Optimizing Business Processes: Where to Start
Posted: Tue Dec 10, 2024 9:43 am
Operational efficiency is based on the gradual identification and elimination of activities that do not add value from the point of view of your customers or that represent a source of waste.
While operational efficiency has its roots in the manufacturing sector, business owners who want to gain or maintain a competitive advantage must also focus on eliminating waste in their business processes. For example, efficiencies can be found in customer-facing activities or back-office operations—such as order management, claims and warranty processing, or accounts payable and receivable management.
Software and information technology now offer a multitude of effective and scalable solutions to support your business processes. However, most companies have a lot of work to do before they can implement these solutions.
First, you can leverage operational efficiency tools and techniques across your organization to “get back to basics,” improve processes that aren’t working, and create an environment focused on ongoing evaluation, investigation, and continuous improvement .
This exercise is called “business process optimization.” But where exactly do you start?
Process mapping
Process mapping, performance measurement, and data collection are essential starting points for understanding the current state of your business processes .
Mapping is the process of “visually” representing how it actually happens (not how you think it happens) and getting everyone on the same page. It’s also a great tool for identifying any sources of waste or frustration and identifying processes that need improvement.
When we conduct process mapping with a client, a common finding is that the left hand of the business doesn’t know what the right hand is doing. In this case, a cross-functional process mapping and advertising database data collection exercise across the business is a great place to start.
Types of process diagrams
From the global FIPEC (Suppliers, Inputs, Processes, Outputs, Customers) diagram to the complex and data-rich value chain map, companies can rely on various types of diagrams.
For any process mapping exercise, we recommend creating a cross-functional team of staff members who will provide process insights. This team should include:
staff members who carry out the processes;
staff members who receive a result of the processes.
This will allow you to develop a company-wide operations diagram.
Facilitating a workshop on process mapping
Beyond building a balanced cross-functional team, here are some questions to ask during a process mapping workshop to better understand your company's processes and identify sources of waste.
What is the goal or desired outcome of the process or subprocess?
When does the process start and end?
What are the activities or tasks that move the process forward?
Which departments and/or staff members are involved in the process?
What happens first , second and third? What is the sequence of events? Are some operations performed in parallel?
Does the process reflect the usual flow of operations? Are there circumstances in which operations are conducted differently?
Does this task or activity generate added value?
BDC’s Operational Efficiency Advisors have conducted hundreds of these types of workshops and we often find that businesses of all sizes divide their operations into functional silos. We have also identified quality errors that are common forms of waste that impact a business’s ability to operate efficiently, including:
errors in information or data (non-quality);
rework loops (non-quality);
the wait;
an excessive amount of documents processed at the same time (waste of ongoing production).
This is not surprising. In many companies, processes are the result of pieces amalgamated over time, often by different people with different goals and perspectives. As a result, companies end up with a bunch of processes made up of forms, spreadsheets, sticky notes, and informal procedures that people more or less follow.
Key performance indicators and data collection
In a recent blog post, I discussed the importance of having a performance dashboard and key performance indicators (KPIs) to support continuous improvement.
Similarly, collecting data and establishing process KPIs will help you see the impact of your business process improvement efforts. Collecting quantifiable data will also allow you to focus on key areas and prioritize root cause analysis and your business process improvement efforts.
For example, I recently worked with an entrepreneur whose company provides checks and printed forms to individuals and other businesses. As part of this project, I created a cross-functional process map that illustrates the process from the time a customer places an order to the time the company receives payment (the order-to-cash cycle).
Using the diagram, we identified customer order entry and work order generation as the key processes for improvement. Many errors were being made in both processes before the orders were even released to the production team. The production team discussed the goals of customer service and work order generation and decided to use “number of orders completed right the first time” as the KPI.
The team also collected data to understand this KPI and the types of errors that were being made. According to the data, 75% of orders were filled correctly the first time, and while 19 types of errors were identified (e.g., wrong name or address), five alone accounted for 80% of all errors.
Collecting this detailed data allowed the team to focus on the root causes of these five types of errors and significantly improve the IRC. The team decided to aim for a 90% accuracy rate for the IRC and focused on root cause analysis and implementing improvements to achieve it.
Here are some key points to keep in mind when adopting this methodology:
Data collection and IRC should be established based on the desired outcome of the process;
business process optimization aims to achieve continuous improvement and progress, not perfection;
Sometimes when collecting data, it's the details that are the problem, as was the case for this entrepreneur.
Keep your goal in mind
It is always important to remember that the ultimate goal of business process optimization is to simplify your processes to deliver greater value to customers and increase operational efficiency. To achieve this goal, you need to identify and eliminate sources of waste.
Companies that are fairly advanced in business process optimization have a person who is responsible for key processes and performance measures used to determine the success of process execution or the "health" of the processes.
For example, we recently worked with another company that specializes in building roads, highways and sidewalks. By optimizing its business processes and establishing new ones, assigning managers and redefining roles and responsibilities, it was able to reduce order processing time by 30%. Once this was done, it decided to invest in software to automate some of its processes and further increase its efficiency.
