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12
AFTER STUDYING THIS UNIT, YOU SHOULD
BE ABLE TO:
1. Explain retail process effectiveness in terms of
sigma level
2. Describe retail process assessment approaches.
3. Create retail processes leveraging the retail
industry process standards.
4. Improve retail process performance using
performance improvement methods.5. Avoid pitfalls of process management
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Process Effectiveness
A business process should always be customeroriented and customer focused
The customer can be an internal customer or an
external customer
Internal customers are employees and external
customers means buyers
A business process is effective only when it
meets the needs of a customer.This unit discusses some effectiveness
indicators, which measure the quality of a
business process.13
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What is Six Sigma?
Six Sigma is a comprehensive system for achieving,
sustaining and maximizing business success.
Six Sigma is driven by close understanding of
customer needs, disciplined use of facts and data, and
statistical analysis
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Six Sigma
Many retail business run at 3 sigma level or
below.To gain market share, the retailers process
effectiveness needs to be higher
Six sigma processes are the process results inonly 3.4 defects per million opportunities
(DPMO)
Sigma is a mathematical term which measures
how much a process varies from perfection,based on the number of defects per million
opportunities.
15
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Six Sigma cont
The 6 sigma was deployed in manufacturingindustries to reduce wastage due to defects
and rework and additional costs.
The focus was to do it right the first time,
hence saving expenditure and increasingprofitability.
Approach equally applicable in service
industries
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Sigma LevelsSigma Level DPMO Percentage
Defective
Percentage Yield
1 691,462 69% 31%
2 308,538 31% 69%
3 66,807 7% 93%
4 6,210 1% 99%
5 233 0% 100%
6 3.4 0% 100%
7 0.019 0% 100%
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Sigma levels
Yield DPMO
30.9% 690,000
69.2% 308,000
93.3% 66,800
99.94% 6,210
99.98% 320
99.9997% 3.4
100 Rounds of golf peryear
Miss 6 putts
Per roundMiss 1 putt
Per round
Miss 1 putt
Every 9 rounds
Miss 1 puttEvery 2.33 years
Miss 1 putt
Every 163 years
Sigma
1
2
3
4
5
6
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Six Sigma in Service Industries
1. Service industries like airlines operate at 12sigma levels
2. Customers would not like to fly with an airline at
6 sigma process effectiveness levels, i.e. in
every million take-offs and landing process, 3.4times the flight may crash
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Process Assessment Approaches
1. Processes can be assessed at the following
stages: -
Approach of the process development
Deployment of the process
Method of recording the learning fromthe process
Integrating the learning from the
process to improve process Results of the process compared to the
best in class benchmarks
Acronym: ADLIR
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Approach
1. The approach refers to the technique ofmethods used to create the process.
2. Is the approach appropriate to the requirement
of achieving business results?
3. The approach needs to be affectively utilisingthe methods deployed.
4. The approach should be repeatable and
predictable5. Repeatability and predictability are the hall mark
of a robust process led organisation
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Approach cont...
1. In the first phase of existence, organisation arereacting to problems experiences.
2. In the second phase, they are adopting systematic
approaches in key areas that create a significant
influence on the business3. Only 20% of the processes are created using a
systematic approach
4. In the third phase, organisations align all their
processes to achieve their leadership position5. The final phase is when organisations are leaning
from their mistakes and learning from the outside
world. It is the ideal state.
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Deployment
1. Deployment refers to the extent to which theapproach is implemented to address the retail
business environment.
2. It also refers to if the approach is deployed
consistently across all relevant processes.3. Sometimes you may find an approach is applied
consistently in one department but not across
other departments with relevant processes
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Learning
1. This refers to improvising the approach by
continuous evaluation and improvement efforts.2. Finding unique game changing solutions (game
changers) through innovation.
3. E.g. no body now likes shopping behind thecounter, but to pick and compare products
4. Are such efforts of creating game changing
solutions encouraged?
5. If you encourage only then do you learn and createthem.
6. Leaning should also be shared from one
department to another (Knowledge management)
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Integration
1. Integration refers to the extent to which the
approach created is aligned to organisationalneeds
2. This refers to the extent to which measures,
information and improvement systems are
complementary across processes and work
units.
