Process Analysis in management

1. Process Analysis in management

2. Process Analysis • Processes may be the least understood and managed aspect of a business • A firm can not gain a competitive advantage with faulty processes • Processes can be analyzed and improved using certain tools and techniques • Process analysis can be accomplished using a six-step blueprint

3. Define scope 2 Identify opportunity 1 Document process 3 Implement changes 6 Evaluate performance 4 Redesign process 5 A Systematic Approach Figure 4.1 – Blueprint for Process Analysis

4. Documenting The Process • Three effective techniques for documenting and evaluating processes are • Flowcharts • Service blueprints • Process charts • They help you see how a process operates and how well it is performing • Can help find performance gaps

5. Marketing lead Follow-up conversation between client and sales Sales: Initial conversation with client Sales and/or consulting drafts proposal Sales lead Is proposal complete? No Follow-up conversation between client and consulting Consulting: Initial conversation with client Consulting drafts proposal Consulting lead Yes Nested Process Client agreement and service delivery Line of visibility Follow-up by accounting, sales, or consulting Client billed by accounting, sales, or consulting Final invoice created by accounting, sales, or consulting Yes Approvalby consulting? No No Yes Payment received? Finish Flowcharts Figure 4.2 – Flowchart of the Sales Process for a Consulting Company

6. Form completed by sales or consulting Is proposal complete? Project manager assigned Verbal OK from client Final invoice created by accounting, sales, or consulting 50% invoiced by accounting, sales, or consulting Delivery of service by consulting Letter of agreement signed Flowcharts Figure 4.3 – Flowchart of the Nested Sub-process of Client Agreement and Service Delivery

7. Two scheduling errors per quarter 100% of credit checked within 24 hours Product and invoice received Payment sent Order generated CUSTOMER Order Order completed and submitted Order cancelled Payment SALES Order Yes New customer? Credit check OK? Order cancellation No Order received Payment received FINANCE Invoice sent Yes Invoice prepared No Credit and invoicing ` Order entered Inventory adjusted Production scheduled Items manufactured Order stopped Product packages Notice of shipment Production Control and Manufacturing PRODUCTION Packages assembled and inventoried Order picked Order shipped Order Assembly and Shipping Flowcharts Figure 4.4 – Flowchart of the Order-Filling Process Showing Handoffs Between Departments

8. Process Charts • An organized way to document all the activities performed by a person or group • Activities are typically organized into five categories • Operation,  • Transportation,  • Inspection,  • Delay,  • Storage, 

9. Process Charts Figure 4.5 – Process Chart for Emergency Room Admission

10. Process Charts Figure 4.5 – Process Chart for Emergency Room Admission

11. Annual labor cost = Time to performthe process in hours Variable costsper hour Number of times processperformed each year Process Charts • The annual cost of an entire process can be estimated • It is the product of • Time in hours to perform the process each time • Variable costs per hour • Number of times the process is performed each year

12. Process Charts • If the average time to serve a customer is 4 hours • The variable cost is $25 per hour • And 40 customers are served per year • The total labor cost is 4 hrs/customer  $25/hr  40 customers/yr = $4,000

13. Work Measurement Techniques • Used to estimate the average time each step in a process would take • Time study method • Elemental standard data approach • Predetermined data approach • Work sampling method • Learning curve analysis is appropriate for new products or processes

14. Time Study of Revised Process EXAMPLE 4.1 A process at a watch assembly plant has been changed. The process is divided into three work elements. A time study has been performed with the following results. The time standard for process previously was 14.5 minutes. Based on the new time study, should the time standard be revised? SOLUTION The new time study had an initial sample of four observations, with the results shown in the following table. The performance rating factor (RF) is shown for each element, and the allowance for the whole process is 18 percent of the total normal time.

15. Time Study of Revised Process The normal time for an element in the table is its average time, multiplied by the RF. The total normal time for the whole process is the sum of the normal times for the three elements, or 10.01 minutes. To get the standard time (ST) for the process, just add in the allowance, or ST = 10.014(1 + 0.18) = 11.82 minutes/watch

16. Work Sampling Figure 4.6 – Work Sampling Study of Admission Clerk at Health Clinic Using OM Explorer

17. 140,000 120,000 – 100,000 – 80,000 – 60,000 – 40,000 – 20,000 – 0 Labor Hours per Unit | | | | | | | 0 20 40 60 80 100 120 Cumulative Units Produced Learning Curves Figure 4.7 – Learning Curve with 80% Learning Rate Using OM Explorer

