Process Redesign

Process Redesign James V Reyes-Picknell, P.Eng. +1-705-431-6598 [email protected]

Agenda

What are business processes? How processes evolve Automating business processes – help or hindrance? Know where you are today – map your current business processes Are your processes meeting your goals? Can your processes be made more efficient and more effective? Redesigning for maximum effectiveness and efficiency

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

What are business processes?

A process is nothing more than a systematic flow of action steps that achieves some goal. A process can also be thought of as a “workflow”. We want our business processes to be: ƒ Effective – they deliver a desired outcome (service and quality) ƒ Efficient – they deliver the outcome at low cost, quickly and at minimum risk We want them to deliver value: Value

=

Output Input

=

Results x Quality Cost x Time x Risk

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Business Process Reengineering

Business process reengineering (BPR) is the analysis and redesign of workflow within and between enterprises. BPR was first introduced to the business world by Frederick Taylor when he published his article The Principles of Scientific Management in the early 1900s. Following on from the earlier ideas of Time and Motion Studies pioneered by Frank and Lillian Gilbreth, Scientific Management was the first step to the introduction of BPR which turned out to be unsuccessful due to the many issues which were not resolved. During Taylor's time, not many knowledgeable workers were employed in the manufacturing workforce, which at the time was the main wealth generator. Scientific Management involved breaking the manufacturing process down to a thoughtless cycle of simple sequences which were to be carried out in the least amount of time possible with the minimum amount of effort. This often raised the factory workers' salaries but also caused the workers to work hard in back-breaking manual labour. Henry Ford’s first assembly line is an example that is still repeated today. This practice of improving efficiency in manufacturing often raises the concern of "dehumanization of the workplace" (Kock, 2002), especially where workers are more educated and motivated by factors beyond mere survival. The Scientific Management method gave birth to Total Quality Management in Japan after World War II. That eliminated many of the discrepancies with the previous method of improving the business structure and increased its focus on people as a part of the solution. William Deming and Dr. Joseph Juran helped Japan become a super economic power by taking over market share from North American businesses with quality goods and services. Total Quality Management's main goal is to improve the manufacturing operations. In the 1990s, Michael Hammer and James Champy introduced their book Reengineering the Corporation, which gave birth to the term business process reengineering.

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Business Process Reengineering

BPR is a highly technical approach that reflects its authors’ engineering backgrounds. It reached its heyday in the early 1990's when Michael Hammer and James Champy published their best-selling book, "Reengineering the Corporation". The authors promoted the idea that sometimes radical redesign and reorganization of an enterprise (wiping the slate clean) was necessary to lower costs and increase quality of service and that information technology was the key enabler for that radical change. Hammer and Champy felt that the design of workflow in most large corporations was based on assumptions about technology, people, and organizational goals that were no longer valid, and they are often right, but not entirely so. They suggested seven principles of reengineering to streamline the work process and thereby achieve significant levels of improvement in quality, time management, and cost: 1. 2. 3. 4. 5. 6. 7.

Organize around outcomes, not tasks. Identify all the processes in an organization and prioritize them in order of redesign urgency. Integrate information processing work into the real work that produces the information. Treat geographically dispersed resources as though they were centralized. Link parallel activities in the workflow instead of just integrating their results. Put the decision point where the work is performed, and build control into the process. Capture information once and at the source.

By the mid-1990's, BPR gained the reputation of being a nice way of saying “downsizing." According to Hammer, lack of sustained management commitment and leadership, unrealistic scope and expectations and resistance to change prompted management to abandon the concept of BPR, embracing the next new methodology, enterprise resource planning (ERP). He said, "Serving the customer is not a mechanical act but one that provides an opportunity for fulfillment and meaning".

