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Introduction to Business Process Analysis and Redesign

Description

Special course on business process analysis and design delivered at University of Granada on 23-24 January 2014. The course covers qualitative and quantitative process analysis techniques and redesign heuristics. Based on the textbook Fundamentals of Business Process Management by Dumas et al.

Transcript

Introduction to Business Process
Analysis and Redesign

Marlon Dumas
University of Tartu
firstname.lastname@ut.ee
Universidad de Granada – 23-24 Jan. 2014

The BPM Lifecycle

Why should we redesign first?

“The first rule of any technology used in a business
is that automation applied to an efficient operation
will magnify the efficiency.
The second is that automation applied to an
inefficient operation will magnify the inefficiency.”
Bill Gates
3

In other words…

Information
Technology

Yields
Business
Value
Enables
Yields

Process
Change

Index Group (1982)

Agenda
• Preamble
– BPMN Refresher
– Basic process modeling guidelines

• Part 1 – Qualitative Process Analysis
– Value-added and waste analysis
– Root-cause analysis

• Part 2 – Quantitative Process Analysis
– Quantitative flow analysis
– Simulation

• Part 3 – Business Process Redesign
– Radical vs incremental process redesign
– Redesign heuristics
5

Companion Material
• Fundamentals of Business Process Management
(chapters 1, 6, 7, 8)
–
–
–
–

Introduction to BPM (freely available)
Qualitative Analysis
Quantitative Analysis
Redesign

http://fundamentals-of-bpm.org
http://slideshare.net/MarlonDumas
Youtube – Marlon Dumas
6

Business Process
Lifecycle

Purposes of Process Modeling

Communication,
simulation, activitybased costing…

Detailed Models
including
Data types, conditions, data
mappings, fault handling…
Integration, testing,
deployment…

Business Process Modeling Notation
(BPMN)
• OMG Standard, supported by many tools:
–
–
–
–
–
–
–
–

Bizagi Process Modeller (free)
Signavio (http://www.signavio.com/) – subscription
Oracle BPA – “kind of free”
ARIS – very sophisticated but the opposite of free
IBM Websphere Business Modeler
Logizian – reasonable tradeoff
Visio – Your company might already have this
Paper and pen! – No excuse not to start

BPMN from 10 000 miles…
• A BPMN process model is a graph consisting of
four types of elements (among others):

Revised Order Management Process

BPMN Exercise:
Simplified Insurance Claim Registration
When a claim is received, we first check if the claimant has a valid
insurance policy. If not, the claim is rejected and the claimant is
informed.
Otherwise, we assess the severity of the claim. Based on the outcome
(simple or complex claim), we send the corresponding form to the
claimant.
Once the form is returned, we check it for completeness.
If the form is complete, we register the claim in the Claims
Management system and the evaluation of the claim may start.
Otherwise, we ask the claimant to update the form. When we receive
the updated forms, we check them again and continue.

Guidelines: Naming Conventions
1. Give a name to every event and task
2. For tasks: verb followed by business object
name and possibly complement
– Issue Driver Licence, Renew Licence via Agency

1. For message events: object + past participle
– Invoice received, Claim settled

1. Avoid generic verbs such as Handle, Record…
2. Label each XOR-split with a condition
– Policy is invalid, Claim is inadmissible

Process Modelling Viewpoints
Organization

Who?

What?
Function

When?
Process

Which?
Data / Service / Product
14

Resource Modelling in BPMN
• In BPMN, the organizational perspective is
modeled using:
– Pools – independent organizational entities, e.g.
• Customer, Supplier, East-Tallinn Hospital, Tartu Clinic

– Lanes –classes of resources within the same
organizational and collaboration space
• Sales Department, Marketing Department
• Clerk, Manager, Engineer

Example with Pools and Lanes

BPMN Information Artifacts
• Data Objects are a mechanism to show how
data is required or produced by activities.
– Are depicted by a rectangle that has its upper-right
corner folded over.
– Represent input and output of a process activity.
Data
Store

• Data stores are containers of data
objects that need be persisted beyond
the duration of a process instance
• Associations are used to link artifacts
such as data objects and data stores
with flow objects (e.g. activities).
17

Example: Data Object

Anything wrong with this model?

Is this better?

