Process Analysis

Rosa Hendijani, PhD

Source: KRM, Ch. 2
“Unit sales increase 1% for every 6 seconds saved
at the drive-thru.”

-- Jack Greenberg, McDonalds CEO

Video: Outsourcing drive thru

For every 1 second in average transaction time at
the Walmart U.S. chain, the company spends about
$12 million in cashier wages.

-- Wall Street Journal, September 3, 2012

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
A Systematic Approach

Define
scope
2

Identify Document
opportunity process
1 3

Implement Evaluate
changes performance
6 4

Redesign
process
5
Gap Analysis for Long Ridge Gliding Club
Documenting the Process

8
Documenting The Process

 Process flowcharts (process flow diagram)

– Note that there are many variants

 They help you see how a process operates and

how well it is performing

 Can help find performance gaps

Process flowchart
 Process flowchart is a graphical representation of the network structure of
a process
 represents activities

 represents precedence relationship

 represents yes/no decisions

 represents events (e.g., beginning, end)

 represents inventory buffer

Flowchart of the Sales Process for a Consulting Company

Marketing
lead
Follow-up
Sales: Initial Sales and/or conversation
conversation consulting between client
with client drafts proposal and sales
Sales
lead No Is
proposal
complete?
Consulting: Follow-up
Consulting Initial Consulting conversation
drafts Yes
lead conversation between client
with client proposal and consulting Nested Process
Client agreement
and service
delivery

Follow-up by Client billed by Yes Approval Final invoice

accounting, accounting, by created by
sales, or sales, or consulting? accounting, sales,
consulting consulting or consulting

No

No Payment Yes
Finish
received?
Flowchart of the Nested Sub-process of Client Agreement and
Service Delivery

Is Form
Project
proposal Verbal OK completed by
manager
complete? from client sales or
assigned
consulting

Final invoice 50% invoiced

Delivery of Letter of
created by by accounting,
service by agreement
accounting, sales, sales, or
consulting signed
or consulting consulting
A More Structured Way to Create Process Flow Diagram
 Determine the inputs and outputs
 Determine the tasks and their sequence
 Determine resources used in each task
 Determine where inventory is kept
Ordering Process at

 Process:
– Customer lists items to purchase
– Customer makes payment at the cashers’
– Items are retrieved from warehouse
– Customer waits and receives ordered items

 Benefits:
– Save space of exhibited items
– Inventory information is better managed
(i.e., transparency)
Draw a process flow diagram
Determine inputs, outputs,
and flow units

Orders
inputs

Finished
outputs
Order
Draw a process flow diagram
Determine tasks and their
sequence

Orders Retrieve from

Payment
warehouse

Finished
Order Reception
Draw a process flow diagram
Determine resources used
in each task
Cashier Mover

Orders Retrieve from

Payment
warehouse

Finished
Order Reception

Receptionist
Draw a process flow diagram
WIP Determine where
inventory is kept
(WIP = work in process)

Cashier Mover

Orders WIP WIP Retrieve from

Payment
warehouse

Finished WIP
Order Reception

Receptionist
 Swim Lane Flowchart
Swim Lane Flowchart – A visual representation that groups functional areas responsible
for different sub-processes into lanes.

Figure 2.7
Process Chart
 A process chart is an organized way of documenting all the activities performed
by a person or group of people at a workstation, with a customer, or working with
certain materials. It analyzes a process using a table, and provides information
about each step in the process.
 In contrast to flowcharts, swim lane flowcharts, and service blueprints, it requires
the time estimates.
 Often it is used to drill down to the job level for an individual person, a team, or a
focused nested process.
Groups of Activities
 Operation. Changes, creates, or adds something. Drilling a hole or serving a
customer are examples of operations.
 Transportation. Moves the study’s subject from one place to another (sometimes
called materials handling). The subject can be a person, a material, a tool, or a
piece of equipment. A customer walking from one end of a counter to the other, a
crane hoisting a steel beam to a location, and a conveyor carrying a partially
completed product from one workstation to the next are examples of transportation.
It could also be the shipment of a finished product to the customer or a warehouse.
 Inspection. Checks or verifies something but does not change it. Getting customer
feedback, checking for blemishes on a surface, weighing a product, and taking a
temperature reading are examples of inspections.
 Delay. Occurs when the subject is held up awaiting further action. Time spent
waiting for a server; time spent waiting for materials or equipment; cleanup time;
and time that workers, machines, or workstations are idle because they have no
work to complete are examples of delays.
 Storage. Occurs when something is put away until a later time. Supplies unloaded
and placed in a storeroom as inventory, equipment put away after use, and papers
put in a file cabinet are examples of storage.
Annual Labor Cost
Evaluating Performance

