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Optimizing parts of a process and then linking them is not the same as optimizing the process. It is by definition sub-optimization. Optimizing sub-functions also tends to result in misaligned objectives.

Process re-engineering: The weakest links

Posted  on 9/3/09

Chain with broken link
Optimizing the parts means sub-optimization

Many times in the effort to develop the optimal process flow, the parts of the process are divided up by function and tackled in chunks. Chunking is a valid way to tackle complex problems, but optimizing parts of a chain is not the same as optimizing the chain. Often times, developing an optimal solution for a sub-process results in a less than optimal solution for the whole process. 

One of the places I always look to improve lead time is the review and approval cycles that are part of many processes. Another initiative in which I was involved was to improve the decision making on which new products to pursue and better focus resources on the most viable projects. Because the organization was busy with a number of initiatives, the project sponsor wanted to keep the scope of the initiative small and the project team was comprised mostly of Marketing resources. The first obvious point of contention was that the business case or proposal for each project went through numerous iterations and multiple review and approval cycles. Every approval added lead time to the decision-making process due to the hectic schedules of the Marketing executives.

The new process included a significantly streamlined new product proposal process with fewer iterations and fewer approvals. Reviews and approvals would not take place until a more robust plan was in place. All those involved in the old process breathed a sigh of relief and the new process seemed to significantly improve the flow of work. Well, it did in Marketing. However, no one from Manufacturing was included on the team, and the new process meant that Manufacturing would get better information much later in the process, something Marketing thought was a good thing. They wouldn't waste Manufacturing's time with requirements that weren't quite right. But the manufacturing sourcing process was quite cumbersome and lengthy due to regulatory requirements and they needed as much lead time as possible to get started. Although Marketing streamlined their process, they added months to the overall process because Manufacturing wasn't getting the proposal information early enough.

Misaligned objectives

Besides sub-optimization, revising work processes in silos can result in an even worse outcome - misaligned objectives where departments work at cross purposes to each other.  I find that this happens quite frequently in the Supply Chain. For instance, most companies have quarterly sales targets upon which their sales force's compensation is based. Sales reps are incredibly motivated to meet their quarterly targets which is why if they are off towards the end of the quarter, they may convince their customers to order more in advance. If you look at sales, they have a tendency to spike right before a target is due - no shocker there. However, the entire supply chain would operate more efficiently if they had smooth demand, rather than ramping up production to meet a slew of customer orders. Of course, demand drops after the target date because the customer orders were pushed ahead to meet the goal. As a result, now production needs to scale down. The whiplashing demand that is a manufacturer's nightmare is not caused by fickle customers, but by the company's very own sales force!

When process reengineering initiatives are conducted by functional area, they often times end up working to objectives that are not aligned with the whole company's goals and the result in mini-versions of the Have cake and eat it, too cycle. A Marketing initiative to increase market share may come at the expense of profit margin until someone from Finance finds out and complains. Initiatives to improve manufacturing efficiencies  often consist of reducing down time, including machine changeovers, in order to pump out as much product as possible. However, increasing throughput volume often comes at the expense of flexibility. Expect that your Sales department will start complaining if you don't allow unplanned orders from important customers to interrupt the schedule.

The biggest problem is that too many initiatives are conducted in a department silo around a departmental goal. Unless all the departments agree on which objectives take priority, like market share over profit margin or customer service over manufacturing efficiency, the company suffers from a pendulum effect where whichever measure is swinging wide gets the attention until another measure starts to swing wide.

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