ANALYZING PROCESSES onal’ cartinully sks ways to improve vith more sustainable resources. Ths efor pays ffm eptember, 2017 i delvered its 100tn consecutive mar sales. Sales were up by 3.9% inthe US and 2.7% in beter quali 4 wth imovatve hot . ystem revenues (company-operated and franchised restaurants) at MeDonald’s reached a record-high $24 billion in 2010, It has more than 32,000 restaurants around the world and 62 million customers visit them each day. It employs 1.7 million people across the globe. Its stock price in October 2011 was $89.94. Things were not so good in 2002, when customer complaints were growing more frequent and bitter. Its stock price was only $16.08 at the end of 2002, McDonald's is now listening to the customers again, and changing its processes to reflect it. The board brought on a new CEO who had spent 20 years on the operational side of the business. Wi suring customer satisfaction and sharing the data freely with operators, he pulled off a turnaround that stunned everyone in the business with its speed and scope. Initiatives were launched to collect performance measures and revamp McDonald's processes to meet customer expectations. McDonald's sends mystery shoppers to restaurants to conduct anonymous reviews using a hard- number scoring system. Mystery diners from outside survey firms jot down on a paper checklist their grades for speed of service; food temperature; presenta- tion and taste; cleanliness of the counter, tables and condiment islands; even whether the counter crewperson smiles at diners. Trailing sixmonth and year-to- date results are posted on an internal McDonald's Web site so owners can com- pare their scores with regional averages. Operators could now pinpoint lingering problems, and performance measures focus operators’ attention on needed a zeal for mea- 139140 PART 2 DESIGNING AND MANAGING PROCESSES process changes. Customers now are encouraged to report their experience at a particular U.S. restaurant by e-mail, regular mail, or tol-free telephone call Another initiative was to send 900 operations missionaries into the field, each Visiting stores multiple times to fine-tune processes while also conducting day. long seminars where store managers could share tips from corporate kitchen gurus—such as where to place staff—that would shave previous seconds off av- erage service times. The process was changed back to toasting buns rather than microwaving them, giving them an even sweeter caramelized flavor, Other initia tives were taken on MeDonale’s fast lane. Every six seconds shaved off the wait time adds a percentage point to sales growth. Outdoor menu boards now have more pictures and fewer words. An LED display confirms what customers say, reducing confusion later on. Premium sandwiches are put in boxes rather than paper wrappers, saving a few seconds, and boxes are color coded by sandwich to improve speed and accuracy. Processes are also being changed to be environment friendly, reaching back from the counters of its restaurants into its supply chain, The U.S, menu involves 330 unique consumer package designs, with 83 percent now made from paper or some other wood-fiber material. Its bulk cooking cil delivery system uses re- usable containers, eliminating more than 1,500 pounds of packaging waste per restaurant por year. Its cornmitment to using sustainable resources has it work- ing with its suppliers to improve coatings on its food packaging. It has shifted more than 18,000 metric tons of fish away from unsustainable sources over the past 5 years. It emphasizes reuse and recycling, managing electrical energy, and effective water management. It also seeks certified sustainable sources for its food. For example, itis piloting a three-year beef farm study to investigate the carbon emissions on 360 beef farms. Allin all, performance measurement and process analysis are increasing customer value and paying off on the bottom line. Source: Daniel Kruger, “You Want Ds Beis, 011 wh That Forber, vo. 178, ne (March 2008, pp. 58-60; ht vmedanas com, LEARNING GOALS After reading this chapter, you should be able to: © pln a systematic way to anaize processes. © describe Pareto charts, cause-and-effect diagrams, and © define towcharts, swim ane flowcharts, service process simulation boprnts, and process chart, © Croste beter processes using bonchmartng © Describe the various workmensuromenttachniques. entity kays for effective process management. @ tenity netics for process evaluation Processes are perhaps the least understood and managed aspect of a business. No mat- terhov talented and motivated people are, afm cannot gain competitive advantage wit faulty processes, ust as Mark Twain sad ofthe Mississippi Rivera process ust keeps rolling on—with one bg difference, Most processes can be improved f someone thinks ofa way and implements iteffectvely Indeed, companies will ether adapt procestes tothe changing needs of customers lr cease to exist Long-term succes comes fom managers and employees who really understand their businesses, Butall too often. highly publicized efforts that seem to offer quick-fix solos fal tative upto expectations over the long hau be they programs for conceptualizing a business visio, conducting culture transformation campalgns, ot providing