CHAPTER 3

A Simutation-Based Framework for BusinessProcesses Design Projects

Chapters 1 and 2 defined the concepts of business processes, process design, process management, and evolutionary as opposed to revolutionary implementation tactics. We also looked closely at the basic principles of Six Sigma and business process reengineering as representatives of recent process-oriented improvement programs. This chapter introduces a framework for structuring business process design projects. The framework is expressed as a number of important issues or steps that typically need to be addressed in these types of projects. It also puts special emphasis on the usefulness of simulation. Because the general purpose of the analytical tools investigated in Chapters 4 through 11 is to support process design projects, the framework also can be viewed as a road map for the remaining chapters of this book. This also means that many of the design principles and issues touched upon in this chapter will be revisited in subsequent chapters for a more thorough analysis.

The scope of a design project as defined in this chapter ranges from the strategic vision of what needs to be done to the final blueprint of the new design. Important intermediate issues include defining and selecting the right process to address, evaluating potential design enablers, and acquiring an understanding of the current process if one exists. In adherence to our distinction between process design and implementation, we do not consider detailed implementation issues to be part of the design project. Consequently, the framework does not deal explicitly with how to implement the design or how to manage organizational change and make it stick. At the same time, we cannot completely separate the design project from the implementation issues. First, it is pointless to design processes that will never be implemented. Therefore, in selecting which processes to design or redesign, we need to consider the expected implementation challenges and corresponding costs. Second, as discussed in Section 2.4, an evolutionary implementation implies sequential adjustments of the original blueprinted design due to emerging implementation restrictions and changes in market demands. To that end, high-level implementation issues are included in our framework (see Figure 3.1).

As will be apparent, many of the ideas and principles underlying the framework have sprung from the reengineering movement with its focus on radical business process redesign. However, it is important to remember that our focus is on business process design (or synonymously, redesign) per se, which in our connotation refers to developing the blueprint for a new process. This does not prescribe the strategy for how the design is going to be implemented. Reengineering, on the other hand, refers to radical process design and revolutionary implementation. Consequently, in the following sections, we will draw on the sound principles for process design stemming from the process improvement and reengineering literature, but we do not make any assumptions regarding how the design ultimately is implemented.

 

The framework is influenced by an approach in Chase et al. (1998) that explicitly advocates the use of computer simulation for the modeling and testing of proposed process designs. However, there are also similarities with the frameworks suggested by Lowenthal, Roberts, and Cross et al. discussed in Section 2.3.5, as well as with the Six Sigma framework covered in Section 2.2.4. Our framework consists of the following eight steps, also depicted in Figure 3.1:

1. Case for action and vision statements.
2. Process identification and selection.
3. Obtaining management commitment.
4. Evaluation of design enablers.
5. Acquiring process understanding.
6. Creative process design.
7. Process modeling and simulation.
8. Implementation of the new process design.

The first seven steps correspond directly to our definition of a design project. The eighth step refers to the high-level implementation concerns mentioned previously and will be discussed only briefly. The shaded steps 4 through 7 in Figure 3.1 refer to the core design activities, carried out by the design team. They will be analyzed further using the modeling approaches and tools explored in Chapters 4 through 11.

The first issue in a business process design project is the formulation of a case for action and vision statements. This step communicates a clear message regarding the need for change and a vision of where to go. This is followed by the identification and selection of the process to be designed or redesigned. This step stresses the fact that not all processes can (or should) be redesigned at once, and the selection should be based on a cost/benefit analysis. This step also includes appointing a design team appropriate for the selected process. The third step, obtaining management commitment, is crucial not just for the design project itself but even more so when considering the likelihood of successful implementation. The importance of top-management involvement increases with the scope of the design and implementation.

The fourth step initiates the actual process design activities by encouraging the design team to evaluate possible enablers of a new process design. The most important design enabler in most cases is new technology. Following an understanding of relevant design enablers, the design team needs to clarify the process to be designed. Important means for acquiring this understanding based on existing processes include process charts and flowcharts, described in Chapter 4. However, it also involves an understanding of customer requirements and the overall purpose of the process and its deliverables.

Step 6 refers to the creative activity of coming up with a new conceptual design for the process. This is where team members use their imagination and general design principles to create a process capable of achieving the level of performance demanded by the marketplace. Business process benchmarking is often used to obtain ideas and stimulate creativity, as well as for gaining process understanding. The seventh step in the framework emphasizes the use of modeling and simulation as a means for testing and predicting the performance of the proposed design. Note the feedback loop from step 7 to step 6 (see Figure 3.1), because process modeling and simulation should be used interactively by the design team to test ideas and to stimulate creativity. The advantage with simulation compared to pilot tests performed on the real system is that it is a cheaper and faster alternative. The drawback is that issues related to human behavior that affect the implementation of the design might go undetected. Consequently, for larger processes a pilot test is still recommended as a first step toward full-blown implementation.

When the team is satisfied with the predicted performance of the proposed process, the implementation phase is initiated, possibly with a pilot test. The feedback loop from step 8 to step 6 indicates that the design might have to be modified due to unexpected implementation issues detected in a pilot test or as an integral part of an evolutionary change tactic.

The remainder of this chapter is devoted to describing the methodological steps in more detail, completing our suggested framework for business process design projects.

3.1 Step 1: Case for Action and Vision Statements

It has been documented that the companies that are the most successful in selling change to their employees are those that develop the clearest message about the need for change. Hammer and Champy (1993), among others, emphasize that this communication should include two key messages:

1. A case for action statement: This shows where the company is as an organization and why it can’t stay there.
2. A vision statement: This is what the organization needs to become and the objectives that need to be fulfilled in order to get there.

Clearly, the focus and importance of the case for action and the vision statements depend on the scope of the business process design project in question. If the project has a large scope and focuses on processes that are core to the organization, the action and vision statements involve the strategic position of the entire company as indicated in the aforementioned steps 1 and 2. When the design project has a more modest scope, the need for action and vision statements is still important for determining the direction of the design project, but they typically refer to a business unit or department rather than the entire company.

The case for action should be brief. Hammer and Champy (1993) illustrate the formulation of an effective case for action with the one in Figure 3.2, which shows the documents that senior management of a pharmaceutical company prepared to convince employees that the research and development process was in dire need of change. This case for action contains five major elements that make it effective: (1) business context, (2) business problem, (3) marketplace demands, (4) diagnostics, and (5) cost of inaction.

The business context means describing what is currently happening, what is changing, and what is important in the environment in which the company operates. The leading competitors, according to the case for action in Figure 3.2, are operating with much shorter development cycles. The business problem is the source of the company’s concerns. The company admits that it is taking too long to develop and register new drugs. The marketplace demands are the conditions that have established performance standards that the company cannot meet. The diagnostics section establishes why the company is unable to meet the marketplace demands. In this case, the company realizes that having globally integrated R&D organizations means a competitive advantage. Finally, the cost of inaction spells out the consequences of not changing. The pharmaceutical company estimates the cost of every week of delay in the development and registration process.

