STANDARDIZATION: Top-Down Vs Bottom-Up
Standardization helps businesses develop the ability to "consistently" deliver high quality products and services its customers. It drives manufacturing excellence by raising the efficiencies of operations by reducing process variability, adopting optimal procedures to complete work and then adapting those procedures as effective practice within the organization.
While most organizations understand the importance of process standardizations, there could be confusion with respect to the approach that should be followed. Businesses looking at standardizing its operations can look at the following approaches -
- Top-Down: This approach is ‘benchmark’ driven standardization approach and is at a business functional level (e.g., manufacturing). It is typically driven by senior management and has strategic focus
- Bottom-up: this is a process standardization driven approach (as in Lean, JIT etc) where processes within a business function (such as production control within manufacturing) are standardized. This is typically handled by operational folks with execution focus.
In practice, there is no one single approach bottom-up or top-down that helps achieve standardization. Organizations that are successful use a two-pronged strategy. While the senior management drives standardization at business function level, they are usually broken down to specific process level standardization initiatives (e.g., while the senior management may want to standardize manufacturing processes the operations manager will convert that into specific initiatives as JIT for material control, Lean for Production control and Kanban for material planning)
When planned and executed in such a manner, standardization initiatives in an organization usually have long range goals and detailed execution plans to achieve success.
Comments
Large corporations gain a lot by embarking upon process standardization initiatives. Process Standardization in the longer run results in overall cost reduction for deployment and maintenance of ERP systems.
It's not always a bad idea to relook at the standardization from a fresh perspective when going for a packaged ERP deployment. It may mean heartburn for a few of those "oldies" in the organization to get rid of the so called "business practice" that they have been following for years but it does help in having a complete re-look at process standardization. Also in large organizations, standardization does not mean everything is the same accross the board - it may just mean a framework that has been laid out for individual companies or sites to follow so as to ensure uniformity accross the organization.
Organizations that ignore standardization initiatives pay a heavy price at a later date in terms of high maintenance costs.
Posted by: Somnath Majumdar | November 19, 2008 01:26 PM
While implementing a standardization initiative, one needs to carefully plan if this requires an ERP initiative. Sometimes process standardization can be driven by bench marking processes with industry standards (Process driven approach) and sometimes organization makes a call to adopt the package embedded best practices as their business processes (package driven approach). Both have their own advantages and disadvantages and while choosing the methodology, the decision maker needs to tie this with the overall deployment approach- top down vs bottom up. By experience, a package driven standardization is better handled through a Top down approach where senior management first accepts that the ERP processes are capable of meeting their long term business goals and objectives and then it is pushed down the organization for larger acceptability and implementation. In a process driven standardization, Bottom up approach may work better as business process needs to be collated from line level transactions and then bench marked- while doing this, it may make sense to keep back some of the existing processes as they are unique to business and are already optimized. Lot of companies (which are multi divisional) also approach process standardization in a 2 step process- first they compare processes of a particular function among the divisions and pick up the most optimal process for that function which is accepted and implemented in all divisions. This brings all the divisions into one standard set of processes for that function. In the next step, they compare this with industry practices or an ERP embedded process and adopt the bench marked process. The time to standardization in this approach is more, but it gives the organization some time for change management. In this case, a two pronged strategy will work better.
Posted by: Nilanjan Chatterjee | November 25, 2008 04:57 AM
In an era of mass customization and constant change, companies need to ensure that while they continue to strive for standardization, focus on innovation should not be diluted. Stakeholders (internal or external) should have the capability to provide new ideas through feedback mechanism for continuous improvement which can then be further standardized across the organization.
Posted by: Ankit Dangar | January 3, 2009 02:03 AM