Business processes optimization

One of the most important aspects of the internal activity of any company is the search for opportunities to optimize the most common and repetitive business processes. This is not a new concept since every enterprise that has taken place is constantly developing methods for improving activities related to personnel, technology, customers and clients and so on.

In general, the optimization of business processes involves obtaining performance information through monitoring or modelling; identification of potential or actual difficulties and potential opportunities for cost savings or improvements; application of these improvements in the process. In-depth analysis tools can help in identifying critical activity and problem areas, increasing business productivity.

For any company, the optimization of business processes in different ways helps:

  • Reduce costs.
  • Save time.
  • Increase the efficiency of processes.
  • Ensure consistency in managing business processes.
  • To contribute to the improvement of the company as a whole.

More specifically about the most important internal aspects of any enterprise:

Staff

Almost always a lack of knowledge or experience either leads to catastrophic consequences or is a very specific reason in the backlog in terms of work processes. The key solution, in this case, is the elimination of these shortcomings. To increase the knowledge and experience of the workforce, you can use a variety of means: training, webinars, group discussions, providing access to online services, so that employees can improve their knowledge at a convenient time for them.

It has been repeatedly noted that labour productivity improves with the periodic conduction of training, and the efficiency of the operation of the operational staff is increased in the planning of maintenance and performance monitoring. All this positively affects the minimization of production losses, the cost of technical and warranty maintenance.

In some cases, enterprises are having difficulties due to the lack of qualified personnel who could be involved in resource planning. Sometimes this is caused by an attempt to cut costs when the company hires inexperienced (“cheap”) employees. This results in even larger losses for the organization. Therefore, before updating or changing the resource strategy, careful planning must be conducted, which must be based on a thorough analysis of the external and internal situation.

Technologies

To make the necessary strategic decisions and perform everyday tasks, the business can use different technologies. This can be either a serial or custom-tailored software. However, regardless of the technologies that the company uses, optimization, based on serial or custom software, affects the very basics of the activity. Technological improvement of the main processes will help “raise the bar” of the whole enterprise.

Process

Each enterprise uses its own processes, which, nevertheless, comply with the rules and procedures specific to a particular industry. For this aspect, the most important is the standardization and improvement of existing business processes. Optimization can be carried out in various ways: thorough, from beginning to end, the study of a particular process or a single business cycle; eliminating the excessive costs of time and money without the negative impact and risk to the business as a whole.

In a broader sense, process optimization can include the following sequence of actions:

  • Understanding the process.
  • Understanding the problems of the process.
  • Factor analysis and evaluation.
  • Preparation of integrated solutions and approaches.
  • Implementation and implementation of decisions.

Understanding the process. Any activity aimed at optimizing an important business process should begin with understanding it, identifying the best ways to implement it, and comparing it with the company’s business.

 

Understanding the problems of the process. Understanding of problems refers to identified in the process of delays or in some of its stages and does not belong to the established process as a whole. The solution can be the modification of certain steps or tasks, the elimination of excessively expensive steps or their combination for more efficient work.

Factor analysis. It is necessary to systematically collect data for carrying out analysis and evaluation of the flow processes, documentation and competence of the workforce.

Preparation of integrated solutions and approaches. After conducting the analysis and evaluation, it is time to prepare integrated solutions and approaches. Sometimes the client himself points out the problem, and in such cases, it is easier to identify the problem points of the enterprise and focus on finding solutions or approaches to the solution.

The report on the optimization process can contain:

  • The main problem points.
  • Available solutions.
  • A detailed description of the key decisions.
  • Recommended approaches and solutions.
  • Plan of action to implement solutions to existing problems.

Implementation of decisions. At this stage, the implementation of recommended solutions is made. To monitor the effectiveness different types of tools are used. Some companies stop at this step due to different restrictions (features of production technology, lack of integration into the existing business model, lack of qualified personnel, etc.).

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Mcdonaldization

In 1939 brothers Maurice and Richard McDonald, who had tried (and failed) to open a retail store up to that moment, saw that the only business that was permanently profitable during the economic depression in the USA were hot dog stands. So, they’ve decided to open a roadside eatery selling fast food. It brought 40000$ of profit in the first year of operation.

Brothers undertook a comprehensive study of the business to find why it was doing so good and what could be done to boost their benefits. They decided to restructure their enterprise and to make a number of changes:

  • No more waiters. Customers had to come to the counter to make an order (“putting the customer to work”).
  • The number of items on the menu was reduced from 25 to 9.
  • Tableware was replaced with cardboard containers and cups, promoting takeaway sales.

One of the MacDonald’s suppliers was so fascinated with their eatery that he suggested to take over the franchise of its operation. This person, Ray Kroc, created the business model and went on to drive its extension from seven cafes in 1955 to more than 30,000 all over the world today.