Take action
Finally, incremental improvements are far preferable to the status quo , especially if your company operates in silos like the ones described in this article.
While operational efficiency has its roots in the manufacturing sector, business owners who want to gain or maintain a competitive advantage must also focus on eliminating waste in their business processes. For example, efficiencies can be found in customer-facing activities or back-office operations—such as order management, claims and warranty processing, or accounts payable and receivable management.
Software and information technology now offer a multitude of effective and scalable solutions to support your business processes. However, most companies have a lot of work to do before they can implement these solutions.
First, you can leverage operational efficiency tools and techniques across your organization to “get back to basics,” improve processes that aren’t working, and create an environment focused on ongoing evaluation, investigation, and continuous improvement .
This exercise is called “business process optimization.” But where exactly do you start?
Process mapping
Process mapping, performance measurement, and data collection are essential starting points for understanding the current state of your business processes .
Mapping is the process of “visually” representing how it actually happens (not how you think it happens) and getting everyone on the same page. It’s also a great tool for identifying any sources of waste or frustration and identifying processes that need improvement.
When we conduct process mapping with a client, a common finding is that the left hand of the business doesn’t know what the right hand is doing. In this case, a cross-functional process mapping and advertising database data collection exercise across the business is a great place to start.
Types of process diagrams
From the global FIPEC (Suppliers, Inputs, Processes, Outputs, Customers) diagram to the complex and data-rich value chain map, companies can rely on various types of diagrams.
For any process mapping exercise, we recommend creating a cross-functional team of staff members who will provide process insights. This team should include:
staff members who carry out the processes;
staff members who receive a result of the processes.
This will allow you to develop a company-wide operations diagram.
Facilitating a workshop on process mapping
Beyond building a balanced cross-functional team, here are some questions to ask during a process mapping workshop to better understand your company's processes and identify sources of waste.
What is the goal or desired outcome of the process or subprocess?
When does the process start and end?
What are the activities or tasks that move the process forward?
Which departments and/or staff members are involved in the process?
What happens first , second and third? What is the sequence of events? Are some operations performed in parallel?
Does the process reflect the usual flow of operations? Are there circumstances in which operations are conducted differently?
Does this task or activity generate added value?
BDC’s Operational Efficiency Advisors have conducted hundreds of these types of workshops and we often find that businesses of all sizes divide their operations into functional silos. We have also identified quality errors that are common forms of waste that impact a business’s ability to operate efficiently, including:
errors in information or data (non-quality);
rework loops (non-quality);
the wait;
an excessive amount of documents processed at the same time (waste of ongoing production).
This is not surprising. In many companies, processes are the result of pieces amalgamated over time, often by different people with different goals and perspectives. As a result, companies end up with a bunch of processes made up of forms, spreadsheets, sticky notes, and informal procedures that people more or less follow.
Key performance indicators and data collection
In a recent blog post, I discussed the importance of having a performance dashboard and key performance indicators (KPIs) to support continuous improvement.
Similarly, collecting data and establishing process KPIs will help you see the impact of your business process improvement efforts. Collecting quantifiable data will also allow you to focus on key areas and prioritize root cause analysis and your business process improvement efforts.
For example, I recently worked with an entrepreneur whose company provides checks and printed forms to individuals and other businesses. As part of this project, I created a cross-functional process map that illustrates the process from the time a customer places an order to the time the company receives payment (the order-to-cash cycle).
Using the diagram, we identified customer order entry and work order generation as the key processes for improvement. Many errors were being made in both processes before the orders were even released to the production team. The production team discussed the goals of customer service and work order generation and decided to use “number of orders completed right the first time” as the KPI.
The team also collected data to understand this KPI and the types of errors that were being made. According to the data, 75% of orders were filled correctly the first time, and while 19 types of errors were identified (e.g., wrong name or address), five alone accounted for 80% of all errors.
Collecting this detailed data allowed the team to focus on the root causes of these five types of errors and significantly improve the IRC. The team decided to aim for a 90% accuracy rate for the IRC and focused on root cause analysis and implementing improvements to achieve it.
Here are some key points to keep in mind when adopting this methodology:
Data collection and IRC should be established based on the desired outcome of the process;
business process optimization aims to achieve continuous improvement and progress, not perfection;
Sometimes when collecting data, it's the details that are the problem, as was the case for this entrepreneur.
Keep your goal in mind
It is always important to remember that the ultimate goal of business process optimization is to simplify your processes to deliver greater value to customers and increase operational efficiency. To achieve this goal, you need to identify and eliminate sources of waste.
Companies that are fairly advanced in business process optimization have a person who is responsible for key processes and performance measures used to determine the success of process execution or the "health" of the processes.
For example, we recently worked with another company that specializes in building roads, highways and sidewalks. By optimizing its business processes and establishing new ones, assigning managers and redefining roles and responsibilities, it was able to reduce order processing time by 30%. Once this was done, it decided to invest in software to automate some of its processes and further increase its efficiency.
Take action
Finally, incremental improvements are far preferable to the status quo , especially if your company operates in silos like the ones described in this article.