Value Chain
• Good practice is that the top-level process should
be simple (no gateways, no lanes) and should
show the main phases of the process
– Each phase then becomes a sub-process
– Top-level process is basically a value chain

• Introduce gateways and lanes at the next levels…

Showing the value chain with subprocesses

Guideline: Modeling Levels
• First level: start with value chain
• Next level add:
– Main decisions
– Handoffs (lanes)

• And only then add procedural aspects:
–
–
–
–

Parallel gateways
Input and output data objects, data stores
Different types of events
And as much detail as you need

Business Process
Lifecycle

Process Analysis Techniques

Purposes of Qualitative Analysis

Eliminating Waste
“All we are doing is looking at the time line, from
the moment the customer gives us an order to
the point when we collect the cash.
And we are reducing the time line by reducing the
non-value-adding wastes ”
Taiichi Ohno

7+1 Sources of Waste
1.
2.
3.
4.
5.

Unnecessary Transportation (send, receive)
Inventory (large work-in-process)
Motion (drop-off, pick-up, go to)
Waiting (waiting time between tasks)
Over-Processing (performing what is not yet
needed or might not be needed)
6. Over-Production (unnecessary cases)
7. Defects (rework to fix defects)
8. Resource underutilization (idle resources)
28

Value-Added Analysis
1. Decorticate the process into steps
2. Classify each step into:
–

Value-adding (VA): Produces value or satisfaction to
the customer.
•

–

Business value-adding (BVA): Necessary or useful for
the business to run smoothly, or required due to the
regulatory environment, e.g. checks, controls
•

–

Is the customer willing to pay for this step?

Would the business potentially suffer in the long-term if this
step was removed?

Non-value-adding (NVA) – everything else including
handovers, delays and rework
29

Example (Equipment Rental Process)

Example – Equipment Rental Process

Issue Register
• A table with the following columns (possibly
others):
–
–
–
–
–

issue number
name
Description/explanation
Impact: Qualitative vs. Quantitative
Possible resolution

• Purpose: to categorise identified issues as
part of as-is process modelling

Issue Register (Equipment Rental)
Name

Explanation

Assumptions

Equipment
kept longer
than
needed

Site engineers keep the
equipment longer than
needed by means of
deadline extensions

BuildIT rents 3000 pieces of equipment p.a.
In 10% of cases, site engineers keep the
equipment two days longer than needed.
On average, rented equipment costs 100
per day

Rejected
equipment

Site engineers reject
delivered equipment due
to non-conformance to
their specifications

BuildIT rents 3000 pieces of equipment p.a.
Each time an equipment is rejected due to
an internal mistake, BuildIT is billed the cost
of one day of rental, that is 100.
5% of them are rejected due to an internal
mistake

Late
payment
fees

BuildIT pays late
payment fees because
invoices are not paid by
the due date

BuildIT rents 3000 pieces of equipment p.a.
Each equipment is rented on average for 4
days at a rate of 100 per day.
Each rental leads to one invoice.
About 10% of invoices are paid late.
Penalty for late payment is 2%.

Qualitative
Impact

Quantitative
Impact

0.1 × 3000 ×
2 × 100 =
60,000 p.a.

Disruption to
schedules.
Employee
stress and
frustration

3000 × 0.05 ×
100 = 15,000
p.a.

0.1 × 3000 ×
4 × 100 ×
0.02 = 2400
p.a.

Techniques for issue analysis
• Cause-effect diagrams
• Why-why diagrams
• Pareto charts

Cause-effect diagram (rejected equipment)

Why-why analysis (equipment rental)
Site engineers keep equipment longer, why?
• Site engineer fears that equipment will not be available
later when needed, why?
– time between request and delivery too long, why?
• excessive time spent in ﬁnding a suitable equipment and approving
the request, why?
– time spent by clerk contacting possibly multiple suppliers sequentially;
– time spent waiting for works engineer to check the requests;

Pareto chart
• Useful to prioritize a collection of issues or
factors behind an issue
• Bar chart where the height of the bar denotes
the impact of each issue

Pareto chart (excessive rental expenses)

http://pareto-chart.qtcharts.com/index.php?g=prtt

Process Analysis Techniques

Fill in the blanks
If you had to choose between two services, you
would typically choose the one that is:
• F…
• B…
• C…

Process Performance Measures

Let’s start with time

Mark McGuinness: Time Management for Creative
People

Cycle Time Analysis
• Cycle time: Difference between a job’s start and end
time
• Cycle time analysis: the task of calculating the average
cycle time for an entire process or process fragment
– Assumes that the average activity times for all involved activities
are available (activity time = waiting time + processing time)

• In the simplest case a process consists of a sequence of
activities on a sequential path
– The average cycle time is the sum of the average activity times

• … but in general we must be able to account for
– Alternative paths (XOR splits)
– Parallel paths (AND splits)
– Rework (cycles)
43

Alternative Paths
p1
p2
pn

T1
T2
…
TN

CT = p1T1+p2T2+…+pnTn =

∑p T

i i

i=1

Inspired by a slide by Manuel Laguna & John Marklund

Alternative Paths – Example
• What is the average cycle time?

