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How processes affect profitability

/ 05:02 AM January 28, 2019

When companies talk about cost cutting, they usually mean reducing operating expenses. While this may indeed help, very few take a look at their business processes, or “how everything is done” as another key area to consider. But cutting down the number of steps of any process could save time and cost—and is worthy of everyone’s attention.

We asked Michael Sibayan, a Six Sigma Black Belter who has years of experience in operations management, for some steps to follow to guide anyone who would like to embark on this endeavor.

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Step 1: Document your current process

There are many benefits in documenting your processes. It serves as a calibration tool to all concerned individuals to ensure consistency of execution and output. It can also serve as a basis to check on what is the standard versus what is really happening. In doing process improvement, you need to start with documenting “what” is actually happening. Not “what should be” happening or “what we think should be” happening. This will help you effectively define the problem areas in your process.

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Step 2: Define in detail the key elements of the process that you are improving.

You need to understand more about the business process. You can do this by identifying the five key elements in a process. That is, the Supplier, The Input, The Process Activities, The Output and the Customer. From here, measure and track the performance of the process output and see how it performs versus the set standards.

Step 3: Define the problem. Identify what is value adding and nonvalue adding

There are many methodologies and tools to use in improving a process. It depends on what you need to improve. And if it is related to productivity, quality, efficiency, or effectiveness. As a start, you can easily improve a process by defining and removing customer/business nonvalue add activities. Simply removing the activities or process steps that don’t add value to anybody can significantly affect both the process activity and the expected output—plus reduce costs.

Sibayan will conduct the “Process Documentation, Mapping and Analysis: Improving business processes for effective execution and output” workshop on March 7, 2019.

The Inquirer Academy is at 4168 Don Chino Roces Ave. corner Ponte St., Makati City. For more information about the workshops or if you would like to add your input on the article, you may email ask@inquireracademy.com, call (632) 834-1557 or 771-2715 and look for Jerald Miguel or Karl Paz, or visit the website at www.inquireracademy.com.

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TAGS: Business, profitability
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