Chapter 7

1. Chapter 7 Process Management

2. Wisdom from Texas Instruments “Unless you change the process, why would you expect the results to change”

3. Key Idea Process managementinvolves 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.

4. Cost Quality High-performance design Consistent quality Flexibility Customization Variety Volume flexibility Time Fast delivery On-time delivery Development speed Competitive Priorities

5. What Is a Process? • Any group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers. • It has to add value.

6. Traditional Organizational Chart(How traditional organizations are managed) CEO Sales Marketing Engineering Manufacturing Distribution Customer service Policy and decisions are deployed downward Information flows upward

7. Process view(How process-focused organizations work) Product Delivered Order placed Chain of events is horizontal

8. Core Process Map Customer Sales Marketing Finance Distribution Field engineering & Customer service Customer Order Delivery acceptance 1.1 Order placement 1.2 Order entry 1.9 Invoice 1.3 Credit check 1.4 Pick and Pack 1.5 Schedule 1.7 Ship 1.6 Site prep 1.8 Install

9. Key IdeaThe Scope of Process Management 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.

10. Types of Processes • Value-creation processes – those most important to “running the business” • Design processes – activities that develop functional product specifications • Production/delivery processes – those that create or deliver products • Support processes – those most important to an organization’s value creation processes, employees, and daily operations

11. Support processes New service/ product development process Customer relationship process External suppliers External customers Supplier relationship process Order fulfillment process Internal Value-Chain Linkages Showing Work and Information Flows

12. Examples of Support Processes Support Processes

13. Understand markets and customers Develop vision and strategy Design products and services Produce and deliver Manage improvement and change Develop and manage human resources Manage information Market and sell Invoice and service customers Execute environmental management program Manage financial and physical resources Manage external relationships Manage improvement and change International Benchmarking Clearinghouse’s Standard Process Classification

14. Process Management • Process management consists of three key activities: design, control, and improvement. • To apply techniques for process management the processes must be repeatable and measurable. • Process owners are accountable for process performance.

15. Out-of-control Controlled process Improvement New zone of control Time Control vs. Improvement

16. Leading Practices (1 of 2) • Define, document, and manage important value creation and support processes • Translate customer requirements and internal capabilities into product and service design requirements early in the process • Ensure that quality is built into products and services and use appropriate tools during development • Manage product development process to enhance communication, reduce time, and ensure quality

17. Leading Practices (2 of 2) • Define performance requirements for suppliers and ensure that they are met • Control the quality and operational performance of key processes and use systematic methods to identify variations, determine root causes, and make corrections • Continuously improve processes to achieve better quality, cycle time, and overall operational performance • Innovate to achieve breakthrough performance using benchmarking and reengineering

18. Product Development Process Idea generation Concept development Product & process design Full-scale production Product introduction Market evaluation

19. Key IdeaProduct 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.

20. Design for Manufacturability • DFM – the process of designing a product for efficient production at the highest level of quality

21. Key IdeaDFM 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.

22. Design Quality and Social Responsibility • Product liability issues • Environmental issues • 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

23. Streamlining Product Development • Competitive need for rapid product development • Concurrent (simultaneous) engineering - a process in which all major functions involved with bringing a product to market are continuously involved with the product development from conception through sales • Design reviews

24. Designing Processes for Quality • Identify the product or service: What work do I do? • Identify the customer: Who is the work for? • Identify the supplier: What do I need and from whom do I get it? • Identify the process: What steps or tasks are performed? What are the inputs and outputs for each step? • 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? • Develop measurements and controls, and improvement goals: How do I evaluate the process? How can I improve further?

25. Process Control • Control – the activity of ensuring conformance to requirements and taking corrective action when necessary to correct problems and maintain stable performance

26. Key IdeaProcess 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.

27. Components of Control Systems • Any control system has three components: • a standard or goal, • a means of measuring accomplishment, and • comparison of actual results with the standard, along with feedback to form the basis for corrective action.

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

29. After Action Review • What was supposed to happen? • What actually happened? • Why was there a difference? • What can we learn?

30. Importance of Process Improvement • 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.

31. Key IdeaProcess 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.

32. 2Define Scope 3Document Process 6Implement Changes 4Evaluate Performance 5Redesign Process Process Analysis • Process analysis is the documentation and detailed understanding of how work is performed and how it can be redesigned. 1Identify Opportunity

33. Kaizen • Kaizen – a Japanese word that means gradual and orderly continuous improvement • Focus on small, gradual, and frequent improvements over the long term with minimum financial investment, and participation by everyone in the organization.

34. Flexibility • 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.

35. Types of Flexibility • Volume • Variety • Customization

36. Cycle 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.

37. Breakthrough Improvement • Discontinuous change resulting from innovative and creative thinking, motivated by stretch goals, and facilitated by benchmarking and reengineering

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

39. Benchmarking • 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.

40. Types of Benchmarking • Competitive benchmarking - studying products, processes, or business performance of competitors in the same industry to compare pricing, technical quality, features, and other quality or performance characteristics of products and services. • Process benchmarking – focus on key work processes • Strategic benchmarking – focus on how companies compete and strategies that lead to competitive advantage

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

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

43. Process Management in the Baldrige 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