3. Finally it refers to the plans, processes, results,
analysis, learning and actions being uniformlymeshing across processes and departments or
work groups to enable organisation goal
achievement
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Results
1. Service industries like airlines operate at 12sigma levels
2. Customers would not like to fly with an airline at
6 sigma process effectiveness levels, i.e. in
every million take-offs and landing process, 3.4times the flight may crash
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Benchmarking
Is a continuous process of comparing ormeasuring processes of manufacturingproducts, selling products, providing serviceswith competitors considered as leaders
Is the process of finding out the best processorganizations anywhere in the world
Benchmarking is the way of the organisationsaying it is willing to learn
Existing or new retail business can directlybenchmark and create processes that are of5th generation (leapfrogging from 1st or 2ndgeneration)
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Retail Industry Process Standards
1. GSI2. eCom
3. ARTS
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1. GSI
GSi (formerly EAN European Article Number)offers universal product code (UPC)
Barcodes have brought tremendous gains in
efficiency to many retail businesses as machine
readable fontGSI has expanded beyond barcodes to include:-
Radio Frequency Identification (RFID)
Product Data Synchronization
A company works with a GSI member that islocated in the country it is located
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2. eCom
GSI eCom encompasses a group ofstandards that address common business
processes in the supply chain
These processes tend to be well suited for
consumer products & retail trade industriesThis is where most of the adoption of eCom
has occurred to date
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3. ARTS
Association of Retail Technology Standards (ARTS) isa standard organisation dedicated to the retail industry
ARTS tend to focus on Application-to-Application (A2A)standards
ARTS has developed 4 Standards:
The Retail Data Model Unified Point of Service (UnifiedPOS)
IXRetail XML schemeas to integrateapplications within the retail enterprise &
Standard RFPs to guide retailer selection ofappliocations and provide a developmentguide for vendors
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Process Improvement Methods
1. Six Sigma2. Lean Thinking
3. ISO 9000 Quality Standards
4. TQM
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1. Six Sigma
Refers to the standard Deviation from theMean of the performance data
The more the variation, the more thebusiness sales is unpredictable
Ideally, predictability needs to be created byprocess improvements
Predictability ensures lesser loses on accountof:-
Higher inventory & carrying costs Stock out resulting in loss of business
opportunities
Six Sigma is all about reducing variation
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Six Sigma Process (DMAIC)
1. D Define2. M Measure
3. A Analyze
4. I Improve
5. C - Control
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DMAIC Problem Solving MethodologyMeasureMeasureDefineDefine AnalyzeAnalyze ImproveImprove ControlControl
Define the goals and customer requirements
Measure the process to determine current performance
Analyze and determine the root cause(s) of the defects
Improve the process by eliminating defects
Control future process performance
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2. Lean Thinking
Lean is about focus, removing waste, andincreasing customer value
Lean is only about value added processes &
elimination of non-value added processes
Another way to look at lean is focus onrevenue generating activities
Eliminate or minimize cost and effort on non
revenue generating activities
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Steps of Assessing Lean Operations
Identify value added or value creating
services.Determine the value stream (sequence of
activities)
Eliminate non value adding activities
Allow customers to pull products/services
E.g.
picking up their products on their own
Assisting in the billing of their own product
Taking the purchased merchandise to their
homes
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3. ISO 9000 Quality Standards
ISO asks to DOCUMENT what you DO andDO what you DOCUMENT.
It has a simple PDCA cycle
Plan
Do Check
Act
Repetition of this cycle brings incrementalimprovements and does not let the process
performance slip
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4. TQM
TQM integrates all the retail organizational
functions (Inventory, Merchandising, Sales,etc) to focus on meeting customer needs andthe goals and objectives of the retailer.
TQM empowers every employee of the
organisation with the responsibility ofensuring quality in their respective areas
TQM aims to get it right the first time everytime
TQM seeks to identify the source of eachdefect, and prevent it from entering the finalproduct or service
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TQM cont.
TQM enforces quality assurance to meet
changes in products and servicesTQM identifies root causes and offers
processes to eliminate and mitigate the root
causes of a defect
TQM is essentially a people dependant
process
To derive full benefit of TQM, people in any
organisation should be synergizedQuality is not the job of a department but
every employee of the organiosation
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Process Pitfalls & its Consequences
1. Ahead of time2. Piecemeal approach
3. Workforce reduction
4. Quick fix solutions
5. Not enabling end-users
6. End users should not be ignored
7. Not celebrating
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1. Ahead of Time
Process improvements using technology appear
to be an easy solution to become a retailbusiness leader
While technology can promise visibility,
productivity, and fast results; do not invest ahead
of time.
Take the time to get the business, process and
management dimensions in place before you
attack the technology
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2. Piecemeal Approach
Dont think about process improvements in a
piece meal manner.Look at improving processes but also ensure that
there are cross functional solutions cutting
across all departments
Think about how the value chain comes together
in the organisation
Create a separate team who will be responsible
for driving the process improvements
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3. Workforce reductionDo not use process management or improvement
as a tool for a hidden agenda of workforce
reduction. This will guarantee failure
Employees will not re-engineer processes to find
themselves eventually redundant and getting laid
offProcess management and improvement is to get
higher productivity and gains
If the business grows then it is not necessary that
employees need to be laid off.
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4. Quick Fix Solutions
Dont teach your team how to do a quick fix and
one-time solutionConduct the training that will teach the team
about process improvements for life
Figure out ways to encourage continuous andsustaining change
Include senior management, IT staff and the end
users in the process design and improvement
stage
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5. Not enabling end users
Empower process users and support them with
the policies, authority, rewards and recognition,compensation, and other means of facilitation.
Dont overlook the need to make this happen
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6. End Users Should Not Be Ignored
Dont overfund technology & infrastructure at the
expense of the doors/end usersTreat end-users as customers
Allow them to add more value
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7. Not Celebrating
Remember to celebrate key successes and
achievementsMotivate others to improve processes and get
recognition and rewards
Improvements may be incremental orexponential but celebrate
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*END*
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