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

BPR Successes BPR, if implemented properly, can give huge returns. BPR has helped giants like Procter and Gamble Corporation and General Motors Corporation succeed after financial drawbacks due to competition. It helped American Airlines somewhat get back on track from the bad debt that is currently haunting their business practice. BPR is about the proper method of implementation. General Motors Corporation implemented a 3-year plan to consolidate their multiple desktop systems into one. It is known internally as "Consistent Office Environment" (Booker, 1994). This reengineering process involved replacing the numerous brands of desktop systems, network operating systems and application development tools into a more manageable number of vendors and technology platforms. According to Donald G. Hedeen, director of desktops and deployment at GM and manager of the upgrade program, he says that the process "lays the foundation for the implementation of a common business communication strategy across General Motors." (Booker, 1994). Lotus Development Corporation and Hewlett-Packard Development Company, formerly Compaq Computer Corporation, received the single largest non-government sales ever from General Motors Corporation. GM also planned to use Novell NetWare as a security client, Microsoft Office and Hewlett-Packard printers. According the Donald G. Hedeen, this saved GM 10% to 25% on support costs, 3% to 5% on hardware, 40% to 60% on software licensing fees, and increased efficiency by overcoming incompatibility issues by using just one platform across the entire company. Southwest Airlines offers another successful example of reengineering their company and using Information Technology the way it was meant to be implemented. In 1992, Southwest Airlines had a revenue of $1.7 billion and an after-tax profit of $91 million. American Airlines, the largest U.S. carrier, on the other hand had a revenue of $14.4 billion dollars but lost $475 million and has not made a profit since 1989 (Furey and Diorio, 1994). Companies like Southwest Airlines know that their formula for success is easy to copy by new start-ups like Morris, Reno, and Kiwi Airlines. In order to stay in the game of competitive advantage, they have to continuously reengineer their strategy. BPR helps them be original. Michael Dell is the founder and CEO of DELL Incorporated, which has been in business since 1983 and has been the world's fastest growing major PC Company. Michael Dell's idea of a successful business is to keep the smallest inventory possible by having a direct link with the manufacturer. When a customer places an order, the custom parts requested by the customer are automatically sent to the manufacturer for shipment. This reduces the cost for inventory tracking and massive warehouse maintenance. Dell's website is noted for bringing in nearly "$10 million each day in sales."(Smith, 1999). Michael Dell mentions: "If you have a good strategy with sound economics, the real challenge is to get people excited about what you're doing. A lot of businesses get off track because they don't communicate an excitement about being part of a winning team that can achieve big goals. If a company can't motivate its people and it doesn't have a clear compass, it will drift." (Smith, 1999) Dell's stocks have been ranked as the top stock for the decade of the 1990s, when it had a return of 57,282% (Knestout and Ramage, 1999). Michael Dell is now concentrating more on customer service than selling computers since the PC market price has pretty much equalized. Michael Dell notes: "The new frontier in our industry is service, which is a much greater differentiator when price has been equalized. In our industry, there's been a pretty huge gap between what customers want in service and what they can get, so they've come to expect mediocre service. We may be the best in this area, but we can still improve quite a bit—in the quality of the product, the availability of parts, service and delivery time." (Smith, 1999) Michael Dell understands the concept of BPR and really recognizes where and when to reengineer his business. Ford reengineered their business and manufacturing process from just manufacturing cars to manufacturing quality cars, where the number one goal is quality. This helped Ford save millions on recalls and warranty repairs. Ford has accomplished this goal by incorporating barcodes on all their parts and scanners to scan for any missing parts in a completed car coming off of the assembly line. This helped them guarantee a safe and quality car. They have also implemented Voice-over-IP (VoIP) to reduce the cost of having meetings between the branches. A multi-billion dollar corporation like Procter and Gamble Corporation, which carries 300 brands and growing really has a strong grasp in re-engineering. Procter and Gamble Corporation's chief technology officer, G. Gil Cloyd, explains how a company which carry multiple brands has to contend with the "classic innovator's dilemma — most innovations fail, but companies that don't innovate die. His solution, innovating innovation..." (Teresko, 2004). Cloyd has helped a company like Procter and Gamble grow to $5.1 billion by the fiscal year of 2004. According to Cloyd's scorecard, he was able to raise the volume by 17%, the organic volume by 10%, sales are at $51.4 billion up by 19%, with organic sales up 8%, earnings are at $6.5 billion up 25% and share earnings up 25%. Procter and Gamble also has a free cash flow of $7.3 billion or 113% of earnings, dividends up 13% annually with a total shareholder return of 24%. Cloyd states: "The challenge we face is the competitive need for a very rapid pace of innovation. In the consumer products world, we estimate that the required pace of innovation has double in the last three years. Digital technology is very important in helping us to learn faster." (Teresko, 2004) G. Gil Cloyd also predicts, in the near future, "as much as 90% of P&G's R&D will be done in a virtual world with the remainder being physical validation of results and options." (Teresko, 2004).

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

BPR Problems

The biggest problem that businesses usually face with BPR is overzealous expectations. BPR is a business tool with a high price and gradual returns. BPR is quoted as having a 30% success rate due to the time and cost involved. BPR has been used by corporations as an excuse for job cuts which has tarnished the name with employees. Specifically, in 1995, Pacific Bell called for 10,000 job cuts, followed by Apple Computer Incorporated. Both used the word reengineering to explain the job cuts. In addition, Michael Hammer and James Champy have admitted that in their book they did not take into account the human constituent of the business process. In late 1996, Dr. Hammer made a confession on the Wall Street Journal where the article read: "Dr. Hammer points out a flaw: He and the other leaders of the $4.7 billion re-engineering industry forgot about people. ‘I wasn't smart enough about that,' he says. ‘I was reflecting my engineering background and was insufficient appreciative of the human dimension. I've learned that's critical. Sometimes BPR implementation was based on generic best practices by a business, not specific to a particular company. One example of using a generic idea to a particular company would be the implementation of a $28,000.00 voicemail system at Winguth, Dohahue and Co., which was later scrapped because of the computer generated voice which sounded a little too cold and clients were tired of going through all the menu prompts to reach the desired person. BPR is also time sensitive. In the case of Metropolitan Life, some claim that their bankruptcy was caused by their failure to switch from filing cabinets of customer files and records to a database system. With every new process implementation there is a security issue, like in the case of Equifax, where people's identities were stolen. eBay was down for 15-hours because the company decided to test a new system, which was a part of the eBay reengineering process, that they had hoped would help the company be more efficient and also provide quality service to the customers.

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Business process design – is it reengineering?

