Process Analysis

Chapter 5

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How Process Analysis

fits the Operations Management
Philosophy

Operations As a Competitive
Weapon
Operations Strategy
Project Management

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Process Strategy
Process Analysis
Process Performance and Quality
Constraint Management
Process Layout
Lean Systems

Supply Chain Strategy

Location
Inventory Management
Forecasting
Sales and Operations Planning
Resource Planning
Scheduling

Omego
Omego is the leading provider of complete global
trade management services, processing more than
one million trades per day and servicing 6,000
broker-dealers, custodian banks and investment
managers in more than 40 countries.
Through process analysis, it was able to reduce
the typical trade expense from $10 or $12 down to
between 20 cents and a dollar.
Trade processing time was reduced from 20 hours
down to three hours.
These changes were the result of considerable
customer contact and reflect more automation and
process reengineering.
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Process Analysis
Process analysis is the documentation and
detailed understanding of how work is performed
and how it can be redesigned.
2
Define Scope
1
Identify
Opportunity

3
Document
Process

6
Implement
Changes

4
Evaluate
Performance
5
Redesign
Process

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A Systematic Approach
to Process Analysis
Suggestion system: a voluntary system by which
employees submit their ideas on process
improvements.
Design team: A group of knowledgeable, teamoriented individuals who work at one or more steps
in the process, do the process analysis and make
the necessary changes.
Metrics: Performance measures that are
established for a process and the steps within it.
Flowcharts: A diagram that traces the flow of
information, customers, equipment, or materials
through the various steps of a process.
Service Blueprint: A special flowchart of a service process
that shows which steps have high customer contact (line of
visibility).

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Flowchart for the Sales Process of a Consulting

Company

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Service Blueprint

Flowchart of a
Nested Subprocess
Client Agreement & Service Delivery Step

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Showing the Handoffs Between Departments

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Process Charts
Process chart: An organized way of documenting
the activities performed by a person or group of
people at a work station, with a customer, or on
materials.
Five categories of process charts:
1. Operations that change, create or add something.
2. Transportation (materials handling): Moving something.
3. Inspection: Checking or verifying something.
4. Delays: Time spent awaiting further action.
5. Storage: When something is put away until a later time.
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Process Chart for an Emergency Room Admission

Process:
Subject:
Beginning:
Ending:

Emergency room admission

Ankle injury patient
Enter emergency room
Leave hospital
Insert Step
Append Step
Remove Step

Step
no.

Time
(min)

1
2
3
4
5

0.50
10.0
0.75
3.00
0.75

15
40
40

6
7
8
9
10

1.00
1.00
4.00
5.00
2.00

60
200

11
12
13
14
15

3.00
2.00
3.00
2.00
1.00
4.00
2.00
4.00
1.00

200
60
180
20

16
17
18
19

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Distance

Summary
Activity
Operation
Transport
Inspect
Delay
Store

Number
of steps

Time
(min)

Distance
(ft)

5
9
2
3

23
11
8
8

815

Step description

(ft)
X

Enter emergency room, approach patient window

Sit down and fill out patient history
Nurse escorts patient to ER triage room
Nurse inspects injury
Return to waiting room

X
X
X
X
X
X

Wait for available bed

Go to ER bed
Wait for doctor
Doctor inspects injury and questions patient
Nurse takes patient to radiology

Technician x-rays patient

Return to bed in ER
Wait for doctor to return
Doctor provides diagnosis and advice
Return to emergency entrance area

X
X
X
X
X
X
X
X
X
X
X

Check out
Walk to pharmacy
Pick up prescription
Leave the building

Evaluating Performance
Checklist: A form used to record the frequency of
occurrence of certain service or product
characteristics related to performance.
Histogram: A summarization of data measured on a
continuous scale, showing the frequency distribution
of some quality characteristic (the central tendency
and dispersion of the data).
Bar chart: A series of bars representing the
frequency of occurrence of data characteristics
measured on a yes-or-no basis.
Pareto Chart: A bar chart on which factors are
plotted in decreasing order of frequency along the
horizontal axis.
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Bar Chart
Example 5.1
The manager of a neighborhood restaurant is concerned about
rising customer complaints. He would like to present his findings in
a way that his employees will understand.

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Pareto Chart
Example 5.1

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More Tools for

Evaluating Performance
Scatter-diagram: A plot of two variables
showing whether they are related.
Cause-and-effect diagram: A diagram that
relates a key performance problem to its
potential causes.
Sometimes called the fishbone diagram.