The vision statement should state the objectives for the new process in qualitative and quantitative terms. These objectives can include goals for cost reduction, time-to-market, improved quality and customer satisfaction levels, and specific values for financial indicators. With these objectives in place, a meaningful reference is established against which to measure progress. It also defines what the new process design should be able to achieve and thereby provides guidance to the design team regarding where to aim. Moreover, having a clear set of goals in place helps spur ongoing action during implementation. Remember that this is one of the cornerstones in the Six Sigma motivation for focusing on one unifying measure and the goal of 3.4 defects per million opportunities.

 

Vision statements do not need to be long, but they should have solid content and not be too simplistic. For example, the statement “We want to be number one in our industry” provides no clue as to what the company needs to do in order to achieve this vision. Compare this statement with the one expressed by Federal Express in its early years: “We will deliver the package by 10:30 the next morning.” This statement is about operations (we will get the package delivered); it has measurable objectives (we will deliver it by 10:30 A.M.); and it changed the basis for competition in an entire industry (from long, unpredictable delivery times to guaranteed overnight delivery). Figure 3.3 shows a longer vision statement, corresponding to the case for action of the pharmaceutical company in Figure 3.2.

The Federal Express vision statement and the one in Figure 3.3 are effective, because they contain three key elements: (1) They focus on operations, (2) they include measurable objectives and metrics, and (3) they define a desired situation that will provide a competitive advantage for the organization when it is reached.

3.2 Step 2: Process Identification and Selection

Process selection is critical to the success of a design project and the subsequent implementation of the designed process. In Sections 2.2.4 and 2.3.4, we addressed the question of how to prioritize improvement projects in Six Sigma and reengineering programs, respectively. Initially, all business processes of an organization should be considered candidates for redesign. Of particular interest are those processes that are core to the organization, because changing these offers the highest potential to impact the organization’s overall performance. On the other hand, they also represent the largest commitment financially and the greatest challenge to change successfully (i.e., successful design and implementation). As the reengineering movement has proven, the risk of failure is high but so are the rewards of success.

 

Regardless of the scope, prioritizing is an important activity because restrictions in budget and resources prevent engaging in too many design projects simultaneously. The criteria of dysfunction, importance, and feasibility can be used to screen the candidate processes and determine which process to redesign first. These criteria were discussed in Section 2.3.4 and can be summarized by the following questions.

• Which process is currently in most trouble?
• Which process is most critical to accomplishing the firm’s business strategy and has the greatest impact on the company’s customers?
• Which process is most likely to be designed and implemented successfully?

Other relevant questions that can help management narrow down the choices include the following.

• What is the project scope, and what are the costs involved in the design project and in the subsequent implementation?
• Can a strong team be formed to redesign and possibly also implement the chosen process effectively?
• Is it likely that management will have a strong commitment to change the process?
• Does the process need a new design, or could a continuous incremental improvement approach deliver the desired results?
• Is the process obsolete or the technology used outdated?

When selecting the appropriate design project, implementation must be considered. The cost associated with the change tactic must be recognized and compared with the limits of the available budget. As discussed in Section 2.4, a revolutionary implementation tactic is usually costly but much faster than an evolutionary strategy. It is pointless to design a new process that can never be implemented due to resource limitations. Another important aspect to consider is the likelihood of configuring a design team with the right attributes to handle the task of redesigning the chosen process, and in some cases to play a major part in its implementation. Another consideration is how likely it is that management commitment will be maintained throughout the design and implementation effort for a certain process.

When selecting processes to be redesigned, it is helpful to recognize that not all processes that perform below expectations do so because of a bad design. As discussed in Section 2.2 on Six Sigma, if the improvement goals can be reached by eliminating the sources of special cause variation (i.e., by applying a continuous improvement methodology), the process under consideration might not be the best candidate for redesign. In general, this means that the process is currently operating below its potential, as defined by its design, and therefore continuous improvement techniques can be effective in closing the gap between actual performance and the theoretical capability (see also Figure 2.12 and the related discussion in Sections 2.2 and 2.3). Other important issues to consider before selecting a certain process for a design project are whether the process is obsolete or the technology it uses is outdated. If replacing the technology is sufficient to achieve the desired performance results, then the process does not need to be redesigned at this time.

After a process is selected, a design team is configured and assigned to the task of conceiving a new process design. The team usually is comprised of a mix of insiders and outsiders with respect to the process in question. The inside individuals can provide profound insight into current operations. The outsiders have no stake in the current way of doing things, and they bring a fresh perspective and possibly some unique new expertise to the table.

3.3 Step 3: Obtaining Management Commitment

The organization’s top management must set the stage for the design project itself and for the subsequent implementation process. Evidence shows that if top management does not buy into the proposed change, the improvement effort is bound for failure. This is reflected by the fact that top-management support is emphasized in all significant improvement programs including Six Sigma and business process reengineering. In fact, the more profound and strategic the change is, the more crucial top-management involvement becomes. If the scope and importance of the process to be designed and implemented are more modest and primarily tactical in nature, involving the top management of the entire corporation might be less crucial. It might suffice to engage only the top executives of the business unit or functional units directly involved in the process.

Securing management commitment, though important, is not simple. Some argue that commitment cannot be achieved without education; that is, management will not commit to something it does not fully understand. True commitment can occur only after management has gained enough understanding of the design and implementation processes and has recognized the need for change. See, for example, Phase I of Lowenthal’s model discussed in Section 2.3.5.

Recall that many failures associated with reengineering core business processes have been attributed to the change-resistant attitude of the organization’s middle managers and the lack of top-management commitment. These two issues are closely related because people, including middle managers, are more likely to be fearful of change when direction is lacking. If top management commits and establishes a sense of where the whole organization is heading, people can get excited about these changes and the meaning of their work within the new process design. Furthermore, as discussed in Section 2.4, revolutionary change tactics put a tremendous strain on the organization by forcing it through a rapid change. Consequently, clear direction and commitment become particularly important when utilizing rapid implementation approaches. A more evolutionary change tactic with its slower progression has in general fewer problems with change-resistant attitudes.

3.4 Step 4: Evaluation of Design Enablers

New technology in general and information technology in particular are considered essential enablers for new business process designs. However, inappropriate use of technology can block attempts to do things in new ways by reinforcing old ways of thinking and old behavioral patterns. Other enablers could be changes in legislature or changes in the market structure on the customer side, the supply side, or among the competition. However, because it is the most prominent process design enabler, we will focus our attention on new technology.

A design team should follow two important principles when evaluating the potential of new technology for enabling new process designs.

1. Do not equate technology with automation. It will prevent creative process design.
2. Do not look for problems first and then seek technology solutions to fix them.

