Business process

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  • Primary: Value-added work directly related to what the customer pays for. Support: Purchasing, maintenance, transportation to point-of-sale, moving and tracking material between value-added steps, administration, etc. Developmental: Design, assessment, and marketing efforts to provide new services or products, training new job skills.
  • Comment on the flow of information as a separate process. How could it be done differently?
  • Follow up on the flow of information process. What inefficiencies are exhibited here? What is required for second tier suppliers to see the OEM needs directly?
  • Comment on how exceptions might be handled – separate process? What about having a set of processes represented by a single step that can be expanded if that step is the one that appears to need the most improvement?
  • Pages 50 through 52 in the text.
  • Pages 50 through 52 in the text.
  • Review differences between value-added and other activities. Good place to point out that unnecessary movement between value-added steps often requires tracking, counting, and storing of inventories. Decision points do not add value, take time
  • Loops take time, do not add value. Work to eliminate them, particularly if they occur frequently.
  • “ Underperformers” that have poor yields, take too long, use unnecessary resources, etc.
  • Symptomatic – exist because of problems that shouldn’t be there.
  • Car X: 0.2 cars/hour Car Y: 0.2 cars/hour
  • Car X: 133.33 Car Y: 135.714
  • Here the actual and standard values represent output or output rate.
  • Called “takt” time in Germany. Can be considered as the “pulse” or “heartbeat” of the process. Throughput is controlled by the cycle time, but is also affected by how many units can be processed together.
  • J. Womack, D. Jones, and D. Roos, The Machine That Changed the World: How Japan’s Secret Weapon in the Global Auto Wars Will Revolutionize Western Industry , New York, HarperPerennial, 1991.
  • Harbour Report North America 1999, http://www.harbourinc.com Note changes since 1998 discussed in the text on page 61.
  • The core value defect level is based on allowing the mean of a process to drift to within about 4.5 standard deviations of either specification limit. A true six sigma variation around a mean centered within specifications would correspond to a defect level of 2 parts per billion.
  • DMAIC is an updated version of the PDSA (Plan-Do-Study-Act) process developed by Walter Shewhart and later promoted by W. Edwards Deming as the PDCA (Plan-Do-Check-Act) process for improvement
  • Source: Supply-Chain Council, www.supply-chain.org
  • Business process

    1. 1. Business Processes
    2. 2. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 2Chapter ObjectivesBe able to: Explain what a business process is and how the businessperspective differs from a traditional functional perspective. Create process maps for a business process and use these tounderstand and diagnose a process. Calculate and interpret some common measures of processperformance. Discuss the importance of benchmarking and distinguishbetween competitive benchmarking and processbenchmarking. Describe the Six Sigma methodology, including the steps of theDMAIC process. Use and interpret some common continuous improvementtools. Explain what the Supply-Chain Operations Reference (SCOR)model is and why it is important to businesses.
    3. 3. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 3Business Processes• Business processes defined• Mapping business processes• Managing and improving businessprocesses–Measuring process performance• The SCOR Model
    4. 4. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 4Business Processes DefinedLogically related sets of tasks oractivities geared toward some businessoutcome Primary Support DevelopmentWhat is the distinction? Examples of each? Arethe dividing lines always clear?
    5. 5. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 5Versus the “functional”PerspectiveWhat are some of the challenges in managing such processes?Developing new products/services (Chapter 6)Evaluating suppliers (Chapter 10)Developing sales & operations plans (Chapter 13)Suppliers Purchasing Engineering Operations Finance Marketing Customers
    6. 6. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 6Mapping Business Processes• Relationship maps– What are they?– What level of detail?– When are they most valuable?• Detailed process maps• ‘Swim Lane’ process maps
    7. 7. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 7ExampleAutomotive OEM wanted to understand how thecompany’s needs were communicated tosuppliers First-tier supplier responsible for entire cockpit(all interior pieces) Second-tier suppliers provide “families” of partsto first-tier supplier (e.g., plastic trim, gaugesand wiring, etc.)
    8. 8. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 8Findings1) OEM provided first-tier supplier withweekly demand forecast for next 10weeks2) First-tier supplier sent its ‘own’ demandforecasts to 10 second-tier suppliers3) Second-tier suppliers delivered therequirements to first-tier supplier
    9. 9. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 9Relationship Map
    10. 10. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 10Detailed Process MapIdentifies the specific activities that make upthe process. Basic steps are:1. Identify the entity that will serve as your focal point: Customer? Order? Item?2. Identify clear boundaries, starting and ending points3. Keep it simple Does this detail add any insight? Do we need to map every exception condition?
    11. 11. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 11Mapping SymbolsTypical, but others may be used as appropriateStart or finishing pointStep or activity in the processDecision point (typically requires a “yes” or “no”)Input or output (typically data or materials)Document createdDelayInspectionMove activity
    12. 12. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 12Example*Process mapping at a San Diegodistribution center (DC)*Textbook, pages 50-52.
