NOTE ON PROCESS FLOW

Processes are the linked activities that get things done. In business, processes are used, for example, to record sales orders, to manufacture products, to insure quality, to collect and report information, to recruit, hire, and train workers, to measure customer satisfaction, and to place orders for raw materials. To understand business activity and to understand the work of managers, it is important to be able to understand what processes do and how efficiently and effectively they produce the desired result.

WHAT DO PROCESSES DO?

The examples above present only a small sample of the wide scope of processes in a business. Generally, all of the processes in a business should be directed at realizing the objectives of that business or supporting some collateral activity, such as calculating and paying taxes, that permits the business to operate. If a process supports a business objective, it is said to “add value” to the product or service or the organization itself. If it fails to support an objective, the process adds no value and is probably wasteful or unnecessary to the business.

Sometimes processes are more complicated than they need to be, or are less effective than they should be for maximum value added. One example of an overly complex process is the purchase requisition process that employees must go through to get materials and supplies at traditional firms.

  1. Create a material purchase request on multi-part carbon paper. Keep the originator’s copy.
  2. Get approval from the department head who signs a copy, and then gets the secretary to keep a file copy and send the other copies to the purchasing agent by company mail.
  3. At the purchasing office, keep one copy for reference and send two on to the budget office in accounting to see if money is allocated to acquire the material.
  4. When the budget office approves, they keep one copy and return the other one to purchasing. The purchasing agent then negotiates and places the order. Copies of the purchase order (PO) are then distributed back to the requester and sent on to accounting and the receiving area in the company which will now expect the material.

Here, we have a five part material purchase request and a multi-part purchase order. Lots of printed forms must be stocked; lots of paper clogs the offices, piling up in stacks; lots of filing cabinet space is required; and lots of time is required to sign, approve, and forward documents.

A better process might look like this.

  1. Create a material purchase request by mouse clicking on a requisition “form” icon on the desktop of the personal computer at your desk. Fill out the information and click on “send” when complete.

  1. The department head receives the request instantaneously, via company e-mail. Although she might not get to it immediately, it is available for approval. When approved, the network computer logs the approval and instantaneously forwards the request for approval to the budget office. (A reference copy may be sent electronically to purchasing at this point.)
  2. When the budget office approves, the purchasing agent is given the document instantaneously, enabling him to purchase the material. The purchasing agent negotiates the order and issues a purchase order. If the vendor is tied in to the company network (as many are), the order is placed electronically. The computer then confirms placement of the order back to the requester and informs both accounting and the receiving area, electronically, to expect the goods.

The revised process uses no paper and no file cabinet space; it takes less time; and requests are less likely to get mislaid or inaccurately processed. Communication is nearly instantaneous, and the approval cycles are nearly automatic, with screen buttons or other electronic devices able to handle the routine decisions.

This example shows how evaluation and re-design of a process can offer significant benefits to businesses and their personnel by speeding up work, reducing costs, and improving accuracy. Therefore, it is important to be able to analyze processes and to determine how well they are satisfying business objectives, because these talents help managers improve both internal operations and employee and customer satisfaction.

PROCESS ANALYSIS

Processes are analyzed using a variety of different tools. The Process Flow Diagram, of which there are many forms, captures the structure of a process. Using a diagram, it records what individuals or organizations are involved, what activity or activities are carried out at each point where work is performed, and whether the process moves and/or waits for attention at given points. Such a diagram depicts the complexity of the process, often gives some idea of the time required to complete it, and shows how much of that time is spent waiting versus having work done. Such a diagram is shown below.

The results of creating a process flow diagram are often surprising, since waiting time, which adds no value, often far exceeds the time spent in processing activities. In the earlier example of materials requisition, the older paperwork system would have required several days of elapsed time before the purchase order was created, but the time required for the individual approval decisions would have amounted to only minutes, taken all together. In the travel authorization example, shown above, three major delay points exist in the original process, whereas only one is present in the e-mail process. In a production line, similar influences may combine to create large batches of product which spend time at various work stations in the factory waiting for the next processing step. Often this happens with relatively small products or parts that require setup tasks to be performed before they can be worked on. Because setup work takes time and causes costs while not immediately adding value to a product, managers often decide to run a large lot of product once a complex process is set up. This “spreads” the setup cost over the large number of product pieces in the lot, thereby reducing the impact of setup costs on any one product unit.

Carrying large lot sizes of product inside a production facility, however, creates other problems. Most of the lot sits idle while individual pieces are worked on, running up the time it takes to get product finished. Secondly, no one gets a chance to work with product units while they wait at a processing station, so there is no way of knowing if defective processing is going on until the whole lot is finished and moved to the next step. Thirdly, having valuable product idly sitting around renders it vulnerable to “shrinkage”, which can consist of spoilage, theft, damage, or obsolescence (if it hangs around long enough.) Even material that doesn’t “shrink” may be lost or buried under other material, requiring a long and non value added search to find it and put it back into the production stream.

WHAT MAKES A GOOD PROCESS?

The best processes are streamlined, responding quickly to needs for a product or service. These processes must also be accurate (able to produce exactly what is desired) and repeatable (able to deliver a continuing supply of precisely what was asked for.) Processes that are centrally important to organizations are often monitored or checked against standards to ensure the continuation of good output. Monitoring can consist of checking every output unit using measuring or comparison methods that themselves have been checked against national standards, or it can consist of sampling the output, statistically, (by selecting a proportion of the output for measuring) to ensure that the processes involved are working properly.

A more enlightened approach to the problem of ensuring that processes work is that of buying the necessary equipment and training operators to ensure that the process has almost no chance of producing defects. Properly set up, such a process can be counted upon to yield acceptable results every time and no inspection is used. The design of such processes, however, requires very consistent input and machinery investment that is considerably higher than the norms for the industry. In some industries which process farm, forestry, or fishery products, it is not possible to acquire highly uniform inputs, and grading and inspections must be carried out.

Another way to depict a process is shown below, where the flow of information and the decision points for an order entry process are depicted. Individual employees within companies often don’t fully understand how some important processes that affect them really work. Drawing a diagram such as this one usually helps those involved in a process to understand it better because the logic of the process and its decisions becomes more obvious. This kind of diagram may also be used where individuals or groups are concerned about changing a process or creating a new improved one. By working together to try to create a chart like this one, individuals often are able first, to describe what is needed, and then, to harmonize conflicting needs and different points of view in a new process.

CONCLUSIONS

Processes make up a great deal of the work that organizations do, and it is important to organizations, and to their employees, to perform the processes effectively. Processes are also subject to change and improvement as technology, customers, and other requirements and opportunities change. However, many employees and managers do not yet understand the extent to which effective process design and/or choice can contribute to successful business operations. Those now studying business will have many opportunities to work with processes, to change and improve them, and to determine whether they are as effective as they should be.

REFERENCE

Schonberger, R. J. and Knod, E. M., Operations Management, Customer-Focused Principles, sixth edition, Irwin/McGraw-Hill, 1997.