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The Truth About Process Loss Costs

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Journal Article

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Air Force Institute of Technology Wright Patterson AFB United States

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A guy comes back from Vegas and brags he won 10,000 at a slot machine. Impressive, right Sure, until you discover it was not his first pull nor his last. And he doesnt mention the airfare, hotel costs, taxi rides, poker losses, and other expenses uniquely associated with his trip. He may have had a good time in Vegas, but chances are, he didnt actually make any money there at least, not once we look at the whole picture. In a similar way, process-oriented methodologies, such as business process reengineering or its successor, business process management BPM, are widely lauded for turning organizations into process enterprises and bringing significant efficiencies to a wide range of activities, from manufacturing to logistics to developmental and operational testing. Process-oriented approaches are also increasingly applied to the full range of business activities, including customer relations and research and development. Advocates like to cite statistics such as a 21-percent reduction in processing time or a 45-percent increase in request handing throughput. That all sounds impressive at first blush. However, as Michael Pollan pointed out in his book The Omnivores Dilemma, Once science has reduced a complex phenomenon to a couple of variables, however important they may be, the natural tendency is to overlook everything else. And in all this discussion of increased efficiency, often overlooked in the equation are the costs associated with process, which we call the process loss cost PLC.

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