In other words, embedding an existing business process in a new information system does not qualify as a new process design. Consider, for example, what automation might have accomplished at the insurance company in Section 1.2.2. The company could have tried to implement an electronic transfer of claims from the local independent agent to the claims-processing center and within the processing center. Such a system would have simplified the old process by eliminating the data entry step at the processing center and possibly replacing office mail with electronic mail. The automation, however, would have done nothing to eliminate the requests for additional information from the processing center to the customer, which not only adds time to the process but also tends to annoy the customer.

Breakthrough improvements are usually not possible with automation alone. In these situations, the technology is used to accelerate the existing process but not to do the necessary work in new ways. Doing things the wrong way faster does not lead to radical improvements.

How can a redesigning team avoid getting caught in the automation trap? A key rule is that the team should not make the mistake of evaluating technology using an existing process as the only point of reference. Consider the following two questions that a team might ask (Hammer and Champy, 1993).

• How can new technology be used to enhance, streamline, or improve what we are currently doing?
• How can new technology allow us to do new things that we are currently not doing?

Note that the first question does involve an element of automation, but the second question has a clear focus on innovation. That is, the second question focuses on exploiting state-of-the-art technology to achieve entirely new goals. The team must keep in mind that the true potential of new technology lies in breaking compromises that were made to accommodate limitations in the old technology. Table 3.1 summarizes the ability of some disruptive technologies to break old rules and compromises (Hammer and Champy, 1993).

Successful application of modern technology within the context of process design requires inductive rather than deductive thinking. In general terms, inductive reasoning means working with observed data or facts to identify structures or patterns, and using these observations to reach a general conclusion. Deductive reasoning, on the other hand, starts with general conclusions in terms of hypotheses, theories, or accepted beliefs and uses these to explain or solve a specific problem through logical arguments.

Many executives and senior managers tend to feel more comfortable with deductive thinking. This means they are good at defining a particular problem associated with a managerial situation. They then seek alternative solutions to the problem based on accepted beliefs and theories, and they evaluate the impact of adopting a particular solution. A major challenge for the design team is to adopt an inductive approach and develop the ability to evaluate current and emerging technologies without getting trapped in conventional beliefs about how things should be done. They are then in a position to identify creative applications that enable new breakthrough process designs. In essence, inductive thinking requires the ability to recognize that modern technology could be an effective solution to a problem that the company is not yet aware it has.

 

To make our discussion on new technology as an enabler for change more concrete, the following two sections will look at how (information) technology has enabled new process designs in the banking and grocery store industries.

3.4.1 EXAMPLE: THE INTERNET-ENABLING CHANGE AT CHASE MANHATTAN BANK

The tremendous advances in information technology (IT) in recent years, in particular those related to the Internet, have triggered numerous initiatives in e-commerce-related areas. Some businesses have expanded their electronic linkages with their partners and suppliers, and others have added electronic services to their customers. This section will look at how e-commerce has enabled change at Chase Manhattan Bank¹.

Traditionally, the financial engineers at Chase compared the efficiency of delivering services using alternative channels and their impact on the bottom line. With the availability of new information technology, it was time for them to understand the effectiveness of e-business compared to other existing channels such as physical branches and ATMs. From a unit cost perspective, e-commerce allows Chase to deliver services more economically and in a more timely fashion.

The move to electronic commerce cannot be achieved without redesigning processes that were historically paper based. The business process unit at Chase managed a project with the operations and legal departments to redesign the processing of money judgment documents, such as restraining notices and account levies. This was a purely paper-based process. So, Chase worked with other banks, government agencies, and creditor rights attorneys to transform the paper-based process into an e-process. The change involved modifying the laws that govern levies and subpoenas to allow electronic service of these legal documents. Other important projects at Chase include e-business changes in retail banking and e-commerce work in the global and institutional banking areas. These projects will allow large corporate customers to have Web access to their account data and to perform transactions online.

For Chase and other companies, electronic business offers tremendous opportunities to break compromises and improve efficiency and effectiveness in the service offering. However, in order to realize this potential, many of their business processes need to be completely redesigned to support the new business environment. When business managers decide they want to initiate a Web presence, it usually means a dramatic change in several business processes. Redesign projects in these companies focus on establishing high-level process strategies that increase efficiency, productivity, and coordination among groups as opposed to concentrating on small pieces of key business processes.

3.4.2 EXAMPLE: NEW TECHNOLOGY AS A CHANGE ENABLER IN THE GROCERY INDUSTRY

After a brief look at how new technology has impacted the banking industry, we now turn our attention to the traditional and well-known retail and grocery store industry. Steven L. Cohen (2000) predicts that this industry will undergo significant change in the next 25 years. He argues that the supermarket of the future will rely heavily on technology as well as process engineering tools and techniques to compete. The following is a description of the changes that Cohen predicts in the supermarket industry and that are enabled by new technology.

The typical supermarket today has scanners at the front checkout area that read the price and description of items from their universal product code. About 85 percent of all items can be scanned from either manufacturer or in-store UPC labels applied to packaging. On-hand shelf inventory is set, ordered, and maintained by personnel with the experience and knowledge to know how fast a particular item sells in that store location. Items are replenished periodically.

Orders are placed by handwritten communication, telephone, fax, and by using a handheld ordering machine that records the warehouse code number. This information is transmitted to each supplier as appropriate. The orders are printed out at the warehouse, and each item is picked from the warehouse’s inventory. Typically, as each case of product is pulled from the storage area at the warehouse, it is brought to a central staging area. The cases are built as a block onto a pallet, and the pallet is wrapped in plastic film for stability and marked for delivery to a particular store location.

After the order is filled, the pallets are loaded onto trucks and shipped to the store. The pallets are off-loaded at the store into the receiving area; broken down; and separated onto large, flat-wheeled carts by the grocery store workers according to the aisle or area of the store to be restocked. These wheeled carts are brought onto the sales floor. The grocery store worker checks each case against the shelf and restocks the item. If a case is damaged or contains the wrong products, these items are set aside. The grocery store manager then calls in a report to the warehouse’s customer service department at the next opportunity. The overstock of items is repacked, condensed onto as few pallets as possible, and placed in store inventory to be put on the sales floor at a later time.

The billing information is printed on paper and is sent with the order to the store. In most cases, but not always, the UPC information is on the bill of sale from the suppliers. The personnel working in scanning check each bill line by line and item by item to compare it to existing information in the store’s computer system. If an adjustment to the item description, a change in UPC code, or a change in price information occurs, the scanning operator makes the change in the computer, prints a temporary tag, and later walks the store to find these changed items and put up the new shelf tag.

Many of the problems and challenges with the processes described are related to lack of communication and the application of new methods and technologies. Technology can play an important role in driving the change in how manufacturers, warehouses, and retailers communicate with each other. Consider, for example, the following.