leadership traning.ANALYZING PROCESSES CHAPTER 4 141 Within the field of operations management, many important innovations over the past sev: eral decades include work-simplification or better-methods programs, statistical process control, optimization techniques, statistical forecasting techniques, material requirements planning, flex- ible automation, lean manufacturing, total quality management, reengineering, Six Sigma pro- grams, enterprise resource planning, and e-commerce. We cover these important approaches in. the following chapters because they can add significant customer value {0 a process. However, they are best viewed as just part ofa total system forthe effective management of work processes, rather than cure-als 0f course, process analysis is needed for both reengineering and process improvement, but itis also part of monitoring performance over time. In this chapter, we begin with a systematic approach, for analyzing a process that identifies opportunities for improvement, documents the current pro- cess, evaluates the process to spot performance gaps, redesigns the process to eliminate the gaps, and implements the desired changes. The goal is continual improvement. Four supporting techniques—(1) flowcharts, (2) service blueprints, (3) work measurement techniques, and (4) process charts—can give good insights into the current process and the pro- posed changes. Data analysis tools, such as checklists, bar charts, Pareto charts, and cause-and- effect diagrams, allow the analyst to go from problem symptoms to root causes. Simulation is a more advanced technique (o evaluate process performance. We conclude with some of the keys 10 managing processes effectively, (0 ensuring that changes are implemented and an infrastructure is set up for making continuous improvements. Process analysis, however, extends beyond the analysis of individual processes, Itis also a tool for improving the operation of supply chains. Process Analysis across the Organization All parts ofan organization need to be concerned about process analysis simply because they are doing work, and process analysis focuses on how work is actually done. Are they providing the most value to their customers (internal or external, or can they be improved? Operations and sales departments are often the frst areas that come to mind because they are s0 closely con~ nected with the core processes. However, support processes in accounting, finance, and human resources ate crucial to an organization's success as well. Top management also gets involved, as do other departments, During these handoffs ofthe "baton," disconnects are often the worst and opportunities for improvement the greatest A Systematic Approach Figure 4.1 shows asix-step blueprint for process analysis. Process analysis the documentation and detailed understanding of how work is performed and how it can be redesigned. Process analysis begins with identifying a new opportunity for improvement and ends with implement- ing a revised process. The ast step goes back tothe first step, thus creating a cycle of continual improvement. We introduce a closely xlated model in Chapter 5, "Managing Quality" as part of the Six Sigma Improvement (DMAIC) Model. Other approaches to process improvement are re- engineering in Chapter 3, “Developing a Process Strategy” and value stream mapping and other techniques in Chapter 8, "Designing Lean Systems.” We avoid overlap by covering each technique just once, while bringing out the essence of the approach covered in each chapter. ‘The chapters do have a shared goal: better processes Step 1: Identify Opportunities In order to identify opportunities, manag- ers must pay particular attention to the four core processes: (1) supplier relation- ship, (2) new service/product development, ) order fulfillment, and (4) the customer relationship. Each of these processes, and the subprocesses nested within them, are involved in delivering value to external cus- tomers. Are customers currently satisfied ‘with the services or products they receive, or is there room for improvement? How about |__| internal customers? Customer satisfaction ‘must be monitored periodically, either with Using Operations to Compete Managing Effective Projects Developing a Process Strategy ‘Analyzing Processes Managing Quality Planning Capacity Managing Process Constraints Designing Lean Systems Managing Inventories Designing Etfective Supply Chains Locating Facilities Integrating the Supply Chain Managing Sustainable Supply Chains Forecasting Demand Planning and Scheduling Operations Planning Sufficient Resources process analysis, wertaton and deta tanding of how an ow ican bo Y FIGURE 4.1 luo or Poo142 PART2 DESIGNING AND MANAGING PROCESSES suggestion system employees submit heri design team group of knowledgeable, tam. stops nthe duct hep rake th metics Performance measures th aofshed for a pro whiny fm by which and the ‘a formal measurement system or with informal checks or studies. Managers sometimes develop an inventory of their core and support processes that provide a guide for what processes need scrutiny. ‘Another way to identify opportunities is by looking at the strategic issues. Do gaps exist be- ‘tween a process's competitive priorities and its current competitive