Graphs: Representation of data in a variety

of pictorial forms, such as line charts and
pie charts.
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Checker Board Airlines

Example 5.2
Personnel

Equipment
Aircraft late to gate
Other

Mechanical failures

Late cabin crew

Air traffic delays

Late baggage to aircraft

Late fuel

Poor announcement of departures

Delayed
flight
departures

Weight/balance sheet late

Late food service

Contractor not provided
updated schedule

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Late cabin cleaners

Unavailable cockpit crew

Weather

Materials

Passenger processing at gate

Procedures

Delayed check-in procedure

Waiting for late passengers

Analyzing Flight Delays Using a

Cause-And-Effect Diagram

Wellington Fiber Board Co.

Example 5.3
The Wellington Fiber Board Company produces
headliners, the fiberglass components that form
the inner roof of passenger cars. Management
wants to identify which defects were most
prevalent and to find the cause.
They decide to use the following tools:
Step 1. Checklist
Step 2. Pareto chart
Step 3. Cause-and-effect diagram
Step 4. Bar chart
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Wellington Fiber Board Co.

Example 5.3

Checklist

Headliner Defects
Defect type

Tally

Total

A. Tears in fabric

////

B. Discolored fabric

///

C. Broken fiber board

//// //// //// ////

//// //// //// /

D. Ragged edges

//// //

7
Total

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36
50

Wellington Fiber Board Co.

Example 5.3

Pareto Chart

50

80

30

60

20

40

10

20

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Defect type

Cumulative Percentage

Number of Defects

40

100

Wellington Fiber Board Co.

Example 5.3

Cause-and-Effect Diagram
People

Materials
Training
Out of specification
Not available

Absenteeism
Communication

Machine maintenance

Humidity
Schedule changes

Machine speed
Wrong setup

Other
Process
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Broken
fiber
board

Number of Broken Fiber Boards

Wellington Fiber Board Co.

20

Example 5.3
Bar Chart

15
10
5
0

First
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Second
Shift

Third

Process Simulation
Process simulation is the act of reproducing the
behavior of a process using a model that describes
each step.
It shows how a process dynamically changes
over time.
Using SimQuick, the first step is to draw a
flowchart of the process using SimQuicks building
blocks.
Flowchart for one-teller bank

Entrance

Buffer

Work Station

Buffer

Door

Line

Teller

Served Customers

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Flowchart
for two-teller bank
Work Station
Teller 1
Entrance
Door

Buffer
Line

Buffer
Served Customers
Work Station
Teller 2

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Bank Simulation Results

Element

Element

Types

Names

Statistics

Overall
Means

Entrance(s)

Door

Service level

0.90

Buffer(s)

Line

Mean inventory

4.47

Mean cycle time

11.04

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Redesigning the Process

Ideas for process redesign and
improvement can be uncovered by asking
six questions about each step in the
process and about the process as a whole.

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1. What is being done?

2. When is it being done?
3. Who is doing it?
4. Where is it being done?
5. How is it being done?
6. How well does it do on the various metrics of
importance?

Redesigning the Process

Answers to the previous six questions are
challenged by asking still another set of
questions.

Why is the process even being done?

Why is it being done where it is being done?
Why is it being done when it is being done?

Brainstorming is letting a group of people,

knowledgeable about the process, propose
ideas for change by saying whatever comes
to mind.
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Benchmarking
Benchmarking is a systematic procedure that
measures a firms processes, services, and
products against those of industry leaders.
Benchmarking focuses on setting quantitative goals for
improvement.

Competitive benchmarking is based on

comparisons with a direct industry competitor.
Functional benchmarking compares functional
areas in the firm with those of outstanding firms in
any industry.
Internal benchmarking involves using an internal
unit with superior performance as the benchmark
for other units.
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Benchmarking Steps
Planning: Identify the process, service or product to
be benchmarked and the firm(s) to be used for
comparison. Determine the performance metrics
and collect the data.
Analysis: Determine the gap between the firms
current performance and that of the benchmark
firm(s).
Integration: Establish goals and obtain the support
of managers who must provide the resources for
accomplishing the goals.
Action: Develop cross-functional teams of those
most affected by the changes, develop action plans,
implement the plans and monitor progress.
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Illustrative Benchmarking Metrics by Type of Process

