Business Processes

Not in book
Relates to Chapter 2
 Introduction

"A bad system will beat a good person every time."

-W. Edwards Deming
 Business Process
Definition: sequence of tasks or activities to achieve a specific outcome; the way
by which something is accomplished;.
Process Map or Flowchart
Customer
Order

Ingredients Make Prepare Assemble Bake Deliver

Dough Crust Pizza

Kind of processes

Primary: main value-added activities. Making a pizza, taking an order.

Support: necessary, but non-value added activities. Billing a customer, ordering
supplies.
Development: improving other processes and outcomes. Creating a new menu,
training employees.
 Defining Processes: Why Important
 Most processes are repetitive
 Want the best processes possible (provide exactly what
is desired—voice of the customer—with minimal
“waste”—lean)
 If the process is not defined
 Everyone does the process a little differently. Output is
inconsistent.
 Cannot identify what is value-added, what is waste
 Difficult to identify sources of problems
 So, cannot improve the process
 Cannot set standards for what is expected
 Difficult to schedule work
 Difficult to meet deadlines
 Cannot replicate the process elsewhere
 Cannot train people
Medical Process Flowchart
Human Resources: Hiring
Process Flowchart
 Defining the Process:
Process Mapping or Flowcharting

 Identify
 Focal point or output of process
 Boundaries of process
 Level of detail
 Investigate tasks
 Interview process participants
 Observe the process
 Record tasks and the sequence of tasks
These are done in a
 Create a map or flow chart of the process “Process Mapping
Workshop”
 Identify value-added versus waste in the
process
Creating the Process Map-Workshop
Creating Process Map using
Post-its
Common Mapping Symbols
Start or finishing point
Step or activity in the process
Decision point (typically requires a “yes” or “no”)
Input or output (typically data or materials
Document created

Delay or wait
Inspection

Move activity

These symbols are typical, but others may be used as appropriate

 Process Flowchart: Luigi’s
Pizzeria
Start or finishing point
Step or activity in the process
Decision point (typically requires a “yes” or “no”)
Input or output (typically data or materials
Document created
Delay or wait
Inspection
Move activity

Kitchen Customer Bake

Process Order

Ingredients Make Prepare Assemble Bake Inspect Deliver

Dough Crust Pizza
Freeze
Valued-added steps?
 Value-Added Steps

 Add direct value to the product or services as

seen or experienced by the customer

Non-value added steps

 Waste, should be eliminated
 Necessary non-value added steps: waste, but
difficult to eliminate (e.g., some kinds of
planning, scheduling, etc.)
 Process Flowchart:Luigi’s
Pizzeria
Start or finishing point
Step or activity in the process
Decision point (typically requires a “yes” or “no”)
Input or output (typically data or materials)
Document created
Delay or wait
Inspection
Move activity = Valued-added
Kitchen Customer Bake
Process Order

Ingredients Make Prepare Assemble Bake Inspect Deliver

Dough Crust Pizza
Freeze
Valued-added steps?
 Walk-in Customer Order
Process Flowchart: Luigi’s

Start or finishing point

Step or activity in the process
Decision point (typically requires a “yes” or “no”)
Input or output (typically data or materials)
Document created
Delay or wait
Inspection
Move activity

(from
kitchen)

= value-added activity
 Walk-in Customer Order Process Flowchart, Expanded
Possible problem areas
Customer arrives

Wait to place order

Keep waiting?
Y N Lost customer
Long wait?
N
Customer places Y
order

Wait for order

Keep waiting?
Y N
Lost customer
Long wait?
N

Order arrives (from kitchen)

Wait for new order?

Order correct? N N
Lost customer
Y
Customer satisfied Y
with order
 What other processes at
Luigi’s?
Processes for:
 Order process from phone or email

 Order filling process in kitchen (food preparation

and cooking)
 Delivery process

 Restaurant/kitchen/restroom cleanliness process

 Foodstuff/materials ordering process

 Staff hiring/training process

 What else?
 Order Processing at Jack’s
Trucking Company

Dealer Paper Order Sits Order Sits Clerk

Order Internal Mail
Faxes In Fax In Clerk’s Processes
Created Delivers Fax
Order In Box In Box Order

4% of 0 to 4 hours 0 to 2 hours 5 minutes

orders lost 2 hours on average 0.5 to 1.5 hours 1 hour on average
1 hour on average
1% of orders lost

10 to 45 minutes
20 minutes on average

Dealer Inspector Worker YES

Transport Firm Is Item
Receives Checks Picks
Delivers Order In Stock?
Order Order Order

NO
2 minutes
1 to 3 hours 0.5% of orders incorrect
2 hours on average Clerk Notifies
No history of lost, Dealer and
damaged, or incorrect
deliveries
Passes Order
On to Plant
 Order Processing at
Jack’sTrucking Company

Dealer Paper Order Sits Order Sits Clerk

Order Internal Mail
Faxes In Fax In Clerk’s Processes
Created Delivers Fax
Order In Box In Box Order

4% of 0 to 4 hours 0 to 2 hours 5 minutes

orders lost 2 hours on average 0.5 to 1.5 hours 1 hour on average
1 hour on average
1% of orders lost

10 to 45 minutes
20 minutes on average

Dealer Inspector Worker YES

Transport Firm Is Item
Receives Checks Picks
Delivers Order In Stock?
Order Order Order

NO
2 minutes
1 to 3 hours 0.5% of orders incorrect
2 hours on average Clerk Notifies
No history of lost, Dealer and
damaged, or incorrect
deliveries
Passes Order
On to Plant
 Analysis: Order Processing at
Jack’s
 Throughput time = S times for steps, start to finish
= 120 + 60 + 60 + 5 + 20 + 2 + 120 = 387 min average
(range: 107- 682 min)
 Analysis of steps:
 Delay: 180 min
 Transport: 180 min
 Inspection: 2 min
 Work: 25 min

 % value added time = 25/387 = 0.0646 = 6.5% !

