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Better Business Process Optimization
By: C. Richard Panico
Posted: October 24, 2006, from the October 2006 issue of GCI Magazine.
Traditional business has realized that “faster, better, cheaper” are not the only prerequisites of success. To dominate an industry, an organization must continually innovate and remain agile to respond quickly to change. Organizations need to have the ability to pursue strategic initiatives with confidence. They also need the means to consolidate their business during economic downturns, using cost-effective new tools for business process integration.
Achieving these outcomes first requires equipping executive management with accurate information to make educated decisions for strategic course corrections and realignment. Once decisions are made, implementation of these business process optimization (BPO) projects often requires an organization to examine and pursue opportunities to reduce costs and cycle times while increasing service levels or product quality. Combining Six Sigma and project management methodologies provides an excellent framework for ensuring seamless execution and delivery of sustainable results.
For many consumers, quality is as important, if not more important, than cost. Six Sigma methodologies can be used to embed quality into process optimization projects. Six Sigma’s goal is the near elimination of defects from any process, product or service—limiting defects to just 3.4 defects per million opportunities. Additionally, to ensure organizational alignment, Six Sigma methodology requires that all improvement projects must be integrated with the goals of an organization. The DMAIC methodology employed by Six Sigma (The Black Belt Memory Jogger, 2002) includes the following activities:
- Define—identify customer needs and the processes and products to be improved.
- Measure—determine the baseline and target performance of the process, define input and output variables of process steps, and validate the measurement systems.
- Analyze—analyze data to identify critical factors needed for process execution.
- Improve—identify improvements (process, procedural, systemic, etc.) to optimize the outputs and eliminate and or reduce defects and variation. Statistically validate the new process operating conditions.
- Control—monitor and assign overall responsibility for sustaining gains made by the implementation of process improvements.
BPO projects follow the same method as defined by the Project Management Institute (PMI), in which projects are broken into five process groups: initiating, planning, executing, controlling and closing. As stated in the PMI PMBOK, 2000 edition, “these process groups are linked by the results they produce—the result of one often becomes an input to another.”
- Initiating—authorize the project and define the project scope.
- Planning—define and refine objectives and select the best courses of action.
- Executing—coordinate people and other resources to carry out the plan.
- Controlling—ensure objectives are met by monitoring and measuring progress regularly to identify variances from plan so that corrective action can be taken when necessary.
- Closing—formalize acceptance of the project and bring it to an orderly conclusion.
One of the most critical activities to ensure the success of any project is the clear and concise definition of the objectives, goals and milestones in the project’s planning phase. The purpose of the project must support the organization’s vision and mission statements, and requires the support and commitment of senior management. BPO projects should define the specific business process to improve. This formal definition of the process optimization scope eliminates any confusion and formally defines the subject boundaries.