Operations Focus

By Tim Connor, Rodeo! Performance Group, Inc.

In Part 1 series, we looked at the importance of beginning with the customers’ needs and requirements to properly design a process. In this concluding piece, we’ll look at both process design and the basics of process improvement.

Designing a Process: What Do You Want?

Once you know what the outside customer wants, your next step is to clarify those wants into measurable outcomes – related wholly to the customer’s specs.

Why is this step important?

Because conformity to those specs is your competitive advantage, a principle which holds true today no matter what your business is, or where in the world it is conducted.

Beginning with customers, there are three primary objectives every business process should meet:

1) it should be effective, or produce the desired results the customer is looking for.
2) It should be efficient, using the minimum resources necessary to produce those desired results.
3) It should be adaptable, have the flexibility to meet changing customer and business needs.

It might seem like an exaggeration, but U.S. businesses have become lazy when challenged in these three areas. Their focus on the efficient part of the process, minimizing resources, is evident in the rise of the CFO as a major force, with cost-cutting now the major response to challenges from outside.

If you hear that and it sounds reasonable, consider the long term effects of a “cost only” concentration. It reduces the ability of your company to deliver products and services. This is a kiss of death where customers are concerned, because those products and services are why they’ve dealt with your company in the first place. It’s also resulted in reduced quality of products, another killer when it comes to customers who want value for their hard earned (and rapidly dwindling!) dollars. Finally, it’s resulted in portions of our businesses, or even whole businesses, being moved offshore. Offshore moves mean –in the long run – those industries will become the industries of the country where they’ve been moved, and no longer the solid underpinnings of the United States economy.

For processes to be improved and remain competitive, all three of the primary objectives have to be addressed.

Applying the Primary Objectives

We’ve already looked at how to address Objective 1, Producing The Desired Results, so we’ll move on to Objective 2.

Objective 2, Making The Process Efficient, is second in importance.

Notice it’s second – if you aren’t making sure that your efficiency is continuing to produce the best product, you have begun a death spiral with your business. While the imperatives for efficiency are most often begun at an executive level, it’s the STAFF doing the process who can usually provide the best returns here. Why is that? Because it’s the people doing the process who have the best idea of what’s needed, since they do it every day.

Process efficiency looks at things like…

  • Cycle time per unit, or cycle time per transaction for a service. In other words, How long does it take to make each thing you make? Or, how long does it take you to complete a transaction with a customer? Time is money, of course, but cycle time doesn’t monitor hourly wages. The less time it takes to make something, or to finish something, the more transactions or items you can produce. Time is capacity!
  • How many resources, how many people, are needed per unit of output? Knowing this allows you not just to monitor costs, but to predict and plan for future needs.
  • What are the value-added costs per unit? This is a little more abstract, but it’s a monitor of the steps in the process that actually add value – value to the customer – to the product or service.
  • What are the non-value-added costs per unit? Believe it or not, most processes have steps within them that add no value to the product in the customer’s eyes. BUT, they still may be critical: preventative maintenance procedures come to mind. You need to know what these steps are.
  • What is the cost of poor quality? This starts with understanding what poor quality is within your product or service. And then it moves on to looking at the consequences of poor quality. Only when you identify the actual problem, and the actual consequences, can you move on to classify the actual costs.

Objective 3, Making The Process Adaptable, is third in importance. This one is quite often ignored in businesses, and results in some dire consequences.

Process adaptability is the ability of the process to meet future customer requirements. As technology expands and expectations of products and services change rapidly, businesses have to be ready to change to remain competitive.

Examples of changes like this include the tracking of shipments while en route, an innovation introduced by UPS that caused immediate scrambling by other carriers to seek to keep up. Such a change as that one often mandate complete scrapping of an existing process because it will never meet the new expectations. Re-engineering is then called for.

Review Your Processes Now

Taking the time to walk through your business’s processes will pay dividends far beyond the hour or so per process a quick review will take. Edwards Deming, who invented many of the process management approaches used today, estimated that between 80 and 90% of all process steps are waste steps, and can be removed from processes using process analysis tools.

Would it make a difference to your company if you could reduce your product cycle time by 40-50%? That’s effectively doubling your production capacity! What about customer response processes, how many complaints would go away if you reduced turnaround there by 20 or 30%? Would that bring your customer loyalty up? How about repeat sales? Take the time to do it today, it’s worth it!