Managing Business Processes:
Design and Improvement
Cheng Li, Ph.D.
California State University, Los Angeles
January 2002
Contents

Basic Concepts
–

Process Design & Improvement Approaches
–

Background, definitions, process structure, and
generic approaches to process design
The four phases of process improvement projects,
TQM, and Reengineering
Process Design & Improvement Techniques
–
Flowcharting, QFD, SPC, queuing, and information
modeling
Basic Concepts
The Process Focus


The changing emphasis of management
practices: from individual activities to process
Background:
–
–
Local optimization is not inadequate.
Activities are increasingly integrated.
What is the business process
approach?


A work process: a set of related activities that
adds value and provides a service to a
customer.
The process focus:
–
–
–
integrative
cross-functional
customer orientation
What is business process
improvement?

Process Improvement: how to do our work
better in terms of customer satisfaction, cost
reduction, and self-fulfillment, etc.

Related Process Management Theories:
–
–
–
Reengineering (Michael Hammer)
Continuous improvement or TQM
BPI: Business Process Improvement (James
Harrington)
Strategic Positioning through
Process Structure

Complexity:
–

e.g. preparation process:
fast food vs. gourmet food
Divergence: degree of customization, the
amount of discretion or freedom allowed
–
–
e.g. H&R Block vs. CPA firms
e.g. Options for Mercedes vs. for Camry
Competitive Advantages through
Process Structure



Competitive Advantages
Competitive Strategies
e.g. Sam’s Club vs. Nordstrom
–

layout, selection, service process, personnel
Competitive Strategy and Structural Positioning
Example: Structural Alternatives
for a Family Restaurant
Lower
 no reservations
 self-seating,
menu on board
 customer fills
out form
 pre-prepared,
no substitute,
limited to 4
choices
Current
take reservation
seat guests, give
menus
Serve water and
bread
Take orders
Prepare orders:
salad (4),
entrée (15)
Higher
specific table
selection
recite menu,
describe entrees and
specials
assortment of hot
breads
at table, taken
personally
individually
prepared
Generic Approaches to Service
System Design

Production Line Approach
–
–
–
–
limited Discretionary Action of Personnel
division of labor
substitution of technology for people
service standardization
Generic Approaches to Service
System Design

Customer as Coproducer
–
–
substitution of customer labor for provider labor
smoothing service demand
Generic Approaches to Service
System Design

Customer Contact Approach
–
–
Degree of customer contact
Separation of high- and low-contact operations
Process Design & Improvement
Approaches
The Four Phases of Process
Improvement




Description
Analysis
Design
Implementation
Process Description


Customers
Activities
–
–



Primary (value-adding) activities
Supporting (non-value-adding) activities
Work flow
Policies and constraints
Output: process flowcharts & description
Process Analysis

Identify potential improvement areas
–
–


sources of information: internal and external
problems and causes
Identify related work processes and prioritize
improvement projects
Output: major problems, causes of the
problems, targeted work processes
Process Design

Customer requirements
–

Design parameters
–

e.g. telephone repair: short down time, when it can
be repaired, convenient hours, short waiting time
e.g. telephone repair: training of the operators,
computer systems, # technicians
Relationships between requirements and
parameters
Process Design (cont.)





Generating ideas
Evaluating alternatives
Designing the new process
Setting policies and controls
Other issues: feedback mechanism,
justification of the new process
Implementation






Planning
Work process changes
Policy changes
Organizational changes
Training
Promotion and education
TQM/Continuous Improvement





The Concept of Total Quality
The Dynamics of Quality Improvement:
continuous improvement vs. tradeoff balancing
Employee Involvement
Emphasis on Customer Satisfaction
Evolution
Reengineering



Redesign: “forget about what you know”
Application of new technology
Break the routine (“a revolution”):
–
–
–
habits
assumptions
values
Reengineering: Assumption
Busting



Problem: a specific performance shortcoming
of the process
Rule: A specific aspect of the process design
that causes the problem
Assumption: a belief about the environment
that gives rise to the rule
Reengineering: Assumption
Busting
Example:
 Problem: Customers don’t know when the
repair can be done.
 Rule: The operator does not have the authority
to schedule technicians.
 Assumption: The operator does not know
where the problem is and does not have
information about technicians’ schedules.
Overcoming Resistance to Change





Resistance is natural and inevitable: expect it
Resistance doesn’t always show its face: find it
Resistance has many motivations: understand
it
Deal with people’s concerns rather than their
arguments: confront it
There’s no one way to deal with resistance:
manage it
The Key Mechanisms for
Overcoming Resistance





Incentives: positive and negative
Information: dispel uncertainty and fear
Intervention: one-on-one connections
Indoctrination: make change seem inevitable
Involvement: make people part of the effort
The Ten Principles of
Communications





Segment the audience
Use multiple channels
Use multiple voices
Be clear
Communicate, communicate, communicate
The Ten Principles of
Communications (cont.)





