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
© 2016. All Rights Reserved.

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.

Process…
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.

Process…
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.

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

Factors influencing Process Design and Process Analysis

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