October 2001
In The Agenda, reengineering pioneer Michael Hammer presents nine ideas that businesses must do to succeed this decade. Over half of these deal with business processes, either directly or indirectly:
- Make doing business with you easy.
- Create a process enterprise.
- Tame chaos with the power of process.
- Redesign and streamline enterprise processes.
- Integrate processes virtually, not vertically.
Hammer defines process as "an organized group of related activities that together create a result of value to customers" and comments as follows:
- Process is the Clark Kent of business ideas: seemingly mild and unassuming but actually amazingly powerful.
- Customers, results, and processes are bound together in a triangle. You can't be serious about one without focusing on the others. The capacity to deliver results customers expect is largely a matter of how well you design and manage your processes. Processes are the route to results and so to success in the customer economy.
- The payoffs of process mastery can be breathtaking. Costs melt away, quality goes through the roof, and time spans shrink to a fraction of what they were.
How can a visionary go on about the lowly process? Quite simply, it is a major part of business that has lacked rigorous review and scrutiny. Processes are almost too obvious to even consider. "Why should we consider reviewing processes? Everyone knows how to process a customer order." This statement is full of assumptions:
- "Everyone" really does not mean "everyone" – At most, it means the persons known by the person making the statement. At least, it means the persons being supervised by the person making the statement.
- "Knows" probably means "assumes" – Unless activities are documented, communicated, followed, and measured, you are dealing with assumption, not knowledge.
- "Customer order" is assumed to be the most important thing that customers provide – A prerequisite to an order is frequently a request for a price quote. If you bobble this request, what chance do you have of receiving an order? After the order is shipped, are your worries over? No, since problems can arise in delivery deadlines, case labeling, or accurate invoicing. Cash is the most important thing a customer provides, since the sale is not complete until it has been collected.
"We're a manufacturing company. Most of our costs are product costs; we should focus on them, not our processes." While it is true that most of a manufacturer's sales dollars are product costs, typically 15% or more cover selling, general, and administrative expenses. Because production costs are rigorously estimated and tracked by industrial engineers and management accountants, how much more improvement do you think can be made in production costs? Have SG&A costs been studied with the same rigor as their production counterparts? No, and that makes them fertile areas for improvement.
"We're a distributor. We have to focus on our customer needs, not our processes." Taking care of the customer is certainly job one, but many distributors operate on a thin profit margin. If you lack well-defined, smoothly-running processes for handling customer situations, you can easily eat up all profit with customer servicing costs.
We have helped our clients focus on improving their business processes and systems – and their results demonstrate that they and others can profit from process.
Todd L. Herman
Client Project Update:
I am pleased to provide you with an update on our client projects. Projects we have completed over this period are...
Performed an Operations Audit
Performed an operations audit of a manufacturer's Offshore Operations department, documenting procedures and recommending process improvements.
Archived Text-Based Green Bar Printed Reports
Archived text-based green bar printed reports, improving the security, accessibility, and sharing of information, while eliminating the recurring cost of current archival methods.
Implemented Workflow Automation for Purchasing Request Forms
Implemented workflow automation for Purchasing request forms, allowing this distributor to complete, route, and approve forms on-line, thereby establishing accountability, eliminating manual paper flow, ensuring consistency in processing, and reducing time to produce a purchase order.
Designed and Developed a System to Notify of Aged Inventory
Designed and developed a system to notify remote sales people of aged inventory items at each warehouse location, allowing this distributor to sell several thousand dollars of inventory that would have otherwise languished on the warehouse floor and resulted in write-down expenses.
Created Summary of Updated Product Manufacturing Specifications
Created an automatic summary of updated product manufacturing specifications for an apparel manufacturer, automatically notifying plant personnel of manufacturing process or product component changes.
Future projects we are planning include...
Resolve Accounts Payable Conversion Issues
Resolve Accounts Payable conversion issues from a system implementation, assuring correctness of accruals and recommending new procedures for efficient operations.
Investigate Inventory Control Procedures
Investigate inventory control processes and systems between an apparel manufacturer and its contract manufacturers, identifying inventory issues, reducing losses, and providing improved procedures and systems.
Enhance Extranet Site
Enhance the functionality of a furniture manufacturer's Extranet site, providing improved security, search capability, and maintenance ease.
Work Automation for Litigation Scheduling
Implement workflow automation for litigation scheduling for a professional services firm, standardizing the process into three distinct areas and improving visibility of case status, budgeted vs. actual hours worked on the case, and client payments.
Packaging Development System
Design a packaging development workflow automation system for a manufacturer, reducing process cycle time by standardizing and streamlining the process, eliminating transport and waiting time, and providing accountability for all process tasks.