Honesty is the only policy
Use emotions, not just logic
Heal, console, encourage
Make the message tangible
Listen, listen, listen
Process Design & Improvement
Techniques
Basic Techniques: Process
Flowchart

e.g. student registration process
–
–
–
–
–
–
get a copy of class schedule
select classes, consult advisor if necessary
make payment
wait for authorization: pin number, time window
call the system
register, etc.
Process Flowchart: symbols
Action/Operation
Decision (If …)
Delay
Transportation
QFD: Quality Function Deployment

Example: a relationship matrix
Training
Computer
System
Down Time
WEAK
WEAK
When
STRONG STRONG
Convenience
#Technicians
STRONG
Statistical Process Control


Emphasis on the process instead of the
product/material
Focus on “prevention”
Control Chart
Abnormal variation
due to assignable sources
Out of
control
UCL
Mean
Normal variation
due to chance
LCL
Abnormal variation
due to assignable sources
0
1
2
3
4
5
6
7
8
9
Sample number
10 11 12 13 14 15
In-Control: random only
UCL
LCL
1
2
Sample number
3
4
Control Charts for Variables


Mean Chart: measuring sample means
Range Chart: measuring sample ranges
i.e. max-min
Out-of-Control: assignable & random
shifted mean
process mean is
shifting upward
Sampling
Distribution
UCL
Detects shift
x-Chart
LCL
UCL
Does not
detect shift
R-chart
LCL
Out-of-Control: assignable & random
increased variability
Sampling
Distribution
(process variability is increasing)
UCL
Does not
reveal increase
x-Chart
LCL
UCL
R-chart
Reveals increase
LCL
Type I Error:
a/2
a/2
Mean
a = Probability
of Type I error
LCL
UCL
Type II Error:
In-Control
LCL
Out-of-Control
Mean
UCL
Control Charts for Attributes

p-Chart - Control chart used to monitor the
proportion of defectives in a process

c-Chart - Control chart used to monitor the
number of defects per unit
Counting Runs
Figure 10-11
Counting Above/Below Median Runs
B A
A
B
A
B
B
B A
(7 runs)
A
B
Figure 10-12
Counting Up/Down Runs
U
U
D
U
(8 runs)
D
U
D U
U D
Process Capability
Lower
Specification
Upper
Specification
Process variability matches
specifications
Lower
Specification
Upper
Specification
Process variability well within
Lower
Upper
specifications
Specification Specification
Process variability exceeds
specifications
Process Capability: 3-sigma & 6-sigma
Upper
specification
Lower
specification
1350 ppm
1350 ppm
1.7 ppm
1.7 ppm
Process
mean
+/- 3 Sigma
+/- 6 Sigma
Other Quality Management Tools






Check sheet
Scatter diagram
Histogram (frequency)
Pareto chart
Control chart
Cause-and-effect diagram
Queuing Systems: basic elements
Processing
order
Arrivals
Waiting
line
Service
System
Exit
Queuing Systems: multiple phases
Multiple channel
Multiple phase
Modeling with Queuing Theory

System Characteristics
–
–
–
–
Population source: finite, infinite
No. of servers
Arrival and service patterns: e.g. exponential
distribution for inter-arrival time
Queue discipline: e.g. first-come-first-serve
Measuring Performance

Performance Measurement:
–
–
–

System utilization
Average no. of customers: in line and in system
Average waiting time: in line and in system
e.g. infinite source, single server, exponential
inter-arrival and service times, first-come-firstserve: (see handout)
Basic Tradeoff
Cost
Total
cost
=
Customer
waiting cost
+
Capacity
cost
Total cost
Cost of
service
capacity
Cost of
customers
waiting
Service capacity
Optimum
Average number on
time waiting in line
Basic Tradeoff (cont.)
0
System Utilization
100%
Applying Queuing Theory

In Process Design:
–
–
–
–
Describe the process and establish a model
Collect data on incoming and service patterns
Find formulas and/or tables, software to calculate
performance measures
Use performance measures to guide process design
decisions
Applying Queuing Theory

In Operations:
–
–
Monitor performance measures
Use performance measures to guide process
improvement and operations decisions
Process Modeling Languages


Process Modeling Languages
QPL: Quality Process Language by Gary Born
Process Modeling Languages

Process, input, output, the process owner,
and authorities
list of bids
Evaluate Bids
----------------
list of bids
Purchasing Officer Selected supplier
Quality Process Language

Unchanged and Changed Output:
–
–
list of bids: unchanged
selected supplier: changed
list of bids
Evaluate Bids
----------------
list of bids
Purchasing Officer
Selected supplier
Quality Process Language

Process Owner: a person or a machine
responsible for execution of processes
list of bids
Evaluate Bids
----------------
list of bids
Purchasing Officer
Selected supplier
Quality Process Language

Process Owner: variable
list of bids
Evaluate Bids
----------------
list of bids
Purchasing Officer
Choice of purchasing officer
Selected supplier
Quality Process Language

Authorities: provide rules and guidance on
how to process information
Purchasing procedures
list of bids
Evaluate Bids
----------------
list of bids
Purchasing Officer
Selected supplier
Modeling Information





Information is the link between processes.
Classifying information based on versions to
keep.
Channel: temporary
Information Store: only the current version
Archive: current and previous versions
Modeling Information

Symbols:
I
channel
Information Store
Archive