History of Process Excellence
The desire for organizations to improve operational efficiency, reduce waste, and enhance customer satisfaction has driven the search for process excellence which has a rich history that spans several decades. Though it is difficult to determine a definite start date for the management discipline described as Business Process Management, related methodologies such as Total Quality Management (TQM), Lean manufacturing and Six Sigma have been developed over the decades, all of which are concerned with the design, execution, measurement, control and optimization of business processes. These methodologies focus on eliminating defects, reducing process variation, and continuously improving processes. For example, the Toyota Production System (TPS), one of the best-known examples of a Lean manufacturing system, identified seven types of waste (transportation, inventory, motion, waiting, overprocessing, overproduction and defects) and relentlessly focused on eliminating or reducing these. Over time, organizations began to realize the importance of process optimization, leading to the development of specialized tools and techniques to analyze and streamline business processes. Utilizing these approaches, many organizations have established sustainable competitive advantages. The Toyota Production System mentioned above enabled the company to produce vehicles of excellent quality efficiently and quickly (see case study below).
Figure 1: Process Optimization
However, there were some fundamental problems with these methodologies. For example, the de-facto approach for implementing one of the most popular methodologies – Lean Six Sigma (LSS) – is DMAIC (Define – Measure – Analyse – Improve – Control) outlining the five stages of a typical LSS initiative. In the Define phase, the discovery of the ‘As-Is’ process was often done manually through workshops and interviews with Subject Matter Experts, among others. However, in addition to being time and resource-intensive, the process models produced often do not accurately reflect the actual process reality. As these process models are the foundation on which improvement efforts are built, these inaccurate models comprised the integrity of the improvement efforts. Additionally, in the Measure phase, the traditional data collection techniques were typically manual, which introduced issues with data quality (e.g. measurement system errors), cost of collection and inadequate or biased sample sizes. Similar issues were encountered in the Control phase which aims to ensure that any improvements to the process are sustained over time.
A couple of complementary developments helped address the issues described above. The first was the widespread adoption of Process-Aware Information Systems (PAIS), which are designed to record accurate information about business processes in event logs in a cost-effective manner. This has provided a means to support, control and monitor operational business processes. The availability of event log data, amongst others, has enabled the development of new and novel approaches to discover, measure and optimize processes.
The second development has been the advances in the research field known as process mining. Process mining is a data-driven approach to process improvement that leverages event logs to extract valuable insights about existing processes. It originated in the early 2000s at the Eindhoven University of Technology (TuE) in the Netherlands. Process mining techniques enable organizations to visualize, analyze, and improve their processes based on real data, rather than relying solely on subjective opinions or assumptions. By uncovering bottlenecks, inefficiencies, and variations in processes, process mining helps organizations make data-driven decisions to enhance operational performance and achieve higher levels of process excellence.
Figure 2: Lean Six Sigma
The Toyota Production System: A Case Study
The Toyota Production System (TPS) is a management philosophy developed by Toyota Motor Corporation over the course of several decades. It is a systematic approach to the elimination of waste and the continuous improvement of processes. TPS is built on the philosophy of “kaizen,” which means continuous improvement. The goal of TPS is to create a lean manufacturing system that is efficient, flexible, and responsive to customer demand.
History of the Toyota Production System:
The roots of the Toyota Production System can be traced back to the 1890s, when Sakichi Toyoda, the founder of Toyota (then known as Toyoda), invented a revolutionary automatic loom. This loom was able to stop automatically if a thread broke, preventing the production of defective fabric. This was a major breakthrough in the textile industry, and it laid the foundation for the development of TPS.
In the 1940s, Toyota began to apply the principles of the automatic loom to its automotive manufacturing operations. The company developed a system of manufacturing that was characterized by its focus on eliminating waste, improving quality, and responding quickly to customer demand. This system was later named the Toyota Production System.
The Toyota Production System was refined and developed over the years by Toyota engineers and managers, including Taiichi Ohno, who is considered to be the father of TPS. Ohno was a brilliant engineer who had a deep understanding of the manufacturing process. He was also a master of kaizen, and he constantly looked for ways to improve the TPS.
The Toyota Production System has been widely adopted by other manufacturers around the world. It is considered to be one of the most successful manufacturing methodologies ever developed. TPS has helped companies to improve quality, reduce costs, and become more competitive.
Why was the Toyota Production System required?:
The Toyota Production System was formally developed in response to the challenges that Toyota faced in the aftermath of World War II. At the time, US productivity in automobile manufacturing was eight times higher than that of their Japanese counterparts, and Toyota was short of equipment and capital. Toyota needed to find a way to raise the value-added productivity of individual workers in order to produce high-quality cars at a low cost.
The Toyota Production System was the answer. It helped Toyota to achieve its goals of high quality, low cost, and flexibility. TPS has been a major factor in Toyota’s success. The company has been able to produce high-quality cars at a low cost, and it has been able to respond quickly to changes in customer demand. TPS has also helped Toyota to build a strong reputation for quality and reliability.
What does the Toyota Production System entail?
The Toyota Production System is based on a set of principles that are designed to eliminate waste and improve efficiency. These principles include:
• Jidoka (automation with a human touch): This principle ensures that any defect in the production process should be detected immediately and corrected. This is done to prevent defective products from being produced and shipped to customers.
• Just-in-time (JIT): This principle means that only the amount of material that is needed is produced at the time it is needed. This helps to reduce inventory and waste.
• Heijunka (leveling production): This principle implies that production is leveled out so that there are no peaks and valleys in demand. This helps to improve efficiency and reduce waste.
