Metlen What is a business

What is a business:
•    A business is a group of people working together with a set of processes to accomplish a specific goal in a specific and, often, dynamic market. These groups and processes are constrained and/or guided by dynamic organizational and governmental structures then who we are as human beings.
•     The end goal in business is to produce the correct product such that value as seen by the customer is greater than competitions priced such that other stakeholders can be satisfied, including a profit sufficiently large to satisfy owners in the short and long term.
•     Profit is obtained by producing and selling the correct product ethically and legally.
•     Process: a structured, measured set of activities designed to produce a specific output.
•     Product: good and/or service (tangible and intangible characteristics)
•     Correct Product: Provides more value to your targeted customer than your competition at a price that provides enough revenue to satisfy the wants and needs of the other five stakeholders. Have to be stakeholder centric to achieve this balance.
•     Value: what a person gives up for what they receive.  Time, money, effort…
•     Six Stakeholders: Owners/stockholders, employees, suppliers, customers, community, environment.
•    Having the correct adaptable Mission, Vision, and Strategy. (high level goals)
•     Being able to operationalize MVS (process mgt, everything we do in the preceding slide)
•     Operationalization occurs through goal congruency (lower level goals aligned with high level goals)
Purpose of  a Process:
What is a process:
“A network of activities performed by resources that transform inputs into outputs.” Anupindi et. Al. 1999
“A set of logically related tasks or activities performed to achieve a defined business outcome.” APICS Dictionary 1995
“The collection of activities and operations involved in transforming inputs, which are the physical facilities, materials, capital, equipment, people, and energy, into outputs, or the products and services.” Evans & Lindsay 2002
“A collection of activities and decisions that produce and output for an internal or external customer.” Devane, T. 2004
Purpose of processes ? create the correct product (greater value than competitors at a profit that provides enough to meet needs of stakeholders in a perceived equable manner) in a given context
Context: market demand, market share, technology (machines, computers, software) and resources (knowledge, materials, people, infrastructure, power) available to execute process
How to judge a process:
How well does it meet demand (step one queue if tied to arrival of orders, capacity, Takt time, cycle time, business rules)
How well does the process utilize resources (utilization (people and machine, rate of consumption of power), WIP (holding/queue or process, or total), power, pollution, safety, material)
How well does it produce the customer described/demanded product
Cost relative to achievable price
Why & how to simulate
i)    Existing: To learn about the process and to do what if analysis
(a)    conceptual model,
(b)    data flow,
(c)    resources (costs),
(d)    demand,
(e)    interfaces,
(f)    business rules,
(g)    collect data from observation
1.    arrival rate, demand, step cycle times, TPT (use for verification), capacity (use for verification), batch size, set up costs, resource costs, mean time to break down/chance of breakdown, time down, scrap, rework, items produced per step,
(h)    Enter into simulator
(i)    Verify data and model (does the model produce the same results every time as expected (costs and output))
(j)    Validate the model (does the model mimic the real outputs of the actual process)
(k)    Do what if analysis, including statistics
ii)    Green Field: To learn about the process and do what if analysis
(a)    conceptual model,
(b)    data flow,
(c)    resources (costs),
(d)    demand,
(e)    interfaces,
(f)    business rules,
(g)    collect data from projections
(h)    arrival rate, demand, step cycle times, TPT (use for verification), capacity (use for verification), batch size, set up costs, resource costs, mean time to break down/chance of breakdown, time down, scrap, rework, items produced per step
(i)    Enter into simulator
(j)    Verify data and model (does the model produce the same results with simple data as mathematically solving the model)
(k)    Do what if analysis, including statistics
Process Management
Process Management (process owner activities: advocacy/influence, boundary management, collaboration, improvement, metrics, know relationship of process to stakeholder satisfaction)
Design/re-design (concepts to keep in mind are TQM, Six Sigma and lean, tools used in this class simulation     and workflow)
Needs analysis & definition (simulation and history): goals, scope/boundaries, participants, constraints, schedule so design, implement and management follow nicely (Cost, time, quality, scope?project management) Goals should be SMART (specific, measurable, attainable, realistic, tangible) Three C’s of leadership (clarity, consistency, and commitment)
Tech
Knowledge of Process logic (steps) schematic needed, Data flow logic, Resource consumption per step, business rules, interaction with other processes (often overlooked) and firm’s stakeholder satisfaction goals
How going to measure (quality control policy)
Implementation (workflow and simulation): probably not the big bang, will not come to a better mouse             trap
Buy-in through communication in design and implementation
Rests on design
Take care of silent dissent as well as voiced dissent
7 c’s of implementation: common goal and measures, cross-functional commitment, continuity, clear communication, competent project management, credible coaching, celebration
Management/control (workflow and simulation)
Who is the owner, cannot be at too low of level or will keep silos and lose cross-functional involvement
Quality control statement (measures should link customer satisfaction drivers to financial outcomes, metrics should be visible (communication))
Training of resources
Evaluation/assessment
Accountability
Cross-functional involvement communication
Continuous training for executive and management on enterprise process management (so old do not forget and new learn so there is process management continuity)
Continuous Improvement (simulation and workflow)
Needs to be culture: obtain culture through metrics, rewards, and training
Take action on what find in mgt/control steps
Where are, where want to go, how going to get there, is it worth it
Important considerations when managing processes
Purpose of process relative to bottom line of company (how does the output and variation of output impact the bottom line?what processes does the output inform, path from output to $ in)
Interfaces with other processes smoothly
Interfaces across functions within process go smoothly
Design human interaction portion of processes relative to human physiology and psychology
Process control policy
Effectiveness of process (correct output done correctly?form/function, time, cost, quality
Processes we need to manage
Processes we need to manage & how to tell if a company is good at process management
Process mgt steps of:
management and control throughout.