18. Evaluating Performance Figure 4.8 – Metrics for Flowcharts, Process Charts, and Accompanying Tables

19. Evaluating Performance Figure 4.8 – Metrics for Flowcharts, Process Charts, and Accompanying Tables

20. Data Analysis Tools • Help identify causes of problems • Checklists • Histograms and bar charts • Pareto charts • Scatter diagrams • Cause-and-effect diagrams • Graphs

21. Pareto Chart for a Restaurant EXAMPLE 4.2 The manager of a neighborhood restaurant is concerned about the smaller numbers of customers patronizing his eatery. Complaints have been rising, and he would like to find out what issues to address and present the findings in a way his employees can understand. SOLUTION The manager surveyed his customers over several weeks and collected the following data:

22. 50 – 45 – 40 – 35 – 30 – 25 – 20 – 10 – 5 – 0 – Failures Discourteous server Slow service Cold dinner Cramped tables Atmosphere Failure Name Pareto Chart for a Restaurant Figure 4.9 is a bar chart and Figure 4.10 is a Pareto chart, both created with OM Explorer’s Bar, Pareto, and Line Charts solver. They present the data in a way that shows which complaints are more prevalent (the vital few). Figure 4.9 – Bar Chart

23. (42 + 20) 89  100% = 69.7% – 100.0% – 80.0% – 60.0% – 40.0% – 20.0% – 0.0% 45 – 40 – 35 – 30 – 25 – 20 – 10 – 5 – 0 – Percent of Total Failures Slow service Cramped tables Discourteous server Atmosphere Cold dinner Failure Name Pareto Chart for a Restaurant Figure 4.10 – Pareto Chart

24. Analysis of Flight Departure Delays EXAMPLE 4.3 The operations manager for Checker Board Airlines at Port Columbus International Airport noticed an increase in the number of delayed flight departures. SOLUTION To analyze all the possible causes of that problem, the manager constructed a cause-and-effect diagram, shown in Figure 4.11. The main problem, delayed flight departures, is the “head” of the diagram. He brainstormed all possible causes with his staff, and together they identified several major categories: equipment, personnel, materials, procedures, and “other factors” that are beyond managerial control. Several suspected causes were identified for each major category.

25. Personnel Equipment Aircraft late to gate Passenger processing at gate Other Mechanical failures Late cabin cleaners Weather Unavailable cockpit crew Air traffic delays Late cabin crew Delayed flight departures Poor announcement of departures Late baggage to aircraft Weight/balance sheet late Late fuel Late food service Delayed check-in procedure Contractor not provided with updated schedule Waiting for late passengers Procedures Materials Analysis of Flight Departure Delays Figure 4.11 – Cause-and-Effect Diagram for Flight Departure Delays

26. Data Analysis Tools • Tools can be used together for data snooping to analyze data and determine causes • Simulation can show how a process changes over time • Process simulation is the act of reproducing the behavior of a process using a model that describes each step

27. Causes of Headliner Process Failures EXAMPLE 4.4 The Wellington Fiber Board Company produces headliners, the fiberglass components that form the inner roof of passenger cars. Management wanted to identify which process failures were most prevalent and to find the cause. SOLUTION Step 1: A checklist of different types of process failures is constructed from last month’s production records. Step 2: A Pareto chart is prepared from the checklist data. Step 3: A cause-and-effect diagram for identifies several potential causes for the problem. Step 4: The manager reorganizes the production reports into a bar chart according to shift because the personnel on the three shifts had varied amounts of experience.

28. 50 – 40 – 30 – 20 – 10 – 0 – – 100 – 80 – 60 – 40 – 20 – 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | C | | | | Cumulative Percentage Number of Failures D A B Defect Failure Causes of Headliner Process Failures SOLUTION Figure 4.12 shows the sequential application of several tools for improving quality Step 2. Pareto Chart Step 1. Checklist | | | | | | | | | Figure 4.12 – Application of the Tools for Improving Quality

29. 20 – – 15 – – 10 – – 5 – – 0 – Number of Broken Fiber Boards People Materials Training Out of specification Absenteeism Not available Communication Broken fiber board Humidity Machine maintenance Schedule change First Second Third Machine speed Shift Wrong setup Other Process Causes of Headliner Process Failures SOLUTION Figure 4.12 shows the sequential application of several tools for improving quality Step 4. Bar Chart Step 3. Cause-and-Effect Diagram Figure 4.12 – Application of the Tools for Improving Quality

30. Redesigning the Process • After a process is documented, metrics are collected, and disconnects are identified, the process analyst determines what changes should be made • People directly involved in the process are brought in to get their ideas and inputs

31. Generating Ideas • Ideas can be uncovered by asking six questions • What is being done? • When is it being done? • Who is doing it? • Where is it being done? • How is it being done? • Howwell does it do on the various metrics of importance?

