Complex and outdated business processes increase effort, slow down the tempo of operations and shrink margins. Mature businesses need to keep an eye out for potential profit thieves, but young companies on the rise must also be wary. As an organization grows, profits will only follow if it gains efficiencies as it expands. A critical task for companies of all sizes: identify cumbersome modes of doing business and convert the wasted effort back into income.
Here is a short list of business processes that may be causing you problems. These problem processes should not be overlooked:
Smaller companies may start out life with a few manual, paper-based processes. But even larger organizations may harbor some outmoded manual operations. Some times, the manual activities may be found lurking between automated systems. For example, an employee might take a paper report generated by one system and enter the data into another system. Those types of manual tasks will often introduce errors — in addition to decreasing efficiency.
At Sears, manual processes, paper-based systems and human error were among the challenges the retailer faced with its store-layout business process. Existing procedures took far too long, costing the company significantly through lost time. Lithyem, however, audited the floor planning process and built a system that lets the company quickly create seasonal floor plans. For the typical Sears store, the process shrank from 15 days to 3 days. The time savings translated into an annual savings of over $1,000,000.
Non-value Added Processes
Some business activities become ingrained in the corporate culture and the original reason for performing them disappears over time. Perhaps a long-ago, and no longer relevant, company policy dictated the addition of a certain business process. If you have such hidden “gems” lurking in your organization, it’s time to get rid of them. A business process that doesn’t help you achieve your business objectives only serves to erode profitability. It deserves its ranking among this list of business processes.
Michael Hammer, in his seminal work, Reengineering The Corporation, summed up this particular problem: “We found that many tasks that employees performed had nothing at all to do with meeting customer needs — that is, creating a product high in quality, supplying that product at fair price, and providing excellent service,” he wrote.
Processes Involving Long Approval Chains
A process that requires multiple sign offs is one that is probably going to bog down operations. Key reviewers may be unavailable due to travel schedules, vacations or illness. Documents passed from inbox to inbox or delivered via email have a way of becoming lost or overlooked. Every delay in the approval cycle represents a cost — a lost sales opportunity, or another day before a project can begin, for example.
An organization should think about simplifying such a process and introducing document management and notification systems to speed up approvals. Add this time-draining process to the list of business processes to watch out for.
Processes Involving Too Many Handoffs
Any process that requires multiple handoffs and re-entering data into various systems should raise a red flag. Such a fragmented way of doing business is grossly inefficient and ultimately a drag on cycle time. A manufacturing firm, for instance, will struggle to ship products to customers on schedule if its order fulfillment process is subject to human error and manual inputs.
Fragmentation also leads to double data entry, which creates additional problems when it comes to the consistency and integrity of data. Data duplication also places additional strain on overtaxed storage systems and hinders data analysis. Processes that lead to such difficulties should not be ignored.
Processes With Accumulated Complexity
A given business process may start out as clean and focused. Unfortunately, a process rarely remains in its original, pristine form. An organization will frequently tack on additional steps to handle one-off cases and manage exceptions. So, the once-simple business process accumulates complexity over time. An organization should check to see whether scope-creep has gradually overtaken any of its business processes. Such activities are ripe for streamlining.
In the end, margins are all about efficiency. This list of business processes that block efficiency provides you with a least a starting point for assessing your own operations. What business process do you find particularly problematic? Leave your responses below.