What is business process improvement?

Business process improvement (BPI) involves analyzing and improving existing business processes to boost the company's efficiency, effectiveness, and adaptability. BPI is becoming more important as margins shrink, industries become more competitive, and consumers expect more from the companies they buy from.

Companies of all sizes have implemented BPI practices in recent years. For example, clothing company Zara has invested heavily in improving its supply chain, focusing on agility and speed instead of relying on cheap materials and labor. This has allowed the company to withstand market fluctuations, enduring the turbulence that has led many other clothing companies to close in recent years.

Why business process improvement is critical for organizations

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BPI helps organizations evaluate their existing processes and identify potential bottlenecks or inefficiencies. For example, inefficient customer service practices could lead to customer churn and lost revenue.

Legacy supply chain tools and manual order fulfillment often result in slow processes, errors, and low productivity. Relying on outdated workflows can increase costs, reduce customer satisfaction, and create extra expenses for returns or errors.

Here's how BPI can help improve these areas:

• Cost savings. Eliminating redundancies, clearing bottlenecks, and improving resource utilization can help organizations save money.

• Improved quality. By identifying inefficiencies and areas where errors are likely to occur, BPI can improve quality control.

• Faster delivery. Streamlining everything from the supply chain to order fulfillment allows for faster delivery times.

• Better compliance. Better record-keeping and traceability help companies comply with regulations.

• Customer satisfaction. Faster delivery times, higher quality products, and more efficient communication all lead to increased customer satisfaction.

Common BPI approaches and methodologies

There are several different approaches to BPI, including:

• Lean process improvement focuses on eliminating waste and allocating resources to produce value for customers. Large organizations often use this method to identify bloated departments or inefficient processes that waste time and money.

• Six Sigma is a data-driven process that aims to reduce defects and variation, improve efficiency, and increase reliability. Six Sigma's value is most apparent in the manufacturing industry, where eliminating product defects helps reduce waste and increase customer satisfaction.

• Kaizen is a practice named after a Japanese philosophy. It focuses on continuous, incremental improvement and helps companies stay competitive. Many technology and automotive companies have implemented Kaizen.

• Business process management (BPM) is a structured method that involves analyzing, designing, implementing, and monitoring workflows. The versatility of this approach lends itself to everything from retail to software development.

Steps in the business process improvement cycle

The BPI cycle involves five key steps:

1. Identify. Consider your current operations and identify areas for improvement. That could be eliminating bottlenecks, improving product quality, or increasing revenue. Pick one area to work on at a time.

2. Analyze. Document the current process thoroughly. Identify inefficiencies, bottlenecks, error-prone areas, and other issues disrupting your operations.

3. Redesign. Using information from the previous stage, you can develop a new process that meets the desired goal. Before implementing new tools, define key performance indicators (KPIs) to track both the current and updated workflows. This approach allows you to test the new processes on a small scale to ensure they work before a full deployment.

4. Implement. Choose a time to implement the new process, preferably when workloads are light, so you have enough time and flexibility to make adjustments if needed.

5. Monitor. BPI isn't a linear process; it's a continuous cycle. After implementing changes, you'll monitor KPIs to determine whether they were successful. Then, you can use the results to refine the process or explore other areas for improvement.

Tools and technologies that support BPI

Data-driven decision-making is a cornerstone of BPI. Having access to information about your supply chain, sales performance, customer retention, and other data helps identify weaknesses and potential issues with your processes.

Some popular BPI tools include:

• Process mapping software can help you make flowcharts, visualize workflows, and plan process improvements.

• Performance dashboards provide an at-a-glance overview of the supply chain, customer service, or other operations.

• Analytics tools identify patterns and generate insights based on the information displayed in the performance dashboard.

• Process mining software analyzes software event logs, creates visualizations, highlights bottlenecks, and identifies common errors or shadow operations.

• Workflow automation systems streamline often-repeated processes. These systems come in many forms, from complex platforms with sophisticated scripting languages to low- or no-code platforms that can be configured using a drag-and-drop interface. Automation can range from "if this happens, trigger an alert/send an email to the customer" to more complex workflows.

• Robotic process automation helps streamline manufacturing and supply chain operations. Cobot systems (designed to work alongside humans) can be used in this environment to merge the precision and speed of robots with the flexibility of human intelligence.

How to identify your business process improvement needs

If you're beginning to implement business process improvements in your organization, focus on these key operational areas as potential targets:

• Bottlenecks in production or delivery

• Errors in manufacturing

• Common customer complaints

• Excessive costs (whether in order fulfillment, material costs, or other overheads)

• Employee morale

Evaluate KPIs such as:

• Gross profit margin

• Customer churn rate

• Conversion rates

• Process cycle times

• Inventory turnover

• CSAT scores (customer satisfaction scores)

These KPIs can help you identify potential problems so you can examine related processes more closely and identify pain points. In addition to quantifiable KPIs, consider asking for qualitative feedback from customers and employees.

When evaluating your processes, you might discover several interconnected problems. Aim to fix only one or two at a time to prevent unexpected issues. Business process improvement is an ongoing task involving constant incremental improvements. Look for small changes that will create clear value within your organization.