process standardization sharing best practices leveraging systems and knowledge improving...

Process Standardization

Sharing best practices

Leveraging systems and knowledge

Improving consistency

Some of the material in this presentation was drawn from the following sources:

“Build-to-Order & Mass Customization, the Ultimate Supply Chain and Lean Manufacturing Strategy for Low-Cost On-Demand Production Without Forecasts or Inventory,” by D. Anderson (2004).

Harrington, H., Esseling, E. and Van Nimwegen, H. (1997), Business Process Improvement Workbook, McGraw-Hill: New York, NY.

Trends in Process Management

Outsourced processes

Example: Dell (text, pg. 122)

Process standardization

BA 553: Business Process Management 2


What is process standardization?

Definition of process standardization:

“The degree to which work rules, policies, and operating procedures are formalized and followed.” 1

Objective of process standardization:

“To make process activities transparent and achieve uniformity of process activities across the value chain and across firm boundaries.” 2

1. Jang, Y. and Lee, J. (1998), “Factors influencing the success of management consulting projects”, International Journal of Project Management, Vol. 16 No. 2, pp. 67-72.

2. Muenstermann, B. and Weitzel, T. (2008), “What is process standardization?” In Proceedings of the International Conference on Information Resources Management, 2008. Conf-IRM 2008 .


Why standardize processes?

Reduces costs:

Lowers salary costs due to collaboration between different units (employees can fill in for each other)

Lowers overhead costs due to sharing documentation and training materials across the organization

Reduces materials costs (ordering larger quantities of standard parts and materials provides purchasing leverage where buyers can benefit from suppliers economies-of-scale and arrange more frequent deliveries, to support just-in-time operations)

Reduces inventory levels (aggregating demand for parts and supplies enables the safety stock and inventory levels to be reduced)

Reduces material overhead (time spent to procure standard parts and materials, which are more common, more readily available, and have more sources)

Lowers IT costs due to supporting similar information systems across the organization (no “one off” applications being used)


Why standardize processes?

Increases quality:

Reduces variability in product / service quality, as all employees perform the process in a similar manner

Achieves more consistent results and outcomes, driving world-class performance

Improves product / service quality, as employees make fewer errors when they understand how to do their jobs

Improves product / service quality through the use of continuous improvement and sharing of best practices


Why standardize processes? (Cont’d.)

Reduces cycle time:

Reduces rework and inefficiency - less work at business unit level as processes are developed once instead of ten times

Improves average cycle time through risk pooling (aggregating demand for parts and supplies across locations means that high demand from one area can be offset by lower demands from other areas, leveling the demand and reducing the risk of running out of parts)


Why standardize processes? (Cont’d.)

Improves organizational management:Facilitates early identification and proactive management of risksImproves accuracy of estimatesImproves external relations, as the company presents a single face to its suppliers and customersProvides a stronger foundation for any organizational restructuring, as processes are similar across similar job functionsImproves knowledge management (more opportunities to leverage and reuse knowledge)Facilitates knowledge sharing and applied learning across organizational boundariesFacilitates various organizational reviews (e.g., SOX reviews)Increases organizational flexibility, as resources such as people and assets can be reassigned according to market requirementsImproves employee retention, as people understand their jobs and what’s expected of themEnables implementation of process control methods (collecting similar metrics and reporting on them)


Steps in Process Standardization

1. Clarify the purpose of the standardization effort (e.g., reduce product cost, increase product quality, improve product cycle time)

2. Identify which aspects of the process need to be standardized to achieve the stated purpose

3. Document a single version of the process

4. Use impact analysis to identify consequences for the organization, e.g., equipment or paperwork changes required

5. Identify and document any training needs based upon standardized process design

6. Develop a plan for implementing the standardized process

7. Train employees in the new process

8. Roll out the new processes to the various regions

9. Identify decision authority for future modifications to the standardized process design

Process Standardization Steps 1 and 2

1. Clarify the purpose of the standardization effort (e.g., reduce product cost, increase product quality, improve product cycle time)

2. Identify which aspects of the process need to be standardized to achieve the stated purpose

Both of these steps are specific to the company or process being standardized, and cannot be prescribed.