BPR (reengineering) addresses a corporate level requirement for change. ƒ BPR was intended as a tool for dramatic change to improve company performance. ƒ Because it was capable of dramatic change companies that were in good shape ignored it – after all, they didn’t need dramatic changes. ƒ Consequently, it tended to get used only when companies were in trouble. They needed dramatic (often drastic) change to survive. It was often painful but, as major surgery saves lives, it saved companies. Business process redesign is like reengineering on a smaller scale. It can create dramatic improvement, but its purpose is simply to support improvement. It is not intended as major surgery, but if your processes are in sad shape, then perhaps that is called for. James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

A process is like a machine

When every part is working right, the machine works smoothly It delivers what its users want: power, smoothly and on demand When any one part is not working the machine stops working smoothly and may even stop. It no longer does what its users want Do your processes all work smoothly and deliver the results that you, the user, want? If not, then some part is broken. Process design can fix that.

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Process share some common features Inputs

Process

Outputs The function of this process delivers:

Fuel Air Water Lube Control Signals

Horsepower Torque RPMs

Byproducts •Heat •Exhaust •Used oil

Value

=

Output Input

=

Results x Quality Cost x Time x Risk

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

A the business level the processes integrate with a broad range of influences (inputs, outputs, requirements, environments, stakeholders) Stakeholder

Ore: -Best Quality

CUSTOMERS

Requirements

Business Process Improvement

Risk & Environmental Management

Technology

General Mgt.

Requirements

Mine Production Mgt

POLITICAL, SOCIAL, ECONOMY ENVIRONMENT Mill Production Mgt

Supplier

-Affordable

$

Materials

Mining Process Milling Process Mineral Recovery Process

Quality of Life

MARKET

Information

Environment Mgt Process Plant Services Process

Human Resources

COMPETITORS

Minimum Environmental Impact

EMPLOYEES

Tools / Spares Parts

Highest Profits

COMMUNITY

SUPPLIERS

Geology Process

SHAREHOLDERS

-High Grade

Safe

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

There is a cascading of requirements, process and management

Job Level

Process Level MINE DEVELOPMENT

GEOLOGY

Organization Level

Stakeholders

Goals DesignManag MARKET

MINING

Goals DesignManag

Goals DesignManag

Expectations

Mine Technicians

DRILL & BLAST

MILLING

Goals DesignManag

Goals DesignManag

Goals DesignManag

Drillers

LOAD, HAUL & DUMP

ORE RECOVERY

Goals DesignManag

Goals DesignManag

Goals DesignManag

Blasters

UNDERG. CRUSHING

ENVIRON. MGT.

Goals DesignManag

Goals DesignManag

Goals DesignManag

Electrician

CONVEYING/HAULING

SAFETY MGT.

Goals DesignManag

Goals DesignManag

Goals DesignManag

Service Crew

SURFACE CRUSHING

PLANT SERVICES

POLITICAL

Goals DesignManag

Goals DesignManag

Goals DesignManag

Expectations

FIRST NATIONS

Expectations SHAREHOLDERS

MINE Goals DesignManag

Expectations MINE EMPLOYEES

CONVEYING TO MILL

HUMAN RESOURC.

Goals DesignManag

Goals DesignManag

Expectations

ENVIRONMENTAL

Expectations

LOGISTICS SUPPOR.

Goals DesignManag

OTHERS

Goals DesignManag

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Integrated maintenance and support processes

Materials Management High Level Process Map

Maintenance Work Order and Execution / Shutdown Planning

Issues

Stock Re-Order

Stock Adds & Deletes

Non-Stock Requirement

Stock Returns

Inventory Management

Stock Cycle Counts; Analysis, Adjustments and Obsolete Stock Elimination. Direct Purchases

Receiving

Services Provided by Supplier

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Processes can be “stand alone” or “integrated” with other processes

Here is a simple high level “stand alone” process – work management You can see that each step in this process may actually have several steps of their own – subprocesses. E.g.: Planning has several important steps Job steps (not too detailed) ƒ Show what has to be done, not “how to” do it Estimating duration (realistic) Estimating resources required ƒ Skilled trades (do you have them all?) ƒ Contractors (contracting support required?) ƒ Tools, test equipment, support equipment (cranes, lifts, scaffolding, etc.) ƒ Parts, materials, consumables (any warranty claims?) ƒ Manuals, drawings, instructions, JSA, MSDS, work permits (hot, cold, confined space, etc.) Estimating costs Impact on other equipment / systems / operations ƒ Notifications required (to operations, regulatory authorities, etc.)

Inputs: •Work requests, manpower, materials, parts, contractors, supervision, safety equipment, etc. (all are costs) Outputs: •Completed work (results) Byproduct: •Scrap materials, used oils, broken tools, injuries, lost production, scrap product, etc.

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

An “integrated” process is linked with other business processes

Here’s the Planning Sub-Process from the previous slide: Job steps (not too detailed) ƒ Show what has to be done, not “how to” do it Estimating duration (realistic) Estimating resources required ƒ Skilled trades (do you have them all?) ƒ Contractors (contracting support required?) ƒ Tools, test equipment, support equipment (cranes, lifts, scaffolding, etc.) ƒ Parts, materials, consumables (any warranty claims?) ƒ Manuals, drawings, instructions, JSA, MSDS, work permits (hot, cold, confined space, etc.) Estimating costs Impact on other equipment / systems / operations ƒ Notifications required (to operations, regulatory authorities, etc.)

