INFS 1000 Session 10: Business Process Analysis & Improvement

Learning Objectives and Theoretical Framework

• Fundamental Principles for Process Improvement: The course focuses on identifying and applying guidelines across three primary categories:

  • Outcome-related improvements

  • Activity-related improvements

  • Resource-related improvements

• Practical Application: Skills involve applying these principles to analyze Business Process Diagrams (BPDs) and recommending specific changes to enhance efficiency and effectiveness.

• Contextual Relevance: Improvement begins after the creation of the "As-Is" model. Analysis of this model determines how to transition to a more optimal process.

• Supporting Literature: Refer to the article by Roseman (2001) available on Canvas for an in-depth reading guide.

Process Improvement: Key Terms and Definitions

To effectively analyze and improve a business process, several quantitative metrics must be understood and calculated:

• Output Rate: The volume of products or services a business process produces within a specific unit of time.

  • Example: If a barista produces 30 cups of coffee in one hour, the output rate is $30\,\text{cups/hour}$.

• Throughput Rate (Flow Rate): The rate at which units flow through a specific, individual activity within the broader process.

  • Example: If customers pass through an order-taking counter at a rate of 20 per hour, the throughput rate for that specific activity is $20\,\text{customers/hour}$.

• Process Capacity: The maximum theoretical output rate a business process can achieve per unit of time.

  • Example: If one barista can make 30 coffees/hour and the shop employs 2 baristas, the total process capacity is $60\,\text{cups/hour}$.

• Capacity Utilization: The percentage of the total process capacity that is currently being utilized.

  • Formula: $\text{Capacity Utilization} = \frac{\text{Output Rate}}{\text{Process Capacity}}$

  • Example: If a shop produces 45 cups/hour with a 60 cups/hour capacity, the utilization is $\frac{45}{60} = 75\%$.

• Lead Time: The total average time required for a process to unfold from the very start to the very end.

  • Example: If a customer waits 6 minutes from the moment they enter the shop until they receive their coffee, the lead time is $6\,\text{minutes}$.

• Activity Time: The average time required to complete one specific activity within the process.

  • Example: Brewing a single cappuccino takes $2\,\text{minutes}$.

• Activity Resource Requirements: The average units of resources (labor, materials, time) consumed by a specific activity.

  • Example: A cappuccino requires 1 espresso shot, $150\,\text{ml}$ of milk, and $1\,\text{minute}$ of barista labor.

Including Additional Information in BPDs for Analysis

Standard Business Process Diagrams (BPDs) can be annotated with metadata to facilitate better analysis:

• Probability at Exclusive Gateways: Assigning percentages to different paths (e.g., $0.3$ vs $0.7$) to see which routes are most common.

• Activity Time Annotation: Labeling each task box with its average duration (e.g., $1\,\text{min}$, $10\,\text{min}$).

• Resource Data: Adding information regarding man-hours or specific costs associated with each task.

Outcome-Related Improvement Principles

Outcome-related improvements focus on the results of the process, including final outputs and intermediate results like orders or invoices.

1. Elimination of Unnecessary Outcomes: Removing outputs that do not add value.

   • Zero-based Start: A radical approach where every outcome is initially eliminated; to be re-incorporated, a specific justification must be provided for its existence.

2. Substitution of Outcomes: Replacing a current outcome with one that is more efficient or effective.

   • Example: Evaluated Receipt Settlement. Instead of the traditional invoice process, payment is made automatically based on the quantity of goods received and the agreed unit price, eliminating the need for an invoice document entirely.

3. Digitization of Outcomes: Converting physical outcomes into electronic formats.

   • Rational: Electronic outcomes are significantly cheaper to store, copy, and distribute.

4. Harmonization of Outcomes:

   • Horizontal Harmonization: Standardizing documents or products across a single process (e.g., ensuring quotes, orders, and invoices use the same structure).

   • Vertical Harmonization: Standardizing and integrating processes occurring in parallel to achieve economies of scale (e.g., integrating online and offline sales channels).

Activity-Related Improvement Principles

Activity-related improvements focus on the tasks themselves and the sequence in which they are performed.

