Business Process Reengineering – not bad if done right

My company helps small businesses grow efficiently and helps companies in trouble figure out how to get out of the soup.  We do help from a financial perspective but that is not the scope of this article.  It’s about Business Process Reengineering.  This has to do greasing or replacing the cogs of the company’s machine so it can produce more efficiently.  Simultaneous improvements in capacity, productivity, quality, lead times, and costs can all be achieved with this approach.  How about tripling sales with a 20% reduction in price and a 25% reduction in lead time, 30% increase in Gross Margins, and a 98% reduction in defects, with no more people than when you started, and everyone is “working smarter, but not harder”?  Interested?  Read on!

As companies grow from the startup level, they go from a multi-disciplined culture to one where the individual tasks are too much for one person to handle.  Policies and procedures need to be created in order for the product’s quality to be sustained.  Those things in that multi-disciplined person’s head need to be documented.  This way, acceptable products can be made if that “expert” is not around.  Maybe they are moving to another area of the company where their expertise will help train the team with another product.  But it’s not enough to train people.  At some point the training feels like “sink or swim” to the new people.  So they prefer written documentation.  Then they can be sure they are doing the job correctly and there is lower stress.  I believe employees want to do the best job they can in order to ensure their own job security.  But they need the right training and tools.

If too many procedures are put in place too early, the small business chokes from the bureaucracy, and growth is slowed.  The challenge at this step is to install the right procedures and processes at the right step so as not to choke off the innovative drive from the people that have helped the company grow to this point.  That’s where we come in.

We analyze the company’s current business processes (even ad hoc ones), product designs, specifications, and customer requirements.  This is called business process mapping.  In LEAN design, we are looking for bottlenecks to streamline time from order to shipment.  The quality approach also wants to be sure that product quality is consistent and not compromised by short cuts. Our experience with many different kinds of manufacturing environments, at all sizes of companies from startup to multi-nationals, enables us to deeply understand the potential pitfalls at each step in the process.  By first determining where we are, we can create a plan to go where we want to go.  But the first pass of this overview analysis can only take a short time, like hours or a day or two.  We want the company to realize their existing process flows.  Raise your hand if you think your CEO is out of touch with what you are doing at the plant level!  Okay, maybe most of our readers are not plant level, but you know what we mean, right?  As companies grow, they develop these ad hoc processes, and management (almost) doesn’t care how things get done so long as they do.  They have a lot of things to worry about, and are assuming that their great multi-disciplined folks are taking care of their side of things.

One problem is that management processes scale better than production processes.  Huh?  When sales double, most of the time the products are the same.  There may be more quoting but the load on management is not increased very much.  Not so with production.  In many case a doubling of sales results in a need to double employees if you are doing the same thing the same way.  This is what we mean by scalable.  Think in terms of high growth, like doubling, tripling, increasing 10x, 100x, 1000x (orders of magnitude).  If you think you can use the same processes at 1x, and at 1000x just hire 1000 times the number of people, you are mistaken.  You’ll need to change the processes so that when you get to 1000x, you can do it with much less than 1000 times the number of people.  I’ve seen 90% gains (or more) in this kind of scaling.  A 90% gain in productivity would mean that 100 people are effectively doing 1000x the production that one person was doing.  Talk about growing pains!

If you were really going to get to 1000x, that one person needs to grow to 100 people (in this example).  Those 100 needs to be trained since that one person cannot possibly be expected to supervise all 1000.  In fact, that person can’t even train that many.  They need to train other key people as they are growing who will train others, and so on.  Now you get into a case of telephone, and if things are not written down, something will be “lost in translation”.  Not to mention you may really have language barriers to deal with.  Hopefully those on the fence now realize that you need to document things in order to grow.

The ISO9000 system can easily be summarized as “document what you do, and do what you document”.  Everyone knows many companies that are ISO9000 qualified.  The early adopters in the US did it because they were exporting to Europe so their customers demanded it.  Earlier than that Deming put forth his quality approach.  The six sigma approach is now being implemented.  Some companies are doing all of these.  The point is that no matter what system you wind up using, or developing on your own, it’s better than no system.  It creates some organized structure that enables you to grow.  Even if your customer does not require it, if you want to grow you will have growing pains and you will need to get organized.

Once management realizes that they need to grow and build structure, they have reached the first hurdle.  Acknowledging they have a problem.  At least now they can work on solving it.  But you don’t want to go too far too soon.  That’s why it is often best to bring in some outside help to enable proper planning of the next steps.  Office-side process, production-side processes, Quality, lead times, costs, inventory turnover, profit margins all need to be looked at so none of these will suffer, and ideally improve.  And significantly!  Much like a business plan it becomes a roadmap to 1000x, and beyond!

Contact us if you are in this pinch, on your way to it, or want to know how to prevent it.

Tom Smith
Focused Solutions Group,
Management and Technical Services for NJ Manufacturers