Generate Cash by Cleaning up Business Processes

By Dr. Donald N. Sweet

Your major business processes generate and consume large amounts of cash. Much like closets, basements and attics, business processes accumulate excess stuff. We usually find that any process that has been around for several years has some waste in it. Those processes that have been around for a decade usually have geometrically more non-value added activities.

With the goal of reducing process waste, we suggest using the Pareto 80/20 principle to define the most important processes in your organization. We’re looking for that handful of mission critical processes. The ones that add most value for the customer and consume the most internal resources.

The first step is to pick the biggest process opportunity. Next, organize a team that will review each and every step of the process. Here we find that a combination of process owners, process support staff and one or two team members who don’t know specifics about the process, works best. We find the last group are the folks that ask the “why do we do it that way” questions that those more familiar with the process ignore (Hint: It’s not uncommon to hear, “because we’ve always done it that way,” or “we tried that seven years ago and it didn’t work,” as answers).

Using LEAN methods (see, we suggest drawing up a current state map that includes each and every single step in the process. Nothing gets left out, however small or seemingly insignificant.

For example, order entry is a key process for most. Orders may come in via the phone, fax, internet, etc. How is each one received? What are its next steps? List the steps that follow, and so forth until the order is eventually fulfilled.

Each and every step, stop, rest, movement, change, etc. is mapped out, often with different color Post-It-Notes. This is known as the current state map. Here we’re looking to capture some 95% of all the possible activity (sorry Pareto). It’s important that it be recorded exactly as the process is currently being done. We find that it is not uncommon for two people working the same process to have slightly different steps. Both should be mapped out.

When complete, the result is known as the “current state map” and it often ends up looking like a spaghetti bowl.
We then go back and review each step asking if it is value added from the customer’s perspective. Typically customers don’t care about batching, or inventories or reviews or approvals, etc. They just want what they ordered, on time. To that end each step gets designated as being either 1) value added or 2) non-value added, always from the customer’s perspective.

Once we have completed this process we go back through it again looking for ways to eliminate as many of the non-value added activities as possible. This is where the “outside the process” people often shine. We record those changes and at the end of this process we have a “future state map“.

Our next step is to take the current state map and look at what needs to be done to migrate to the future state as we see it now. Some changes can usually be made immediately. Other will take longer. Still others might require investments in additional resources, i.e. computers, people, etc. Those investments will have to be weighed against the benefit they provide before determining whether they make business sense or not.

Once the major processes have been cleaned out, you can start on the next tier.  At some point revisiting the major processes again and again will often provide more return on investment. The ultimate goal is to develop LEAN thinking within the organization and perpetuate continual improvement.

Just like closets, basements and attics, processes gather clutter over time and need to be cleaned out.