It has links to other processes outside of the overall “work management” process:

Contracting process Support equipment supply Stores, purchasing, warranty management Engineering, safety information, permitting May link to accounting approvals May link to operations planning systems

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

What VALUE does this process deliver to the business?

Maximizes results and quality of those results: ƒ Captures all required work ƒ Gets the right work done right ƒ Captures knowledge that helps us eliminate the need for future work Minimizes cost, time and risk ƒ Re-uses standard job plans so that no plan is created more than once ƒ Achieves a high level of schedule compliance so work is only scheduled once ƒ Uses plans for all proactive work, all project work, all non-urgent repairs, anticipated emergencies ƒ Work is done once and only once ƒ The process happens quickly so that less urgent work does not become urgent ƒ All work done is prioritized to minimize business risks (safety, environment, costs)

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

How does the process add that value? What it delivers Maximizes results and quality of those results: ƒ Captures all required work ƒ Gets the right work done right ƒ Captures knowledge that helps us eliminate the need for future work ƒ Provides information to other processes Minimizes cost, time and risk ƒ Re-uses standard job plans so that no plan is created more than once ƒ Achieves a high level of schedule compliance so work is only scheduled once ƒ Uses plans for all proactive work, all project work, all non-urgent repairs, anticipated emergencies ƒ Work is done once and only once ƒ The process happens quickly so that less urgent work does not become urgent ƒ All work done is prioritized to minimize business risks (safety, environment, costs) ƒ Provides information to other processes

How it delivers The process must be: ƒ Thorough – miss nothing ƒ Accurate – identifies the right work from sometimes vague requests ƒ Comprehensive – it’s not just about getting work done, it’s about learning from what we found and did so we can improve ƒ Efficient – `

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`

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It doesn’t force us to do things twice, it saves plans for future use It does not require multiple reviews and approvals – each step is carried out by someone who can get it done entirely Urgent work is handled urgently with a minimum of fuss

Effective – `

` `

It anticipates what work will arise and plans for that work before the event occurs (proactive) Deals with all work requests arising Priorities and urgencies are honored

It must add value overall! The process step that adds value may cost us up front but the value may be captured elsewhere.

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Do all of these processes add value?

Contracting process

Do their sub-processes always add value?

Support equipment supply

For example Contracting: ƒ Defining work scope to be contracted ƒ Defining work conditions ƒ Defining contractual terms and conditions

Stores, purchasing, warranty management Engineering, safety information, permitting

`

Accounting (or other) approvals

Do they all add value or are they merely there to alleviate fear • Fear is always driven by the “unknown” and the “unreal” – things that have not happened and may never happen • If you fear it you will make it happen

Operations planning systems

ƒ Requesting bids from multiple suppliers `

What if the best supplier is already known?

ƒ Evaluating bids `

Again, what if the supplier has been chosen ahead of time by the decision maker (not the purchasing agent or contracts officer)

ƒ Work oversight `

If you are contracting the work, are you really the best person to oversee the work?

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Not every step and not every process adds value

Do we really intend to destroy value ?

So how did we get there ?

What caused us to add steps and processes that don’t add value ?

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

How processes evolve

The only constant in life is change! Every change in our working environment demands some sort of response When our business processes can no longer do what we want them to do, we adapt and change them so that they can do what we want If the change we want is not “allowed” we simply work around the rules, our “real” processes become informal, undocumented and highly dependent on those who operate them Causes of change: ƒ People and their preferences change – the demands on our processes will change so we must change to meet those demands (e.g.: the new boss wants to do things differently) ƒ Assets change – new equipment, new technology can lead to changes in what we need to do to manage them (e.g.: we add automation to a previously manual production process) ƒ New methods – better ways of doing things arise so we streamline our process (e.g.: we outsource) ƒ Regulations and other rules change – we need to respond with process changes, often adding approvals, checks, balances… `

ƒ ƒ ƒ ƒ ƒ ƒ

Sadly, many of these are imposed in response to some “failure” of another process so often they add little of value

Technology drives change – computerization, use of wireless devices, use of internet The old methods just aren’t fast enough any more – customers demand faster service, mass customization Demands to cut costs or material usage as a result of global competition Quality expectations continue to rise so we add methods to improve the quality of what we deliver (this transformed the entire North American automotive industry) Someone “cheats” and causes harm to others (&/or themselves) so we put checks and balances in place to prevent it from happening again (e.g.: Sarbane’s Oxley in the US has transformed management consulting and auditing) Exceptional circumstances arise and the process is modified to accommodate them

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

What happens to our processes over a long time?