    13. 13. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 13Facts of the Case IProcess1) Dealer faxes order to DC. One out of 25 orders lostbecause of paper jams.2) Fax sits in “In Box” around 2 hours (up to 4) until internalmail picks it up.3) Internal mail takes about one hour (up to 1.5 hours) todeliver to the picking area. One out of 100 faxes aredelivered to the wrong place.4) Order sits in clerk’s in-box until it is processed (0 to 2hours). Processing time takes 5 minutes.
    14. 14. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 14Facts of the Case II5) If item is in stock, worker picks and packs order (average= 20 minutes, but up to 45 minutes).6) Inspector takes 2 minutes to check order. Still, one out of200 orders are completed incorrectly.7) Transport firm delivers order (1 to 3 hours).
    15. 15. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 15Let’s Map the Process(No looking in chapter!) What is the focal point of the mappingeffort? What are the boundaries of the processmap? What detail is missing from this simpleexample?
    16. 16. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 16One Possible Solution
    17. 17. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 17Improving Business Processes:Guidelines• Attack each delay– What causes it?– How long is it?– How could we reduce its impact?• Examine each decision point– Is this a real decision or just a checking activity?– If the latter, can we automate or eliminate it?• Dematerialize documentation.– Can we do it electronically?– Eliminate multiple copies?– Share a common database?
    18. 18. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 18More Guidelines• Look for loops– Why is this loop here?– Would we need to loop if we didn’t have any failuresin quality, planning, etc?• Process steps– What is the value of this activity, relative to its cost?– Is this a necessary activity (support ordevelopmental?), or something else?
    19. 19. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 19Taking It Further ...• All activities add costs and time• Not all value-added activities provide “net”value– “Underperformers”• Not all support and developmental activitiesare necessary– Necessary versus “symptomatic”
    20. 20. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 20Symptomatic Activities ...• Inspecting or reworking goods• Expediting shipments or “fightingfires”• Overproducing, holding excessiveinventories• Standard backorder process
    21. 21. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 21…and Typical Causes• Poor quality• “Flying blind,” poor planning• Poor controls, training, etc.• Excessive demand variability• Mismatches between an organization’scapabilities and market requirements
    22. 22. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 22Process ImprovementValue Cost Description ActionNet Value-Added Activity++ + Adds net value Find ways toincrease value andlower costs furtherUnderperformer + ++ Potential value-adding activityChange to value-adding activity oreliminateNecessary 0 + Necessarybusiness activityReduce cost ofperforming activitySymptomatic 0 ++ Activity causedby poor businesspracticesEliminate practicesthat cause theactivity
    23. 23. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 23Swim Lane Process Map** Adapted from map by John Grout, Campbell School of Business, Berry College, Mount Berry, Georgia
    24. 24. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 24Swim Lane Process Map• Shows functional relationships versus time• Can help in measuring loading on variousfunctional areas• Illustrates cross-function communicationprocesses• Other names: cross-functional flowchart,Rummler-Brache diagram.• Useful for mapping MIS support forprocesses
    25. 25. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 25Process MeasuresProductivityEfficiencyCycle TimeBenchmarking
    26. 26. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 26Productivity MeasuresProductivity =OutputsInputsSingle-factor, Multifactor, and Total measures of productivity
    27. 27. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 27ExamplesBatteries ProducedMachine Hours + Direct Labor HoursTotal Nightly Sales ($)Total Nightly Costs ($)Batteries ProducedDirect Labor HoursSingle-factorproductivity ratio:Multifactor:Total multifactor:
    28. 28. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 28Consider the following data . . .Quantity $/UnitCar X 4000 cars $8,000/carCar Y 6000 cars $9,500/carTotal labor forbuilding X20,000 hours $12/hourTotal labor forbuilding Y30,000 hours $14/hour
    29. 29. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 29What is the Labor Productivityin hours for Each Car?Car X: (4,000 cars / 20,000 hrs) = ?Car Y: (6,000 cars / 30,000 hrs) = ?How might these measures be affected bycapital substitution?
    30. 30. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 30What is the Labor Productivityin dollars for Each Car?Impact of wage, price changes?Car X: (4,000 × $8,000) = ?(20,000 × $12)Car Y: (6,000 × $9,500) = ?(30,000 × $14)
    31. 31. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 31Results(What are the Benefits? Caveats?)Car X: (4,000 × $8,000) = 133.33(20,000 × $12)Car X: (4,000 units / 20,000 hrs.) = 0.2 units / hrProductivity (hours)Productivity ($)Values for Car Y?
