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Open-Loop Processes versus Closed-Loop Processes
I’ve done a fair amount of business process re-engineering over the course of my career and the single biggest problem I find is always the same: open-loop business processes.
To illustrate the point I’m going to talk about a large pharma organization that will remain nameless to spare people’s blushes. Their problem was that they were paying taxes on hundreds of millions of dollars of equipment they no longer could trace, and they wanted to remove this unnecessary expense. Our project uncovered a great many fundamental process flaws, all of which added up to tens of millions of dollars of unnecessary taxes being paid each year and, it turned out, tens of millions more being spent on ordering the same things multiple times by mistake.
Like all large organizations, responsibilities were in silos. Someone in Manufacturing needs equipment X so they inform Finance and a PO is generated. Ordering sends the PO to the vendor. At some time in the future (potentially up to a year) X is delivered and accepted by Receiving. Receiving notifies Manufacturing and Finance. Finance issues an asset tag, which Receiving slaps onto X. X is placed into the production line and all is well.
Except, all is not well. For a start, because people come and go and a lot is happening, it’s easy to look up one day and see you don’t have any…