• Communication networks can be established to allow lower inventory levels and just-in-time delivery from the manufacturer to the retailer.
• On-hand shelf inventory in the retail store can be linked to the store’s main computer.
• Automatic computer reordering can be established to maintain stock on hand.
• Increases in demand due to seasonal or market changes can be flagged for store management.
• Manufacturers can develop more efficient packaging methods, allowing for more flexible units sizes, which would minimize the number of backorders at the warehouse and retail levels.
• Aisles in the store can be divided into aisle, aisle side, and section (e.g., Aisle 1, Side A, Section 14). This would facilitate restocking of products and mapping of the store and its products, and allow the manufacturer, warehouse, and retailer to apply simulation techniques to plan store and product layouts.
• Orders at the warehouse can be picked and palletized according to aisles and sometimes aisle side.
• When the truck arrives from the warehouse to the store, the pallets can be brought directly onto the sales floor for restocking without time-consuming breakdown of pallets and sorting of stock onto carts for the appropriate aisle.

To implement process changes enabled by the appropriate application of new technology, employees would have to be better trained and computer literate. Some of the changes in employees’ roles and responsibilities might include the following.

• Employees who are restocking the shelves in the store would carry small, handheld computer/printers. To find out what section of the aisle a product is in, the employee would scan the UPC tag on a case of product, which would eliminate time wasted searching for shelf location.
• In case an item is damaged or if it is simply the wrong product, employees would be able to enter that information into the handheld computer for credit or return to the warehouse.
• Updated pricing information would be forwarded to the store mainframe via the billing department so that all appropriate price changes and percentage calculations could be completed before the order arrives at the store.
• The people putting up the order would check the shelf tag and compare the item they are stocking to the posted retail information. If necessary, they would print a new tag to update the price change, thus eliminating discrepancies between shelf and register pricing.

On the customer side, information technology also could produce some changes, for example, in shopping habits. Paper coupons could be a thing of the past, because retailers and manufacturers could offer virtual coupons as customers develop electronic shopping lists. Information tracking and customer shopping cards could supply manufacturers and store owners with useful data. The store would be able to tailor its on-shelf inventory and perform better shelf management by tracking consumers’ purchasing habits, and thus increase the rate of inventory turnover.

To summarize, information and increased computer capability would enable manufacturers, warehouses, retailers, and customers to communicate more effectively. As a result, members of the supply chain would be able to voice their desires and needs more effectively.

3.5 Step 5: Acquiring Process Understanding

Understanding the process to be designed is a key element of any design effort. In terms of process understanding, only a subtle difference exists between redesigning an existing process in an organization and creating a design for a currently nonexisting process. In both cases, we must understand what the new process is supposed to do, and particularly what customers desire from it. In the former case, it is also important to understand what the existing process is doing and why it is currently unsatisfactory. However, even if the process to be designed is the only one of its kind within the organization, similar processes usually can be found elsewhere. Business process benchmarking, further discussed in Section 3.6.1, is a tool that is often used to gain process understanding and inspire creative new designs by studying related processes with recognized excellent performance. In the following section, we will look first at some important issues related to gaining understanding about an existing process. Then we will consider aspects of process understanding related to customers and their requirements.

3.5.1 UNDERSTANDING THE EXISTING PROCESS

To acquire the necessary understanding of an existing process, whether it is internal to the organization or an external benchmark, the design team needs to seek the answers to the following general questions.

• What does the existing process do?
• How well (or poorly) does the existing process perform?
• What are the critical issues that govern the process performance?

These questions can be answered at various levels of detail. Hammer and Champy (1993) argue that the goal of a design team must be to understand the process and not to analyze it. The difference is that understanding can be achieved at a high level, but analysis implies documenting every detail of the existing process. In other words, the team can gain enough understanding of the process to have the intuition and insight to redesign it without analyzing the process in “agonizing detail.”

Analyzing to an extreme generally is considered a mistake. It is easy to fall into this trap, because the analysis activity tends to give a false impression of progress. However, process analysis should not be ignored or considered a negative activity either, because in many situations it helps persuade others that a new design is necessary. Conventional process analysis is also a useful tool in the implementation or post-implementation steps. At this stage, a continuous improvement approach is used to close the gap between the theoretical capabilities of the new process and its actual performance. Further investigation of several tools associated with conventional process analysis can be found in Chapters 4 and 5.

The rationale for emphasizing understanding over analyzing is fairly straightforward: The team must avoid what is referred to as “analysis paralysis.” This phrase is used to describe the phenomenon of becoming so familiar with a process that it becomes virtually impossible to think of new ways in which to produce the same output. Analysis is then considered an inhibitor of creativity, which is one of the main assets that the design team must possess in order to be successful. Note that understanding a process is not less difficult than analyzing it; on the contrary, in many ways understanding can be considered harder. It is also hard to know when the team has gained enough understanding to be able to move to the creative design and modeling phase without neglecting important pieces of information regarding the process in question. This issue has no simple answers.

We conclude this section with a discussion regarding concrete issues that are important to consider when gaining understanding of an existing process. The essential issues and activities we consider are the configuration of the design team, building a high-level process map or flowchart, testing the original scope and scale, and identifying the process owner (Lester, 1994).

The Configuration of the Design Team. The design team performs most of the work in the process-understanding and new-process-design phases. As mentioned in Section 3.2, the team is made up of business insiders (those performing the current processes, including managers and workers) and outsiders (those not directly involved in the current process, such as consultants, human resource experts, and customers). A ratio that works well is three insiders for each outsider.

Building a High-Level Process Map. The map should focus on the customer and be business oriented; that is, instead of consisting of names of organizations (such as marketing and distribution), the map should depict the interactions between connected business processes and how they support the customer’s processes. The goal of this map is as follows.

1. To build a common understanding among the team and other stakeholders.
2. To encourage a common vocabulary that cuts across functional boundaries.
3. To highlight the subprocesses that are critical to achieving customer demands.
4. To test the boundaries established by the initial scope and scale.
5. To identify key interface points.
6. To pinpoint redundancies and other forms of wasted effort.

The map should have about 6 and certainly no more than 15 subprocesses from start to finish. An example of a high-level process map for a telecommunications company is depicted in Figure 3.4. Note that the map is neither a detailed flowchart² nor an organizational chart. It shows the interactions between subprocesses and not the flow of work or data. (Later, in Chapter 4, several charts will be introduced including service systems maps, which contain a higher level of detail because they focus on activities and flows.)

Testing the Original Scope and Scale. The design team should reassess the initial scope and scale based on the new information available through self-examination, benchmarking, and customer visits. This activity is iterative in the sense that the team might have to revisit the scope and scale issue more than once.

 

Identifying the Process Owner. The process owner, as discussed in Section 2.1, is the person who will take responsibility for the new business process and will be held accountable for the results of the process. The more the process owner is involved in the design of the new process, the smoother the transition to the subsequent implementation phase will be. Therefore, identifying this individual and involving him or her in the process design project will allow for valuable early interaction and input throughout the design phase.

