By: Simon Holloway, Practice Leader - Process Management & RFID, Bloor Research
Published: 10th April 2012
Copyright Bloor Research © 2012
Much of what has happened in industry, particularly manufacturing, distribution and retail in the last 30 years or so, has focused on ways that organisation could improve the processes that run their businesses. The quality models to reduce defects that were introduced by Japanese companies such as Toyota have seen a number of methodologies develop over that time to help organisation achieve better effectiveness and efficiency in the way they operate.
The first of these business approaches was Total Quality Management (TQM). TQM is management approach for continuously improving the quality of products and processes. TQM works on the premise that the quality of products and processes is the responsibility of everyone who is involved with the creation or consumption of the products or services offered by an organisation. In other words, TQM capitalises on the involvement of management, workforce, suppliers, and even customers, in order to meet or exceed customer expectations. There are nine common TQM practices that have been identified as being key; these are cross-functional product design, process management, supplier quality management, customer involvement, information and feedback, committed leadership, strategic planning, cross-functional training, and employee involvement. TQM is based on a strategic approach that focuses on maintaining existing quality standards as well as making incremental quality improvements. It can also be described as a cultural initiative, as the focus is on establishing a culture of collaboration among various functional departments within an organization for improving overall quality.
Lean manufacturing, lean enterprise, or lean production, often, simply, "Lean", is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Essentially, lean is centered on preserving value with less work. Lean is a management philosophy derived mostly from the Toyota Production System. There are 2 key pillars to the approach: Just-in-time (JIT) or "flow", and "autonomation" (smart automation). Lean implementation is therefore focused on getting the right things to the right place at the right time in the right quantity to achieve perfect work flow, while minimising waste and being flexible and able to change.
Motorola evolved TQM in Six Sigma when, in 1986, it started a management initiative to drive towards reducing defects by minimising variation in processes. Six Sigma is an approach to improving the quality of process outputs by identifying and removing the causes of errors and minimising variability in business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organisation - the "Belts" - who are experts in these methods. Each Six Sigma project carried out within an organisation follows a defined sequence of steps and has quantified financial targets that effect operational costs. Six Sigma focuses on defect reduction, cycle time reduction, and cost savings. It is different from conventional cost cutting measures that may reduce value and quality. It focuses on identifying and eliminating costs that provide no value to customers such as costs incurred due to waste.
Having started in manufacturing, these approaches have spread to that it is common to hear financial, government and even charities talk about bean "lean" or adopting a "six-sigma approach". These 3 approaches have merged over the lifetime, and ideas from each are incorporated in many consultancy approaches or internal organisation derived approaches. Consultancy organisations have developed expertise in one or more vertical. So one approach to process improvement is through a management-led business approach to the quality of the operations of the organisation. This often goes hand in glove with a need to automate the "improved processes".
On the other hand IT has also developed two main approaches to improve and automate processes. The first was the development of the package application; resulting in the king of all packages, an enterprise resource planning (ERP) solution. The other major application packages, such as Customer Relationship Management (CRM), and Supply Chain Management (SCM), are similar to ERPs but only cover a smaller process area in an organisation.
ERP solutions integrate internal and external information across an entire organisation, embracing finance/accounting, manufacturing, sales and service, and customer relationship management. ERP systems automate this activity with an integrated software application. Their purpose is to facilitate the flow of information between all business functions inside the boundaries of the organisation and manage the connections to outside stakeholders. For more details on ERP, please see Enterprise Resource Planning (ERP): What does it mean to us today?. An ERP is built using processes that the vendor has come across as being best practice to accomplish that action. All of the current products on the market also offer the ability for organisation to customise and extend the package to better fit the way they want to work. This has in the past led to lengthy implementation as organisations have basically not changed their processes but just implemented what they already do - sometimes this is correct, but too often it is the wrong approach.
Today an ERP package has to be process and event driven rather than transaction driven. It has to have fewer moving parts and allow configuration to be minimised as well as much easier to perform - not forgetting faster! We are looking for ERP packages to be modularised so that not only can we choose only the ones we are interested in, but also be able to integrate, based on standards, with other packages with no issues.
Born out of the need to provide a technology solution for organisations to integrate their different applications, the other solution to process improvement has arisen. In the beginning, the technology solution, referred to as Enterprise Application Integration (EAI) software, was seen as a point solution between 2 programs/different applications. However, what was soon realised by the vendors, consultants and customers of the software was that what was needed was something more sophisticated, which allowed a user to define the business process and relate it to the different application programmes needed to complete the business transaction; hence Business Process Management Software (BPMS) came into being. The next technology solution was to automate the rules used to make decisions in business and so we had Expert Systems, which have evolved into Business Rules Management Systems (BRMS). If the reader wants to know more about BPMS or BRMS software then please see respectively Business Process Management Market Update and Business Rules Management: Managing business rules of an organisation.
Figure 1: Process Improvement Market map
So there you are. You have decided that to keep in business and to expand your market share as the World comes out of recession, you need to implement a "Lean-Six Sigma-TQM" project to improve your customer facing processes, particularly so you are able to exploit the way the Y Generation of employees in your customers want to work. So we are talking of mobile-collaborative abilities, both for your customers and for your own customer-facing employees. You may have already done a "Lean-Six Sigma-TQM" project or implemented an ERP or even implemented a BPMS project. All of these will help, but actually you need a combination of the management techniques and the IT software solutions that fit your needs and you need to implement them fast, preferably within a month! Tall order, but a realistic business demand. So what should you do?
Well the key is the timeframe so you have to have tight control over specification and changes. You also are not going to deliver it all in one go but in a series of projects. So you need to identify where the big issues are and where there is nothing to do or relatively nothing to do. For the latter you can either leave in place what you have or you can use a best of breed solution delivered in a packaged software solution. However don't underestimate the time it may take to move from one system to another! It is certainly worth using Automated Process Discovery Software to discover what your current process is actually, rather than what you imagine it to be. This will also help to identify the process you have and where redundancy exists. The step by step measuring all the time you deliver the necessary process improvement changes. Remember to always keep your stakeholders (that is your customers and suppliers and of course your own employees) involved in the feedback. And of course remember process improvement never stops!!
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