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.

1. Introduction to Business Process
Analysis and Redesign
Marlon Dumas
University of Tartu
firstname.lastname@ut.ee
Universidad de Granada – 23-24 Jan. 2014

2. The BPM Lifecycle
2

3. 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

4. In other words…
Information
Technology
Yields
Business
Value
Enables
Yields
Process
Change
Index Group (1982)
4

5. 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

6. 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

7. Business Process
Lifecycle
7

8. Purposes of Process Modeling
Communication,
simulation, activitybased costing…
Detailed Models
including
Data types, conditions, data
mappings, fault handling…
Integration, testing,
deployment…
8

9. 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
9

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

11. Revised Order Management Process
11

12. 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.
12

13. 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
13

14. Process Modelling Viewpoints
Organization
Who?
What?
Function
When?
Process
Which?
Data / Service / Product
14

15. 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
15

16. Example with Pools and Lanes
16

17. 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

18. Example: Data Object
18

19. Anything wrong with this model?
19

20. Is this better?
20

21. 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…
21

22. Showing the value chain with subprocesses
22

23. 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
23

24. Business Process
Lifecycle
24

25. Process Analysis Techniques
25

26. Purposes of Qualitative Analysis
26

27. 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
27

28. 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

29. 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

30. Example (Equipment Rental Process)
30

31. Example – Equipment Rental Process
31

32. 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
32

33. 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.
33

34. Techniques for issue analysis
• Cause-effect diagrams
• Why-why diagrams
• Pareto charts
34

35. Cause-effect diagram (rejected equipment)
35

36. 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;
36

37. 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
37

38. Pareto chart (excessive rental expenses)
http://pareto-chart.qtcharts.com/index.php?g=prtt
38

39. Process Analysis Techniques
39

40. Fill in the blanks
If you had to choose between two services, you
would typically choose the one that is:
• F…
• B…
• C…
40

41. Process Performance Measures
41

42. Let’s start with time
Mark McGuinness: Time Management for Creative
People

43. 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

44. Alternative Paths
p1
p2
pn
T1
T2
...
TN
n
CT = p1T1+p2T2+…+pnTn =
∑p T
i i
i=1
Inspired by a slide by Manuel Laguna & John Marklund
44

45. Alternative Paths – Example
• What is the average cycle time?
45

46. 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
46

47. Parallel Paths – Example
• What is the average cycle time?
47

48. 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

49. Rework – Example
• What is the average cycle time?
49

50. Rework At Most Once – Example
• What is the average cycle time?
50

51. Quick exercise
Calculate cycle time
51

52. 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
52

53. Limitation 1: Not all Models are Structured
0.3
0.5
0.7
0.8
0.5
0.2
53

54. 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)
54

55. Business Process
Lifecycle
55

56. 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

57. Process Redesign Approaches
57

58. 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
58

59. 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

60. The correct answer is …
Mazda’s Accounts Payable Department
60

61. How the process worked? (“as is”)
61

62. How the process worked? (“as is”)
62

63. How the process worked? (“as is”)
63

64. How the process worked? (“as is”)
64

65. How the process worked? (“as is”)
65

66. How the process worked? (“as is”)
66

67. Reengineering Process (“to be”)
67

68. Reengineering Process (“to be”)
68

69. Reengineering Process (“to be”)
69

70. Reengineering Process (“to be”)
70

71. Reengineering Process (“to be”)
71

72. Reengineering Process (“to be”)
72

73. 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

74. 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
74

75. 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
© Laguna & Marklund
75

76. 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
© Laguna & Marklund
Approved
glass
vendor
76

77. Existing claims process
1.
2.
3.
4.
5.
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.
© Laguna & Marklund
77

78. Process Redesign Approaches
78

79. 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
79

80. Process Redesign Tradeoffs
Costs
Time
Flexibility
Quality
80

81. 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

82. (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

83. (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

84. Example
84

85. (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

86. (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

87. Example
87

88. 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.
88

89. (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

90. 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
90

91. 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?
91

92. (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

93. (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)
93

94. Exercise
• Textbook, chapter 1, exercise 1.5 (Prescription
fulfillment process)
– How can automation be applied in this process?
94

95. Business Process
Lifecycle
See videos on YouTube
– Marlon Dumas
95