capabilities, as was found for the assessment of operations strategy at a credit card division in Chapter 1, “Using Operations to Compete”? Do multiple measures of cost, top quality, quality consistency, delivery speed, and ‘on-time delivery meet or exceed expectations? Is there a good strategic firin the process? If the process provides a service, does its position on the customer-contact matrix (see Figure 3.2) seem appropriate? How does the degree of customer contact match up with process structure, customer involvement, resource flexibility, and capital intensity (see Figure 3.8)? Similar questions should be asked about manufacturing processes regarding the strategic fit between process choice, volume, and product customization (see Figure 3.10) Employees who actually perform the process or internal suppliers or customers should be ‘encouraged to bring their ideas to managers and stall specialists (such as industrial engineers), or perhaps pass on their ideas through a formal suggestion system. A suggestion system is avolun- tary system by which employees submit their ideas on process improvements, Usually, a specialist evaluates the proposals, makes sure worthy suggestions are implemented, and provides feedback to those who make the suggestions, Sometimes, the person or team making a good suggestion is rewarded with money or special recognition. Step 2: Define the Scope Step 2 establishes the boundaries ofthe process to be analyzed, Is ita broad process that stretches across the whole organization, involving many steps and many employees, or a more narrowly bracketed nested subprocess that is just part of one person's job? A process's scope can be too narrow or too broad, For example, a broadly defined process that outstrips the resources avail- able, sometimes called “trying to boil the ocean,” is doomed because it will increase employee frustration without producing any results The resources that management assigns to improving or reengineering a process should ‘match the scope of the process. For a small nested process involving only one employee, perhaps he or she is asked (o redesign the process. For a project that deals with a major core process, ‘managers typically establish one or more teams. A design team consists of knowledgeable, team- oriented individuals who work at one or more steps in the process, conduct the process analy- sis, and make the necessary changes. Other resources may be full-time specialists called internal ‘or external facilitators, Facilitators know process analysis methodology, and they can guide and, tain the design team. Ifthe process cuts across several departmental lines, it may benefit from a steering team of several managers {rom various departments, headed by a project manager who oversees the process analysis, Step 3: Document the Process Once seope i established, the analyst should docurnent the process. Documentation includes taking alist ofthe process's inputs, suppliers intemal or external), outputs, and customers tintenal or external). This information then canbe shown asa diagram, with a more deaied breakdown gen in ble The next part of documentation is understanding te differen steps performed in the pro- cess using one of mote ofthe diagrams, tables, and charts described later inthis chapter When breaking down the process into steps the analyst notes the degrees and types of customer contact and process divergence along ie various slop in Ine process. The andyst also nates what slpe are visible tothe customer and where n the process works handed af fom one department to thenext Step 4: Evaluate Performance {tis important to have good performance measures to evaluate a process for eues on how oim- prove it Metres are performance measures forthe process and the steps within i. A good place qo starts with competitive priors, but dhey need tobe specific, The enalyt creates mulple tmeasures of quality customer satisfaction, tine to perform each step or the whole process, cst rors safety, envitoamental measures, on-time delivery, eb, and the like. Once the metres ae identified itis met collect information on how the process is curreniy pecforming on etch one, Measurement can be reug-cutectnales or que exfoncve, Technquea Foranalzing waittimes and delay can provide important information ave Supplement, -WalingANALYZING PROCESSES Line Models” and MyOMLab Supplement &, “Simulation’). Work measurement techniques are also more extensive and are pre- viewed in a later section ofthis chapter. Step 5: Redesign the Process A careful analysis of the process and its performance on the selected, metrics should uncover disconnects, or gaps, between actual and desired performance. Performance gaps can be caused by illogical, missing, or extraneous steps. They can be caused by metres that re- inforce the silo mentality of individual departments when the pro: cess spans across several departments. The analyst or design team should dig deep to find the root causes of performance gaps, ‘Using analytical and creative thinking, the design team gen- erates a long list of ideas for improvements. These ideas are then sifted and analyzed. Ideas that are justifiable, where benefits out- | fcbopal's uses mysley sho weigh costs, are reflected in a new process design. The new design