32. Generating Ideas • Brainstorming involves a group of people knowledgeable about the process proposing ideas for change by saying whatever comes to mind • After brainstorming the design team evaluates ideas and identifies those with the highest payoff

33. Generating Ideas • Benchmarking is a systematic procedure that measures a firm’s processes, services, and products against another firm • Competitive benchmarking is based on comparisons with a direct competitor • Functional benchmarking compares areas with those of outstanding firms in any industry • Internal benchmarking compares an organizational unit with superior performance with other units

34. Benchmarking • There are four basic steps • Step 1. Planning • Step 2. Analysis • Step 3. Integration • Step 4. Action • Collecting data can be a challenge • Some corporations and government organizations have agreed to share data

35. Benchmarking Figure 4.13 – Illustrative Benchmarking Metrics by Type of Process

36. Benchmarking Figure 4.13 – Illustrative Benchmarking Metrics by Type of Process

37. Benchmarking Figure 4.13 – Illustrative Benchmarking Metrics by Type of Process

38. Managing Processes • Failure to manage processes is failure to manage the business • Seven common mistakes • Not connecting with strategic issues • Not involving the right people in the right way • Not giving the design teams and process analysts a clear charter and then holding them accountable

39. Managing Processes • Seven common mistakes • Not being satisfied unless fundamental “reengineering” changes are made • Not considering the impact on people • Not giving attention to implementation • Not creating an infrastructure for continuous process improvement

40. Solved Problem 1 Create a flowchart for the following telephone-ordering process at a retail chain that specializes in selling books and music CDs. It provides an ordering system via the telephone to its time-sensitive customers besides its regular store sales. The automated system greets customers, asks them to choose a tone or pulse phone, and routes them accordingly. The system checks to see whether customers have an existing account. They can wait for the service representative to open a new account. Customers choose between order options and are routed accordingly. Customers can cancel the order. Finally, the system asks whether the customer has additional requests; if not, the process terminates.

41. Solved Problem 1 SOLUTION Figure 4.14 – Flowchart of Telephone Ordering Process

42. Solved Problem 1 SOLUTION Figure 4.14 – Flowchart of Telephone Ordering Process

43. Solved Problem 2 An automobile service is having difficulty providing oil changes in the 29 minutes or less mentioned in its advertising. You are to analyze the process of changing automobile engine oil. The subject of the study is the service mechanic. The process begins when the mechanic directs the customer’s arrival and ends when the customer pays for the services. SOLUTION Figure 4.15 shows the completed process chart. The process is broken into 21 steps. A summary of the times and distances traveled is shown in the upper right-hand corner of the process chart. The times add up to 28 minutes, which does not allow much room for error if the 29-minute guarantee is to be met and the mechanic travels a total of 420 feet.

44. Solved Problem 2 Figure 4.15 – Process Chart for Changing Engine Oil

45. Solved Problem 3 What improvement can you make in the process shown in Figure 4.14? SOLUTION Your analysis should verify the following three ideas for improvement. You may also be able to come up with others. a. Move Step 17 to Step 21. Customers should not have to wait while the mechanic cleans the work area. b. Store small inventories of frequently used filters in the pit. Steps 7 and 10 involve travel to the storeroom. c. Use two mechanics. Steps 10, 12, 15, and 17 involve running up and down the steps to the pit. Much of this travel could be eliminated.

46. Solved Problem 4 Vera Johnson and Merris Williams manufacture vanishing cream. Their packaging process has four steps: (1) mix, (2) fill, (3) cap, and (4) label. They have had the reported defects analyzed, which shows the following: Draw a Pareto chart to identify the vital defects.

47. 29 60 18 60  100% = 48.33%  100% = 30.00% Solved Problem 4 SOLUTION Defective labels account for 48.33 percent of the total number of defects: Improperly filled jars account for 30 percent of the total number of defects: The cumulative percent for the two most frequent defects is 48.33% + 30.00% = 78.33%

48. Lumps represent of defects; the cumulative percentage is Defective seals represent of defects; the cumulative percentage is 6 60 7 60  100% = 10.00%  100% = 11.67% Solved Problem 4 78.33% + 11.67% = 90.00% 10% + 90% = 100.00% The Pareto chart is shown in Figure 4.16

49. 40 – 36 – 32 – 28 – 24 – 20 – 16 – 12 – 8 – 4 – 0 – – 100 – 90 – 80 – 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0 100% 90% 78% 48% Frequency of Defects Cumulative Percentage of Defects Label Fill Mix Seal Solved Problem 4 Figure 4.16 – Pareto Chart