  • Activities

    • Primary (value-adding) activities

    • Supporting (non-value-adding) activities

  • Work flow

  • Policies and constraints

  • Output: process flowcharts & description


Process analysis
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
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
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
Implementation

  • Planning

  • Work process changes

  • Policy changes

  • Organizational changes

  • Training

  • Promotion and education


Tqm continuous improvement
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
Reengineering

  • Redesign: “forget about what you know”

  • Application of new technology

  • Break the routine (“a revolution”):

    • habits

    • assumptions

    • values


Reengineering assumption busting
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 busting1
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
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
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
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
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



Basic techniques process flowchart
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
Process Flowchart: symbols

Action/Operation

Decision (If …)

Delay

Transportation


Qfd quality function deployment
QFD: Quality Function Deployment

  • Example: a relationship matrix


Statistical process control
Statistical Process Control

  • Emphasis on the process instead of the product/material

  • Focus on “prevention”


Control chart

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


In control random only

1

2

3

4

In-Control: random only

UCL

LCL

Sample number


Control charts for variables
Control Charts for Variables

  • Mean Chart: measuring sample means

  • Range Chart: measuring sample ranges

    i.e. max-min


Out of control assignable random shifted mean

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


Out of control assignable random increased variability

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


Type i error

a/2

a/2

Mean

LCL

UCL

a = Probabilityof Type I error

Type I Error:


Type ii error

Mean

Type II Error:

In-Control

Out-of-Control

LCL

UCL


Control charts for attributes
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


Managing business processes design and improvement

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


Process capability

LowerSpecification

UpperSpecification

Process variability matches specifications

LowerSpecification

UpperSpecification

Process variability well within specifications

LowerSpecification

UpperSpecification

Process variability exceeds specifications

Process Capability


Managing business processes design and improvement

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
Other Quality Management Tools

  • Check sheet

  • Scatter diagram

  • Histogram (frequency)

  • Pareto chart

  • Control chart

  • Cause-and-effect diagram


Queuing systems basic elements

Processing

order

Arrivals

Waiting

line

Service

Exit

System

Queuing Systems: basic elements


Queuing systems multiple phases
Queuing Systems: multiple phases

Multiple channel

Multiple phase


Modeling with queuing theory
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
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
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
Basic Tradeoff (cont.)

Average number on time waiting in line

0

100%

System Utilization


Applying queuing theory
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 theory1
Applying Queuing Theory

  • In Operations:

    • Monitor performance measures

    • Use performance measures to guide process improvement and operations decisions


Process modeling languages
Process Modeling Languages

  • Process Modeling Languages

  • QPL: Quality Process Language by Gary Born


Process modeling languages1
Process Modeling Languages

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

list of bids

Evaluate Bids

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

Purchasing Officer

list of bids

Selected supplier


Quality process language

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


Quality process language1

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


Quality process language2

list of bids

Evaluate Bids

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

Purchasing Officer

list of bids

Choice of purchasing officer

Selected supplier

Quality Process Language

  • Process Owner: variable


Quality process language3

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
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 information1
Modeling Information

  • Symbols:

    Ichannel

    Information Store

    Archive


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