Support Processes
Corporate planning SWOT
Develop Mission, Vision, Goals, Strategy
R&D
Design Products
Manage/develop technology
Knowledge mgt
Accounting
Information Tech
Improvement and change
Assessment (internal, self, external supplier/customer/environment/owner, up, down)
Goal congruency
Finance
Capital Structure
Capital and operations budgets
Resource, real property and others mgt
HR
Develop (train educate) and Manage (hire, fire, control, desk audits TDRs) Human Capital
Procurement
Manage supply side relationships
Process Mgt steps of: design, implementation, redesign, implementation
Primary Processes
Logistics
Manage supply and customer side relationships
Operations
Make products
Marketing & Sales
Manage customer side relationships
Service
Manage customer side relationships
Bridging Processes
Product Development Process
Internal processes
Internal services
Internal goods
External products
Knowledge Management
Process Management
Why categorize:
The same reason we make a high level logic flow diagram for a process before we start breaking down the sub-processes, categorization gives a birds eye view of the process flow in a company.
Reminder that we need to look at more than just production processes.
It is the ground work to help guide the interacting links between process output and the end goal (the spaghetti diagram). Shows the enterprise wide view of PM.
Given the above, there is a guide work to find the problem behind the symptom.
Helps to define structure within a company, what needs to be done.
Helps with data flow and business rule formation; prioritization of what should be done when.
Helps with, if I change X process, how will that affect the enterprise.
Helps with understanding the people, processes, control mechanism, and organizational structure and interactions of a firm, or six major dimensions of an organization: knowledge communities/functions, processes, content, marketplaces, culture, and organizational structure.
Process Management Framework
High level: What is the organization (relationship between people, processes, control mechanisms, and org structure), can it support a process management perspective
Organizations are composed of people, processes, control mechanisms, structure (what is relationship in the given firm and how well does the composition react to environment (including external stakeholders))
Communication flow (including how goal congruency is achieved)
Functional relationship
Board and C?O
History of continuous improvement
Excel test
Quality of management/leadership, assessment, design, conformance, control in the three levels organizational, process and operational (and three within each: strategic, tactical, personal)
Culture, is there an enterprise/systems view or is it myopic (expressed and displayed can be different), what is being displayed
Given the correct set of the above
What is the current state of processes
Stakeholder satisfaction
View of stakeholder satisfaction
Who is looking at the processes, is there a process owner
Are processes looked at enterprise wide
Is there an enterprise wide process schematic that shows logic flow, resource needs, information flow/data flow logic, business rules, and interfaces between processes
Is there a quality control policy for each process, how are processes assessed/evaluated
What business rules control process drift
How do they design processes
Are processes tied to wants/needs of stakeholders
Are processes designed around who people are
Is there a structured methodology for process design? (HoQ, Axio. Des.)
Are processes designed with consideration for human nature?
During planning of implementation, are users as well as other stakeholders considered?
Where will changes lead us relative to current state?
How do they implement processes
Is implementation started in design
Were people (users, stakeholders) involved in design? Implementation?
Was implementation lead or pushed?
How do they manage and control processes
QC policy for each process or set of processes
Is there a process owner and what is that person’s relationship to the users
What is the continuous improvement process
Are there channels for ideas
Is there education and learning relative to continuous improvement
What is the reward system
Is there goal congruency so that process suggestions and changes actually promote high level strategy obtainment and customer satisfaction.