(93.5% of throughput time is non-value added waste)

 Other wastes:
 Lost orders, 5%
 Errors, 0.5%

 Everything gets even worse if item is not in stock!

 Order Processing at Jack’s Trucking Company
What is the maximum number of orders that can be processed per 8-hour day?
Assume 3 workers, each must wait for previous worker
1
Dealer Paper Order Sits Order Sits Clerk
Order Clerk picks
Internal Mail
Faxes In Fax In Clerk’s Processes
Order Created In Box
Up fax Fax
Delivers
In Box Order

4% of 0 to 4 hours 0 to 2 hours 5 minutes

orders lost 2 hours
2 hours on average 0.5 to1
1.5hour
hours 1 hour1onhour
average 5 minutes
1 hour on average
1% of orders lost

20 minutes 2 minutes 45 minutes

10 to 45 minutes
3 220 minutes on average
Dealer InspectorFirm Inspector Worker YES
Transport Is Item
Receives Checks Picks
Order
DeliversOrder
Delivers Order Order Order
In Stock?

NO
2 minutes
Process bottleneck is worker1 to1:3 2hours
hours, 5 minutes = 125 minutes
0.5% of orders incorrect
This is the maximum throughput rate (125 min/order)
2 hours on average Clerk Notifies
No history of lost, Dealer and
damaged, or incorrect
Output = time available = 8deliveries
hrs x 60 min/hr = 3.84 orders/day Passes Order
On to Plant
bottleneck 125 min/order

What is labor efficiency?

 Order Processing at Jack’s Trucking Company
What is the labor efficiency?
Dealer Paper Order Sits Order Sits Clerk
Faxes Order In Fax Clerk
Internalpicks
Mail
In Clerk’s Processes
Created Delivers Fax
Order In Box Up fax In Box Order

4% of 0 to 4 hours 0 to 2 hours 5 minutes

orders lost 2 hours
2 hours on average 1 hour
0.5 to 1.5 hours 1 hour on average1 hour 5 minutes
1 hour on average
= worker task 1% of orders lost

20 minutes 2 minutes 45 minutes

10 to 45 minutes
20 minutes on average

Dealer Inspector Worker YES

Receives Inspector
Transport Firm
Checks Picks
Is Item
Delivers Order In Stock?
Order Delivers Order Order Order

NO
2 minutes
If the three workers only processed orders:
1 to 3 hours 0.5% of orders incorrect
2 hours on average Clerk Notifies
No history of lost, Dealer and
Labor efficiency = actual work time/order = 65 + 45 + 22 min _
damaged, or incorrect
deliveries
Passes Order
On to Plant
time available/order (3 workers) (125 min)
= 0.352 = 35.2%
i.e., Of the total labor time available to process each order, only 35% of
the time the workers are working on orders (the remaining time they
are “idle” or doing something else)

What is value-added labor efficiency?

 Order Processing at Jack’s Trucking Company
What is the value-added labor efficiency?

Dealer Paper Order Sits Order Sits Clerk

Order Clerk picks
Internal Mail
Faxes In Fax In Clerk’s Processes
Order Created In Box
Up fax Fax
Delivers
In Box Order

4% of 0 to 4 hours 0 to 2 hours 5 minutes

orders lost 2 hours
2 hours on average 0.5 to1
1.5hour
hours 1 hour1onhour
average 5 minutes
1 hour on average
= value-added task 1% of orders lost

20 minutes 2 minutes 45 minutes

10 to 45 minutes
20 minutes on average

Dealer InspectorFirm Inspector Worker YES

Transport Is Item
Receives Checks Picks
Order
DeliversOrder
Delivers Order Order Order
In Stock?

NO
2 minutes
1 to 3 hours 0.5% of orders incorrect
Value-added labor efficiency = value
2 hours added time/order
on average = 5 + 45 Clerk Notifies
No history of lost, Dealer and
time available/order
damaged, or incorrect
(3 workers) (125 min)
= 0.133 = 13.3%
deliveries
Passes Order
On to Plant
Only 13.3% of the time available to process orders is value-added work!
 Summary

 With a defined process

 Can set standards for what is expected
 Can replicate the process and train people
 Everyone does the process the same way (output is consistent)
 Can identify what is value-added, what is waste
 Can improve the process
 Tricia S.
Jessica S.
Nick P.
Example: Credit Request Approval Process
Andrew K. This flow chart is pretty good!
Myrsini-Christina D.
Shortened
?
Wait for response

Receive request from Research Call CFO or Write request

company and Treasurer with memo for 2 – 3 days
Relationship Manager questions approval
study F/S

½ - 1 day
½ - 1 day
Waste Give memo
to manager
for review

Waste

1 - 3 days Wait for manager

to read and give
corrections
Waste
1 - 3 days
Is approval subject to any
Approved? Wait for response
limits?

Submit to Revise memo

Begin Client Contract Credit Chair for manager’s
Yes for approval No corrections

Waste Yes
No
1 day
Approved by Committee?
Submit to BCRG
committee for limit
Yes approval

No Wait for meeting to be

set

Stop process 1 day – 2

weeks
 Example:

Value Stream Map

This flowchart is inadequate!
• Doesn’t show everything (like all
the places where the patient has
to wait).
• Doesn’t point out places that are
wasteful of opportunities for
improvement.
• Doesn’t have a title!