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A Simulation Based Framework for Business Process Design Projects

Chapter 3

Business Process Modeling, Simulation and Design

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Overview

The Overall Framework• Step 1: Case for Action and Vision Statement• Step 2: Process Identification and Selection• Step 3: Obtain Management Commitment• Step 4: Evaluate Design Enablers• Step 5: Acquire Process Understanding• Step 6: Creative Process Design

– Benchmarking– Design Principles

• Step 7: Process Modeling and Simulation• Step 8: Implementation of the New Process

Design

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A Simulation Based Framework for BPD Projects

1. Case for actionand vision

2. Process Identification and selection

3. Obtaining Managementcommitment

4. Evaluation of Design Enablers

5. Acquiring Processunderstanding

6. Creative ProcessDesign

7. Process Modeling and Simulation

8. Implementation of the New Process Design

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A clear message about the need for change and where the change is going to take us is necessary for successfully selling the redesign concept to the company’s employees

Case for Action– Here is where we are as a company and this is why we cannot stay here– Five major elements build an effective argumentation

1. Business context – what is important and what is changing2. Business problems – source of the company’s concern3. Marketplace demand – performance standards & demands to

meet4. Diagnostics – why are we unable to meet the posed demands5. Cost of inaction – consequences of not changing

Case for Action and Vision Statements (I)

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Case for Action and Vision Statements (II)

We are disappointed by the length of time we require to develop and register drugs in the United States and in major international markets. 

Our leading competitors achieve significantly shorter development cycles because they have established larger-scale, high-flexible, globally integrated R&D organizations that operate with a uniform set of work practices and information systems. 

The competitive trend goes against our family of smaller, independent R&D organizations, which are housed in several decentralized operating companies around the world. 

We have strong competitive and economic incentives to move as quickly as possible toward a globally integrated model of operation. Each week we save in the development and registration process extends the commercial life of our patent protection and represents, at minimum, an additional $1 million in annual pretax profit — for each drug in our portfolio.

Example: Case for action in a pharmaceutical company

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Vision Statement– This is what we as a company need to become– Should include both quantitative and qualitative

statements– Need not be excessively long but should not be

simplistic

Case for Action and Vision Statements (III)

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Case for Action and Vision Statements (IV)

We are a worldwide leader in drug development.

1. We have shortened drug development and registration by an average of six months.

2. We are acknowledged leaders in the quality of registration submissions.3. We have maximized the profit potential of our development portfolio.

We have created, across our operating companies, a worldwide R&D organization with management structures and systems that let us mobilize our collective development resources responsibly and flexibly. 

1. We have established uniform and more disciplined drug development, planning, decision-making, and operational processes across all sites.

2. We employ innovative technology-based tools to support our work and management practices at all levels and between all R&D sites.

3. We have developed and implemented common information technology architecture worldwide.

Example: Vision Statement in a pharmaceutical company

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• Process selection is critical for the success of a design project– Core processes have the highest impact on overall performance but are

also more costly and risky to change– The implementation tactic cannot be ignored, even due to budget

constraints

• Useful criteria for prioritization of projects are: Dysfunction Importance Feasibility

• Other relevant screening issues/questions are: What are the project’s scope and costs involved? Can a strong and effective team be formed? Is it likely to obtain strong management commitment? Can other programs (e.g. continuous improvement) be used instead? Is the process obsolete or the technology outdated?

Process Identification and Selection

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• Top management must set the stage both for the design project and the subsequent implementation– Without top management support the improvement effort is bound

to fail

– The more profound and strategic the change is the more crucial the top management support becomes

Obtaining Management Commitment

• Commitment assumes understanding and cannot be achieved without education– People are more likely to be fearful and

resisting change if there is a lack of direction and they do not understand the implications of the change

– Occurrence of “resisting change” issues is particularly prevalent in rapid revolutionary change scenarios

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• New (information) technology is an essential design enabler…

• …but could also reinforce old ways of thinking– Automation redesign– Do not look for problems first and then the technology to

fix them– Evaluating new technology needs inductive thinking

• New technology should not be evaluated within the structure of the existing process– New technology enables us to break old rules and

compromises • To avoid the automation trap the question to ask is:

– How can new technology enable us to do new things or to do things in new ways?

Evaluation of Design Enablers

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Technology as a Mechanism to Break Rules and Compromises

Old Rule New Technology New RuleInformation can appear Shared databases Information can appear in only one place at a time. simultaneously in as many

places as needed.

Only experts can perform Expert systems A generalist may be able to docomplex work. the work of an expert.

The best contact with a potential Interactive videodisk The best contact with a potentialbuyer is personal contact. and web pages. buyer is effective contact.

Businesses must choose Telecommunication Businesses can simultaneouslyBetween centralization networks reap the benefits of centralization

and decentralization.and decentralization.

People must find where Automatic identification Things tell you where they are.tracking technology. Plans get revised instantaneously.things are.