1. Elimination of Activities: Highlighting and removing non-value-adding tasks, often associated with Lean Management.

2. Moving from Push to Pull Principles: Transitioning to a system where work is only performed when requested by the subsequent stage. Ideally, processes following the Kanban (pull) principle should minimize or eliminate bottlenecks.

3. Elimination of Bottlenecks: Identifying the activity with the lowest throughput rate (the bottleneck) and increasing it to improve the overall process capacity.

   • Scenario Table:

     • Take Order: Throughput Rate = $20/\text{hr}$

     • Cook Food: Throughput Rate = $4/\text{hr}$ (The Bottleneck)

     • Serve Food: Throughput Rate = $10/\text{hr}$

     • Collect Payment: Throughput Rate = $15/\text{hr}$

   • To increase total capacity, the "Cook Food" activity must be improved.

4. Automation of Activities: Replacing manual human activities with IT applications or robotic systems.

5. Parallel Routing of Activities: Also known as "Simultaneous Engineering." This involves performing sequential activities at the same time to reduce total lead time. This requires deep understanding of interdependencies and communication.

   • Example: Combining separate "Take Drink Order" and "Take Food Order" tasks into a single activity, then preparing food and drinks simultaneously.

6. Substitution of Activities: Replacing time-consuming tasks with faster alternatives or adding pre-process tasks that simplify the main process.

   • Example: Instead of cooking food for 30 minutes after an order is taken, the food is pre-cooked for 20 minutes beforehand, reducing the active order-to-serve time to 10 minutes.

7. Increasing the Probability of Efficient Pathways: Adjusting the business model to guide customers or users toward faster, cheaper routes.

   • Example: Moving from a $50/50$ split between over-the-counter ($30\,\text{min}$) and online ($5\,\text{min}$) services to a $90\,\text{online}/10\,\text{OTC}$ split.

Resource-Related Improvement Principles

These guidelines focus on how human and physical resources are utilized within the process.

1. Integration of Activities: Expanding the scope of what a single resource does.

   • Job Enlargement: Combining two related activities of the same difficulty level (e.g., sorting mail and distributing mail).

   • Job Enrichment: Incorporating more challenging or complex tasks into a role (e.g., merging production tasks with quality control).

2. Assignment of Resources: assigning resources to more specific tasks to gain efficiency through specialization.

   • Strategy: Assign specialists to complicated, non-standard tasks while using general line staff for highly standardized, repetitive tasks.

Case Study: JB Hi-Fi's Price Matching Process

Current "As-Is" Process Description:

1. Customer walks into store and approaches a sales assistant to request a price match.

2. Assistant requests evidence (printed ad, screenshot, or webpage).

3. Assistant verifies by visiting the competitor's website.

4. If invalid (out of stock, different model/color), the assistant explains the rejection and the process ends.

5. If valid, the assistant checks if the price difference exceeds a specific threshold.

6. If it exceeds the threshold, the match is rejected.

7. If under the threshold, the assistant calls the manager via the Microsoft Teams Walkie Talkie app.

8. The manager takes an average of $4\,\text{minutes}$ to arrive.

9. The manager enters a managerial code into the Point of Sale (POS) system because the override function is restricted.

10. Payment is processed, receipt is printed, and product is handed to the customer.

Recommended Improvements for JB Hi-Fi:

• Solution 1 (Digitization of Outcomes): Replace paper receipts with electronic receipts sent via email to reduce waste.

• Solution 2 (Elimination of Bottleneck/Integration of Activities): Empower experienced sales assistants to apply small price overrides within set limits, removing the $4\,\text{minute}$ wait for a manager.

• Solution 3 (Elimination of Bottleneck/Substitution of Activities): Integrate manager approval via a digital pop-up or notification within the POS system so the manager can approve remotely without walking to the counter.

• Solution 4 (Digitization of Outcomes): Implement a Live Chat or in-store app feature where customers can upload evidence for pre-approval before they even reach the store.

• Solution 5 (Automation of Activities): Use an automated competitor price-checking tool to maintain daily pre-approved match lists for major retailers, saving the assistant approximately $3.5\,\text{minutes}$ per transaction.