Business Process Improvement Estimating the Cost of a Business Process

To measure any accomplishment, you need to know where you started. Whether you want to lose weight or run a marathon, you need to establish a baseline to know how much you have improved. How much do you weigh today, or how quickly do you run a marathon today? In BPI work, to establish an improvement target, you first need to know how long a process takes and what it costs.

After you draw a process map, you understand the activities involved and you can estimate how much time is required to complete each step, known as the process time. You often hear two types of time related to BPI:

• Process time is the time required to complete a single activity.
• Cycle time is the time required to complete an entire process, from its first to its last step. You may also hear this referred to as elapsed time.

Identifying the process time will help you to summarize the labor required to deliver the business results. When you include the employee and overhead expenses in your BPI projects, you start bringing a financial dimension to your work.

Once you estimate how long each activity takes, you need to identify the annual volume, decide the FTE (Full-time Equivalent) calculation to use, and apply the employee salary and benefit rates to the time estimates. Since many employees are not dedicated to a single business process, the FTE calculation allows you to account for portions of an employee's time. At the end of this analysis, you will know if a business process consumes 2.5 FTEs, for example, and costs $450K per year.

Once you have drawn the process map and estimated the associated time for each activity, validate this information with any interested parties (e.g., stakeholders, employees who do the work, sponsor, etc.). Performing this review validates the baseline for your improvement target and eliminates the possibility of any future challenges. You want to be sure that everyone involved agrees with the labor used today so that improvements gained are not placed in question. Validating this information provides you with a solid foundation to start the next step, the actual improvement phase.

Estimating process and cycle time and their associated cost is the fourth step to improving the effectiveness, efficiency, and adaptability of your business processes, and validating the information (both the map and estimated times) is the fifth step.

Understanding How Applying Kaizen in the Business Process Can Provide Permanent Improvement

Kaizen is for improvement and most businesses need such. Because you have to be competitive enough to beat your rivals in the industry, you always have to continue improving. Improvement is not about haste and this is one of the mistakes that people do. In this case, kaizen is the perfect tool that you can utilize in order for you to secure your business' future through good changes. When it comes to applying kaizen in business process, you will have to think about large and small scale improvement. What most individuals choose here is the large scale improvement because we cannot deny how attractive this can be especially when done right. However, in order for you to really be successful in targeting a big change throughout the organization, you will have to think about different areas including your people and the processes that you execute.

Applying kaizen in business process means that you need to think about small first. This is because improvement here is easier and faster. One of the benefits here is that the risks are quite low compared to large scale changes. Risks come in smaller proportions because they have limited effect on the company. The disadvantage however is that if there is an accumulation of the negative effects, it can be detrimental to your firm as compared to a single large change. Today, kaizen is called kaizen blitz or kaizen events especially in the United States. Both of the terms are synonymous to each other and they pertain to a project that is focused, forceful yet concentrated short term project. The main aim here is to improve a certain local process. Two of the main resources here are engineering maintenance and cell operators.

The kaizen events have trainings and analyses which are designed to rearrange the products that are being manufactured. There is usually a consultant who will be leading the entire activity and typically the event will take up to five days.

Applying kaizen in business process after the training will give you results that are dramatic yet immediate and satisfying. In order for you to correctly execute kaizen into your business, you will have to consider the process of slow accumulation of small developments that happen within the organization. Over the years, there are top companies that experienced great effects once they have started applying kaizen in business process.

Kaizen blitz will help your firm in obtaining permanent changes particularly on the methods that are being processed. Aside from that, there is a guarantee of continuous workflow especially on the flow of small ideas. Local implementation is immediate and easy plus the entire process is quick with big effects. Your employees are usually the ones who are involved in applying kaizen in business process. They will have to identify the problem and they will have to develop an idea that is aimed at improving or eliminating the wastes that he was able to keep track of. The supervisor will of course have to participate as well by means of reviewing the action. After that, when the idea is approved, it will be implemented.