3.5.2 UNDERSTANDING THE CUSTOMER

A crucial element in understanding a process is to understand its customers and their current and future needs. Customers demand basically two things from any provider of products and services: (1) They want products and services that meet their needs and requirements, and (2) they want to obtain those products and services efficiently and effectively. Understanding these requirements is fundamental to arriving at a good process design. This is why most experts agree that the best place for a team to begin to understand a process is at the customer end (see, for example, the CPS model discussed in Section 2.1.1). To gain an understanding of the customers’ needs, the following questions would be useful for the design team to consider (Hammer and Champy, 1993).

• What are the customers’ real requirements?
• What do they say they want and what do they really need if the two are different?
• What problems do they have?
• What processes do they perform with the output?

Because the ultimate goal of designing a new process is to create one that satisfies customer demands, it is critical for the design team to truly understand these needs and desires. Also note that to gain this understanding, it is not sufficient to simply ask customers what they need, because in most cases the answer is based on what they think they need. There is an important difference between stated and real (or hidden) needs. For example, a customer might state the need for a clothes dryer, but the real need is to remove moisture from clothes. Identifying the real or hidden need opens the door for new, creative ways to satisfy this need other than via the conventional dryer. Another example would be customers of a residential construction contractor who state that they need an efficient heating system. Their real need is a warm home and low heating costs. This real need is best fulfilled if the contractor pays attention to the insulation of the house and uses energy-conserving, three-pane windows instead of the standard single-pane windows. Focusing on the stated need would mean installing the best heating system available at great cost. However, in a poorly insulated house with single-pane windows, it would most likely not make much of a difference. As a result, although the stated need was addressed, the customers will be unhappy because their real need was not satisfied by the building process.

3.6 Step 6: Creative Process Design

Process design is just as much a creative art as it is a science, and maybe even more so. Consequently, there exists no cookbook solution or uniform stepwise method for arriving at a good process design. Process designers need to use creative thinking and put aside current rules, procedures, and values in order to find new ways of doing the necessary work. Existing processes tend to be complicated and inefficient because they have evolved over time. As discussed in Section 1.4, most processes were not designed; they just emerged as new parts of the process were added to satisfy some immediate need. Because the process is expanded incrementally, the intermediate decisions of how to incorporate new elements into the process affect the final design and its efficiency.

Suboptimal solutions and inefficient systems are created when local incremental methods are used to find answers for decision or design problems. At each intermediate stage, the arrangement of information might be right, but this does not ensure that the final arrangement will be entirely correct (or optimal). Consider an experiment designed by Dr. Edward de Bono, founder of the Cognitive Research Trust in Cambridge, England. When two pieces of plastic are given to someone with instructions to arrange them in a shape that can be described easily, the pieces are always arranged into a rectangle as shown in Figure 3.5.

If these pieces represent two elements of a process, then the person was given the task of designing the simplest process that incorporates the given elements. We assume that the simplest process is the one that can be described most easily. The person has used the available information to find a design that maximizes simplicity. Then a square piece is added, as shown in Figure 3.6. The task is still to arrange the pieces in a shape that is easy to describe, so the result is usually another rectangle, as shown in Figure 3.6.

 

 

 

Then two additional pieces are added as shown in Figure 3.7. Few people are able to incorporate these two final pieces effectively; that is, in a way such that the final shape is easy to describe. For example, the configuration in Figure 3.7 might be obtained.

The difficulty stems from the tendency to add the new pieces without redesigning the existing structure. This makes the construction of the second rectangle almost inevitable after the first one has been made. Yet, considering the pieces independently of the sequence in which they appeared, the square pattern is just as good an arrangement for the second step. From the square pattern, the final arrangement, shown in Figure 3.8, is obvious, but if one starts at the rectangle, it is nearly impossible to conceive.

This example illustrates how a particular arrangement of information might make the best possible sense at the time and in the sequence it is presented, and yet it can represent a block to further development. Extending the analogy, when a design team encounters an inefficient and ineffective design based on a “rectangle,” the team must break away from this configuration to introduce the “square” as an entirely different way to think about the process.

3.6.1 BENCHMARKING

Benchmarking essentially refers to the efforts of comparing the organization’s activities and performance in certain areas with what others in the same industry or in other disciplines are doing. Every benchmarking relationship involves two parties: the target firm, or the benchmark that is being observed, and the initiator firm that requests contact and observes. It is important to recognize that these roles are usually not static over time. The target firm often enters into a reciprocal agreement to study some aspects of the initiator firm’s operations. Without offering something in return, it is often difficult for the initiator firm to gain access to all the desired information.

 

Embarking on a benchmarking effort has two basic purposes.

1. To assess the firm’s or the process’s current performance relative to the competition and thereby identify performance gaps and set performance goals.
2. To stimulate creativity and inspire ideas for how to improve on current process performance.

Based on which objective is the most important and on what is being benchmarked, it is possible to identify a number of different types of benchmarking and an infinite number of ways to execute the benchmarking activities. However, the second objective of learning how to improve process performance typically requires a more involved approach with close interaction between the initiator firm and the target firm, often including onsite visits. This type of benchmarking often is referred to as business process benchmarking and is what will be examined in this section. The type of benchmarking that focuses on identifying performance gaps and goals in certain metrics, whether measures of productivity, time, quality, or finance, will be explored further in Chapter 11. In that chapter, we show how data envelopment analysis (DEA) can be a useful tool to analyze this type of benchmarking data and define relevant performance goals.

In the context of a process design project, both objectives are relevant. The design team must be able to determine relevant performance goals to know what to aim for in creating the new design. Even more importantly, business process benchmarking can be used to stimulate the design team’s creativity and to generate ideas for how to do things in a new way. In order for this to happen, it is important that the target firms are chosen carefully. The idea is to learn and be inspired by the best. This could refer to the best in an industry (best-in-class benchmarks) or the best across all industries (often called best-of-the-best or best-in-the world benchmarks). Generally, the further away a design team goes from its own industry, the greater the potential is of getting break-through design ideas. However, at the same time, it is more challenging to identify and translate similarities between processes. A famous example of successful out-of-industry or best-of-the-best benchmarking is Xerox, which in order to improve the irwarehousing operations turned to the mail order company L.L. Bean.

After identifying an appropriate target firm, a good starting point for a business process benchmarking effort is the 5w2h framework developed by Robinson (1991). This framework specifies seven questions that should be answered through the business process benchmarking effort. Five of these questions begin with the letter w (who, what, when, where, and why), and the remaining two start with the letter h (how and how much). See Table 3.2. If the initiator’s design team can answer these questions after the benchmarking effort is completed, it has acquired a good understanding of the process under study. In considering the 5w2h questions, it is important to recognize that they should be viewed in the context of a process.

The 5w2h framework also can be used to acquire an in-depth understanding of an existing process that is about to be redesigned. Therefore, it complements the discussion in Section 3.5.1 about how to gain understanding of an existing process.