Field personnel need offices Wireless data Field personnel can send andWhere to receive, store, retrieve

portable computers.receive information wherever

and transmit information.communication and

they are.

Plans get revised periodically. High performancecomputers.

Plans get revised instantaneously.

Managers make all decisions. (databases, modeling tools) everyone’s job.Decision support tools -Decision making is part of

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• Subtle difference between redesigning an existing process and designing a new currently non-existing process

– In both cases we need to understand the purpose of the process and what the customers desire from it

– If the process exists, we need to understand what it is currently doing and why it is unsatisfactory

• Business Process Benchmarking may be a useful tool– To gain process understanding

– To inspire creative new designs

Acquiring Process Understanding

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• Questions the design team needs to answer What is the existing process doing? How well does it perform? What are the critical issues that impact the process performance?

• The redesign team must understand the process but should not overanalyze it in order to avoid “analysis paralysis”

– Becoming so familiar with the process it is impossible to think of new ways of doing it

• Essential activities for building process understanding1. Configure the redesign team

2. Build a high level process map

3. Test the initial scope and scale

4. Identify the process owner

Understanding the Existing Process

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1. Configure the redesign team– A mix of business insiders (managers and workers directly involved in

the current process) and business outsiders (consultants and employees not involved in the process)

2. Build a high level process map– Neither a low level flow chart nor an organizational chart

– Shows interactions between sub-processes, not the flow of data

– Focuses on customers and business outcomes

– Objectives

1. Build common understanding 4. Use a cross functional vocabulary

2. Highlight critical sub-processes 5. Test initial scope and scale

3. Identify key interfaces 6. Pinpoint redundancies and waste

Activities for Building Process Understanding (I)

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High Level Process Map for a Telecom Company

CapacityProvisioning

ServiceAssurance

Markets &Planning

Local NetworkOperations

Mass MarketsService Delivery

CustomerTransactionsand Billing

Customers

Carrier ServiceDelivery

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3. Test the initial scope and scale– Self examination

– Environmental scanning/benchmarking

– Customer visits

4. Identify the process owner– The person that will take responsibility

and be accountable for the performance of the new process

Activities for Building Process Understanding (II)

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Understanding the Customer

• The customer end is the best place to start understanding a business process– What are the customers’ real requirements?

– What do they say they need and what do they really need?

– What problems do they have?

– What do they do with the process output?

• The ultimate goal with a business process is to satisfy the customers’ real needs in an efficient way!

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Creative Process Design (I)

• Designing new processes is more of an art than a science– Cannot be achieved through a formalized method

• Most existing processes were not designed; they just emerged as new parts were added iteratively to satisfy immediate needs

• The end result of any design is very much dependent on the order in which information becomes available– Inefficient processes are created when iterative design methods are

applied

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Illustration Process Evolution (I)

• Two pieces of plastic are given to you with instructions to arrange them in an easily described shape

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Illustration Process Evolution (II)

• Then a third piece is added still the objective is to build a simple shape

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Illustration Process Evolution (III)

• Two more pieces are added, but very few people are able to incorporate these and still obtain a simple shape

?

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Illustration Process Evolution (IV)

• Considering the pieces independently of the sequence by which they appear leads to a much better solution!

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Benchmarking

• Comparing the firm’s/process’s activities and performance with what others are doing

– In the same company, in the same industry or across industries

• Every benchmarking relationship involves two parties The initiator firm – who initiates contact and observes (the pupil) The target firm (or benchmark) – who is being observed (the

master)

• Fruitful benchmarking relationships are usually characterized by reciprocity

• Two basic benchmarking purposes1. To assess the firm’s/process’s performance relative to the

competition identify performance gaps and goals2. To stimulate creativity and inspire innovative ideas for how to do

things better, i.e. improve process designs & process performance

• For BPD projects both purposes are relevant

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Business Process Benchmarking (I)

• Focus on how things are done– Typically the most involved type of benchmarking

• The underlying idea is to learn and be inspired by the best– The best in a certain industry (best-in-class benchmark)– The best across industries (best-of-the-best benchmark)

• Generally, the further away from the firm’s own industry that the design team goes

– Higher potential for getting breakthrough design ideas– More difficult to identify and translate similarities between processes

• After choosing a target firm a good starting point for a business process benchmarking effort is the 5w2h framework (Robinson 1991)

– Can also be used to understand an existing process to be redesigned

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Business Process Benchmarking (II)

The 5w2h frameworkClassification 5w2h questions Description

People Who? Who is performing the activity?Why is this person doing it?Could/Should someone else perform the activity?

Subject matter What? What is being done in this activity?Can the activity in question be eliminated?

Sequence When? When is the best time to perform this activity?Does it have to be done at a certain time?

Location Where? Where is this activity carried out?Does it have to be done at this location?

Purpose Why? Why is this activity needed?Clarify its purpose.

Method How? How is the activity carried out?Is this the best way or are there alternatives?

Cost How much? How much does it currently cost?What would be the tentative cost after improvement?

