BIS 494 Topics in Information Systems A Simulation
BIS 494: Topics in Information Systems A Simulation Based Framework for Business Process Design Projects Chapter 3 Business Process Modeling, Simulation and Design 1
Overview Ø 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 2
A Simulation Based Framework for BPD Projects 1. Case for action and vision 5. Acquiring Process understanding 2. Process Identification and selection 6. Creative Process Design 3. Obtaining Management commitment 7. Process Modeling and Simulation 4. Evaluation of Design Enablers 8. Implementation of the New Process Design 3
Step 1: Case for Action and Vision Statements v 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 ü Case for Action – Here is where we are as a company and – this is why we cannot stay here ü Vision Statement – This is what we as a company need to become – Should include both quantitative and qualitative statements 4
Step 2: Process Identification and Selection • 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 Is the process obsolete or the technology outdated? 8
Step 3: Obtaining Management Commitment • 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 • 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 9
Step 4: Evaluation of Design Enablers • 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? 10
Technology as a Mechanism to Break Rules and Compromises Old Rule New Technology New Rule Information can appear in only one place at a time. Shared databases Only experts can perform complex work. Expert systems Information can appear simultaneously in as many places as needed. A generalist may be able to do the work of an expert. Businesses must choose Between centralization and decentralization. Telecommunication networks Managers make all decisions. Decision support tools (databases, modeling tools) Businesses can simultaneously reap the benefits of centralization and decentralization. Decision- making is part of everyone’s job. Field personnel need offices Where to receive, store, retrieve and transmit information. Wireless data communication and portable computers. Field personnel can send and receive information wherever they are. The best contact with a potential buyer is personal contact. Interactive videodisk and web pages. The best contact with a potential buyer is effective contact. People must find where things are. Automatic identification tracking technology. Things tell you where they are. Plans get revised instantaneously. Plans get revised periodically. High performance computers. Plans get revised instantaneously. 11
Step 5: Acquiring Process Understanding • 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 12
Understanding the Existing Process • Questions the design team needs to answer ü What is the existing process doing? ü How well does it perform? ü 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 understanding 1. 2. 3. 4. Configure the redesign team Build a high level process map Test the initial scope and scale Identify the process owner 13
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! 17
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 18
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 ü The initiator firm – who initiates contact and observes (the pupil) ü The target firm (or benchmark) – who is being observed (the master) • Fruitful benchmarking relationships are usually characterized by reciprocity • Two basic benchmarking purposes 1. To assess the firm’s/process’s performance relative to the competition identify performance gaps and goals 2. 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 23
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 5 w 2 h framework (Robinson 1991) – Can also be used to understand an existing process to be redesigned 24
Business Process Benchmarking (II) The 5 w 2 h framework Classification 5 w 2 h 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? 25
Design Principles General people-oriented and conceptual process design principles 1. Organize work around outcomes, not tasks 2. Let those who use the process output perform the process 3. Merge information processing and data gathering activities 4. Capture the information once – at the source Themes: 6. Treat geographically dispersed resources as though they were centralized 7. Link parallel activities instead of just integrating their output 8. Design the process for the dominant flow not the exceptions 9. Look for ways to mistake-proof the process 5. Put the decision point where the work is performed and build control into the process 10. Examine process interactions to avoid sub-optimization 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 26
Ten Conceptual Design Principles (I) 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 output 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 27
Ten Conceptual Design Principles (II) 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 28
Ten Conceptual Design Principles (III) 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 = Poka 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” 29
Step 6: Process Modeling and Simulation (I) • 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 31
Process Modeling and Simulation (II) • 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. 2. 3. 4. Building the simulation model Running the simulation Analyzing performance measures Evaluation of alternative scenarios 32
Process Modeling and Simulation (III) 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 33
Step 7: Implementation of the Process Design (I) • 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 ü ü Time Cost Improvement potential Likelihood of success 34
Implementation of the Process Design (II) • 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 ü Strong leadership ü Buy-in from line managers and employees ü Training of the workforce 35
Final Notes • 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 36
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