Unit 4

Process Management Dynamics

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

LEARNING OBJECTIVES

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Process Effectiveness
A business process should always be customer oriented 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.
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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

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 in only 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 manufacturing industries 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 increasing profitability. Approach equally applicable in service industries

Sigma Levels
Sigma Level 1 2 3 4 5 6 7 DPMO 691,462 308,538 66,807 6,210 233 3.4 0.019 Percentage Defective 69% 31% 7% 1% 0% 0% 0% Percentage Yield 31% 69% 93% 99% 100% 100% 100%

Sigma levels
Yield 30.9% 69.2% 93.3% 99.94% 99.98% 99.9997% DPMO 690,000 308,000 66,800 6,210 320 3.4 Sigma 1 2 3 4 5 6
Miss 6 putts Per round Miss 1 putt Per round Miss 1 putt Every 9 rounds Miss 1 putt Every 2.33 years Miss 1 putt Every 163 years 100 Rounds of golf per year

Six Sigma in Service Industries

1. Service industries like airlines operate at 12 sigma 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, 3.4 times the flight may crash

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 from the process Integrating the learning from the process to improve process Results of the process compared to the best in class benchmarks Acronym: ADLIR

Approach
1. The approach refers to the technique of methods used to create the process. 2. Is the approach appropriate to the requirement of achieving business results? 3. The approach needs to be affectively utilising the methods deployed. 4. The approach should be repeatable and predictable 5. Repeatability and predictability are the hall mark of a robust process led organisation

Approach cont...
1. In the first phase of existence, organisation are reacting to problems experiences. 2. In the second phase, they are adopting systematic approaches in key areas that create a significant influence on the business 3. 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 position 5. The final phase is when organisations are leaning from their mistakes and learning from the outside world. It is the ideal state.

Deployment
1. Deployment refers to the extent to which the approach 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

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 the counter, 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 create them. 6. Leaning should also be shared from one department to another (Knowledge management)

Integration
1. Integration refers to the extent to which the approach created is aligned to organisational needs 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 uniformly meshing across processes and departments or work groups to enable organisation goal achievement

Results
1. Service industries like airlines operate at 12 sigma 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, 3.4 times the flight may crash

Benchmarking
Is a continuous process of comparing or measuring processes of manufacturing products, selling products, providing services with competitors considered as leaders Is the process of finding out the best process organizations anywhere in the world Benchmarking is the way of the organisation saying it is willing to learn Existing or new retail business can directly benchmark and create processes that are of 5th generation (leapfrogging from 1st or 2nd generation)

Retail Industry Process Standards

1. GSI 2. eCom 3. ARTS

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 font GSI has expanded beyond barcodes to include: Radio Frequency Identification (RFID) Product Data Synchronization

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

2. eCom
GSI eCom encompasses a group of standards that address common business processes in the supply chain These processes tend to be well suited for consumer products & retail trade industries This is where most of the adoption of eCom has occurred to date

3. ARTS
Association of Retail Technology Standards (ARTS) is a 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 integrate applications within the retail enterprise & Standard RFPs to guide retailer selection of appliocations and provide a development guide for vendors

Process Improvement Methods

1. 2. 3. 4. Six Sigma Lean Thinking ISO 9000 Quality Standards TQM

1. Six Sigma
Refers to the standard Deviation from the Mean of the performance data The more the variation, the more the business sales is unpredictable Ideally, predictability needs to be created by process improvements Predictability ensures lesser loses on account of: Higher inventory & carrying costs Stock out resulting in loss of business opportunities

Six Sigma is all about reducing variation

Six Sigma Process (DMAIC)

1. 2. 3. 4. 5. D Define M Measure A Analyze I Improve C - Control

DMAIC
Define

Problem Solving Methodology

Measure Analyze Improve Control

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

2. Lean Thinking
Lean is about focus, removing waste, and increasing customer value Lean is only about value added processes & elimination of non-value added processes Another way to look at lean is focus on revenue generating activities Eliminate or minimize cost and effort on non revenue generating activities

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

3. ISO 9000 Quality Standards

ISO asks to DOCUMENT what you DO and DO what you DOCUMENT. It has a simple PDCA cycle
Plan Do Check Act

Repetition of this cycle brings incremental improvements and does not let the process performance slip

4. TQM
TQM integrates all the retail organizational functions (Inventory, Merchandising, Sales, etc) to focus on meeting customer needs and the goals and objectives of the retailer. TQM empowers every employee of the organisation with the responsibility of ensuring quality in their respective areas TQM aims to get it right the first time every time TQM seeks to identify the source of each defect, and prevent it from entering the final product or service

TQM cont.
TQM enforces quality assurance to meet changes in products and services TQM 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 synergized Quality is not the job of a department but every employee of the organiosation

Process Pitfalls & its Consequences

1. 2. 3. 4. 5. 6. 7. Ahead of time Piecemeal approach Workforce reduction Quick fix solutions Not enabling end-users End users should not be ignored Not celebrating

1. Ahead of Time
Process improvements using technology appear to be an easy solution to become a retail business 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

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

3. Workforce reduction
Do 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 off Process 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.

4. Quick Fix Solutions

Dont teach your team how to do a quick fix and one-time solution Conduct the training that will teach the team about process improvements for life Figure out ways to encourage continuous and sustaining change Include senior management, IT staff and the end users in the process design and improvement stage

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

6. End Users Should Not Be Ignored

Dont overfund technology & infrastructure at the expense of the doors/end users Treat end-users as customers Allow them to add more value

7. Not Celebrating
Remember to celebrate key successes and achievements Motivate others to improve processes and get recognition and rewards Improvements may be incremental or exponential but celebrate

*END*

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