Episode B.007 How to Improve or Build a Process

​Definitions
This is to serve as an overview of the HOW – how do you Analyze a process, Document the current state, and solicit input to make it better. Our starting point is the introduction of a few terms and concepts essential to bring processes under control.

• Value Mapping – a method of documenting a process that determines the value-added by each step. Value is defined as (1) if you itemized the bill would the customer be willing to pay for the listed activity, and/or (2) is the activity necessary to either build it at a specified quality level or to comply with external requirements (safety, environment, etc.).
• Document the Process – this is another name for Value Mapping a specific process. Take what was informal up to now and create a visual representation so it can be analyzed.
• AS IS Process – what you are currently doing in a specific process. It is essential to have an accurate picture of the current state. Without it you cannot decide which improvements will produce the greatest results.
• TO BE Process – how we want to do it – if we are going to do it better than anybody else and use it as a competitive advantage, how do we engage the entire organization? This is where you can apply some very simple principles that will provide exponential returns.
• Balance – the impact of scheduling on a process. Efficiency starts with balancing production demands to remove day-to-day variation. It is about creating a schedule that makes the same production demands everyday.
• Demand – the impact of scheduling on a process. How the job is executed will  ensure the schedule doesn't demand more than people or equipment should perform. This will eliminate the sources of safety and health issues as well as unforced errors – defects.
• Waste – empowering front-line employees to identify and eliminate the 7 sources of waste. Balance and Demand are predominately management imposed issues and only solved by management. Once you have Balance and Demand under control you can charge the people doing the work to reduce or eliminate waste.

Where to Start?
The first decision is which process to work on first. After handling many complex process improvement projects, we recommend the following criteria for selecting your first process design project.

• Easy. You need a quick win to build positive momentum to bring all your processes under control. Easy means fewer steps to analyze, simpler production or delivery challenges, a process not in season, etc. Cut your teeth on something simple.
• Business Impact. This is an area where everybody has been complaining and needs to be fixed. This is an easy sell and smart to pick something with high visibility that matters to your employees.
• Most Profitable Product / Service. This is a different type of corporate impact. Unlike the Business Impact option, this is directly related to your ability to increase margins on your best offer. The impact will not be as obvious to employees but you and the accountant will see the impact quickly.
• Most Profitable Customers / Accounts. This a variation of most profitable products or services only the focus is on the short term satisfaction and long term loyalty of your best customers. Hard to go wrong here because the feedback will be immediate and since your manufacturing process is in front of the customer – they will experience the customer's satisfaction with the improvements.

One of the most difficult transitions in business and a major point of failure is moving from the hub (owner) and spoke (employees) model of control and coordination. Most owners, no matter how harried, avoid it because it feels like the business will start spinning out of control. This valid emotion does not have to become fact. What is being demanded of the business owner and managers is a higher level of sophistication – moving from Direct Supervision to Process as a control method.

Some Unsolicited Advice
The first process we recommend you tackle is part of the Financial Process - Purchasing / Ordering of Materials. Once the sale is made, how quickly and accurately are the materials ordered to ensure best price and availability when needed. Leaving the inventory process for later – this is about monitoring when it is delivered (the clock starts ticking on Accounts Payable) and how much (you are storing must be viewed as cash on the shelves). 

The second process we recommend to bring under control is Accounts Receivable. Purchasing / Ordering of Materials Process controls the velocity of cash going out, Accounts Receivable Process impacts the velocity of cash coming in. You can see the reason for starting here – get cash flow positive by having the velocity of cash coming in exceeding the velocity of cash going out.

We will start Value Mapping / Documenting the Process to identify the AS IS process for Purchasing / Ordering of Materials.

​Find a conference room and invite everybody involved. Take a seat at the end of the table and have the members sit in their process order starting to your left. Once you have explained the reason for the meeting, hand each individual an index card – bigger is better in this case – and have them record the following information:

• Name of the Process
• Name of their Step
• How is it currently Measured
• What activities (in order) must they perform to complete the step
• On average how long does it take to complete all of the activities
• Example
  • Process: Material Ordering
  • Step: Creating a BOM (Bill of Materials)
  • Measured: don't know, is it?
  • Activities (in order)
    • take request from in-box
    • review sales sheet to extract needed materials
    • check our inventory levels – how many need to be ordered
    • check supplier's online site and review catalog for sku# and latest pricing
    • check supplier's online site to determine availability
    • complete purchase order
    • send purchase order to accounting