Even though the 5w2h framework seems simple enough, finding answers to these questions for a complex cross-functional process is not easy. Effectively managing a large-scale business process benchmarking effort is a difficult matter associated with high costs. In the context of our process design project, the benefits must be weighed against these costs. As indicated before, there exists no cookbook approach to process design. Process benchmarking is sometimes useful to generate ideas for new designs, but in other cases it can cost more than it is worth. This is why the scope of the benchmarking effort must be controlled carefully.

 

A more in-depth discussion of issues related to management of benchmarking projects falls beyond the scope of this book but can be found in Camp (1995).

3.6.2 DESIGN PRINCIPLES

The creative nature of the design phase makes it impossible to specify any definite rules for how to proceed and how to succeed. However, it is possible to point to a number of general design principles that can help guide the design team and inspire its creativity. See, for example, Hammer (1990), Chase et al. (1998), and Hyer and Wemmerlöv (2002). In broad terms, these design principles relate to who does the work and where, when, and why it is done. However, they also involve the information and level of integration necessary to coordinate the process. In this section, we will take a closer look at 10 general design principles from a qualitative perspective. We will refer to them as people-oriented and conceptual because many of them are related directly to horizontal and vertical work integration contingent on the workforce’s capabilities. Furthermore, their focus is to inspire the creativity of the design team in its efforts to come up with a new conceptual process design.

At the end of this section, we also will mention briefly seven somewhat more technical and flow-oriented workflow design principles. These principles have a long tradition in industrial engineering where they have been used successfully for improving the efficiency of manufacturing processes. Chapter 4 provides a detailed investigation of these principles together with modeling approaches and analytical tools. It is also worth noting that all the quantitative tools and modeling approaches explored in Chapters 5 through 11 have the purpose of facilitating analysis and evaluation of several aspects of a given process design. They represent ways to quantitatively investigate the effects of applying the design principles discussed in this section to specific real-world situations.

The people-oriented and conceptual design principles that we will discuss are summarized in Figure 3.9. In reviewing Figure 3.9 and for our discussion of these design principles, it is important to keep in mind that they are guiding principles and not absolute rules. Every design instance is unique and needs to be treated as such. Trying to apply these design principles without discretion is more likely a road to disaster than one to success in business process design.

 

1. Organize work around outcomes, not individual tasks. The idea behind this principle is to move away from highly specialized and fractionalized task assignments and more toward horizontally integrated activities. Process complexity is reduced and activity complexity is increased, as illustrated in Figure 1.3. The rationale for moving in this direction is that it leads to fewer activities in the process that need formal coordination. It also reduces the number of handoffs and eliminates the related control steps, all of which represent some of the major causes of process inefficiencies. It also increases the work content for individual workers, which encourages them to take responsibility for their work and to take pride in what they do. These are important people issues that attempt to empower the workforce and lead to high-quality output.

Applying the principle implies that several specialized tasks previously performed by different people should be combined into a single activity. This activity can then be performed by an individual “case worker” or by a “case team” consisting of a limited number of individuals with complementary skills. The choice between the two includes considerations regarding the scope of work, the capacity needs, how critical it is to avoid handoffs, the importance of a single point of contact for customers, the required ability to handle exceptions, cultural issues, training costs, and so on. It should be mentioned that an important enabler for horizontal integration is cross-functional training, which means that each individual is trained to perform several different tasks.

The principle has spawned the integration of the labor approach known as case management (Davenport and Nohria, 1994). The case manager’s role represents a break with the conventional approach to the division of labor. Davenport and Nohria have observed four common components of a successful case manager’s role. The case manager:

• Completes or manages a “closed-loop” work process to deliver an entire product or service to the customer.
• Is located where the customer and various other functions or matrix dimensions intersect.
• Has the authority to make decisions and address customer issues.
• Easily accesses information from around the organization and uses information technology in decision making.

Case management is an appropriate design for work that is performed along process lines rather than in business functions. Unlike the business functions, processes are designed around the completion of a significant product or service. Furthermore, case management is particularly useful in processes that deal with customers and therefore involve managing the entire cycle of activities from customer order to product or service delivery, billing, and payment. In many ways, case management parallels the governing ideas for process management discussed in Section 2.1, with the case manager playing the role of the process owner.

In Section 1.1.2, we described the process at IBM Credit Corporation, which was documented in an attempt to improve performance. The entire process consumed 6 days on average, and sometimes it took as long as 2 weeks, although the actual work could be completed in an average of 90 minutes. IBM tried several fixes with the goal of improving this process. For example, they installed a control desk that could answer questions from field salespersons. The control desk helped find the status of each request but also added more turnaround time.

After some brainstroming, IBM Credit realized that the problem did not lie in the tasks and the people performing them but in the structure of the process, which forced work to be handed from one office to another. The existing process was designed under the assumption that each request was unique and difficult to process, therefore requiring the intervention of four highly trained specialists. The reality was that most requests were simple and straightforward. So in the end, IBM Credit replaced its specialists with generalists supported by an easy-to-use computer system that provided access to the databases and tools that specialist would use. The generalists became case workers in charge of the transaction from the beginning to the end. They would get help from a small pool of specialists when requests were indeed unique and difficult to handle.

2, Let those who use the process output perform the process. Another way of expressing this is that work should be carried out where it makes most sense to do it. By avoiding excessive delegation of responsibilities, the risk of coordination inefficiencies and “laissez faire” mentality decreases. If you are using the output you produced yourself, there is no one to blame or point a finger at if that output does not meet your expectations. This idea is closely related to the principle of horizontal integration of specialized tasks discussed previously. The objective is again to avoid handoffs and coordination inefficiencies.

A typical example of the application of this principle is allowing employees to make some of their own purchases without going through a purchasing department. The purchases can be limited to a given dollar amount in order to maintain a certain amount of control over expenses. Another example is the various sorts of so-called vendor managed inventory (VMI) initiatives whereby a company asks its suppliers to manage its incoming goods or parts inventory. Wal-Mart has successfully implemented this principle, using information technology to transfer point-of-sale data to suppliers, who use the data to monitor inventory levels and assume the responsibility of telling Wal-Mart when to reorder.

3. Merge information processing and data-gathering activities. This principle is based on having the people who collect the data also analyze it and turn it into useful information. This idea is closely related to the previous principle of having those who use the output of the process perform the process. The difference is the particular focus on information processing, which is often a major issue in administrative business processes. Having the same people collect the data and process it into information eliminates the need for an additional group to process and when necessary, reconcile data that they did not collect. This reduces the risk of introducing errors and presenting inaccurate information. An example is the traditional accounts payable department that receives and reconciles purchase orders and supplier invoices. Through electronic order and information processing, the need for invoices is eliminated. This increases the accuracy of the submitted information and renders much of the traditional reconciling work obsolete.