All these causes of change lead to responses that modify our existing processes Some of those are well documented and some are not ƒ Changes in response to quality program demands are often well documented ƒ Changes in response to regulation changes are often well documented ƒ Changes that simply help get the job done better are often NOT well documented `

These are the most common changes and the troublesome in the long term

Some of those changes are introduced as “work-around actions” by the individuals responsible for the process or for part of the process ƒ People just want to do their job “better” or “faster” ` `

E.g.: a planner uses his own stash of pre-planned jobs to enable him to plan more work as the workload increases, but he may not share the stash with other planners E.g.: store rooms are left unlocked at night for “emergency” parts issues to tradesmen so they can get parts more quickly than waiting for a stores-man, but the stock issues are seldom recorded and stock counts often reveal inaccuracies

ƒ We respond to the reasonable demands of our “customers” ` `

E.g.: a buyer issues a PO number to a supplier in order to expedite delivery before the Purchase Request is formally approved E.g.: tradesmen are assigned to an emergency job before the work order is even raised for the work

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

The changes add up

All these little changes, each one for its own good reasons, will add up. Just like stress on our minds and bodies this puts stress on the formal business process and it can fail to deliver. This complicates our business processes ƒ The process that we actually follow seldom matches the process that we have documented `

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In this case the formal process is clearly “broken” and in need of repair

This isn’t always a problem, especially if the new (unofficial) process works more smoothly than the official version, it is consistent, repeatable and sustainable `

Unfortunately it’s the consistency, repeatability and especially the sustainability that are often lacking

So all these well intentioned changes can add up to be a (big) problem: ƒ Someone new comes to do the job but doesn’t know about the work-arounds and no one can explain them (the process will get bogged down and at worst stop working altogether) ƒ Others, whose cooperation is needed, suddenly stop cooperating (e.g.: supplier demands a written PO instead of a verbal PO number; stores is locked at night by a new stores supervisor; maintenance demands formal work requests where previously verbal requests were sufficient) ƒ The entire process gets bogged down in its own complexity and work that is being processed effectively gets “lost” (e.g.: paperwork submitted to governments; change requests to large contracts; appraisal systems for employee performance in large companies) `

ƒ ƒ

My old navy “in-box” was date stamped. If someone asked for something it got done, but if they didn’t it just sat until it became 1 month old or more – then it got trashed (over 4 years no one ever discovered this). So, was the work that was being requested really needed? Answer: NO.

Process results are no longer consistent and repeatable – everything gets treated as an exception or the process is used consistently, but most of the work flowing through it is a genuine exception. In that case the process is clearly out of date with the reality of what’s happening in the business. Your computerized work flow systems and processes need constant over-rides and manual changes where results should be automated

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

How do you know you have a problem?

You depend on only one person to get something done because no one else can do it right. Your people are working around the processes you thought were in place – they are constantly working to correct for deficiencies in the processes People are complaining about lack of consistency It takes a long time to train someone new in your processes and even after the training is complete, things just don’t work right You are not getting the results you want (costs are high, time is long, inconsistency, lack of service, poor quality of service delivery) i.e.: value is low You decide to automate the process and you can’t agree on how it works today nor can you agree on how it should work in the future Most cases get treated as “exceptions” Computer system require frequent manual intervention and over-rides

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Automating business processes – help or hindrance?

Effectiveness is all about doing the right things – the steps to ensure that happen must be designed into the process, whether it is automated or not ƒ Effectiveness comes from designing the process ƒ Where speed is important to being effective then automation can help Efficiency is all about getting things done quickly and at minimal cost. It is possible to become very efficient while doing the wrong things and being completely ineffective. ƒ Efficiency comes from automating parts of the process Automation (computerization) can reduce the time it takes to process information, can speed the transmission of information from one step or person to the next, can enforce repeatability of process (very consistent), can help cut processing costs, but It can’t ensure you are doing the right things – those must be thought out before hand It can’t be flexible in handling exceptions without being complex ƒ Complexity can slow things down and create opportunities for errors A computer can make any process, even an ineffective one, efficient. It takes brains to make a process effective.

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Process and information flows are sometimes opposed to each other Computers feed information in any needed direction as a process moves only forward

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

The capabilities of computers

Maintenance Management Systems are designed around the basic work management process Different systems handle it different ways They deal with transactions, just like accounting systems, except that here the transaction document is the work order where: 1 Work Order = 1 Job Generally these systems have some capability, either built in or from integration with other systems for materials management (stores), purchasing and accounting for costs More complex systems will interface with budgeting systems, project management, GIS, human resources, finance (for capital works and asset tracking), condition monitoring systems (for automated work order triggering), production scheduling (for equipment availability) and others. Some systems have a limited ability to track failure data to feed reliability improvement efforts but many make an attempt to help (e.g.: use of how found and failure codes, use of data fields with RCM titles, automated statistics about failures / work frequencies, drop down lists of failure modes to pick from)

These systems are very good at tracking activities and transactions (because they are set up to do those things), but they are limited in capability as statistical analysis tools (because they are not designed as such)

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org

Configuration vs. customization

Most systems provide for a degree of user configuration that allows the users to modify certain settings: ƒ Failure codes ƒ “How found” codes ƒ Insertion of logos on reports and work orders ƒ Layout of reports ƒ Switch capabilities on / off – e.g.: currency conversion, metric vs. imperial units, date formats, allow material reservations, user permissions, security Configuration changes “survive” system modification upgrades by the vendor But major changes that vary from the designed in (fundamental) business process may require customization to the system code to meet the business requirements ƒ e.g.: a natural gas gathering and processing company modified its tracking of fuel and oil consumption to take advantage of unique tax and royalty advantages in their Canadian operation regions ` `

