Process Optimization

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)

Strategy	Action	Example
Eliminate	Remove NVA steps.	Stop printing emails to sign them.
Combine	Merge steps/roles.	Cashier also packs bags.
Rearrange	Change sequence.	Validate data before processing payment.
Simplify	Make step easier.	Use dropdown instead of text field.

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.