23
Evaluating Performance

• Data analysis tools

• Constraint Management

• Linear programming

• Waiting lines and queuing analysis

Data Analysis Tools

 Checklists
 Histograms and bar charts
 Pareto charts
Pareto Chart for a Restaurant
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. The manager surveyed his customers over
several weeks and collected the following data:

Complaint Frequency
Discourteous server 12
Slow service 42
Cold dinner 5
Cramped table 20
Atmosphere 10
Bar Chart
Pareto Chart
Example 2.4

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.
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 identified 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.
Example 2.4

Checklists Pareto Chart

Figure 2.14
Example 2.4
Cause-and-Effect Diagram
Bar Chart

Figure 2.14
Cause-and-Effect Diagram for Delayed Flight
Redesigning the Process

33
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
Generating Ideas
 Ideas can be uncovered by asking six questions
1. What is being done?
2. When is it being done?
3. Who is doing it?
4. Where is it being done?
5. How is it being done?
6. How well does it do on the various metrics of importance?
Another series of questions:
7. Why is the process even being done?
8. Why is it being done where it is being done?
9. Why is it being done when it is being done?
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
Benchmarking

 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
Benchmarking
 There are four basic steps
– Step 1. Planning: Identify the process, service, or product to be
benchmarked and the firm(s) to be used for comparison; determine the
performance metrics for analysis; collect the data.
– Step 2. Analysis: Determine the gap between the firm’s current
performance and that of the benchmark firm(s); identify the causes of
significant performance gaps.
– Step 3. Integration: Establish goals and obtain the support of managers who
must provide the resources for accomplishing the goals.
– Step 4. Action: Develop cross-functional teams of those most affected by
the changes; develop action plans and team assignments; implement the
plans; monitor progress; recalibrate benchmarks as improvements are
made.

 Collecting data can be a challenge.

 Some corporations and government organizations have agreed to share
data. The American Productivity and Quality Center, a nonprofit
organization, created thousands of measures (www.apqc.org).
 Supply chain council
Benchmarking

Customer Relationship Process

 Total cost of “enter, process, and track orders” per $1,000 revenue
 System costs of processes per $100,000 revenue
 Value of sales order line item not fulfilled due to stockout, as percentage of
revenue
 Average time from sales order receipt until manufacturing logistics is
notified
 Average time in direct contact with customer per sales order line item

Order Fulfillment Process

 Value of plant shipments per employee

 Finished goods inventory turnover
 Reject rate as percentage of total orders processed
 Percentage of orders returned by customers due to quality problems
 Standard customer lead time from order entry to shipment
 Percentage of orders shipped on time
Benchmarking

New Service/Product Development Process

 Percentage of sales due to services/products launched last year

 Cost of “generate new services/products” process per $1,000 revenue
 Ratio of projects entering the process to projects completing the process
 Time to market for existing service/product improvement project
 Time to market for new service/product project
 Time to profitability for existing service/product improvement project

Supplier Relationship Process

 Cost of “select suppliers and develop/maintain contracts” process per

$1,000 revenue
 Number of employees per $1,000 of purchases
 Percentage of purchase orders approved electronically
 Average time to place a purchase order
 Total number of active vendors per $1,000 of purchases
 Percentage of value of purchased material that is supplier certified
Managing and Implementing Processes
 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.
 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.