PROCESS IMPROVEMENT/INNOVATION
Honley Company has 20 clerks that work in its accounts payable department. A study revealed the following activities and the relative time demanded by each activity: Suppose that clerical error is the common root cause of the non value added activities. Paying bills is a subprocess that belongs to the procurement process. The procurement process is made up of three subprocesses: purchasing, receiving, and paying bills.
|
Activities |
Percentage of Clerical Time |
|
Comparing purchase orders and receiving orders and invoices |
15% |
|
Resolving discrepancies among the three documents |
70 |
|
Preparing checks for suppliers |
10 |
|
Making journal entries and mailing checks |
5 |
The average salary of a clerk is $30,000.
Required:
1. What is the definition of a process? Identify the common objective for the procurement process. Repeat for each subprocess.
2. Now, suppose that Honley decides to attack the root cause of the non valueadded activities of the bill paying process by improving the skills of its purchasing and receiving clerks. As a result, the number of discrepancies found drops by 30 percent. Discuss the potential effect this initiative might have on the bill paying process. Does this initiative represent process improvement or process innovation? Explain.