What tools and/or concepts are used
Lean manufacturing
Simulation
Statistical (SPC, 6sigma, ???)
Other quant and qual tools
BPM type software
What is the understanding relative to efficiency and effectiveness
Is cost/benefit analysis alive and well
Short version:
How to determine degree of PM expertise a company may have.
Evidence of correct product: stakeholder satisfaction (relative to something, past, industry…)
Owners: stock price, growth, sustainable mission, vision, strategy
Employees: turn over, unions or not, incentive programs, compensation
Suppliers: turn over, evidence of SCM
Customers: growth, brand image
Communities: what do they do for their communities
Environment: what do they do to ensure that they are sustainable from an     environmental perspective
What evidence of what part of  PM is the driver of their current status relative to ‘correct product’.
Support processes: MVS creation, knowledge management (accounting, IT, IS, improvement and change, assessment, goal congruency) , R&D of product, Hiring, Training, Compensation, TDR’s, Communication, finance, community relations, R&D of process, the process of process mgt…
Primary Processes: SCM/procurement, customer relations/marketing, manufacturing, service
Interface management: how well do all of the above work together
Process Selection Framework
Process analysis finds problems with People, Processes, Control, and Structure (PPCS). Since work is done by processes, how we design, execute, control, and bind processes determines our effectiveness in providing higher value than our competitors to our customers at a profit; that is the goal. Thus we can ID processes that need modified by:
Degree of Frustration and/or dissatisfaction with performance (speed, flexibility, cost, quality)
Time of process lens
Percentage of process time analysis (value added vs. non-value added steps)
Processing, Waiting, Rework, Moving, Inspection, Setup
Cost of Process lens : will probably want to standardize relative to something square feet impact, etc.
Quality of process lens:
Flexibility of process: relative to meeting stakeholders needs
Waste framework: (1) over production, (2) waiting or idle time, (3) transportation, (4) inefficiency of the process itself, (5) inventory, (6) unnecessary motion and effort and (7) defects MORE: FG not sold at determined price, remove waste in one area that enables value added in another (not seeing the whole system)
Types of stakeholder dissatisfaction that triggers process change
Things take to long
Mgt throws people and $ at symptoms without solving underlying problem (five whys)
Employees are frustrated
The processes that span departments have resources that point away from them
No process QCP policy and if there is, it is not executed
Low utilization of resources
Redundancy of all types, data and work
Micro mgt (reviews and sign offs)
Exceptions aren’t
Expedite and de-expedite are common
No process owner, only step owners that do not talk communicate much
Firefighting
Are there issues
Away issues: current hurts, want to move (pain, danger, frustration)
Move to issues: OK where at, but better if we move
Quality Control Policy
1.    Determine context of the production process relative to best of practice and why that specific context exists. Determine what portion of the context should be changed and if it can be changed, and what it would take to create that change?
Context is organizational structure, organizational culture, approach to human resource/capital, and attitude towards quantitative and qualitative tools to make sound decisions. How effective is the firm relative to the three main ideas of QM (stakeholder centric, goal congruency (employee involvement), continuous improvement) and their skill in executing management/leadership, assessment, design, conformance, and control (MADCC ) in all levels of the organization.  Production process means you are making something, a good, a service, a decision, a strategy, a report, a … These processes encompasses both support and primary processes (Michel Porter’s value chain).
2.    Determine what is the product the production process is currently creating and why is it that product, is it the correct product
Characteristics of product (Garvin 8, Kano 3, Juran 3)
3.    Determine the current production process for producing the product in question (process flow diagram). This step in conjunction with the next step is a ‘lean’ analysis.
What steps of the production process determines appropriate levels of the characteristics delineated in number two above
What inputs, resources, and information are utilized at each of the above steps
What are the duration times
What is the bottleneck, Takt time, throughput time, and capacity
How well is the bottleneck managed
How are they controlling and assessing the current process
What is wrong with the current production process and control process
What ‘waste’ (lean) is apparent
This process is the production process, not the proposed control process or proposed production process
What is the current performance level?
4.    Determine what level of performance (actual product) is currently achieved relative to expected (correct product) (specification and/or DPMO) and the degree to which the process addresses those expectations. What does the current level of performance cost them in lost revenue, rework, inspection,  and/or additional costs relative to possible/desirable outputs? Current and expected level of performance of the production process, one should also delineate what level of capability the control policy should have based on what is possible with current technology. This step is part a lean, waste analysis.
