10.2 Understanding “Process”

A process, in its most fundamental form, is a series of actions or steps taken to achieve a particular end. It’s a dynamic sequence of events or operations that produce a specific outcome, encompassing various activities including processing tasks, waiting periods, decision points, and the utilization of resources. These resources can range from machines and technology to human effort, each with their own processing time and capacity. Importantly, the elements that constitute a process can be scattered across various departments within an organization, making the orchestration of these elements critical to the process’s success.

To understand the intricate nature of business processes, let’s delve into the “Purchase to Pay” (P2P) process, a comprehensive workflow that many of you have studied in previous chapters on purchasing. The P2P process serves as an exemplary model demonstrating how processes span across multiple departments and involve a wide array of activities and resources.

The “Purchase to Pay” process begins with the user department identifying a need for goods or services and initiating a purchase request. This simple starting point quickly evolves into a complex process involving several departments and key steps: the finance department must approve the budget; the purchasing department is responsible for selecting suppliers and placing orders; the materials department receives and stores the inventory upon delivery; and the quality control department ensures the goods meet specified standards before they are finally used. Throughout this process, various decision points dictate the flow of activities based on criteria such as cost, supplier reliability, and product quality.

This process is not just a linear sequence of tasks but a complex interplay of decisions, resources, and collaborations that span across the organization. It underscores the reality that processes are not confined to single departments but are the connective tissue that links various parts of an organization, driving it towards its operational goals.

10.2.1 Input-Output process model

Mapping complex processes like “Purchase to Pay” can initially seem daunting for beginners. A practical starting point to understand and visualize how processes function is the simple input-output process model. This model breaks down a process into its fundamental components, making it easier to grasp the basic structure and flow of any process before tackling more intricate details.

This input-conversion-output model serves as a fundamental framework for understanding and analyzing processes in any business domain. It emphasizes the importance of each phase and how they interconnect to produce the final outcome, which is vital for any business operation.

The input-output process model is a straightforward framework that outlines how resources are transformed into valuable outputs through a series of actions or operations. It comprises three primary components:

• Input: Inputs are the resources required to carry out a process. These can include materials, human efforts, and information. For example, in a marketing process, inputs might consist of market data for analysis, creative content for campaign materials, and advertising budgets to execute promotions.
• Conversion: At the heart of the process, conversion involves transforming inputs into outputs. This transformation process can be tangible, as seen in manufacturing where raw materials are turned into finished products, or intangible, such as in finance where data analysis leads to actionable reports. The conversion phase is where value is added, enhancing the inputs to produce a desired outcome.
• Output: The outputs are the end results of the process. They represent the goal of the process, manifesting as products, services, decisions, or any deliverable that meets a need. An example can be seen in HR recruitment, where the process output is the successful hiring and onboarding of a new employee.

Crucially, this model incorporates a feedback loop or ‘controls’, which are mechanisms for monitoring and refining the process. Controls assess the process’s efficiency and effectiveness, providing insights that guide adjustments for continuous improvement.

To further clarify the input-output process model, let’s illustrate its application with two examples. The first example delves into the manufacturing sector, showcasing the transformation of raw materials into a tangible product. The second example explores the service industry, highlighting how intangible inputs like information and expertise can produce valuable services. These examples aim to demonstrate the model’s versatility and its ability to capture the essence of process transformation across different industry landscapes.

Manufacturing a Bicycle:

In this first example, the process begins with the inputs—raw materials such as metal for the frame, rubber for the tires, plastic for the gears, along with the skilled labor of workers and the specialized manufacturing equipment. The design specifications serve as a blueprint for the final product. During the conversion phase, these inputs are taken through the assembly line where each part of the bicycle is meticulously crafted, shaped, and assembled. This stage is critical as it transforms the separate, raw inputs into a cohesive, functional product. The output of this process is the finished bicycle, ready for distribution and sale to consumers. Additionally, the feedback loop plays a crucial role here, with quality control checks and customer feedback informing potential adjustments in the design and manufacturing processes to improve future output quality and efficiency.

Creating a Software Application:

Our second example shifts focus to the tech industry, where the initial inputs include software requirements that outline the application’s intended functions, the coding expertise of the development team, development tools and software, and initial feedback from potential users or stakeholders. The conversion process in this context involves the intricate tasks of writing, testing, and refining code, ensuring that the application not only meets its requirements but also provides a user-friendly experience. The output is the launch of a functional software application, made available to users. Following release, the feedback loop becomes particularly significant, as user feedback and performance analytics are collected to identify areas for improvement, guiding updates and refinements to the application to better meet user needs over time.

10.2.2 Fundamental Concepts of Business Processes

Building on the detailed exploration of the input-output process model and its practical examples in both the manufacturing and service industries, it’s clear that processes are central to the functioning of any organization. Drawing from this foundation, we can distill some core aspects that highlight the significance and complexity of processes and process design. These elements underscore why understanding processes goes beyond just mapping actions from start to finish; it involves appreciating the intricate dynamics that make processes the backbone of any successful organization.

1. Processes are ubiquitous: Processes are not limited to specific departments like marketing or finance; they permeate every aspect of a business. From answering customer calls to developing new products, every activity can be broken down into a series of interconnected steps. Recognizing these processes helps in streamlining operations and ensuring consistency.
2. They create value: The essence of a process lies in its ability to transform inputs (resources) into outputs (valuable deliverables). This transformation adds value, whether tangible or intangible. For example, a manufacturing process transforms raw materials into finished products, while a customer service process transforms a customer inquiry into a resolution, improving customer satisfaction.
3. They involve decision points: Processes are not always linear sequences of steps. Often, there are decision points where the flow of the process can change based on specific criteria. This can involve evaluating options, approving requests, or adapting to unexpected situations. Effective processes incorporate clear guidelines and decision-making frameworks to ensure consistent and optimal outcomes.
4. They are dynamic and adaptable: The business landscape is constantly evolving, and processes need to adapt to remain effective. Feedback loops, also referred to as controls, are crucial in this regard. By monitoring and measuring the performance of a process, organizations can identify bottlenecks, inefficiencies, and opportunities for improvement. This allows for continuous refinement and adaptation of the process to keep up with changing needs and circumstances.
5. They foster collaboration: Many processes involve the interaction of various individuals and departments. Defining clear roles, responsibilities, and communication channels within a process ensures that everyone involved is working towards the same goal and understands their contribution to the overall outcome.