4. Capture the information once—at the source. Information should not be reentered several times into different computerized systems or have to move back and forth between electronic and paper format. To avoid errors and costly reentries, it should be collected and captured by the company’s computerized information system only once—at the source (i.e., where it was created). This idea is closely connected to principle 3 of merging information processing into the activity that gathers the data. The objectives in both cases are to speed up the process, avoid mistakes, and assure high information quality at a lower cost. A typical example that violates this principle of capturing the data at the source is given by the original claims processing process of the insurance company in Section 1.2.2. Information gathered by the independent agent is later rekeyed at the claims-processing center. Furthermore, the information was typically incomplete, forcing additional contact with the customer.

5. Put the decision point where the work is performed, and build control into the process. Case management compresses processes horizontally in the same way that employee empowerment compresses the organization vertically. Vertical compression occurs when workers make decisions in instances where they used to go up the managerial hierarchy for an answer. This principle encourages decision making to become part of the process instead of keeping it separate. An effective way to achieve this is to let workers assume some of the responsibilities previously assigned to management. Under the mass-production division of labor paradigm, the assumption is that workers have neither the time nor the inclination to monitor and control the work they are doing, and furthermore that they lack the knowledge to make decisions about it. Today, this assumption can be discarded, due to a more educated and knowledgeable work-force and the advent of decision support systems. Controls are made part of the process, reinforcing a vertical integration that results in flatter, more responsive organizations.

6. Treat geographically dispersed resources as though they were centralized. Moderninformation technology makes it possible to break spatial compromises through virtual colocation of individuals and work teams. This means that although they are sitting at different locations, employees can have on-line access to the same information and multiple media to support instantaneous communication. As a result, geographically disbursed resources should not constrain the design team to consider only decentralized approaches. This does not imply that a centralized structure is always the best alternative, but it leaves that door open for the design team despite potential spatial restrictions. Concrete examples of enabling technologies include GroupWare software, which facilitates parallel processing of jobs performed by geographically dispersed organizational units, intranets, and videoconferencing. The latter technology enables people at different locations to see the reactions and the body language of those with whom they communicate.

7. Link parallel activities instead of just integrating their output. An important cause of costly rework and delays in processes is related to situations where outcomes of parallel sequences of activities are being integrated or assembled. If any discrepancies or errors are detected in either of the outputs to be combined, the job is delayed and requires at least partial rework. The problem is compounded if detection of the problem is delayed.

The heart of the problem is that most processes that perform activities in parallel let these activities operate independently. Therefore, operational errors are not found before the integration activity is performed, resulting in the need for an excessive amount of additional resources for rework. Parallel activities should be linked and coor-dinated frequently to minimize the risk of realizing that major rework must be done at the integration step. To illustrate, consider the simultaneous construction of a tunnel through both sides of a mountain. Without continuous linking of the two parallel approaches, the risk is high that they will not meet in the middle as intended. The result is a costly rework project or two parallel tunnels through the mountain at twice the cost.

8. Design the process for the dominant flow, not for the exceptions. By focusing toomuch on the exceptions and special cases that could arise, the process design tends to be overly complicated. For example, some jobs might be so expensive or performed for such important customers that higher-level management believes it is necessary to inspect them. However, these exceptional cases do not imply that all jobs should be subject to management approval. An approval step should not be designed into the process unless it is needed for all jobs. An excellent example of a process suffering from too much focus on exceptional cases is the original process at IBM Credit Corporation discussed previously and in Section 1.1.2.

9. Look for ways to mistake-proof the process. To mistake-proof or fail-safe the process means designing it so that it becomes virtually impossible for certain mistakes or errors to occur. Due to its Japanese origins, mistake-proofing is also referred to as Poka-Yoke a well-known strategy for waste reduction and improvement in product and process design. Countless examples of this conceptually simple but somewhat elusive design principle can be cited: ATMs that start buzzing if you do not remove your card, self-flushing public toilets, templates that guide correct insertions of components, order-entry systems that will not accept incorrect part numbers, color-coded fields for data entry, on-line process documentation guiding work execution in real time, and personal digital organizers with sound reminders for important appointments.

A tenth principle, derived from the systems design theory (Van Gigch, 1978), can be added to the nine aforementioned principles.

10. Examine process interactions to avoid suboptimization. A process improvement developed in isolation for a distinct part of the overall process might seem effective in light of the particular subprocess in question. However, by neglecting interactions with other subprocesses and the effects on the overall process, an isolated improvement could easily result in a suboptimal design in the context of an enlarged horizon. Looking for improvements by analyzing only portions of the total process leads to what is known in general systems theory as disjointed incrementalism. To illustrate, consider the following example of suboptimization adapted from Hammer and Champy (1993).

 

A plane belonging to a major airline is grounded one afternoon for repairs at Springfield Airport. The nearest mechanic qualified to perform the repair works at Jamestown Airport. Joe, the maintenance manager at Jamestown, refuses to send the mechanic to Springfield that afternoon. The reason is that after completing the repairs, the mechanic would have to stay overnight at a hotel and the hotel bill would come out of Joe’s budget. Therefore, the mechanic is not dispatched to the Springfield site until the following morning, enabling him to fix the plane and return home the same day. This means that Joe’s budget is not burdened with the $100 hotel bill. Instead, a multi-million dollar aircraft sits idle, and the airline stands to lose hundreds of thousands of dollars in revenue. Joe is not foolish or careless; he is doing what he is supposed to do—namely, to control and minimize his expenses. Minimizing labor costs might be a worthwhile goal for the maintenance subsystem viewed in isolation, but it disregards the goals of the larger system—the airline, for which earning revenue is the overriding objective.

 

To conclude our discussion on the people-oriented and conceptual design principles, let us look at Figure 3.10, which summarizes the principles and some of the recurring themes and objectives that characterize them. Particularly, principles 1 through 4 have a common focus on horizontal integration of tasks into augmented activities, thereby eliminating handoffs, control points, and sources of errors. Horizontal integration also implies fewer activities to coordinate within the process at the price of increased task complexity within each activity. A key issue is then to have cross-trained personnel who can perform the tasks in an activity without formal coordination. Principle 5 complements the horizontal integration by focusing on the importance of vertical work integration and delegation of responsibility. Empowering workers eliminates formal control points and facilitates easier coordination through decentralization. Moreover, principles 6 through 10 focus on aspects of coordinating activities so that waste, rework, and other inefficiencies are avoided.

 

 

The aforementioned people-oriented and conceptual design principles can be complemented with seven somewhat more technical or flow-oriented design principles. These stem from the field of industrial engineering and are often referred to as work flow design principles. The principles are to: (1) establish a product orientation in the process, (2) eliminate buffers, (3) establish one-at-a-time processing, (4) balance the flow to the bottleneck³ (5) minimize sequential processing and handoffs, (6) schedule work based on its critical characteristics, and (7) minimize multiple paths due to specialized operations for exception handling. See Figure 3.11. Industrial engineers have applied these principles successfully to design of manufacturing systems for decades. In broad terms, they focus on achieving efficient process flows, managing resource capacities, maximizing throughput, and reducing cycle times. (See also Figure 3.11.) Detailed discussions of these important design principles are included in Chapter 4, where each will be investigated thoroughly together with relevant tools for implementation, quantitative modeling, and evaluation.

