Process Optimization Skill

Purpose

Streamline business operations by removing waste, reducing variation, and improving speed/quality. Moving from “As-Is” to a better “To-Be”.

When to Use

• “Process is too slow” complaints.
• High error rates or rework.
• Cost reduction initiatives.
• Automation projects (Automating a bad process = Faster bad process).
• Scaling operations (Manual process won’t scale).

Methodologies

1. Lean (Eliminate Waste)

Focus: Speed and Efficiency. identify the 8 Wastes (DOWNTIME):

1. Defects: Rework, errors.
2. Overproduction: Making more than needed.
3. Waiting: Idle time between steps.
4. Non-utilized Talent: Underusing people’s skills.
5. Transportation: Moving items unnecessarily.
6. Inventory: Storing excess work/materials.
7. Motion: Unnecessary movement of people.
8. Extra Processing: Doing more work than customer values (Gold plating).

2. Six Sigma (Reduce Variation)

Focus: Quality and Consistency (DMAIC).

• Define: Problem statement.
• Measure: Baseline current performance.
• Analyze: Root cause analysis.
• Improve: Implement solutions.
• Control: Sustain gains.

3. BPR (Business Process Reengineering)

Focus: Radical redesign (Blow it up and start over).

Analysis Techniques

1. Value Added Analysis

For every process step, ask:

• Value Added (VA): Customer pays for this (e.g., Assembling product). -> Keep/Optimize.
• Business Value Added (BVA): Customer doesn’t care, but regulation/business needs it (e.g., Audit logs, Payroll). -> Minimize.
• Non-Value Added (NVA): Waste (e.g., Waiting for approval, re-entering data). -> Eliminate.

2. Root Cause Analysis (5 Whys)

Problem: “Report is late.”

1. Why? Data wasn’t ready.
2. Why? System export failed.
3. Why? Server timeout.
4. Why? Query optimization issues.
5. Why? No index on date column. -> Root Cause.

3. Fishbone Diagram (Ishikawa)

Categories causes of a problem:

• People
• Process
• Technology/Equipment
• Materials
• Environment

Optimization Strategies (ECRS)

Process Optimization Report Template

1. Problem Statement

“Order fulfillment takes 5 days average, resulting in 10% cancellation rate.”

2. Current State Metrics (Baseline)

• Cycle Time: 5 days
• Touch Time: 45 mins (Actual work duration)
• Process Efficiency: (45 mins / 5 days) = < 2% (Very bad – mostly waiting)

3. Root Cause Analysis

• Bottleneck at “Manager Approval” step (avg wait 2 days).
• Duplicate data entry between CRM and ERP (error prone).

4. Proposed Improvements

• Short Term: Raise approval threshold from $0 to $500 (Eliminates 80% of approvals).
• Long Term: Integrate CRM <-> ERP (Eliminates data entry).

5. Expected Benefits (To-Be)

• Cycle Time: 1 day (-80%)
• Cancellations: < 2%
• Annual Savings: $50k in labor.

Checklist for Optimization

• Have I mapped the As-Is process?
• Have I measured the baseline?
• Have I identified the bottleneck? (Theory of Constraints)
• Have I consulted the people doing the work?
• Have I considered “Don’t automate, obliterate” (Eliminate step first)?

References

• The Goal (Eliyahu Goldratt).
• Lean Six Sigma Pocket Toolbook.