    32. 32. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 32EfficiencyA comparison of a company’s actualperformance to some standardUsually expressed as a percentageStandard is an estimate of what should be producedbased on studies or historical resultsEfficiency = 100%(actual rate / standard rate)OR: Efficiency = 100%(standard time/actual time) forone unit
    33. 33. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 33Cycle TimeTotal time required to complete aprocess from start to finish.– The percent of cycle time spent onvalue-added activities is a measure ofprocess effectiveness.
    34. 34. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 34Cycle Time DriversCauses that increase cycle time are:Waiting timesUnneeded stepsReworkUnnecessary controls or testingOutmoded technologyLack of information or training
    35. 35. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 35BenchmarkingA comparison of a company’sperformance to the performance of:Other firms in its industry (strategic)Firms identified as “world-class”(process)
    36. 36. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 36Benchmarking Data from“The Machine That Changed The World”Number of assembly defects per 100 vehicles (1989):Average Japanese plant: 34.0Average US plant: 64.6Average European plant: 76.8Is this strategic or process benchmarking?
    37. 37. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 37More Benchmarking Data ...Labor and machine hours per vehicle (1989):Average Japanese plant: 16.9Average US plant: 35.7Average European plant: 57What is the benefit of having both sets of figures?
    38. 38. So what’s happened since?Some new productivity figures.
    39. 39. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 39From “The Harbour Report”,July 1998“Labor hours needed for stamping, powertrain, and assembly operations”:(100%) Nissan 27.6 hours(168%) GM 46.5 hours (126%)Ford 34.7 hours"If GM could operate at Nissans level of productivity, theydsave themselves about $4.4 billion a year," Measuredanother way, the report shows GM has about 55,000 moreworkers than it needs.
    40. 40. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 40Other Measures ICostsQuality• Materials• Labor• Shipping• etc.• Defects per million (ppm)• Number of returns• Time between failures (MTBF,reliability)
    41. 41. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 41Other Measures IISpeedFlexibility• Lead time to customer• Percent orders late• Changeover time• Volume to meet changes indemand
    42. 42. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 42Measurement Key Points• Can be situation-specific• Should be relative to past performance andfuture goals• Potential for conflicts. Consider:# of Students TaughtProfessor hours% of SatisfiedStudentsversus
    43. 43. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 43Six Sigma MethodologyCore value is having less than 3.4 defects permillion opportunities (DPMO). Key elements are:Understanding and managing customerrequirementsAligning key business processes to achievethose requirementsUsing rigorous data analysis to understand andultimately minimize variation in those processesDriving rapid and sustainable improvement tobusiness processes.
    44. 44. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 44Six Sigma MethodologyTwo basic Six Sigma processes are:DMAIC (Define-Measure-Analyze-Improve-Control) — an updated version ofthe PDCA process promoted by Deming.DMADV (Define-Measure-Analyze-Design-Verify)
    45. 45. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 45The PDCA CyclePlanDoCheckAct
    46. 46. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 46Common ImprovementTools Cause and effect diagrams (aka “Fishbone”or Ishikawa diagrams) Check sheets Pareto analysis Run charts and scatter plots Bar graphs Histograms
    47. 47. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 47A Services ExampleFlight delays at Midway• Cause and Effect Diagrams• Check Sheets• Pareto Analysis
    48. 48. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 48Problem: Delayed Flights• No one is sure why, but plenty of opinions• “Management by Fact”• CI Tools we will use:– Fishbone diagram– Check sheets– Pareto analysis
    49. 49. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 49Cause and Effect DiagramASKS: What are the possible causes?Root cause analysis — open and narrow phases
    50. 50. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 50Generic C&E Diagram
    51. 51. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 51Midway C&E diagram
    52. 52. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 52Check Sheets(root cause analysis -- closed phase)Event: Day 1 Day 2 Day 3Late arrival II II IGate occupiedToo few agents I IAccepting latepassengersII III II
    53. 53. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 53Pareto Analysis(sorted histogram)Late passengersLate arrivalsLate baggage to aircraftWeatherOther (160)100857065
    54. 54. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 54Percent of each out of 480total incidents ...Late passengers 21%Late arrivals 18%Late baggage to aircraft 15%Weather 14%Other 33%
    55. 55. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 55Run Charts and ScatterPlotsTimeMeasureVariable YVariable XRunScatter
    56. 56. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 56HistogramsFrequencyMeasurements
    57. 57. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 57Supply-Chain OperationsReference (SCOR) ModelFive core processes for Level 1• Source• Make• Deliver• Return• PlanThree expanded processes for Level 2• Planning• Execution• Enable
    58. 58. © 2008 Pearson Prentice Hall --- Introduction to Operations and SupplyChain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 3, Slide 58SCORModelwww.supply-chain.org
    59. 59. Business Processes CaseStudyZephtrex Fabric

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