should be documented “as proposed.” Combining the new pro- cess design with the documentation of the current process gives the analysts clear before and after pictures. The new documenta- tion should make clear how the revised process will work and the performance expected for the various metrics used. while revising orocess enveonmentaly trendy Step 6; Implement Changes Innplementation is more than developing «plan and carrying it out, Many processes eve been redesigned effectively, but never get implemented. People resist change: "We have always done it that way” or we tle tha before" Widespread participation in process analysis is essenal not only because ofthe work involved but also because it lds commitment Itistmach easier to Implement something that pardy your own idea In addition, special expertise mey be needed, such as or developing software New jabs and sks may be needed, volving taining and invest ments in new technology Implementation brings to le the steps needed to bring the redesigned process online. Management or the steering committee must make sure tha the implementation Project goes according to schedule In the remainder ofthis chapter, we examine steps in process analysis in detail Documenting the Process Five techniques are effective for documenting and evaluating processes: (1) flowcharts, (2) swim lane flowcharts, (3) service blueprints (4) work measurement techniques, and (5) process charts They allow you to “lft the lid and peer inside" to see how an orge- nization does its work. You ean see how a process operates, at any level of etal, and how wel itis performing. Trying to create one of, these charts might even teveal a lack of any established process, It may not be a pretty picture, but itis how work actually ges done. Techniques for documenting the process lend themselves to finding performance gaps, generating ideas for process improvements, and documenting the look ofa redesigned process. Flowcharts A flowchart traces the flow of information, customers, equipment, for materials through the various steps of a process, Flowcharts are also known as flow diagrams, process maps, relationship maps, or blueprints. Flowcharts have no precise format and typically are drawn with boxes (with a brief description of the step inside), and ‘with lines and arrows to show sequencing The rectangle (Z} shape is the usual choice for a box, although other shapes (©, O, O. V, or 3) can differentiate between different types of steps (eg, opera tion, delay, storage, inspection, and so on). Colors and shading can also call attention to different types of steps, such as those particu- larly high on process divergence. Divergence is also communicated when an outgoing arrow from a step splits into two or more arrows that lead to different boxes. Although many representations are | "49 is suppl flowchart that cneratons “emissarie" tits stores to hel managers CHAPTERS = 143 6 ofa pro ough ‘cosa cases he pool fr new organs ole pram wih les ing flew reg Th a cha cn lp SRE RE GI144 PART2 DESIGNING AND MANAGING PROCESSES MyOMLab FIGURE 42> Fwchar of he Sais Proves for 2 Oosuting Company FIGURE 43> acceptable, there must be agreement on the conventions used. They can be given as @ key some- where in the flowchart, and/or described in accompanying text. It is also important to communi cate what (eg, information, customer order, customer, materials, and so on) is being tracked. You can create flowcharts with several programs. Microsoft PowerPoint offers many different formatting choices for flowcharts (see the Flowchart submenu under AutoShapes) ‘The tutorials "Flowcharting in Excel” and “Flowcharting in PowerPoint” in MyOMLab offer other options, and its live demonstrations of flowchatting in Figures 4.2 and 4.3 are instructive. Other powerful software packages for flowcharting and drawing diagrams (such as organiza- tion charts and decision (rees) are SmartDraw (www.smartdraw.com), Microsoft Visio (www -microsoft.com/office/visio), and Microgratx (www.micrografx.com). Often, free downloads are available at such sites on a trial basis. Flowcharts can be created for several levels in the organization, For example, a the strategic level, they could show the coze processes and their linkages, as in Figure 1.4. Acthis level, the w= charts would not have much detail; however, they would give a bird's eye view of the overall busi- ness, Just identifying a core process i often helpful. Let us now turn ta the process level, where we get into the details of the process being analyzed, Figure 4.2 shows such a process, which consists ‘of many steps that have subprocesses nested within them. Rather than representing everything in csang yes, No YesANALYZING PROCESSES CHAPTER 4 145. one flowchart, Figure 4.2 presents an overview of the whole process, It describes the sales process for a consulting fitm that specializes in organizational development and corporate education pro- grams. Four different departments (accounting, consulting, marketing, and sales) interact with, the external customer (clien). The process goes through three main phases: (1) generating bu: ness leads, 2) client agreement and service delivery, and (3) billing and collection. Figure 4.2 illustrates one other feature. The diamond shape (©) represents