These customer specific changes go beyond the changes allowed by the configuration capabilities of the system and can be extensive (as they were in the example above) These customizations often include integration points with other systems (e.g.: finance or purchasing systems that might be from different vendors or even “home grown”)

Customizations often don’t survive vendor code upgrades so it’s very common to stop upgrading the basic system after customizations have been applied ƒ This prevents you from taking advantage of process improvements offered by the vendor ƒ It prevents you from taking advantage of the easy technology improvements offered ƒ It prevents you from getting the “bug fixes” and “patches” that correct system deficiencies ƒ It can make future upgrades as technology changes (e.g.: green screen to Windows and GUI) very expensive ƒ If dramatic changes are needed you may not be able to “migrate” your data and processes to an upgraded and updated system – this could force you to undergo a complete “conversion” to a new system James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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To integrate or not to integrate – that is the question

If your system is a basic CMMS it will have all the functionality you need for maintenance, but only limited functionality for accounting or other corporate functions (e.g.: MRO Maximo, DataStream, Ivara) ƒ These simpler systems tend to be easy to learn and to use and they are often favored by tradesmen ƒ These can be “best of breed” systems that handle their function extremely well ƒ Process changes are often not needed within these systems, but at the interfaces with other systems ƒ Transferring information between these various functions must be done either manually, through batch transfer processes, through data warehouses, or through system integrations that automate the transfer If your system is a complex corporate “enterprise” system you will already have full “integration capability” with other corporate functions provided they are implemented and turned on (e.g.: SAP, JDE/Oracle, Mincom) ƒ These complex systems are harder to implement, learn and to use simply because they are inherently more complicated ƒ These systems attempt to incorporate “best of breed” capabilities but have a tough time keeping up with best practice simply because of their complexity ` `

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Any change in these systems can have far reaching implications elsewhere in the system Process changes can be difficult to implement so many users simply “work around” them – as a consequence, these systems tend to breed the need for process redesign

Even though information can be input once and used many times, the entire system capability has to be implemented to make that happen seamlessly ` `

This is often not done because of the high cost of initial implementation and the resource drain that implementation puts on the company This lack of use of full functionality can also breed work-arounds and the need for eventual process redesign.

Deciding which to use can be a difficult choice that entails trade-offs between functional excellence (which may be best served by best of breed solutions) and overall corporate performance (which may be best served by highly integrated solutions)

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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One company’s dilemma (a natural gas collector and processor)

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Purchased a corporate ERP system in 2001 to gather data from broad range of international operations Implemented it across the company with basic configuration decisions Carried on with customizations for each of more than a dozen business units to meet local needs Continued to customize the system in response to regulatory and accounting changes over the past 5 years Failed to enforce usage discipline at all levels and in all functional areas ` ` `

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In the past 2 years (new CEO on board) the company has shifted focus from an international market to a purely North American market with a focus on low yield gas and oil fields where production is more dependent on large quantities of processing equipment (generally a lot of gear with low capacity) so asset reliability is more important to cost containment ` ` `

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It must support consistent “successful practice” processes It must support continuous improvement in reliability and asset management Maintenance processes must “integrate” smoothly with inventory and purchasing

However, their highly customized system can no longer be supported or upgraded by the vendor `

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They can no longer afford high levels of unreliability and high levels of downtime They can no longer afford to “throw money” at problems They can no longer afford inefficiencies in purchasing and supply chain management

Today (only 5 years later) the company needs consistent business processes and results in maintenance across all business units to meet its overall corporate business strategy `

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Some users used it extensively but most did not, some not at all – very inconsistent from one business unit to another and this made transfer of personnel challenging due to the training required to learn different processes in different areas It wasn’t always used for purchasing, inventory and human resources needs – today, purchasing is highly uncontrolled Gathering of financial data is automated but must be manually verified for accuracy

The company IT department has modified it beyond the point where it can be integrated with other functional areas yet that integration is a key to their success

They are being forced to look at whole scale replacement of a corporate-wide enterprise management system only 5 years after the initial investment `

These investments are on the order of $100 million +

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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One company’s dilemma (a natural gas collector and processor)

They are in this situation because they failed to focus on their business processes when they first installed the system and they failed to enforce any discipline for those they did configure. They bought one of the best systems that was and still is excellent for supporting corporate integration and turned it into a collection of “best of breed” modules that fail to communicate with each other and fail to deliver the results they need today Their actions also provided a system that can’t be changed at any reasonable cost to meet changing demands They focused on the technology and limited their field of view to one functional area at a time, ignoring the needs of the overall business. •Had they followed successful practice in implementing their original system they could upgrade it to current technology and retain full integration capabilities •They would not need to change their purchasing and inventory management “culture” as extensively as they are now faced with •Maintenance could focus on reliability improvements without the need to get the basic process disciplines in place (a two year job at least) •They would not be faced with full scale system replacement – another two year project that will likely cost them in excess of $100 million. •Today all of this will take place in a tight labor market brought on by demographic trends and a booming business environment James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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What could they have done differently?

