We carry out processes every day and may not even know it. We all have our own routines and ways of getting things done. Business processes are critical because they have the power to determine how profitable a business will be.
Business Management Process
A process is simply a set of activities carried out together for a purpose. In most cases, we follow a process to get something done consistently each time we need to complete the task. For example, every morning you wake up and get ready to go where you need to go. Many of us carry out the same routine every morning. Our processes will vary from person to person, but common morning processes consist of taking a shower, getting dressed, and eating breakfast. We carry out these same activities almost every morning for the purpose of getting to where we need to be, whether that is work or class.
When considering a business process, the definition does not change. A business process is still a set of activities that are carried out for a purpose. Business processes will vary depending on the type of business and the type of work that the individual does. For example, a loan officer at a bank has a process for meeting with the customer, entering the customer's information into the system, pulling the customer's credit report, and deciding whether the bank can lend money to the customer. At a manufacturing plant, there is a specific process that needs to occur to transform raw materials into finished products.
Every business has its own set of processes that must be carried out in order for the business to make a profit. Many businesses analyze their processes to see if their process can be improved. When businesses work to improve their processes, this is called continuous improvement. The primary reason that businesses want to improve is due to competing businesses. If the competitor can build the same product at a less expensive cost, then the competitor can also charge a lower price. Most customers will buy the less expensive product if the products are the same.
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Let's consider an example. Company A and Company B both produce toy cars. Company A's process includes three employees. The first employee assembles the metal pieces of the car. The second employee adds the wheels, and the third employee packs the car into the shipping box. It takes an average of two minutes per car to go through all three stations.
Company B's process uses only two employees. The first employee assembles the entire car, and the second employee packs the car into the shipping box. It takes Company B only an average of one minute per car to go through both stations.
Which company do you think has the more efficient process? If you think Company B is more efficient, then you are correct. The reason Company B is more efficient is because it only takes them one minute per car instead of two minutes, and Company B only needs two employees, not three like Company A.
Based on this quick analysis, it appears that Company B has carried out a higher level of continuous improvement than Company A. If we run the numbers using the assumption that the employees all work for $12 per hour, then the cost of Company A to produce one car is $1.20, while the cost of Company B to produce one car is $0.40.
In summary, business processes occur in every aspect of the business, from manufacturing processes to accounting processes. Every department has processes, and these processes should be analyzed to see if there is any opportunity to make the processes more efficient.
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