Parallel Paths
• If two activities related to the same job are done in
parallel the contribution to the cycle time for the job is
the maximum of the two activity times.
T1
T2
…
TN

CTparallel = Max{T1, T2,…, TM}

Inspired by a slide by Manuel Laguna & John Marklund

Parallel Paths – Example
• What is the average cycle time?

Rework
• Many processes include control or inspection points
where if the job does not meet certain standard, it is
sent back for rework

CT = T/(1-r)
48

Rework – Example
• What is the average cycle time?

Rework At Most Once – Example
• What is the average cycle time?

Quick exercise

Calculate cycle time

Cycle Time Efficiency
• Measured as the percentage of the total cycle time
spent on value adding activities.
Cycle Time Efficiency =

Theoretical Cycle Time
CT

• CT = cycle time as defined before
• Theoretical Cycle Time (TCT) is the cycle time if we
only counted value-adding activities and excluded
any waiting time or handover time
– Count only processing times

Inspired by a slide by Manuel Laguna & John Marklund

Limitation 1: Not all Models are Structured

0.3

0.5

0.7

0.8
0.5
0.2
53

Limitation 2: Fixed load + fixed resource
capacity
• Cycle time analysis does not consider waiting times
due to resource contention
• Queuing analysis and simulation address these
limitations and have a broader applicability
– Introduce notions of “arrival rate” and “resource pools”
with a fixed capacity (number of resources)

Business Process
Lifecycle

Process Redesign
• Purpose: Identify possibilities for improving the
design of a process: “as is”  “to be”
Descriprive modelling
of the real world (as-is)

Prescriptive modelling
of the real world (to-be)

• No silver-bullet: requires creativity
• Redesign heuristics can be used to generate ideas
56

Process Redesign Approaches

The Ford Case Study (Hammer 1990)
Ford needed to review its procurement process to:
• Do it cheaper (cut costs)
• Do it faster (reduce turnaround times)
• Do it better (reduce error rates)
Accounts payable in North America alone employed
> 500 people and turnaround times for processing
POs and invoices was in the order of weeks

The Ford Case Study
• Automation would bring some improvement
(20% improvement)
• But Ford decided not to do it… Why?
a) Because at the time, the technology needed to
automate the process was not yet available.
b) Because nobody at Ford knew how to develop the
technology needed to automate the process.
c) Because there were not enough computers and
computer-literate employees at Ford.
d) None of the above
59

The correct answer is …
Mazda’s Accounts Payable Department

How the process worked? (“as is”)

Reengineering Process (“to be”)

The result…
• 75% reduction in head count
• Material control is simpler and financial
information is more accurate
• Purchase requisition is faster
• Less overdue payments
 Why automate something we don’t need to do?
Automate things that need to be done.
73

Principles of BPR
1. Capture information once and at the source
2. Subsume information-processing work into the
real work that produces the information
3. Have those who use the output of the process
drive the process
4. Treat geographically dispersed resources as if
they were centralized

Exercise – Claims Handling in a
Large Insurance Company
• Claims handling for replacement of
automobile glass
• Under the existing process the client may
have to wait 1-2 weeks before being able
to replace the damaged auto glass
⇒ Goal – A radical overhaul and of the
process to shorten the client waiting time

Overview of the existing claims
process
Request additional information
Pay
Notify agent
Client

Give instructions
File claim

Local
independent
agent

Forward
claim

Claims
processing
center

Request quote
Provide quote
Pay

Approved
glass
vendor

Existing claims process
1.

2.
3.