3. Document a single version of the process

Document the versions of the process being used

Conduct workshop with representatives from various regions and functions involved in the process

Identify best internal practice (sections of the process may be done best by different regions)

Identify where process needs to be tailored (for instance, due to tools, language, culture, local regulations), and document these alternatives

Determine whether process improvements are possible and within scope - if so, identify improvements to incorporate into the new process

Develop a specification for the process

Document a single version of the process in a flowchart


5. Identify and document training needs

Identify and document any training needs based upon standardized process design:

If this is a new process design, it may involve new technology or systems that require employee training

If this is an existing process, the adoption of methods used in other regions or the implementation of improvements may require training


6. Develop implementation plan

Develop a plan for implementing the standardized process, including the following components:

Training plan

Communication plan

Measurement plan

Process implementation plan


9. Identify decision authority level

Identify level of decision authority for future modifications to the standardized process design:

If decision authority rests with local groups, the benefits of standardization may not be maintained

If decision authority rests only at the enterprise level, the process may not be flexible or adapt easily to changes

This is less of an issue for smaller companies than it is for global organizations


Decision Authority ModelsEnterprise

ModelDescription• Ultimate decision authority is at

the Enterprise level by process• Enterprise governance body can

be led by a single process owner or small board of owners

• Regional and/or BU level bodies make lower level decisions

Advantages• Less costly to maintain• Full standardization benefits• Enables global management of

the business

Tradeoffs• Some loss of flexibility to meet

specific business needs• Greatest change challenge

Business Unit Model

Description• Ultimate decision authority is at

the Business Unit level by process

• The BU process owners may meet to gain informal consistency across the enterprise

• Regional level bodies make lower level decisions

Advantages• Provides flexibility for business

units in process design• Decision making typically faster

than Enterprise Model

Tradeoffs• Loss of cross Business Unit

synergies• Some loss of local control

Regional Model

Description• Ultimate decision authority is at

the regional level by process• The regional process owners may

meet to gain informal consistency across the enterprise

• Local governance bodies make lower level decisions

Advantages• Provides flexibility for regions in

process design• Decision making typically faster

than Enterprise and BU Models

Tradeoffs• More difficult to manage

enterprise globally• Some loss of flexibility to meet

business unit needs within a given region

Localized Model

Description• Ultimate decision authority at the

local level by process• Localities have lead process

owners who make decisions for their locality

• Consistency not maintained across the enterprise

Advantages• Enables nimble decision making• Localities have flexibility to design

processes to meet their needs

Tradeoffs• Costly solution to build and

maintain; loss of efficiencies• Loss of standardization benefits• Most difficult to manage business

globally

StrictStrictOpenOpen

Typical Attributes Exceptions granted as requested Loose network of process experts (if any) Local review boards manage exceptions Decentralized decision making

Typical Attributes Regional or BU business justified

exceptions granted Regional or BU process expert

network Decision making bodies

Typical Attributes Exceptions typically granted only for

compliance or significant benefit Corporate process owners Global review boards Centralized decision making

Example from Chevron, 2005.


Process Standardization Example

Modus offers supply chain management processes such as customer care services, content and materials management, product assembly, and fulfillment

Modus operates 21 manufacturing/distribution facilities in 12 countries

The company decided to standardize its processes across facilities to improve customer benefit

The effort resulted in a 35% reduction in inventory costs, 61% reduction in order turnaround time, and a 64% reduction in working capital requirements.

Manrodt, K. B. and Vitasek, K. (2004), “Global process standardization: A case study”, Journal of Business Logistics, Vol. 25 No. 1.


Process Standardization Example

Chevron has found significant savings in standardizing refinery process steps using mobile workflow software and rugged PDAs to deliver decision support to field workers

Chevron has increased refinery operating reliability, reduced maintenance costs, and improved safety and environmental compliance

Chevron estimates that these process improvements will save the company $3 million to $5 million annually” across eight refineries

“Chevron Drives Process Standardization and Efficiency with Mobile Decision Support”, September 2008, http://mobilesolutions.wonderware.com/customers/cs_chevron.pdf website, accessed 7 February 2010.


Process Standardization: Principles for Success

Beginning standardization effort with a pilot process to demonstrate success

Selecting processes for standardization that are part of the value chain

Design process to achieve improved metrics around process time, cost and quality (as described earlier)

Employee involvement in designing the process, including identifying best internal practice

Employee ownership of the standardized process

Management buy-in to the process design

Management commitment to make the infrastructure changes necessary to enable standardization (e.g., purchase of common systems and software)

Process simplification wherever possible (standardization should not lead to over-complication)

Train employees as needed in the differences between their local processes and the standardized process


Process Standardization: Issues to Address

Lack of clarity on purpose for the standardization effort

Lack of understanding of the benefits of standardization

Lack of time and resources to design and deploy standardized process

Lack of involvement of all regions or groups in the new design

Unclear on decision-making authority when disagreements arise

Employee resistance to change

Turf battles by functional managers

Standardized process does not address intent of the effort: does not reduce cost, improve quality, or reduce cycle time

Lack of training in how to perform the standardized process

Allowing too much tailoring in initial design standardization effort

Not enforcing adherence to standardized process once deployed

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