Never Stop Improving Your Business Processes

In our previous two blog posts, we covered the topics of performance management and margin enhancement – both critical practices that companies often fail to address until financial or operational challenges surmount.  This month we introduce an approach to improving the efficiency and cost effectiveness of a company’s operations based on a standardized approach to business process improvement.

In Japan, the term “Kaizen” is used to describe processes associated with continuous improvement within an organization. So prevalent is the practice within Japanese business culture that many economists credit the management practice with stimulating Japan’s post WWII economic ascendance, in particular within the global automotive and electronic manufacturing sectors. Further, the core principles associated with Kaizen have inspired numerous other manufacturing methods such as Lean Manufacturing and Six Sigma, which are used today by many of the world’s leading manufacturers and service providers across all industries.

When properly implemented, the practice of continuous process improvement can have infinite positive impact on a company’s product or service capability, brand image and financial performance.

However, the key to successful implementation lies in the organization’s ability to create a culture of constant evaluation and internal collaboration – from assembly line worker to CEO.  It is with this principle that we begin our five-step approach to improving company processes.

5 steps for improving company processes 

The most important, and perhaps most challenging part of improving company processes is creating a culture of continuous collaboration and measurable accountability throughout the organization. This is no easy feat, but it is critical to the long-term success of your business.

With a culture that values process improvement, you can follow these five steps to identify and improve specific business processes.

1. Identify and prioritize processes for improvement and assign measurable objectives to determine the future success of the overall opportunity.
2. Map “current state” processes (or opportunities), detailing current steps, responsibilities and perceived organizational inefficiencies.
3. Analyze and measure the overall efficiency of the current process, and determine the measurable impact that fixing the process will have both internally (within the organization) and externally (with customers or key vendors). Frequently, investment in (or customization of existing) enterprise resource planning (ERP) software is complementary to process improvement initiatives.
4. Diagram the desired “future state” process based on this value assessment and present measurable impact of recommended improvements to management and process stakeholders for approval.
5. Designate individual responsibilities for the implementation of the future state process, and execute according to an agreed plan and measurements.

For example, one process you might want to improve is inventory management practices, which can result in significant cost savings and enhance a company’s cash position. If you were to apply these steps to improve an inventory management process, it would look something like this:

1. Calculate historic average inventory benchmarks (days inventory outstanding [DIO] or other) to understand past performance.
2. Diagram current processes relating to ordering, carrying and transporting inventories.
3. Measure existing efficiencies and evaluate discrete opportunities for efficiency gains through improved processes and recalculate days sales of inventory (DSI) and other metrics based on these process improvements.
4. Diagram improved future state processes and submit to stakeholders for review.
5. Pending approval, assign responsibility and accountability for implementation of new policies and processes.

There are multiple advantages to using these steps or a similar approach to improving business processes. If done right, the result will be management decisions that are both transparent and measurable – transparent because all tasks are diagrammed and visually represented for management’s review, and measurable because productivity, required resources and costs are represented in current and future state format.

With these attributes organized and presented effectively, companies can quickly identify whether initiatives provide financial or operational benefit. Further, by having the ability to present multiple process improvement scenarios across varying opportunities, managers are able to prioritize these opportunities based on measurable near-term and long-term ROI.  This enables managers to align process improvement decisions with the company’s broader strategic vision.

Contact us to learn more about how you can improve your business processes.