Business Process Management: Benchmarking and Value Chain

Cross-Functional Process Map for P-Bicycle

P-bicycle specializes in the service and manufacture of custom bicycles. With booming business, P-bicycle is experiencing business process challenges that have resulted in delayed deliveries of orders. Figure 1 shows a cross-functional map that illustrates the business process at the company, highlighting different departments, the processes they conduct, and how they are interdependent.

Figure 1: P-bicycle functional map of the process of servicing a bicycle

Figure 1 shows the workflow at P-bicycle for the servicing of a bicycle. The process begins with the placement of an order by a customer, along with specifications, received by the sales team. The sales team prepares a work order that is forwarded to the service section or engineering department, where the order and specifications are verified. Additionally, the service section confirms that all parts required for the service are available in inventory, prepares a job schedule, and proceeds to begin servicing the bicycle. If some parts are not available in inventory, the service section informs the purchasing department, which coordinates with suppliers while servicing of the bicycle continues.

The service section proceeds with the work despite missing some parts using a concurrent-engineering approach. If critical parts are unavailable and limit the ability to proceed, the bicycles are set aside to continue once the parts arrive in inventory. Once a bicycle is complete, the distribution department is informed and contacts the customer for pickup or delivery. After the customer verifies the product, an invoice is prepared, and when payment is made in full, the bicycle is made available for collection.

The improvements made to the cross-functional map included the addition of a direct inquiry channel between the service section and the customer. This improvement aims to prevent customers from failing to confirm the service once complete and notified for collection, and to alleviate the need to return the product for additional service. Notably, the sales team may not be familiar with all technical requirements customers have; giving engineers an option to address these differences makes it possible to lower the time spent servicing a bicycle. The elimination of the distribution department and the reallocation of responsibilities — including fee collection and customer notification — to the sales department is also beneficial, since the company works exclusively with customer orders using a just-in-time production approach. This change also eliminates the time required for reorientation in the client–company relationship, as the customer relationship is already established by the sales department.

Figure 2: Improved P-bicycle functional map of the process of servicing a bicycle

Ethical Challenges in Purchasing and Organizational Ethics

In the purchasing department, the firm could potentially source materials of lower quality than the customer requires, for the company's financial gain through savings on service costs. This could create customer dissatisfaction, prompting customers to seek services elsewhere and ultimately lowering the demand for P-bicycle's services. The moral standpoint is to be fair to customers and uphold ethical principles in the interest of the organization's long-term benefit and growing demand.

Figure 3: Challenges arising from unfairness to customers when ordering parts

The scenario in which an organization sources cheap bicycle parts and charges fees for standard parts would be considered immoral management. Immoral managerial ethics are driven by a selfish approach in which management maximizes organizational benefit at the expense of other stakeholders. The core facets of organizational ethics include a code of ethics, ethics training, situational ethical guidance, and confidential reporting systems. The intrinsic organizational rewards for adopting an immoral ethical stance include cost savings and charging standard prices to increase profit margins.

The absence of ethical foundation elements — which inform employee and stakeholder conduct — facilitates the realization of higher margins through unethical means. In an immoral approach to organizational ethics, rules are perceived as obstacles to be overcome rather than standards to be upheld. The strategic approach becomes one of exploiting customers for company profit. Management decisions, actions, and behaviors in this context imply active opposition to what is typically moral or ethical — discordant with accepted ethical principles and constituting an active negation of moral requirements.

Competitive Benchmarking Metrics for P-Bicycle

Competitive benchmarking is a tool used by organizations in the same industry to evaluate their performance across different areas and identify opportunities for improvement in processes, products, customer relations, or services. The most suitable performance measurements for the comparative benchmarking of P-bicycle are process performance metrics and customer metrics.

The customer metric benchmarking measures the total amount of money a customer is expected to spend on P-bicycle's services throughout the entire business relationship. This measure is referred to as the customer lifetime value (CLV) (Krishnamoorthy et al., 2014). CLV is calculated by multiplying the mean value of a purchase by the number of times the client purchases per year, multiplied by the average length of the customer relationship in years:

CLV = Mean value of purchase × Times the customer purchases yearly × Mean length of customer relationship (in years)

Process performance metrics aim to measure and monitor operational performance across the organization. P-bicycle is experiencing challenges with delayed deliveries and requires optimizing its service process to avoid the backlog of customer orders. Process performance is measured by dividing the number of defective products by the total products produced (Barrows & DiPietro, 2016). The core objective of this measurement is to lower the result as much as possible to obtain a throughput that indicates the efficacy of the time taken to complete a particular process.

References

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