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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
slide41

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
slide43

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:

I channel

Information Store

Archive