9. Process Management

What is a process? SIPOC is a six sigma tool. The acronym stands for Suppliers, inputs, process, outputs, customers. A SIPOC is completed most easily by starting from the right ("Customers") and working towards the left. Process approach: the application of a system of processes within an organization, together with the identification and interactions of these processes, and their management. The ISO 9001 process approach emphasizes the importance of: Understanding and meeting requirements;, The need to consider processes in terms of added value;, Obtaining results of process performance and effectiveness, and, Continual improvement of processes based on objective measurement.

Managing activities and related resources as a process means: Systematically defining the activities necessary to obtain a desired result;, Establishing clear responsibility and accountability for managing key activities;, Analyzing and measuring the capability of key activities;, Identifying the interfaces of key activities within and between the functions of the organization;, Focusing on the factors such as resources, methods, and materials that will improve key activities of the organization;, Evaluating risks, consequences and impacts.

Business Processes: Acquiring customer and market knowledge;, Strategic planning;, Research and development;, Purchasing;, Developing new products and services;, Fulfilling customer orders;, Managing information;, Measuring and analyzing the performance;, Training the employees, etc.

Three categories: Value-creation processes (core processes) / Support processes / Management processes.

1. Value-Creation Processes Are those most important to running the business and maintaining or achieving a sustainable competitive advantage: Design processes, which involve all activities that are performed to incorporate customer requirements, new technology, and past learning into the functional specifications of a product. // Production/ delivery processes, which create or deliver the actual product.

2. Support Processes Are those that are most important to an organization’s value-creation processes, employees, and daily operations. -> accounting/ finance, human resources, management information systems, ordering, stocking, research and development, technology acquisition, supply chain management, sales and marketing, project management, etc.

3. Management Processes Planning, Organizing, Coordinating, Leading, Controlling/ Evaluation, Staffing, Motivating, Improving

Value Chain: The string of activities that moves a product from the raw material stage, through manufacturing and distribution, and ultimately to the end user. By studying a product or service’s value chain, an organization can identify ways to create additional value and assess whether it has the means to do so. Value chain analysis is also helpful in identifying opportunities for new businesses and in understanding how business models emerge.

a) Primary Value Chain Activities: Inbound Logistics: The receiving and warehousing of raw materials. Distribution to manufacturing / Operations: The processes of transforming inputs into finished products or services / Outbound Logistics: The warehousing and distribution of finished goods / Marketing and Sales: The identification of customer needs / The generation of sales. / Service: The support of customers after the products and services are sold to them.

b) Support Value Chain Activities: Procurement: Purchasing inputs such as materials, supplies, and equipment / Technology Development: Technologies to support value-creating activities / Human Resource Management (HRM): Employee recruiting, Hiring, Training, Development, Compensation / Firm Infrastructure: Organizational structure, Control systems, Company culture.

Value-added perspective on quality: A value-added activity can be pinpointed by asking, “Would this activity matter to the customer?”. In other words, a value-added activity will have economic value to the customer.

Three categories are used to describe types of value that a process step may have:

Value added to customers served: steps that directly impact the satisfaction of the customers served

Value added to operations: steps that support the ability to deliver services to the customers served

Non-value-added: steps that could be eliminated or changed without harming service levels or the organization

a) Value-added to customers served: In order to assess whether the steps in the process have value to the customers served, ask: Is this step required by the customers served by the process? Are those served willing to pay for this activity? An activity can be described as adding value for the customers served only if: the customers served recognize the value; the activity specifically impacts the service requirements of those served; the step is necessary to meet the timelines and expectations of those served.

b) Value-added to operations: In order to assess whether the steps in the process add operational value, ask:

Could this activity be eliminated if some preceding activity were done differently? Is there a risk if this activity is eliminated? Could any existing technology eliminate this activity? Could this activity be eliminated without impacting the quality of our product or service? Does this activity fulfill an external regulatory requirement? An activity adds operational value if it is not a customer value-added activity and is required to: sustain the ability to perform value-added activities for the customers served; meet contractual, legal, or other regulatory criteria; meet health, safety, environmental, or personnel development criteria.

c) Non Value-added: In order to assess whether the steps in the process are non-value-added, ask: Does this activity add value for the customers served or operations? An activity is ‘non-value-add’ if it does NOT add value for either the customers served or for operations.

Process Steps: Request account to be opened, Gather information, Qualify request against legal compliance, Authorize request, Request review, Send incomplete requests to account rep, Obtain account information, Complete memo, Request set up, Account manager review, Account manager approval, Risk manager review, Risk manager approval, Notify account manager, Request authorization key, Data entry to system, Data formatted to open account, Distribute to various departments, Account open, Student receives notification.