• Kanban (visual control system): This system uses visual cues to signal when material needs to be replenished. This helps to prevent overproduction and waste.
• Kaizen (continuous improvement): This principle ensures that everyone in the organization is constantly looking for ways to improve the process. This helps to create a culture of continuous improvement.
The benefits of the Toyota Production System:
The Toyota Production System has consistently delivered several benefits, including:
• Improved quality: TPS helps to improve quality by eliminating defects and preventing them from being produced in the first place.
• Reduced costs: TPS helps to reduce costs by reducing waste and improving efficiency.
• Increased flexibility: TPS helps to increase flexibility by allowing companies to respond quickly to changes in customer demand.
• Improved employee morale: TPS helps to improve employee morale by creating a sense of ownership and responsibility for the process.
• Increased customer satisfaction: TPS helps to increase customer satisfaction by providing high-quality products that are delivered on time.
All these benefits have resulted in a significant increase in shareholder value as demonstrated by the chart below:
Figure 3: Changes in Toyota Motor Corporation’s shareholders’ equity from 1937 to 2011
Lean Six Sigma and Toyota Production System:
Lean Six Sigma was developed in the 1980s by combining the principles of TPS with the statistical tools and problem-solving techniques of Six Sigma. Six Sigma is a quality management methodology that focuses on reducing defects to a level of no more than 3.4 defects per million opportunities (DPMO).
Lean Six Sigma combines the best of both worlds, bringing together the focus on waste elimination of TPS with the statistical rigor of Six Sigma. Below are some examples of how Lean Six Sigma has been used by some financial services and healthcare organizations to achieve significant improvements in quality, productivity, and profitability.
Merrill Lynch’s Partnering Team, which was entrusted with increasing equipment efficiency, is made up of Merrill Lynch and five key suppliers. Its goals were to lower costs, decrease rework, and increase the throughput of equipment processing. The group achieved all of its objectives as a result of a Lean Six Sigma project. Merrill Lynch strengthened its supplier relationships while achieving an annualised cost savings of $1,088,000. Another project focused on reducing the length of customer statements without affecting the customer data. The number of pages was cut by 15%, and there were considerable postage savings and increases in customer satisfaction.
Standard Bank Group:
According to the case study provided by European independent IT research and analysis firm Bloor, the bank realised substantial aggregate savings of R438 million ($64.84 million) over a four-year period because of changes associated with Lean Six Sigma initiatives.
The Personal and Business Banking (PBB) section of Standard Bank, which offers financial services to both individuals and small- to medium-sized businesses, participated in the Lean Six Sigma programme. Approximately 34% of the Standard Bank Group’s yearly revenue comes from the PBB business.
Four completed Lean Six Sigma initiatives brought in annualized savings of $3 million as opposed to the initial aim of $2.4 million.
Mayo Clinic Transplant Center
A four-and-half quality improvement program had a total cumulative return on investment (ROI) of $28.8M. Of this, $11.2 million came from operational cost reduction and efficiency benefits (net present value [NPV] approach utilized) and $17.6 million came from revenue growth models, which were ascribed to one project (Living Kidney Donor Transplant Improvement)
Memorial Hermann Southwest Hospital:
A Lean Six Sigma project with the aim of reducing the turnover time between operations brought the rotation time down to 20 minutes (from 24 minutes). More significantly, the percentage of faults (turnovers longer than 25 minutes) has decreased from 40% to 21%. The Central Processing Department (CPD)department kept up a 40% improvement in instrument availability eleven months after the improvement. Implementing and maintaining these changes required the cooperation of the orthopaedic team in the operating room and CPD. A graph visualizing the reduction of Operation Room turnover faults is shown below.
Figure 4: Changes in Operating Room Turnover Defects After Lean Six Sigma Project
In six months, Six Sigma, which is used by more than two thirds of the organization, generated an additional $5 million in profitability. However, the most significant benefit of Six Sigma is the reduction of process variance, which enhanced project execution, raised customer satisfaction, and promoted repeat business.
Current Outlook for Process Excellence and Process Mining
In today’s highly competitive business landscape, process excellence has become a strategic imperative for organizations across various industries. The relentless pursuit of operational efficiency and continuous improvement is essential for staying ahead in the market. Organizations increasingly adopt process mining as a critical tool in their process improvement initiatives. The growing availability of digital data, along with advancements in data analytics and machine learning, has made process mining more accessible and powerful than ever before.
Process mining offers several benefits in the current business environment. It provides organizations with a comprehensive view of their end-to-end processes, allowing them to identify process variations, bottlenecks, and compliance issues. By visualizing process flows and performance metrics, organizations can pinpoint areas for improvement and optimize their operations for better outcomes. Moreover, process mining can be integrated with other process improvement methodologies, such as Lean Six Sigma or Business Process Management (BPM), to create a holistic approach that combines data-driven insights with proven methodologies for process excellence.
Several factors are converging to accelerate the development and adoption of process mining. One of these is the development of commercial process mining tools such as Celonis, Apromore, Signavio, etc. All the key technology vendors have invested heavily in the development of Process Mining tools and in March 2023, Gartner (a leading provider of IT research and consulting services) launched a Process Mining Magic Quadrant).
Another factor is the close symbiotic relationship between academia and industry. This has resulted in a continuous flow of advances in process mining and monitoring research, several of which are implemented in commercial tools to deliver value to businesses.
Descriptive process mining, which aims to discover the true nature of business processes, is currently the most mature sub-discipl