Statistical Thinking: Improving Business Performance, Second Edition

Chapter 3

Understanding Business Processes

Processes produce results.

—Peter F. Drucker

In Chapters 1 and 2, we introduced statistical thinking and discussed its use in improving business processes. The first fundamental of statistical thinking is that “all work occurs in a system of interconnected processes.” The second fundamental is that “variation exists in all processes.” Clearly, “process” is at the heart of statistical thinking and business improvement.

In this chapter, we show how to view all the work within a business as a process and how to identify and critically analyze business processes—even before data are collected. These important skills are needed to improve business performance. The goal of process improvement projects is ultimately to improve business results, typically by better serving our customers (revenue generation) more efficiently (cost). Processes define how we do the work to serve our customers. In many cases, little or no capital investment is required to make improvements, as was the case in the billing operation in Chapter 1.

The main learning objective in this chapter is to be able to identify a process—including the associated suppliers, process inputs, process steps, process outputs, and customers. Other learning objectives include being able to identify non-value-added process steps, to develop key process measurements, to utilize process benchmarking, to identify the interconnections of individual processes to form systems, and to identify ...