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Improving Your Business Process 101 - A Guide to Major Frameworks
Primer on major business process improvement frameworks and how these principles have helped make some forest products companies more competitive.
By Henry Quesada
Date Posted: 6/1/2010
During the last four decades, business organizations have under gone an intense focus on improvement processes designed to reduce waste, enhance efficiency, cut costs, improve quality and overall make enterprises run better. These improvements have come in the form of frameworks that are a collection of ideas and traditions under a set of guidelines. Some of these frameworks need heavy support from information technologies, and some are more like a philosophy or set of organizational cultural guidelines. This article provides a summary of the basic frameworks as well as examples of how wood products firms are adapting some of them to make their companies more competitive.
Total Quality Management (TQM)
In the middle 1980’s, the concept of quality circles and TQM was conceived as a way to involve human resources from all company levels in decision making. Several qualitative and quantitative tools came with the TQM concept that helped many business organizations in the manufacturing, service, financial, and government sectors to redesign their processes in search of better levels of productivity.
During the same decade, Toyota was studied extensively by many researchers who coined the concept of lean thinking. This powerful philosophy considers that waste needs to be eliminated or minimized for a business organization to increase the value of its operations. However, it was not until the early 2000’s when business organizations around the world started their attempt to go lean. Lean thinking has been seen as a perfect alternative to decreasing cost and increasing added value for the end customer.
After TQM made a huge impact on the way managers of business organizations looked at customers, the six sigma concept was developed by Motorola in the early 1990’s. Perhaps the most important contribution of the six sigma methodology, besides the statistical process control foundation, was the addition of Ed Deming’s continuous improvement cycle based on five steps: define, measure, analyze, improve, and control (DMAIC). With this new process improvement approach, business organizations were able to start embracing continuous improvement over sporadic and finite attempts.
In the 1990’s, companies started a more radical process improvement framework called re-engineering. This concept considered that everything under the umbrella of the organization needed an exhaustive and radical change. Out of the previous process improvement frameworks, re-engineering has been the one associated with the most failure, although the real reasons behind this failure remain unclear.
Activity Based Costing (ABC) Management
Another not so successful process improvement framework introduced in the 1980’s was ABC management. Up to that point in time, business organizations tried to control cost by assigning direct materials, direct labor, and overhead to a product or cost center. However, the realization that cost cannot be controlled by itself started a new initiative called ABC management.
This new way of allocating cost has its foundation in the basic principle that organizations can improve or control activities or processes but not cost. Given this principle, cost was assigned to processes or activities, and products on each process were allocated a portion of the process- or activity-cost based on an activity driver.
Supply Chain Management (
In the early 1990’s the concept of
Corporate Social Responsibility (CSR)
This concept is defined by the Boston College Center for CSR (BCCC 2009) as the way in which a company understands, considers, and accounts for economic, social, and environmental impacts in the design of its products and services, the management of its operations, and its contribution to communities. The traditional approach of corporate responsibility was conceived as a way to contribute to economic development of the communities with no further business implications.
Today, we have seen industries using CSR as a business strategy more than a philanthropic activity. For example, Starbucks works very closely with coffee producers in Central America to help them to transition from traditional coffee farming to organic coffee farming. Starbucks provides expertise, training, and different types of support with a double goal: to contribute to the economic development of those communities and to assure their supply of organic coffee.
Business Process Management (BPM)
This is perhaps one of the latest process improvement frameworks out there. It is similar to the Supply Chain Management because it is based on Porter’s value chain concept. Under this framework a firm will change from a Departmental or Functional Management (Vertical) to a Process Management style (Horizontal).
The main value chains across the organization need to be identified, analyzed and improved. A set of performance measurements is designed for each value chain and there is a Process Manager that oversees each value chain. A couple of wood products firms in the primary and the secondary sector have tried BPM with relative success. The most important goal for BPM is to increase customer satisfaction levels by synchronizing all the activities of the value chain.
Applications of Process Improvement Frameworks
Primary wood products industries have slowly adapted some of the mentioned process improvement frameworks.
Another driver that has led to the use of
The wood products industry has also embraced Lean Thinking as a process improvement framework. It seems that both primary and secondary wood products industries have found Lean Thinking as a very successful process improvement framework. As indicated earlier, Lean Thinking provides a set of guidelines that can help any industry, especially manufacturing companies such as primary wood industries, to minimize or decrease waste while increasing added-value for the end customers.
The size of the industry does not seem to be a problem when implementing a Lean thinking project. As long as the project is being supported by the upper management, the implementation is bound to be successful with results sometimes in the short term. The VT Lean Thinking group has very successful in implementing some of the Lean tools such as Total Productive Maintenance, 5s, Energy Savings, Visual Control, and Standardized Work in hardwood and softwood sawmills.
In the next two articles we will review more in depth the most popular process improvement frameworks. We will give you implementation and continuous improvement tips. If you have any questions please feel free to contact Henry Quesada at email@example.com.