5.    Develop a set of controls, assessment and/or process changes you think would achieve expected performance and an over arching, general statement of the purpose for the various control methods and process changes you propose. For each step of the production process, determine how you are going to control the activities of that step. Really, you are creating a control process for the production process ? to maintain real time control we will…. To determine overall effectiveness of the production process and control process we will perform end of production process evaluation by ….. To get here, the information from 3 above or your new improved process steps and characteristic there of is absolutely necessary. Do you control the inputs and/or the resources used to alter/shape/evaluate the inputs, how do you know the information received and sent is correct…..
6.    Referencing the production process, how good does this production process have to be to satisfy customers? Where will you set the control limits for those steps that you are using SPC, at the standard +/- 3 standard deviations, more than 3, or less than 3? The answer to this question will determine how ‘good’ the control process has to be and help you calculate the costs of Type I and Type II errors, which determines how many standard deviations you set your control limits at, how often you measure, and the sample size you take when you measure.
7.    For each of the controls and assessments in number five above, determine what to measure (inputs, outputs, durations…) that will insure ‘correct product’ status. referring to production process
8.    Express why the above measures are necessary and why others are not.
9.    Determine how each of the different measures will be made.  This step helps to delineate your control process and includes how the control or measure will be done. For instance, will a person take a sample and then analyze that sample with something, or will a machine take the sample and analyze that sample, or will a machine measure continuously and a software program analyze the results, compare to a standard and then direct another machine to adjust the process, or…
10.    Determine where on the product, input, and/or process-time-line each measure will be performed.  this step helps to delineate your control process
11.    Determine where in the production process the product, input, and/or process time line each measure will be performed. this step helps to delineate your control process (think “The Goal” by Goldratt)
12.    Determine who and/or what should perform each of the measures this step helps to delineate your control process
13.    Determine sample size for each of the measures this step helps to delineate your control process (think rational sub-group and probability of catching a given shift in the mean, measured in standard deviation, and cost of measuring versus cost of mistakes happening.)
14.    Determine how often each of the measures should be performed this step helps to delineate your control process (robustness of process, cost of mistakes, cost of measuring and analyzing)
15.    Determine how process operators should react to the data generated from each of the measures this step helps to delineate your control process (is it common or special cause of error, is the measure a real time feedback mechanism or an end of production step or process evaluation
16.    Determine how (and why) the data from each of the measures should be displayed (most likely a control chart of some type or large board in the production area) this step helps to delineate your control process
17.    Determine who (and why) should have access to the displayed data this step helps to delineate your control process and stakeholder relationships
18.    Determine how the effectiveness of the QCP should be determined how are you going to ensure that your control process is working  (calibration of measuring tools and measurer, is the measure being done ch 12 pp 623-630)
19.    Conduct a cost benefit analysis to ensure that the NPV of your proposed quality control process and/or process improvement is positive.
Business Rule Framework
Types of Process Control/business rules:
Authorization ? Condition: if this limit, do that
Reconciliation ?Action: balance cashier
Review: inventory once per qt
Mgt review ? Oversight: review weekly sales
Configuration: Quality control policy
System Access: who has access relative to process information flow and execution
Segregation of duties: checks and balances
Key performance indicator: what ever is tracked to make sure high level goals are meet
Exception or edit: why special causes of variation
Components of process control
Environment: does management promote control
Risk Assessment: what happens if we control at x degree, what are the costs (balance cost of failure and prevention)
Control activities: policies and procedures that ensure control if and how control is done
Information and communication: how report
Monitoring: how measure
Who oversees controls (author says internal audit) what do you think
What about Simulation
Simulation of…
System: collections of parts organized for a purpose
Natural, Designed physical, Designed abstract (math model), Human (family)
Purpose of simulation: understanding, controlling, changing, managing systems
Advantages of simulation: time compression, cost, understanding, real system does not exist
Disadvantages: Can be expensive (relative to benefit), time, data hungry, skill, OVERCONFIDENCE
Types of simulation: Throwaway, ongoing use, regular use, generic and reusable
Simulate when you have a complex enough system that deterministic models do not model system and when cost of simulation is covered by possible outcomes.
Conceptual model: description of the simulation model that is to be developed describing the objectives, inputs, outputs, content, assumptions, simplifications (black boxes, rules, and data), data flows, business rules, interactions/interfaces with other process, resource needs and costs. The model should be:
Valid: sufficiently accurate for purpose at hand (‘good’ data is available: good:
when model is executed, it mimics real system)
Credible: clients perceive the model as on that is sufficiently accurate for purpose at hand
Utilitarian: both modeler and client believe output of model will be adequate to base decisions on
Feasible: both modeler and client believe can create computer model
Rules: routes, processing times, schedules, allocation of resources, queue order and length, check offs, quality inspection, …..
