processes management - dynamics

8/6/2019 Processes Management - Dynamics

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12

AFTER STUDYING THIS UNIT, YOU SHOULD

BE ABLE TO:

1. Explain retail process effectiveness in terms of

sigma level

2. Describe retail process assessment approaches.

3. Create retail processes leveraging the retail

industry process standards.

4. Improve retail process performance using

performance improvement methods.5. Avoid pitfalls of process management

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Process Effectiveness

A business process should always be customeroriented and customer focused

The customer can be an internal customer or an

external customer

Internal customers are employees and external

customers means buyers

A business process is effective only when it

meets the needs of a customer.This unit discusses some effectiveness

indicators, which measure the quality of a

business process.13


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What is Six Sigma?

Six Sigma is a comprehensive system for achieving,

sustaining and maximizing business success.

Six Sigma is driven by close understanding of

customer needs, disciplined use of facts and data, and

statistical analysis


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Six Sigma

Many retail business run at 3 sigma level or

below.To gain market share, the retailers process

effectiveness needs to be higher

Six sigma processes are the process results inonly 3.4 defects per million opportunities

(DPMO)

Sigma is a mathematical term which measures

how much a process varies from perfection,based on the number of defects per million

opportunities.

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Six Sigma cont

The 6 sigma was deployed in manufacturingindustries to reduce wastage due to defects

and rework and additional costs.

The focus was to do it right the first time,

hence saving expenditure and increasingprofitability.

Approach equally applicable in service

industries


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Sigma LevelsSigma Level DPMO Percentage

Defective

Percentage Yield

1 691,462 69% 31%

2 308,538 31% 69%

3 66,807 7% 93%

4 6,210 1% 99%

5 233 0% 100%

6 3.4 0% 100%

7 0.019 0% 100%


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Sigma levels

Yield DPMO

30.9% 690,000

69.2% 308,000

93.3% 66,800

99.94% 6,210

99.98% 320

99.9997% 3.4

100 Rounds of golf peryear

Miss 6 putts

Per roundMiss 1 putt

Per round

Miss 1 putt

Every 9 rounds

Miss 1 puttEvery 2.33 years

Miss 1 putt

Every 163 years

Sigma

1

2

3

4

5

6


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Six Sigma in Service Industries

1. Service industries like airlines operate at 12sigma levels

2. Customers would not like to fly with an airline at

6 sigma process effectiveness levels, i.e. in

every million take-offs and landing process, 3.4times the flight may crash


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Process Assessment Approaches

1. Processes can be assessed at the following

stages: -

Approach of the process development

Deployment of the process

Method of recording the learning fromthe process

Integrating the learning from the

process to improve process Results of the process compared to the

best in class benchmarks

Acronym: ADLIR


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Approach

1. The approach refers to the technique ofmethods used to create the process.

2. Is the approach appropriate to the requirement

of achieving business results?

3. The approach needs to be affectively utilisingthe methods deployed.

4. The approach should be repeatable and

predictable5. Repeatability and predictability are the hall mark

of a robust process led organisation


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Approach cont...

1. In the first phase of existence, organisation arereacting to problems experiences.

2. In the second phase, they are adopting systematic

approaches in key areas that create a significant

influence on the business3. Only 20% of the processes are created using a

systematic approach

4. In the third phase, organisations align all their

processes to achieve their leadership position5. The final phase is when organisations are leaning

from their mistakes and learning from the outside

world. It is the ideal state.


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Deployment

1. Deployment refers to the extent to which theapproach is implemented to address the retail

business environment.

2. It also refers to if the approach is deployed

consistently across all relevant processes.3. Sometimes you may find an approach is applied

consistently in one department but not across

other departments with relevant processes


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Learning

1. This refers to improvising the approach by

continuous evaluation and improvement efforts.2. Finding unique game changing solutions (game

changers) through innovation.

3. E.g. no body now likes shopping behind thecounter, but to pick and compare products

4. Are such efforts of creating game changing

solutions encouraged?

5. If you encourage only then do you learn and createthem.

6. Leaning should also be shared from one

department to another (Knowledge management)


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Integration

1. Integration refers to the extent to which the

approach created is aligned to organisationalneeds

2. This refers to the extent to which measures,

information and improvement systems are

complementary across processes and work

units.

3. Finally it refers to the plans, processes, results,

analysis, learning and actions being uniformlymeshing across processes and departments or

work groups to enable organisation goal

achievement


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Results

1. Service industries like airlines operate at 12sigma levels

2. Customers would not like to fly with an airline at

6 sigma process effectiveness levels, i.e. in

every million take-offs and landing process, 3.4times the flight may crash


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Benchmarking

Is a continuous process of comparing ormeasuring processes of manufacturingproducts, selling products, providing serviceswith competitors considered as leaders

Is the process of finding out the best processorganizations anywhere in the world

Benchmarking is the way of the organisationsaying it is willing to learn

Existing or new retail business can directlybenchmark and create processes that are of5th generation (leapfrogging from 1st or 2ndgeneration)


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Retail Industry Process Standards

1. GSI2. eCom

3. ARTS


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1. GSI

GSi (formerly EAN European Article Number)offers universal product code (UPC)

