Process analysis, redesign, and standardization
Learning outcome statements
The learning outcome statements relevant for this section are:
- demonstrate an understanding of process analysis and business process reengineering, and calculate the resulting savings
Introduction
Organizations improve performance by examining how work is actually performed. Process analysis finds the inefficiencies, redesign or reengineering removes them, and standardization sustains the gains by making the improved process the way everyone works.
Process analysis
Process analysis refers to the systematic examination of a business process to understand how work is performed, identify value-added versus non-value-added activities, and uncover inefficiencies, redundancies, or bottlenecks. It involves mapping the current process (often referred to as the “as-is” process) and evaluating it against desired outcomes such as speed, quality, or cost efficiency.
Example: Analyzing the customer onboarding process to identify unnecessary approval steps that slow down account setup.
Standardization
Standardization is the process of documenting, formalizing, and enforcing best practices across the organization to ensure consistency and repeatability. Once a process has been improved, standardization ensures that all employees perform tasks using the same method, minimizing variation and promoting quality control.
Example: Creating a standardized template and procedure for monthly financial reporting to be used across all business units.
Business process reengineering (BPR)
Business process reengineering is a more radical approach that involves the fundamental rethinking and redesign of core business processes to achieve dramatic improvements in key performance measures such as cost, quality, service, and speed. BPR often involves breaking away from outdated procedures and adopting entirely new workflows, sometimes enabled by new technologies.
Process redesign can also be incremental: it improves the existing “as-is” process step by step, for example by removing a redundant approval. BPR instead starts from a clean slate, asking how the work would be designed if the current process did not exist, and uses modern tools and technologies to reach gains that incremental changes cannot, for example by replacing a chain of departmental handoffs with one team responsible for an order from start to finish. The exact steps vary with the organization’s industry, size, and complexity, but most BPR efforts follow a sequence similar to the following:
- Identify the process to be reengineered
Select high-impact or strategically critical processes that are underperforming, overly complex, or outdated. - Map the current process (“as-is”)
Document the existing process flow using diagrams or flowcharts to understand all steps, roles, and systems involved. - Analyze for inefficiencies and pain points
Examine the current process for delays, redundancies, rework loops, unnecessary approvals, or lack of automation. - Define the desired outcome
Set clear performance goals such as reduced lead time, improved customer experience, or lower costs. - Design the new process (“to-be”)
Develop an optimized process that removes non-value-added steps, leverages technology, and simplifies decision-making. - Pilot and implement the redesign
Test the new process in a controlled environment, adjust based on feedback, and roll out organization-wide with change management support. - Standardize and monitor
Document the redesigned process formally, train personnel, and establish metrics to ensure ongoing compliance and continuous refinement.
The savings from a redesign are measured against what it costs. Count only the costs that change, and compare the recurring savings with the one-time costs of redesign and implementation, such as consultants, new software, and training.
Example: Savings from reengineering invoice processing
Process analysis shows that each supplier invoice takes 24 minutes of clerk time at $30 an hour, or $12 per invoice. The redesigned process matches invoices to purchase orders and receiving reports automatically and removes two approval steps, cutting the time to 10 minutes, or $5 per invoice. The company processes 20,000 invoices a year, and the redesign costs $60,000 to implement. What are the annual savings and the first-year net savings?
Answer: Annual savings are ($12 − $5) × 20,000 = $140,000. First-year net savings are $140,000 − $60,000 = $80,000, and each later year saves the full $140,000. The labor savings are real only if the freed clerk time is eliminated or moved to other work.