Client notifies local agent that she wishes to file a claim. She is
given a claims form and told to obtain a cost estimate from a local
glass vendor.
When the claims form is completed the local agent verifies the
information and forwards the claim to a regional processing center.
The processing center logs the date and time of the claim’s arrival.
The data is entered into a computer-based system (for record
keeping only) by a clerk. The claim is then placed in a hard copy file
and passed on to a claims representative.
a) If the claims representative is satisfied with the claim it is passed
along to several others in the processing chain and eventually a
check is issued and sent to the client.
b) If there are problems with the claim the representative mails it
back to the client for necessary corrections.
When the client receives the check she can go to the local glass
vendor and replace the glass.

Process Redesign Approaches

Incremental Process Re-design
1. Select issues to address, improvement goals
2. Map goals to process performance measures
and set objectives/targets
3. Apply re-design heuristics on the “as is”
process model and analyze the tradeoffs
4. Select promising “change options”, justify and
prioritize their implementation

Process Redesign Tradeoffs
Costs

Time
Flexibility
Quality
80

Redesign Heuristics
1. Task elimination
2. Task composition
3. Triage
4. Resequencing
5. Parallelism

6. Process specialization and
standardization
7. Resource optimization
8. Communication optimization
9. Automation

Each heuristics improves one side of the devil’s
quadrangle, generally to the detriment of others
81

(1) Task Elimination
• Sometimes “checks” may be skipped: trade-off between
the cost of the check and the cost of not doing the check.

(T+,Q-,C+/-)
82

(1) Task Elimination (cont.)
• Other tasks to consider for elimination:
–
–
–
–
–

Print
Copy
Archive
Store
More generally: non-value adding activities

• Task elimination can be achieved by delegating
authority, e.g.
– No need for approval if amount less than Y
– Employees have budget for small expenses
83

Example

(3) Triage
• Consider dividing a general task into two or
more alternative tasks or the integration of two
or more alternative tasks into one general task.

(T+,F-)
85

(4) Resequencing

•
•
•
•

Order tasks based on cost/effect
Put “knock-out checks” first – identify problems early
Postpone expensive tasks until the end.
In other words: order the tasks using the ratio “costs/effect”.
(T+,C-)
86

Example

Exercise
• Textbook, chapter 1, exercise 1.5 (Prescription
fulfillment process)
– What tasks could be re-ordered to address current
customer service problems?
– Hint: consider the tradeoffs between front-loading and
backloading checks in the process.

(8) Communication optimization
• Reduce the number of messages to be exchanged with
customers and business partners
– But avoid front-loading the process too much
– Not necessarily suitable if customer contact is desirable

• Monitor customer interactions, record exceptions,
determine what to front-load/back-load
• Try to automate handling, recording and organization of
messages (send/receive).

(T+,Q+,C+/-,F-)
89

Interlude: the Complete Kit Concept
• Many processes follow the “complete kit” concept:
– Work should not begin until all pieces necessary to
complete the job are available

• In such cases, consider three principles:
– Provide complete and easy-to- follow instructions for
those who will initiate the process.
– If a process cannot start, the client should be notified of
all defects that could be reasonably identified at the
onset of the process.
– Consider the tradeoff between “incomplete-kit” process
initiation and roundtrip to revise and resubmit a request.
Michael zur Muehlen: “Service Processes: The Customer at the Center?” http://tinyurl.com/5tunkxy

Exercise
• Textbook, chapter 1, exercise 1.5 (Prescription
fulfillment process)
– What is the current communication structure?
– What issues arise from the current communication
structure?
– How can the communication structure be improved?

(9) Automation
• Use data sharing (Intranets, ERPs) to:
– Increase availability of information to improve decisions or
visibility (subject to security/privacy)
– Avoid duplicate data entry, paper copies
• Use network technology to:
– Replace materials (e.g. paper document) flow with
information flow
• E.g. querying government agency DBs replacing document flow

– Increase communication speed: e-mail, SMS
• Note: e-mails are unavoidable, but not always desirable

– Enable self-service (e.g. online forms)

(T+,Q+/-,C+/-,F-)
92

(9) Automation (cont.)
• Use tracking technology to identify/locate
materials and resources where reasonable
– Identification: Bar code, RFID
– Location: indoor positioning, GPS

• Automate tasks and decisions
– Capture and automate business rules where effective

• Automate end-to-end processes
– See next lecture (BPMS)

Exercise
• Textbook, chapter 1, exercise 1.5 (Prescription
fulfillment process)
– How can automation be applied in this process?

Business Process
Lifecycle
See videos on YouTube
– Marlon Dumas
95

Introduction to Business Process Analysis and Redesign

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