Instead of purchasing an integrated ERP to support only financial requirements they should have looked at all the needs of the business ƒ While integrated financial results were needed, the rest of their business culture would have been better served by best of breed solutions Examine existing business processes to learn what makes them work ƒ Part of their business success is due to an entrepreneurial (cowboy) culture that is stifled by excessive controls, rigid processes and complex systems – again, best of breed solutions would be suited this environment better Look to the future of the business and its strategy to determine what directions the company is likely to take and what process requirements may arise ƒ Oil and gas demands have been rising steadily but limitations on supply have been demanding new and creative exploration and exploitation techniques. This company was very good at that, but failed to allow for a great deal of flexibility that would invariably be demanded Design new, integrated business processes across all corporate functions with sufficient initial flexibility to support potential future process needs ƒ Their processes were not integrated nor were they consistent, even at a high level. This suited the cowboys but didn’t serve the financial needs very well – the initial implementation missed the mark even for its primary customer (accounting & finance) Implement a system to support the new fully integrated processes Avoid the temptation to customize to achieve “best practice” in any one functional area – all changes must support the company’s direction as a whole ƒ Customizations build you into a box that is difficult and expensive to get out of, as it did here Take advantage of technology upgrades from the IT supplier ƒ Even if the technology undergoes a major change (as it has) it is easier to take advantage of vendor supported upgrades and migrations than major conversions to new systems ƒ Customizations (on a large scale in this case) completely shut the IT suppliers out of their business – it was good for IT department jobs, but bad for the business in the longer term because the business is now faced with a huge bill to upgrade

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Don’t let yourself get into that same situation

Know where you are today – map your current business processes Are your processes meeting your goals? Can your processes be made more efficient and more effective? Redesigning for maximum effectiveness and efficiency

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Know where you are today – map your current business processes

Some proponents of business process reengineering suggest that you don’t need to spend time understanding the old processes – after all, it’s the new ones that matter, so spend your time designing efficient and effective new processes I disagree Understanding the old processes and what it is that makes them work helps you understand the company culture and how it really gets things done It’s the people in the processes that really matter. Ignoring the old processes is equivalent to ignoring that most important element – your people Also, don’t just focus on processes, look at the business and where it is headed. Look at the business environment and what it is likely to bring. You won’t have a crystal ball, but you can still make the best forecast of future needs if you “step back from the trees and look at the forest” James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Process mapping

In this activity you draw a line diagram (flow chart) of the steps in your existing business processes The steps will reflect the manual activities and the automated activities

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Sample process map This diagram shows links with other processes and where CMMS is used

3.4.1 Identify and Evaluate Maintenance (1 of 2)

Policy for Emergency Work

Originator

Policy Should clearly stated communication requirement, Definition etc. MIC5 / Maintenance Supervisor

MIC5 / Maintenance Supervisor

Originator

START

Yes

Any Fault / Request

Should this be considered Emergency work?

Yes 3.5.1 Emergency Maintenance

Is it real Emergency work?

Verify Facts

Planners take Possession of Own Work Request or assign to Others

No No

Originator

3.6.1 Implement Maintenance Improvement Cycle

Yes Do You Have Access To Ellipse

Originator

Planner

Planner

Yes

No Raise a Work Request MSQ541

Are You authorized to raise WO for the required WG

Frequently Review Open WR

1

Has WR been assigned to the correct Work Group

No Originator Yes

Agreed that the only position in Work Group to create WO for Plan Work is a Planner

Planner No Correct Work Group (MSQ541)

Originator

Roles Involved in Process: Originator MIC 5 Maintenance Supervisor Maintenance Planner Maintenance Engineer Area Superintendent

Advise Supervisor (MIC 5) TIC

Yes Is a Work Request required for subsequent Ellipse Action? No

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Sample process map This diagram shows links with other processes but not where CMMS is used It does imply CMMS use by reference to a data base

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Process analysis is aided by use of process maps

Who does the work is shown in “swimming lanes”

Activities are analysed to see where the volume of work lies and where the costs are incurred

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Data gathering

If you don’t have the sort of data identified on the previous slide, then you need to gather it Process observations and estimates Data sampling “Day in the life” studies Experiment and observe just as you would for a Six-Sigma project Pareto analysis For variable data test for correlation against possible causes (e.g.: quality variations vs. experience of employee) James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Gather documents that illustrate the various steps in the process

Collect sample reports, sample work orders that are completed, work sheets, check lists, etc. You want to examine the real documents that are in use, not the ones that are supposed to be in use Look at those documents critically: ƒ Are they understood? ƒ Are they being completed? ƒ What parts of them are being used? What parts are not being used? Why? ƒ Does the document require excessive work to complete? ƒ Does the document get used by someone downstream in the process or in another process? Ask the user if it as valuable to them? How could it be improved? ƒ Is all the information that is collected being used? If not, why not? Is it needed?