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Design Principles

General people-oriented and conceptual process design principles

1. Organize work around outcomes, not tasks

2. Let those who use the processoutput perform the process

3. Merge information processing and data gathering activities

5. Put the decision point where the work is performed and build control into the process

4. Capture the information once – at the source

8. Design the process for the dominant flow not the exceptions

6. Treat geographically dispersedresources as though they were centralized

7. Link parallel activities instead of just integrating their output

9. Look for ways to mistake-proof the process

10. Examine process interactions to avoid sub-optimization

Themes: Horizontal and vertical integration of work, hand-off elimination, improved

quality and task coordination

Coordination of activities, simplification of flows, elimination

of waste and rework

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1. Organize work around outcomes not tasks– Focus on horizontal integration of activities– Eliminates unnecessary handoff and control steps– Process complexity is reduced while activity complexity grows

• This integration approach often referred to as case management

2. Let those who use the process perform the process– Work should be carried out where it makes most sense to do it– Risk of coordination inefficiencies due to excessive delegation decreases

3. Merge information processing and data gathering activities

– The people collecting the data should also process it into information– Reduces the risk of errors and incorrect information

4. Capture information once – at the source– Reduces costly reentry and frequency of erroneous data– Speeds up the process, increases the quality of information and reduces

costs

Ten Conceptual Design Principles (I)

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5. Put the decision point where the work is performed and build control into the process – Case management compresses processes horizontally and employee

empowerment compresses them vertically– Workers are taking over previous management responsibilities

6. Treat geographically dispersed resources as though they were centralized– IT breaks spatial compromises through virtual co-location– Geographically disbursed resources should not constrain the design

team to only consider decentralized approaches

7. Link/coordinate parallel activities instead of just integrating their results– If parallel activities are operated independently operational errors

are not detected until the outcomes are integrated– Reduces the amount of rework

Ten Conceptual Design Principles (II)

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8. Design the process for the dominant flow not for the exceptions– Reduces the risk of fragmentation and overly complex processes

with inherent coordination problems

9. Look for ways to mistake-proof (or fail-safe) the process– Design so that certain critical errors cannot occur– Mistake-proofing = Poke Yoke

10. Examining interactions to avoid sub-optimization– By neglecting interactions, isolated improvements to sub-processes will

lead to sub-optimal solutions– Known in systems theory as “disjointed incrementalism”

Ten Conceptual Design Principles (III)

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• Stems from the field of industrial engineering– Successfully used for designing manufacturing systems for decades

Seven Workflow Oriented Design Principles

Establish product orientation in the process

Eliminate Buffers

Establish one at a time processing

Balance the flow to the bottleneck

Minimize sequential processing and hand-offs

Schedule work based on its critical characteristics

Minimize multiple paths due to specialized operations for exception handling

Traditional, technically oriented workflow design principles

Focus: Efficient process flows, managing resource capacity, throughput and cycle times

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• Conceptual process designs need to be tested before they are implemented in full scale

– Pilot projects or process modeling techniques

• Business processes are often too complex and dynamic to be analyzed only with simple tools like flowcharts and spreadsheets

• Discrete event simulation is a powerful and realistic tool to complement the more simplistic methods

– Allows exploration of the redesign effects without costly interruptions of current operations

– Helps reduce the risks inherent in any design/change project

• Compared to pilot projects simulation is faster and cheaper– Simulation not good for capturing soft people issues and attitudes

Simulation and pilots complement each other

Process Modeling and Simulation (I)

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• A discrete event simulation model mimics the real world but in compressed time

– Focus only on events when the state of the system changes and skips the time between these events

• Basic steps in evaluating a process design through discrete event simulation

1. Building the simulation model2. Running the simulation3. Analyzing performance measures4. Evaluation of alternative scenarios

Process Modeling and Simulation (II)

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Advantages with discrete event simulation

• Promotes creativity by enabling easy testing of ideas• Captures system dynamics but avoids disturbances of

current process• Can capture interactions between sub-processes

– Mitigates the risk of sub-optimization

• Graphical reporting features promotes better process understanding and facilitates communication

• The quantitative nature brings a sense of objectivity into the picture

Process Modeling and Simulation (III)

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• Detailed implementation issues beyond the scope of the design project

• High level implementation issues need to be considered when selecting a process to design– No point in designing a process which cannot be implemented

• Crucial high level implementation issues Time Cost Improvement potential Likelihood of success

Implementation of the Process Design (I)

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• Conceptually an implementation strategy can be characterized as revolutionary, evolutionary or on a continuum in between– A rapid revolutionary approach tends to require more external

resources

• Regardless of the implementation tactic important factors for a successful implementation are Strong leadership Buy-in from line managers and employees Training of the workforce

Implementation of the Process Design (II)

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• Important to reflect on what can be learned from a given design and/or implementation project– What worked, what didn’t and why?– What were the main challenges?– What design ideas didn’t work out in practice and why?

• The process of designing and implementing new process designs also needs improvement– Sharing experiences and collecting feedback is key to any

improvement effort

Final Notes