Customer Relationship Process
Total cost of enter, process, and track orders per $1,000 revenue
System costs of process per $100,000 revenue
Value of sales order line item not fulfilled due to stockouts, as % of revenue
Percentage of finished goods sales value that is returned
Average time from sales order receipt until manufacturing or logistics is notified
Average time in direct contact with customer per sales order line item

Order Fulfillment Process

Value of plant shipments per employee
Finished goods inventory turnover
Reject rate as percentage of total orders processed
Percentage of orders returned by customers due to quality problems
Standard customer lead time from order entry to shipment
Percentage of orders shipped on time

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Illustrative Benchmarking Metrics by Type of Process

New Service/Product Development Process
Percentage of sales due to services/products launched last year
Cost of generate new services/products process per $1,000 revenue
Ratio of projects entering the process to projects completing the process
Time to market for existing service/product improvement project
Time to market for new service/product project
Time to profitability for existing service/product improvement project

Supplier Relationship Process

Cost of select suppliers and develop/maintain contracts process per $1,000
revenue
Number of employees per $1,000 of purchases
Percentage of purchase orders approved electronically
Average time to place a purchase order
Total number of active vendors per $1,000 of purchases
Percentage of value of purchased material that is supplier certified
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Illustrative Benchmarking Metrics by Type of Process

Support Process
Systems cost of finance function per $1,000 revenue
Percentage of finance staff devoted to internal audit
Total cost of payroll processes per $1,000 revenue
Number of accepted jobs as percentage of job offers
Total cost of source, recruit, and select process per $1,000 revenue
Average employee turnover rate

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Process
Management Mistakes
1. Not Connecting with Strategic Issues
2. Not Involving the Right People in the Right Way
3. Not Giving the Design Teams and Process Analysts
a Clear Charter and Then Holding Them
Accountable
4. Not Being Satisfied Unless Fundamental
Reengineering Changes Are Made
5. Not Considering the Impact on People
6. Not Giving Attention to Implementation
7. Not Creating an Infrastructure for Continuous
Process Improvement.
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Flowchart of Telephone Ordering Process

Solved Problem 1
Create a flowchart for the following telephone-ordering process at a retail chain that
specializes in selling books and music CDs. It provides an ordering system via the
telephone to its time-sensitive customers besides its regular store sales.
First, the automated system greets customers and identifies whether they have a tone or
pulse phone. Customers choose 1 if they have a tone phone; otherwise, they wait for the
first available service representative to process their request. If customers have a tone
phone, they complete their request by choosing options on the phone.
The system checks to see whether customers have an existing account. Customers choose
1 if they have an existing account or choose 2 if they want to open a new account.
Customers wait for the service representative to open a new account if they choose 2.
Next, customers choose between the options of making an order, canceling an order, or
talking to a customer representative. If customers choose to make an order, then they
specify the order type as a book or a music CD, and a specialized customer representative
for books or music CDs picks up the phone to get the order details. If customers choose to
cancel an order, then they wait for the automated response. By entering the order code via
phone, customers can cancel the order.
The automated system says the name of the ordered item and asks for the confirmation of
the customer. If the customer validates the cancellation of the order, then the system
cancels
the
order; otherwise, the system asks the customer to input the order code again.
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Education
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Automobile Service
Solved Problem 2
An automobile service is having difficulty providing
oil changes in the 29 minutes or less mentioned in
its advertising.
You are to analyze the process of changing
automobile engine oil.
The subject of the study is the service mechanic.
The process begins when the mechanic directs the
customers arrival and ends when the customer
pays for the services.
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Process
Chart
for
Changing
Engine
Oil

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Vanishing Cream Analysis

Solved Problem 4
Vera Johnson and Merris Williams manufacture vanishing cream. Their
packaging process has four steps: mix, fill, cap, and label. They have
had the reported defects analyzed, which shows the following.

Draw a Pareto chart to identify the vital defects.

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Vanishing Cream
Analysis
Solution:
Defective labels account for 48.33 percent of the total number of defects:
29
60

100% = 48.33%

Improperly filled jars account for 30 percent of the total number of defects:
18
60

100% = 30.00%

The cumulative percent for the two most frequent defects is

48.33% + 30.00% = 78.33%
Lumps represent 7 100% = 11.67% of defects; the cumulative
60
percentage is
78.33% + 11.67% = 90.00%
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Vanishing Cream Analysis

Pareto Chart
40
90%

36
78%

32
Frequency of Defects

100%

90
80

28

70

24

60

20

48%

50

16

40

12

30

20

10

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Label

Fill

Mix

Seal

Cumulative Percentage of Defects

100