a yes/no de sion of outcome, such as the results of an inspection or a recognition of different kinds of eus- tomer requirements. In Figure 4.2, the diamond represents three yes/no decision points: (1) whether the proposal is complete, (2) whether consulting approves the invoice, and (G) whether payment is received. These yes/no decision points are more likely to appear when a process is high in divergence. Sometimes, itis impossible to get the whole flowchart on one page. Figures 4.2 and 4.3 show how to create nested processes for steps that can be more aggregated. For example, Figure 4.3 flowcharts a nested process within the client agreement and service delivery step in Figure 4.2, Figure 4.3 brings out, more details, such as invoicing the customer for 50 percent of the total estimated cost ofthe service before the service is delivered, and then putting together a final invoice after the service is finished, This nesting approach often becomes a practical necessity because only so much detail can be shown in any single Nowchart Swim Lane Flowcharts ‘The swim lane flowchart is a visual representation that groups functional areas responsible for different sub-processes into lanes. Itis most appropriate when the business process spans several department boundaries, and where each department or a functional area is separated by paral- [el lines similar (o lanes in a swimming pool. Swim lanes are labeled according to the functional groups they represent, and can be arranged either horizontally or vertically. ‘The swim lane flowchart in Figure 4.4 illustrates the order placement and acceptance process at a manufacturing company. The process starts when an order is generated by a customer and swim lane flowchart A visual presentation tat tle for aiterents Is most app ness process spans several department boundaries. om counts em Pests ‘A FIGURE 4.4 Sim ane Fowenar of th Special Tes Raspnse146 PART 2 DESIGNING AND MANAGING PROCESSES service blueprint al lowchat of as wile sons Y FIGURE 45 Senice Consulting Company's Inventory Appraisal Procass Contact not ‘gree upon eS Process visible to bank ends when the order is actually rejected, modified, or approved by the company in consultation with the customer. Al functions contributing to this process are included in the flowchart. The ‘columns represent different departments or functional areas, and the steps appear in the depart ‘ment column where they are performed. The customer is also shown as one of the column head- ings. This approach shows the handoffs from one department to another when the outgoing arrow from a step goes to another column, Special dotted-line arrows are one way to show handolfs, Handoffs ate points where cross-functional coordination is at particular risk due to the silo men- tality. Misunderstandings, backlogs, and errors are more likely at these points. Flowcharts allow the process analyst and managers (0 look at the horizontal organization, rather than the vertical organization and departmental boundaries implied by a typical organiza tional chart, Flowcharts show how organizations produce their outputs through cross-functional ‘work processes, and allow the design team to see all the critical interfaces between functions and. departments. Service Blueprints A good design for service processes depends first and foremost on the type and amount of cus~ tomer contact. A service blueprint is a special flowchart of a service process that shows which steps have high customer contact. It uses line of visibility to identify which steps are visible to the ‘customer (and thus. more ofa front-office process) and those that are not (back office process). ‘Another approach to creating a service blueprint is to create three levels. The levels clarify ‘how much control the customer has aver each step, For example, consider a customer driving into ‘aFast Lube shop to have their car serviced. Level | would be when the customer is in control, such {as driving in for service or paying the bill at the end. Level 2 could be when the customer interacts, ‘with the Service provider, such as making the initial service request, or being notified on what needs to be done. Level 3 could be when the service is removed from the customer's control, such ‘as when the work is performed and the invoice is prepared. Figure 4,5 illustrates a fairly complex service blueprint. It not only shows steps with its cus- tomers, but also with its consumer's customers. Itshows the steps taken by a consulting company that specializes in inventory appraisals and inventory liquidations. Its external customers are large banks that make asset-based loans, The bank’ customers, in turn, are customers seeking a loan based on the value oftheir assets (including inventories). Figure 4.5 describes the consulting com- pany’s current evaluation and appraisal process. This service blueprint not only shows the steps in its current inventory evaluation and appraisal process, but also which steps are visible to its exter nal customers (the banks) and its customers’ customers (the company seeking a loan). The steps visible to the banks (salmon boxes) are partitioned with the vertical ines of visibility. The steps Contract agreed Proves visible ta company pn Requested information ‘ecsted ine ovis