Methods of modeling variability, both quant and qual (description of process and actions of players used to develop conceptual model):
Data types/nature
Trace: (assume independence) queue time, cycle time, down time, what happened over time in the processes
Empirical distributions: distribution of trace
Statistical distributions: fit of trace data to distribution, then use rand()
For this class use a software to fit data, or visual of histogram, ch 7 tells how to determine type of distribution, but there are software solutions for $20 that do this for you
Problem with normal distribution (negative values), might have to use a triangular distribution.
Bootstrapping: selecting with replacement of trace data at random
Data to gather
TPT
Takt time (assuming market demand and production rate are same)
WIP cost ? queue and in process
Resource Utilization
Queue times
Resource cost
Arrival rate and interarrival times
(distributions)
Step cycle times and distributions (parameters)
Set up
Mean time to breakdown
Maintenance schedule
Vacation
Sick leave
Coding, testing, DOCUMENTING (20 to 30% of time should be donated to documentation, it saves time in the long run)
Separate data from model (do not hard coed data in an equation, reference data)
Three types of documentation:
Model documentation: the model, assumptions and simplifications, input data including interpretation and sources, results format,
Project documentation: meeting minutes, project specifications (cost, time, quality, scope), verification and validation, scenarios executed and results, final report, project review
User documentation: why you did what so you can do a better job next time
Terminating: business closes or lunch hour is over
NonTerminating: capacity, just let it run (steady state) (warm up period = initial transient and provides initialization bias)
Transient output: stochastic
Determining warm up period: min is achieving steady state
Run length, 10 times warm up period
Number of replications, enough for reliable CI
We are going to use TOC and Lean principles to determine how to improve a model and hypotheses testing of mean differences to determine if we succeeded in improving the model.
Implementation: a concise exploration if this subject will be needed in your project
what barriers do you see that will impede implementation of the new system
resource (time, money, availability of skilled employees, equipment)
people issues (buy in or not)
how would you avoid those impediments
Verification: conceptual model is translated into simulation model and the simulation model works as designed
Validation: accurate model, it mimics the actual process
Impossible to verify completely, do best can in time you have
Check against real world (statistics, means testing)
Check against simple model
Does it make sense????
Conceptual Model
Conceptual model/Functional Specification pp 47 &48, Ch 13, and appendix 1: First develop understanding  of problem situation (client dependent for first round, they may not understand the causal relationships, or see the problem, only the symptom, visiting and back checking are required, several iterations)
Contact information!!!!!!!!!!!!!!
Objectives: purpose of model, goals of project (know what ‘they want’, what is their definition of project success)
Understand the system and what the problem is, know the bounds of the system, performance metrics of system and project, what are baseline values of these metrics
Inputs to change model: experimental factors, elements that can be changed to improve process (batch size, duration times, mix of products, moving components, BRs, resource changes )
Outputs: reports of simulation executions
Content: components and connections (scope and level of detail, high level steps, activities)
Assumptions: how things work
Simplifications: black boxes to make parts not important to the question at hand simple and fast
What tool to use to analyze the system: use simulation only when appropriate
Animation exactness
Project deliverables
Project contact, who and where to go for data and discuss changes in scope
Client review of specification and signed agreement
Some questions to ask, this is not a complete list
What should be included in model (process flow diagram and detail)
What level of detail (high level, TDR’s??)
What are resources, their schedules, their tasks, their costs
Scrap rate by entity type
Distribution of times between failures and downtime duration
Experience curve effects
What is the process flow, is it up to date, is it always followed, when isn’t
What are the rules: business rules, procedures, legal, physical ? can they be changed
How are decisions made (what to do when…. Or if……)
What data is there, how accurate is it (duration time by step, part, resource; failures: frequency and duration; resources and schedules or assumptions; process inputs and outputs
If no data, who will collect it and when will it be done, or what are the estimates
What type of animation is required and how will they be used
Who will verify and validate the model
What output is required: through put, resource utilization, costs, revenue, value added, non-value added,             should these metrics be ranked
How general should the model be, can the basic model be used for other processes
Who will perform the what if, how do you determine to change in your what ifing, how many what ifs will              be executed
What are major milestones of study (when report to your contact)
What will the project cost
WHAT ARE THE DELIVERABLES
The conceptual and computer models have to be
valid, credible, have utility, and be feasible
Simulation project specification (scope and expected output) (short hand of 1st section)
Background to problem situation
Objectives of simulation study
Expected benefits
Inputs, outputs, content, assumptions, simplifications
Experimentation: scenarios to be considered
Data requirements: what, when, who, why
Time-scale and milestones
Estimated cost
Why the first cut specification (charter) will be wrong: omissions, changes in environmen