The main feature of the McDonald’s business model is the distribution of generic products to market in large amounts. This has a number of aspects, which may be systematized under the next captions:

  • Productivity. Production of such items is usually cost not much, products delivered fast and they are efficient in their consumption of resources.
  • Calculability. The activity pays a lot of attention to assessments such as weight, size, waiting time and price. These are easy to handle and franchise.
  • Predictability. Customers can assuredly purchase any product from anywhere in the world without having a second thought. You can buy a Big Mac in Manchester or Beijing and have no fear of disappointment since you know exactly what you’ll get.
  • Control. Production concerns usage of the certain set of resources and a simple, prearranged chain of tasks. It makes the process of performance evaluation easier: just compare actual inputs with standard ones.

This is just a representation of traditional scientific management, developed by Henry Ford and Frederick Taylor. McDonaldization is a perpetuation of old ideas that have become obsolete in some business sectors. Though, the latest discussions about management accounting are about how shortening of the product life cycles, increasing product customization and growth of service element deprecates the standard cost concept.

Moreover, there are claims, that the traditional approach (based on static optimization) to performance evaluation using comparing actual and standard costs tends to evade certain thrusts of contemporary ideas like total quality management, value engineering and continuous improvement. The McDonald’s business model counters this theory.

US sociologist George Ritzer in 1993 published a book called The McDonaldization of Society, in which he used this term as derogatory and identifying the following negative aspects:

In 1939 brothers Maurice and Richard McDonald, who had tried (and failed) to open a retail store up to that moment, saw that the only business that was permanently profitable during the economic depression in the USA were hot dog stands. So, they’ve decided to open a roadside eatery selling fast food. It brought 40000$ of profit in the first year of operation.

Brothers undertook a comprehensive study of the business to find why it was doing so good and what could be done to boost their benefits. They decided to restructure their enterprise and to make a number of changes:

  • No more waiters. Customers had to come to the counter to make an order (“putting the customer to work”).

  • The number of items on the menu was reduced from 25 to 9.

  • Tableware was replaced with cardboard containers and cups, promoting takeaway sales.

One of the MacDonald’s suppliers was so fascinated with their eatery that he suggested to take over the franchise of its operation. This person, Ray Kroc, created the business model and went on to drive its extension from seven cafes in 1955 to more than 30,000 all over the world today.

The main feature of the McDonald’s business model is the distribution of generic products to market in large amounts. This has a number of aspects, which may be systematized under the next captions:

  • Productivity. Production of such items is usually cost not much, products delivered fast and they are efficient in their consumption of resources.

  • Calculability. The activity pays a lot of attention to assessments such as weight, size, waiting time and price. These are easy to handle and franchise.

  • Predictability. Customers can assuredly purchase any product from anywhere in the world without having a second thought. You can buy a Big Mac in Manchester or Beijing and have no fear of disappointment since you know exactly what you’ll get.

  • Control. Production concerns usage of the certain set of resources and a simple, prearranged chain of tasks. It makes the process of performance evaluation easier: just compare actual inputs with standard ones.

This is just a representation of traditional scientific management, developed by Henry Ford and Frederick Taylor. McDonaldization is a perpetuation of old ideas that have become obsolete in some business sectors. Though, the latest discussions about management accounting are about how shortening of the product life cycles, increasing product customization and growth of service element deprecates the standard cost concept.

Moreover, there are claims, that the traditional approach (based on static optimization) to performance evaluation using comparing actual and standard costs tends to evade certain thrusts of contemporary ideas like total quality management, value engineering and continuous improvement. The McDonald’s business model counters this theory.

US sociologist George Ritzer in 1993 published a book called The McDonaldization of Society, in which he used this term as derogatory and identifying the following negative aspects:

The fast food assured by McDonald’s isn’t actually that fast. Customers often have to stand in long queues to get their order and then they have to find an empty seat where they can eat. Though quantity and quality of the product may be predictable, the second one is never more than just fine. The use of disposable wrapping and cups externalises costs by forcing the community to pay for the collection and clearance of dumped packaging.

According to self-service policy, customers have to serve themselves and are frequently compelled to clear their own tables. They may also have to deal with food and packaging leftovers, which is also a part of exteriorization of expenses.

The standardisation and division of job give to the workers very little of challenge and responsibility. Communication with unskilled and low-paid employees does not improve the customer experience.

An abundant amount of McDonaldization’s features have pervaded different areas of the business. For example, Internet banking requires customers to do the bulk of work themselves. You can use the computer to access and operate your account and get cash at ATM. It could be enough until some problems or special requirements occur. Then you phone the bank only to be left on hold, listening to a repeating loop of music and a computerised voice periodically assuring you that “your call is valuable to us”.

McDonaldization can be a satisfactory business strategy for some industries, but there are pieces of evidence that the intensive introduction of associated management ideas into other sectors may be inappropriate.

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