Factors influencing Process Design and Process Analysis

Dr. Pradeep Desai Factors influencing Process Design and Process Analysis

Technology and Innovation

Contents

1 Understanding Business Process

2 Business Process and Value Chain

3 Business Process Change

4 Major Factors Affecting Business Process

5 Specifying Business Process Model

6 Analyzing Business Processes

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Understanding Business Process • Cummins (2008) defined processes as the linkage between an

organization itself or between its “suppliers, partners, distribution channels, products and services, people, and other stakeholders.”

• Davenport (1992) defines a business process as “a set of logically related tasks performed to achieve a defined business outcome for a particular customer or market.”

• A business process starts with an active beginning and ends with a conclusion (Bridgeland & Zahavi, 2008). Every procedure is an activity as an atom existing in the process and then diversity of activities are composed of business process.

• The process points out a unit of work which should be done, clarifies people who does the work and has taken the responsibility, specifies when the work needs to be done, and finally finds what the work has influence on business outcomes (Cummins, 2008).

• In other words, a transparent process reflects the details in the business management at operational level day-to-day management of an organization.


Business Process and Value Chain...


• From Porter's value chain diagram, every function added value performs business process through a series of activities.

• All of the activities should be comprehensive and transparent to perform appropriate business processes. E.g. In manufacturing for example, it needs to focus on production procedure to manage its product lines and also connect with its suppliers and its distribution channel.

• Further, a company would transform their materials from a raw form into a distinguished form to add additional value by the manufacturing process.

• It is necessary to synthesize the whole business process which requires that there is no gap between two activities. That means communication and collaboration are very crucial for carrying out well-organized business process to realize each step's value.

Porter's value chain diagram

• The value chain describes a standard and integrated business process for an organization. Business processes, like value chain, should be designed or redesigned to adapt organization's compliance requirements and new business environment, avoiding implementing useless tasks and business risks. Even, some uncertain factors and variables will have impact on business processes and business strategies.

• For instance, if a company wants to introduce a new product into its business, new processes require new measurements and new business objectives so that the formal process might need to be changed. Also, the employee’s performance also has to alter his or her work efforts to contribute themselves into new business process. In addition, new resources are put into new production so that business processes ensure the integration and combination of new resources.


Business Process and Value Chain

• Three levels of business process change:

– process re-engineering which scans major threats or opportunities in the external business environment and proposes a re-think of the large-scale process at the strategic level

– process redesign which focuses on medium-sized processes improvement

– process improvement at tactical level, such as a Six Sigma approach.

• Thus implying that the business process change needs to carefully evaluate the factors influencing Business Processes and analyzing them with respect to value chain of the organization.


Business Process Change

Major Factors Affecting Business Process…


Nature of Demand: Organizations have to produce products or services based on customer needs and preferences. They have to schedule their production so as to be able to meet the estimated future demand levels. Methods for estimating future demand consider factors like seasonality, growth trends, and other demand patterns that affect future demand levels.

Influence of demand patterns: The demand for a product rises or falls over a period of time and is influenced by factors like seasonal fluctuations that affect the design of the production process of the product. For example, the demand for products like air conditioners, refrigerators, etc. varies from season to season.

Influence of price level: The price-volume or the demand curve influences the process design. As customers are price-sensitive, they have a tendency to buy more of a product at a low price and less at a high price.



Degree of vertical integration: Vertical integration is the extent to which the production and the distribution chain is brought under the ownership of the organization. The degree of vertical integration determines the extent to which a product and its components are produced internally.

Vertical integration is of two types: forward and backward.

Forward integration is the expansion of ownership of production to the distribution chain, towards the market. And when it is expanded backward or toward the sources of supplies, it is referred to as backward integration. Vertical integration provides flexibility in manufacturing which results in increased profits due to centralized overheads, pooling of R&D and design efforts, and economies of scale.



Flexibility: A flexible organization is one that responds quickly to the changing customer preferences or market conditions. Organizations have to be flexible in order to increase or maintain their market share. Flexibility can be broadly classified into: Product/service Flexibility - The ability of the production system to shift quickly from producing one product to another is referred to as product/service flexibility. This is necessary for organizations which produce different custom-designed products/services in small lots using general-purpose equipment and multi-skilled employees. Volume Flexibility - The ability to increase or decrease production volumes rapidly in response to external changes is referred to as volume flexibility. This is necessary for organizations that produce products the demand for which fluctuates and for which it is uneconomical to maintain a high level of inventory.

Major Factors Affecting Business Process


Degree of automation: Operations managers in the past avoided automation due to the high costs involved in automating the processes and the difficulty in integrating them with other production processes. Of late, they have realized that automation can be used as a strategic weapon for competing with others.

