Process value analysis definition
/What is Process Value Analysis?
Process value analysis involves a review of each step in a process to see if the activity provides value to the customer. If the activity does not provide value, the analysis team looks for ways to eliminate it from the process. By going through a comprehensive process value analysis, a business can strip costs out of the organization while also shortening the duration of the process. When the length of a process is reduced, customers experience a shorter turnaround time for their orders, which increases customer satisfaction levels. In essence, the goal is to at least maintain the current level of customer service while reducing expenses.
Processes can undergo repeated analyses of this type, where the latest technologies and equipment can be applied to the newest iteration of a process. The concept is also applicable to acquired businesses, where the acquirer can budget for likely cost reductions from a sweeping set of process value analyses.
When to Use Process Value Analysis
Here are five scenarios where conducting a process value analysis would be useful:
Manufacturing process optimization. A car manufacturer notices that assembling a specific component takes longer than expected. Upon review, they find that workers are manually inspecting each part, even though automated sensors already perform quality checks. By eliminating the redundant inspection step, they reduce production time and improve efficiency.
Reducing delays in order fulfillment. An e-commerce company experiences frequent delays in shipping orders. The analysis team discovers that warehouse workers spend extra time manually verifying addresses, even though the system already flags incorrect entries. By automating this step, they speed up order processing and improve customer satisfaction.
Streamlining customer service. A telecom provider finds that customer complaints take too long to resolve. Process value analysis reveals that agents must fill out multiple approval forms before offering refunds, even for minor billing errors. By simplifying the approval process, they reduce resolution time and enhance the customer experience.
Improving healthcare efficiency. A hospital struggles with long patient wait times in the emergency room. Analysis shows that nurses repeatedly collect the same patient information at different checkpoints. By integrating electronic medical records, they eliminate duplication and speed up patient care.
Enhancing software development processes. A tech company notices delays in deploying software updates. Process value analysis identifies unnecessary meetings and approval layers slowing down code releases. By streamlining communication and automating approvals, they accelerate development cycles and deliver updates faster.
How to Conduct a Process Value Analysis
A process value analysis works best when a structured approach is used, so that the analysis team’s time is used in the most efficient manner. The basic steps needed in a process value analysis are as follows:
Put boundaries around the process. The process should be clearly defined, so that no work is conducted on out-of-bounds activities.
Review process steps. Analyze each successive step in the process, to determine whether it provides any value to the customer. If not, and it is not needed to meet any regulatory requirements, then explore ways to reduce, sidestep, or eliminate the step.
Formulate integrated process flow. Once you have a set of process revisions, look at them as an integrated whole to see how they can be applied in the most efficient manner.
Examine controls. Review the controls associated with the system, to see if they now need to be modified to ensure that key control issues are still being addressed.
Roll out the altered process. Develop an implementation plan, train the users in the new process steps, and oversee the process as it is rolled out. This may result in some iterations to the system, if any flaws are found in the process.
Related AccountingTools Courses
Disadvantages of Process Value Analysis
A process value analysis might initially appear to be an outstanding way to improve several aspects of an organization, but there are a few concerns with it. They are as follows:
Loss of controls. There is a risk that key control points will be cut out of a process in the pursuit of cost reductions. The result can be an increased level of fraud. To avoid this problem, the accounting staff or a controls analyst should be included in the analysis, to advise on how to retain robust controls.
Increased conflict. Most members of a process improvement team are trying to enhance efficiencies, while the controls analyst wants to preserve controls, even if doing so is less efficient. This can trigger a certain amount of conflict within the team, and may lead to suboptimal results.