process analytics (pa)
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Process Analytics (PA). Steps required in producing a bottle of water. Outputs. Inputs. Processes. Processes. Are whatever we do to add value to a product or service. Processes can be broken down into sub-processes, which in turn can be broken down further. - PowerPoint PPT PresentationTRANSCRIPT
© 2007 Pearson Education
Process Analytics (PA)Process Analytics (PA)
Steps required in producing a bottle of water
© 2007 Pearson Education
ProcessesProcessesAre whatever we do to add value to a
product or service.
Processes can be broken down into sub-processes, which in turn can be broken down further.
Any process that is part of a larger process is considered a “nested process.”
Each process and each nested process has inputs and outputs.
Inputs Processes Outputs
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Companies with Business Companies with Business Processes that are hard to Processes that are hard to beat!beat!
McDonaldsSouthwest AirlinesDell Direct ModelOrder fulfillment at Amazon
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The dark side of business The dark side of business processes failures: The financial processes failures: The financial meltdown of 2008meltdown of 2008
The process of selecting investmentsThe process of assessing riskThe process of auditing and
developing controls activitiesThe process of complying to
regulationsThe process of benefits and rewardsThe process of collecting and
disseminating information
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Service Processes and Service Processes and Manufacturing ProcessesManufacturing Processes
Manufacturing processes causes change in one or more of the following dimensions:◦ Physical properties◦ Shape◦ Fixed dimensions◦ Surface finish◦ Joining parts and materials
If a process isn’t doing at least one of these, then it is a service (non-manufacturing) process.
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Manufacturing Manufacturing and Serviceand Service
Goods ProductionTangibleCan be inventoriedLow customer contactCapital IntensiveQuality easily
measured
Service Production IntangibleCan’t be inventoriedHigh customer contactLabor IntensiveQuality hard to measure
Most firms provide both goods and services.
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InputsTransformation Processes
(Adding value)Outputs
Process Analytics is…Process Analytics is…
“the science of designing and controlling processes that transform inputs into services and products
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What is process analytics?What is process analytics?
Can we use science, management or technology to eliminate those activities that do not add value (waiting in line, transportation, restocking, counting, inventory, employee empowerment)..
Can we use science, management or technology to do things quicker (doing things in parallel rather than sequentially, making right turns rather than left, having people print their boarding passes at home rather than at a ticket counter)
Can we use science, management or technology to improve the quality of our product or services (6 sigma design, prevent employees from doing the wrong thing even if they want to)
Can we use science, management or technology to improve differentiation (customization of products or services (Dell & Hanna Casino)), flexibility using CNC machines, modular manufacturing, outsourcing)
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ProductivityProductivity
Productivity is the value of outputs (services and products) produced, divided by the value of input resources(wages, costs of equipment, etc.)
OutputProductivity =
Input
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Productivity CalculationProductivity Calculation
1. Single factor Three employees process 600 insurance
policies in a week. They work 8 hours per day, 5 days per week. Calculate the productivity in policies per hour.
Labor productivity = Policies ProcessedEmployee Hours
600 Policies(3 Employees) (40 hours/employee)
= = 5 policies/hr
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Productivity CalculationProductivity Calculation
2. Multifactor A team of workers makes 400 units of a product, valued by its standard cost of $10 each (before markups for other expenses and profit). The accounting department reports that the actual costs are $400 for labor, $1,000 for materials, and $300 for overhead. Calculate the productivity.
Multifactor productivity = Quality at standard cost
Labor cost + Materials Cost + Overhead cost
(400 units) ($10/unit) $400 + $1000 + $300
= = 2.35$4,000 1,700
=
These figures must be compared with performance levels in prior periods and with future goals.
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ApplicationApplication
Calculate the year-to-date labor productivity:
Calculate the multifactor productivity:
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In class assignmentIn class assignment In a community college there are 50 students in a
3 credit hour class. Adjunct instructors are asked to teach classes at a cost of $4,000 for each 3-credit course. It costs the college $20 per student to make copies of the reading material and give them access to the internet. There are lots of administrators in this college between admissions, registrar, secretaries and other non-core personnel that cost a cool $1,000,000 per semester. This college offers a total of 40 courses a semester. Each student pays $100 per credit hour and the school receives a $100 subsidy from the state per student per credit hour. What is the multi-factor productivity of this community college?
Solved Assignment
a. Multifactor productivity is the ratio of the value of output to the value of input resources
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In class assignmentIn class assignmentContinued!Continued!
Assuming that this class runs for 16 weeks and that the students have 14 hours of instruction per week. What is the labor productivity per hour assuming that the revenue from the course is still $30,000.
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Process Analytics is a Process Analytics is a StrategyStrategy
“We get brilliant results from average people managing brilliant processes. We observe that our competition often gets average (or worse) results from brilliant people managing broken processes.“
Kujio ChoChairman, Toyota
Motors
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What is meant by What is meant by Strategy?Strategy?
Strategy is the process of choosing how to compete and there are 2 basic ways that firms compete:◦Low Cost◦Differentiation
Quality Time Variety Flexibility Volume Consistency (Reliability) Features
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Competitive PrioritiesCompetitive Priorities
Cost 1. Low-cost operationsQuality 2. Top quality
3. Consistent qualityTime 4. Delivery speed
5. On-time delivery6. Development speed
Flexibility 7. Customization8. Variety9. Volume flexibility
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Why is Process Analytics so Why is Process Analytics so important?important?
Designing products and services that better meet customer needs and wants and do so consistently
Designing and producing products and services faster and more efficiently (cheaper..Lower cost)
Delivering products and services to customers efficiently and effectively:◦ On time◦ cheaply◦ No errors
Importance of Business Processes
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Current Challenges facing Current Challenges facing U.S. firmsU.S. firms
Globalization
Rapid technological change
Ethical issues across cultures
Increasing diversity of the workforce
Environmental impact issues
Financial crisis Lessons from Amazon Jeff Bezos