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Examination of the existing processes provides insight

What is the purpose of the process? What’s its function? What is being done? Who is doing it? Is that person the best for this activity? Why is it being done? What are we achieving? Is it adding value? How does it add value for the organization? For who? Why is it being done that way? This can reveal a lot about the culture of the organization and the way it “really works” How much is being managed (# of WOs, # of transactions, etc.)? What does each one cost? Is the cost reasonable? How long does it take? Is the time frame meeting user demands? How much is being backlogged? Do we have sufficient capacity to handle things the way we are today? How much is being routed through “exception” channels? Or outside the process? Are there any disconnects or discontinuities at handoff points, especially between departments? Are risks being managed effectively? Is the process under control? Is it being measured, managed and improved? Do measures drive behaviour? Is the behaviour what you want? Is the process informing those interested stakeholders with a legitimate “need to know”?

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Are your processes meeting your goals?

The insights we gain from our existing processes can tell us a great deal about whether or not our processes are meeting our goals

Can you get the results you want from your process? Is it performing its function? Is it running smoothly or not? What parts seem to be breaking down the most? Why are they incapable of taking the load we are asking of them? Is there a reason for that – were they designed to take it in the first place? Have the demands on the process changed?

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Can your processes be made more efficient and more effective?

This is a decision point. If you decide that there is an opportunity you follow up by changing the process. The fundamental questions: Does the process add or destroy value as it stands? Can it add more value than it is today?

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Can you redesign?

The nature of some processes is that they are constrained by factors that are not within your control You may have a process that could clearly add more value if it changed by say, removing bureaucratic steps, but those steps may be required by regulators In that case, you can’t do much about it Willingness to invest in technology may also constrain your redesign efforts. Your company may not want to make the financial investment required to implement the potential redesigns. For example, you may want to implement unmanned access to store rooms with bar codes and scanners using RF technology to streamline the stores issue process, but the return on investment is too low to pass your company’s hurdle rate.

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Redesigning for maximum effectiveness and efficiency

At this point you have a process that needs redesign to stop destroying value, to create value or to create more value You want to ƒ Maximize the outputs (service, production, quality) ƒ Minimize the inputs (cost, time, risk)

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Redesign tips

Look at the existing process Identify the steps that are inefficient, time consuming, costly Identify the constraints on the process that cause it to be inefficient or ineffective Identify the time and costs associated with the hand-offs between steps Identify areas where backlogs pile up and the flow slows or stops Ask “why is this the way it is”? Know what reasons underlie your findings, they may be irrelevant today or they may still be very important Identify what more we need from the process that it is not delivering today

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Redesign considerations

Ask: ƒ Can bureaucracy be reduced? E.g.: approval steps – are they really needed if your people are trained and truly competent? ƒ Are there any excess moves, waiting time, filing steps or rework? Can these be streamlined out or can quality be improved to eliminate rework and waste? ƒ Is there an easier, simpler or more streamlined approach? Can you change to order of steps? Balance workloads? Shift resources? Can we contract some of it out? ƒ Can duplication of effort be eliminated? ƒ Can sequential activities be done in parallel? ƒ Can critical path steps be shortened or eliminated? ƒ Can steps be error proofed to eliminate quality problems? Can standardization help here? Can a specialist be used here? ƒ Can any of it be automated? Look at simple, repetitive steps. Is there an automated work flow or other system that can do this for you? ƒ Does the work need to be done at all? ƒ If there are lots of exceptions consider designing a new process stream just for them, or eliminating the cause of the exceptions up front. James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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If you decide to reengineer…

•Do it as part of strategic planning •Address the leveraging of IT as a competitive tool •Place the customer at the center of the reengineering effort ƒ Concentrate on reengineering fragmented processes that lead to delays or other negative impacts on customer service. •Ensure it is "owned" throughout the organization, not driven by a group of outside consultants and not driven solely by senior management ƒ Make it yours from the start or it will never truly be yours ƒ When things go wrong people will blame the “owner” make sure they will need to blame themselves and somehow problems just get resolved •Use teams comprised of both managers as well as those will actually do the work. ƒ The more you involve interested parties in the process the greater the chances of success implementing the redesigned solution •IT should be an integral part of the reengineering team from the start. •It must be sponsored by top executives, who are not about to leave or retire. •The project must have a timetable, ideally between three to six months, so that the organization is not in a state of "limbo“ between past and future practices ƒ Be decisive and quick •Do not ignore corporate culture and emphasize constant communication and feedback. ƒ Culture, individual and group resistance can derail just about any change effort •Use an unbiased facilitator, preferably someone from outside the organization

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

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Thank you for listening

Recommended Reading: Campbell, John & Reyes-Picknell, James: Uptime, Strategies for Excellence in Maintenance Management, 2006, Productivity Press, NY Maureen Weicher, William W. Chu, Wan Ching Lin, Van Le, Dominic Yu: Business Process Reengineering: Analysis and Recommendations, 1995, Baruch College, NY Any questions? Please feel free to contact me: James (Jim) Reyes-Picknell: +1-705-431-6598 or [email protected] Web site: www.consciousasset.com

James V Reyes-Picknell, President, Conscious Group Inc., “Process Redesign” ©2006 Conscious Group Inc.

www.ipamc.org