Busines Process Optimization
Busines Process Optimization
Busines Process Optimization
Introduction
“Our plans miscarry because they have no aim. When a man does not
know what harbor he is making for, no wind is the right wind.” – Seneca
(4BC – AD 65)
One of the single, most critical activities to ensure the success of a project,
whether it be in the development of a software application, drug compound,
or optimizing a key business process, is the clear and concise definition of
project objectives, goals and milestones in the projects planning phase.
The purpose of the project must support the organization's vision and
mission statements and require the support and commitment of top
management. Business process optimization projects should contain a
section in the charter that defines the specific business process to improve.
This formal definition of the process optimization scope eliminates any
confusion and formally defines the subject boundaries. Additionally, it
assists in the identification of the final product deliverable. For example, a
fulfillment organization receives customer complaints on low order fill rates.
The customer places an order for a quantity of 100 for a particular item,
and receives only a quantity of 90. The project objective, in the example,
would be “to optimize the warehouse picking process to ensure an increase
in the fill rate on customer orders from 90% to 98% by 4th Quarter 200X”.
The process scope has been narrowed specifically to the picking process
and provides the basis for the process goal.
Six Sigma is a data driven problem solving methodology that requires the
formal definition of performance standards. When planning for a process
optimization project, specific Six-Sigma tools and activities are used to
characterize customer needs, and processes to be improved. These tools
include the mapping of the high-level process in its current state,
identification of the processes existing performance measures (i.e., pick
time, product staging time) and a process financial analysis (i.e., resource
cost, overhead). Specifically, Six-Sigma seeks to identify the Costs of Poor
Quality (COPQ). COPQ includes costs of rework, rejects, inspection,
testing, and in the case of our fulfillment example, the cost of customer
complaints. While a process optimization project's benefit can be measured
financially (hard) or non-financially (soft) most business cases are based on
the hard benefits. In our example, the soft benefit of “improved customer
satisfaction” should not be ignored.
Speaking of the “customer”, Six-Sigma projects take the time to understand
the needs of the customer. The project team must understand how the
process problem links to the eventual customer. Six-Sigma employs ‘Voice
of the Customer’ (VOC) research to gain this important insight. There are
many different methods to researching the customer's voice. These
include, but are not limited to the following:
- Customer Complaint database- generally this is an acceptable place to
start if the organization formally tracks issues.
- Direct Contact- if allowed, considers phone call surveys, focus groups,
interviews at the point of provision.
- In-Direct Contact- includes mail surveys, feedback cards, market research
and competitor analysis.
- Become the Customer- order from your own distribution center; buy your
own brand products, set up a new account with your own financial
institution.
Another effective tool to use in a process optimization project is the SIPOC
High Level Process Mapping tool. The acronym SIPOC stands for
Suppliers, Inputs, Process, Outputs, Customer. It is a simple, yet effective
tool to align the project team and all stakeholders as to the core process
within the scope of the project. It is important to note that it is too early in
the project to detail the existing process (that comes later in the Measure
Phase). The following is an example of a SIPOC High Level Process Map
(Exhibit 2):
Exhibit 2- SIPOC
The general approach to the SIPOC process identification includes the
following steps:
1. Start with a simple definition of the in-scope process
2. Identify key steps of the process (expand these at the bottom of the
SIPOC diagram)
3. Have the team identify the major inputs and outputs of the process
4. Have the team identify key suppliers of the inputs, and customer for each
output
Exhibit 4
Another Six-Sigma tool is a Pareto analysis to help identify the most
common categories or reasons for process failure. Pareto charts are simply
frequency plots where the most frequent results are placed in order from
the left side of the chart to the right. The chart also plots, as a line, the
cumulative frequency from the left of the chart. Be certain to have an ample
sample size of data in each Pareto chart as this will ensure that the chart
results are meaningful. Below (Exhibit 5) is an example of a Pareto chart
used to analyze the root causes of process missed milestones in a retail
organization's Product Category Line Review Process.
Exhibit 5 – Pareto Chart Example
Once the project team has identified what the most frequent reasons for
process delay or failure, the team may choose to utilize the “5 Whys” to
investigate the reasons for a specific failure or delay to find a problem's root
cause. The “5 Why's” is a simple yet effective technique to investigate the
results from the Pareto Analysis in more detail. Taking from the Pareto
Analysis, the project team will question “why” the cross-reference
spreadsheet was not completed or finalized on time. Below is an example
of the “5 Why's” using the cross reference example:
Problem: Cross Reference Spreadsheet was not completed or finalized on
time.
Why #1- Category Manager used the wrong version and had to rework the
spreadsheet.
Why #2- Category Manager did not allocate the needed 2 week time frame
to prepare the final version
Why #3- Divisional Vice-President did not communicate a final deadline
date to the Category Manager
Why #4- Product manufacturer had provided incorrect SKU number for
input into the spreadsheet
Why #5- Product manufacturer was not provided a deadline date for SKU
submittal.
The key to a process optimization project lies in the ability of the project
team to identify process inefficiencies and causes of failure. Process
Mapping, SWOT Analysis, Pareto Analysis, and the 5 Whys are examples
of tools that the BPO project team can utilize to identify and understand the
root cause of process inefficiencies or failure. Other effective tools for
organizing the team's thoughts include the Fishbone (Ishikawa) diagram
that identifies root causes and their effect on the remainder of the process.
Utilization of these tools by the project team greatly increases the chances
of identifying effective solutions to ensure process execution success.
After the project team identifies process inefficiencies and causes of failure,
the focus of the team effort is on the identification, development and
implementation planning of the most viable solutions. If the process is to be
re-engineered, the project team may choose to map a desired state
process map. Mapping the desired state process is a very useful tool that
allows the team to visualize the optimized process and ensure all process
weaknesses and threats are amply mitigated while sustaining process
strengths, and implementing process opportunities. The project team may
optimize the process in several different areas including the identification of
systemic enhancements such as software applications, reports or email
reminders that enable improved process communications or a direct impact
on process performance. Or, a simple reworking of process roles and
responsibilities may eliminate the need for rework or process redundancies.
The BPO project team may elect to capture these systemic, procedural, or
responsibility changes directly on the desired state process map.
Summary