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.
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Disadvantages of Process Value Analysis
This analysis might initially appear to be an outstanding way to improve several aspects of an organization, but 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. The presence of these parties can trigger conflict within an analysis team, since most team members are trying to enhance efficiencies, while the controls analyst wants to preserve controls, even if doing so is less efficient.