Though automation is expensive, it can reduce labor and related costs. Operations managers should decide on the degree of automation required for their production processes.

Quality level and degree of customer contact: The quality levels of a product or service decide its competitiveness in the market and affect the production process design at all stages of production. The desired level of quality has direct implications for the degree of automation and the extent of customer interaction and contact required for the production process.

Specifying Business Process Model


A strategy should be articulated at first. Gaining a long-term and sustainable competitive advantage usually requires a specific business strategy. Business performance management is a method that could be used to select, evaluate and fix the business objectives and strategies of the company.

At the second level, after the business strategy is adopted, it will be divided into operational goals, which can be organized and divided into sub goals. These sub goals will affect the business processes.

At the third level, some organizational business processes will be built, so as to achieve the goals that have been adopted in the second level. These processes are “high-level processes that are typically specified in textual form by their inputs, their outputs, their expected results”.


At the fourth level, activities within these processes will be specified as well. That is to say, operational business processes are more precise and detailed than organizational business processes. They are interrelated and possibly dependent on each other. Besides, operational business processes are fundamental to the designing and developing implemented business processes.

At the implemented level, a business process model may be established to assist BPM goals and strategy. In this phase, firstly, it represents a viewpoint of the real world; secondly, it can (re)structure the business process based on the business objectives to realize business value; thirdly, it is easy to set business planning due to a mature business model.

Specifying Business Process Model

Analyzing Business Processes…


• Analyze business process for signs of process inefficiency: A business process consists of inputs and outputs. Labor, energy, materials and capital equipment are considered inputs. An input is an asset you use to produce revenue and profits. An output, on the other hand, is a physical product or service. Inputs go into your process and create an output. You need to perform analysis to find inefficiencies. Your process should use inputs efficiently to produce outputs. For e.g., that you manage a chain on auto repair shops. Your inputs are labor, equipment and repair parts. Your output is a repaired customer vehicle.

• Long repair times or large work backlogs are an indication that something is wrong with your process. The problem may be that you’re scheduling repairs too close together.



• If the cost of your replacements parts is far higher than you budgeted, that is another indication that something is wrong. Specifically, you may have a problem with your purchasing department, or the with vendors who sell you parts

• Based on the problems you identify, decide which processes need to be improved. If you need to prioritize between several processes, select the process that has the biggest impact on your business. For example, you may want to fix the wait time process first. Long wait times may cause you to lose customers. Make fixing that process your first priority.


a. Talk with key personnel about the process • Once you identify a process to fix, discuss the process with the people

responsible for implementation. Take the time to interview key participants, and ask them to identify any potential improvements. Ask your staff what they do and why they do it.

• Determine the inputs needed to perform each task and where you obtain each input. If you manufacture denim jeans, for example, you need to know who supplies your denim and how often the vendor ships the denim material to you.

• Identify the outputs of each task, and who receives the output. If you manage a car repair shop, your repair staff should document the work they perform. The repair staff should forward that information to your billing department. The billing area produces a bill for the customer.

• Ask for suggestions on how to resolve process inefficiencies that your staff uncovers.



b. Conduct a brainstorming session to find process improvements • Many processes involve more than one department in your business.

Group sessions can identify process inefficiencies that impact more than one department. These sessions can also validate the information provided during your one-on-one interviews with participants.

Summarize the information you have received and distribute it to process participants. This should include both participants you have interviewed and others that you did not interview. Ask for feedback from everyone. The feedback will provide additional guidance for your analysis.

• Information received from participants in the process should provide you with a clear idea how the process works, and what its issues are.

• The discussions with personnel become the basis for making changes to a process. Your changes may reduce costs, reduce cycle time, simplify a process or improve customer service.



c. Create a business process flowchart for each process • A process flowchart can help you visualize a business

process. You can use the documentation from your process discussions to create the flowchart. The flowchart should contain all of the steps required to complete a particular business process. It is important to note that a business process flowchart should only contain the defined procedures that employees must follow.

• Flowcharts may be prepared manually or with the use of software. Word processors and spreadsheet programs with charting functionality can be used. You can also find software that is designed to draw flowcharts.

• The flowchart is an excellent tool to clearly see the business process in front of you. This visual tool can make it is much easier to identify and fix inefficiencies.

• Once you make changes to a process, review the outcomes and see if the process made the improvements you expected. If not, analyze the process again and try to identify areas of improvement. Process analysis should be an ongoing task for your business.

Analyzing Business Processes

Leadership & Management

Factors influencing Process Design and Process Analysis