Barcodes have brought tremendous gains in

efficiency to many retail businesses as machine

readable fontGSI has expanded beyond barcodes to include:-

Radio Frequency Identification (RFID)

Product Data Synchronization

A company works with a GSI member that islocated in the country it is located


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2. eCom

GSI eCom encompasses a group ofstandards that address common business

processes in the supply chain

These processes tend to be well suited for

consumer products & retail trade industriesThis is where most of the adoption of eCom

has occurred to date


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3. ARTS

Association of Retail Technology Standards (ARTS) isa standard organisation dedicated to the retail industry

ARTS tend to focus on Application-to-Application (A2A)standards

ARTS has developed 4 Standards:

The Retail Data Model Unified Point of Service (UnifiedPOS)

IXRetail XML schemeas to integrateapplications within the retail enterprise &

Standard RFPs to guide retailer selection ofappliocations and provide a developmentguide for vendors


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Process Improvement Methods

1. Six Sigma2. Lean Thinking

3. ISO 9000 Quality Standards

4. TQM


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1. Six Sigma

Refers to the standard Deviation from theMean of the performance data

The more the variation, the more thebusiness sales is unpredictable

Ideally, predictability needs to be created byprocess improvements

Predictability ensures lesser loses on accountof:-

Higher inventory & carrying costs Stock out resulting in loss of business

opportunities

Six Sigma is all about reducing variation


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Six Sigma Process (DMAIC)

1. D Define2. M Measure

3. A Analyze

4. I Improve

5. C - Control


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DMAIC Problem Solving MethodologyMeasureMeasureDefineDefine AnalyzeAnalyze ImproveImprove ControlControl

Define the goals and customer requirements

Measure the process to determine current performance

Analyze and determine the root cause(s) of the defects

Improve the process by eliminating defects

Control future process performance


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2. Lean Thinking

Lean is about focus, removing waste, andincreasing customer value

Lean is only about value added processes &

elimination of non-value added processes

Another way to look at lean is focus onrevenue generating activities

Eliminate or minimize cost and effort on non

revenue generating activities


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Steps of Assessing Lean Operations

Identify value added or value creating

services.Determine the value stream (sequence of

activities)

Eliminate non value adding activities

Allow customers to pull products/services

E.g.

picking up their products on their own

Assisting in the billing of their own product

Taking the purchased merchandise to their

homes


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3. ISO 9000 Quality Standards

ISO asks to DOCUMENT what you DO andDO what you DOCUMENT.

It has a simple PDCA cycle

Plan

Do Check

Act

Repetition of this cycle brings incrementalimprovements and does not let the process

performance slip


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4. TQM

TQM integrates all the retail organizational

functions (Inventory, Merchandising, Sales,etc) to focus on meeting customer needs andthe goals and objectives of the retailer.

TQM empowers every employee of the

organisation with the responsibility ofensuring quality in their respective areas

TQM aims to get it right the first time everytime

TQM seeks to identify the source of eachdefect, and prevent it from entering the finalproduct or service


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TQM cont.

TQM enforces quality assurance to meet

changes in products and servicesTQM identifies root causes and offers

processes to eliminate and mitigate the root

causes of a defect

TQM is essentially a people dependant

process

To derive full benefit of TQM, people in any

organisation should be synergizedQuality is not the job of a department but

every employee of the organiosation


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Process Pitfalls & its Consequences

1. Ahead of time2. Piecemeal approach

3. Workforce reduction

4. Quick fix solutions

5. Not enabling end-users

6. End users should not be ignored

7. Not celebrating


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1. Ahead of Time

Process improvements using technology appear

to be an easy solution to become a retailbusiness leader

While technology can promise visibility,

productivity, and fast results; do not invest ahead

of time.

Take the time to get the business, process and

management dimensions in place before you

attack the technology


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2. Piecemeal Approach

Dont think about process improvements in a

piece meal manner.Look at improving processes but also ensure that

there are cross functional solutions cutting

across all departments

Think about how the value chain comes together

in the organisation

Create a separate team who will be responsible

for driving the process improvements


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3. Workforce reductionDo not use process management or improvement

as a tool for a hidden agenda of workforce

reduction. This will guarantee failure

Employees will not re-engineer processes to find

themselves eventually redundant and getting laid

offProcess management and improvement is to get

higher productivity and gains

If the business grows then it is not necessary that

employees need to be laid off.


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4. Quick Fix Solutions

Dont teach your team how to do a quick fix and

one-time solutionConduct the training that will teach the team

about process improvements for life

Figure out ways to encourage continuous andsustaining change

Include senior management, IT staff and the end

users in the process design and improvement

stage


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5. Not enabling end users

Empower process users and support them with

the policies, authority, rewards and recognition,compensation, and other means of facilitation.

Dont overlook the need to make this happen


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6. End Users Should Not Be Ignored

Dont overfund technology & infrastructure at the

expense of the doors/end usersTreat end-users as customers

Allow them to add more value


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7. Not Celebrating

Remember to celebrate key successes and

achievementsMotivate others to improve processes and get

recognition and rewards

Improvements may be incremental orexponential but celebrate


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*END*

processes management - dynamics

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