3.7 Step 7: Process Modeling and Simulation

Conceptual process designs must be tested before they are implemented. It is possible for the design to be flawed or to simply not deliver the intended outcomes. The design team uses test results to decide whether to proceed with the implementation phase or go back to the drawing board to revise the design. The iteration between design modifications and testing continues until the team is satisfied with the predicted performance of the new process.

The testing can be done through implementation of pilot projects as suggested by Roberts (1994). See Section 2.3.5. However, this is generally an expensive way to perform an initial assessment of the process performance. It also takes quite some time before enough data are available from the pilot to make a sound judgment of the effects of the new design. As a result, the design team is fairly restricted about how much testing can be done. Therefore, an attractive alternative is to use process modeling and quantitative tools for the initial testing. Among the available modeling tools, the most flexible and in many respects most powerful (although not always the most appropriate) is simulation. The advantage of using quantitative models to test the design is that it is much cheaper and faster than the pilot implementation approach. This means that the design team has much greater freedom in testing new ideas, which stimulates creativity and allows the team to arrive at better process designs. The drawback is that any model, by definition, is an approximation of reality, although it can never capture all aspects of it. Particularly hard to model are behavioral issues, which have to do with attitudes, resistance to change, and worker behavior—all factors that to a large extent are unknown before the implementation. Therefore, process modeling and simulation can never completely replace pilot testing, and vice versa. Rather, the two approaches complement each other. In terms of supporting the design team in developing a good blueprint for a process design, process modeling and simulation is a powerful approach. To finalize the design and explore behavioral issues, pilot testing is often a worthwhile step before moving on to a full-blown implementation.

The remainder of this section is devoted to a conceptual discussion regarding the usefulness of simulation, or more specifically, discrete event simulation for process modeling and evaluation. The technical aspects of discrete event process simulation and simulation modeling are thoroughly treated in Chapters 6 through 10.

In general terms, simulation means “to mimic reality in some way.” This can be done through physical models like wind tunnels or through computer-based models. Flight simulation is a well-known example of a computer-based model. Simulation in the context of process modeling actually refers to discrete computer event simulation. This is a technique that allows the representation of processes, people, and technology in a dynamic computer model. Process modeling and simulation as a concept consist of the following basic steps.

1. Building a simulation model of the process.
2. Running the simulation model.
3. Analyzing the performance measures.
4. Evaluating alternative scenarios.

The simulation model mimics the operations of a business process, including customer arrivals, truck deliveries, people missing work, and machines breaking down. This is accomplished by stepping through the events in compressed time, often while displaying an animated picture of the flow. While stepping through the events, the simulation software accumulates data related to the model elements, including capacity utilization of resources, number of jobs, and waiting times in buffers. The performance of the process can then be evaluated through statistical analysis of the collected output data. Although conceptually straightforward, successfully using simulation for process modeling and design requires some technical skills. We will examine these technical issues regarding process modeling and simulation in detail in Chapters 6 through 10.

One of the major strengths of simulation modeling as a tool for business process design is that it can help reduce the risks inherent in any type of change. The use of scenario-based what-if analyses enables the design team to test various alternatives and choose the best one. The result is that goals can be met in an efficient manner (Avni 1999). With regards to what-if analyses, the main advantages of simulation modeling over tests performed on the real system are that (1) it is done “off-line” without disturbing current operations, and (2) time is compressed in a simulation run. In a redesign effort, an existing process is observed and strategies are developed to change it to enhance performance. Testing such strategies on the real system would disturb daily operations and negatively impact results. In a simulation model, any strategy can be tested safely without upsetting the environment. Time compression can be used because in a simulation model, events are accelerated. By only considering the discrete events when something happens in the system, simulation can compress time and “advance the clock” much faster than it would occur in real time, enabling the analyst to examine longer time horizons. Depending on the size of the model and the computer’s capabilities, several years can be simulated in minutes or even seconds.

Another risk that simulation can help mitigate is that of suboptimization. As the simulation model encompasses various processes, analysts can study how these processes interact and how changing one process impacts the others. For example, in a manufacturing facility, maximization of the output of a group of machines can increase inventory in the assembly area. However, a simulation model containing machining and assembly information can be used to optimize the overall output and inventory.

As mentioned, simulation modeling also promotes creativity and thereby leads to better designs. With the low cost of testing a new design at virtually no risk, people are less reluctant to participate in the design process and to pitch in new ideas. The flow of ideas gains momentum, and soon a brainstorm session produces a much-needed shower of creativity.

In relation to other quantitative tools, a major strength of simulation modeling is its ability to capture system dynamics. Random events such as equipment breakdowns and customer arrivals are modeled by using probability distributions. As the simulation advances in time, the embedded distributions are sampled through the use of random-number generators. Hence, the dynamic interaction among system elements is captured. For example, two workstations in a sequential flow might break down at the same time and cause no inventory accumulation between them; however, the occurrence of stop-pages at different times might cause significant blockage or idle time and reduce output. In other words, when something happens can be as important as what happens.

Another interesting aspect of simulation that is directly related to the simulation software available today is its ability to provide animation to help visualize the process operations. Through the use of animation, ideas come alive. Equally important are the multitude of other graphical tools enabling dynamic reporting of results and trends. Time series, histograms, and pie charts are some of the dynamic reporting features of most simulation software packages today. These features help simulation modeling enhance communication. At the same time, the quantitative nature of simulation reporting brings objectivity into the picture. Improvement initiatives can be compared and prioritized. Subjective statements such as “That idea will never work” or “We don’t know how much improvement we will obtain” can be put to rest.

To conclude this discussion on the usefulness of simulation modeling, consider as an example a team in charge of redesigning the customer service process of a call center. A simulation model could help the design team capture the dynamics of the system. This is done by incorporating into the model the random nature of calls arriving at the center and the time it takes to serve each of these calls. The model also can capture the process structure, including the interdependencies among customer representatives and the alternative routing schemes. With the model in place, it is easy for the design team to test different scenarios and new ideas for improving the process performance. Particularly, it can assist in determining staffing levels, telecommunications technology requirements, and operational policies.

3.8 Step 8: Implementation of the New Process Design

As indicated in the introduction to this chapter, a detailed discussion of implementation issues and challenges is beyond the scope of our framework for business process design projects. However, the design project cannot be considered in complete isolation from the subsequent implementation step. When selecting the process to be designed (or redesigned), the implementation strategy is an important factor, because clearly, designing a process that will never be implemented is pointless. Crucial criteria in this respect are time, cost, improvement potential, and likelihood of success. In this section, we discuss some high-level implementation issues that can have a direct bearing on these issues and thereby on the process design project as a whole.

As discussed in Chapter 2, the implementation strategy or change tactic can be identified conceptually as revolutionary, evolutionary, or on a continuum in between. For a more detailed discussion of the characteristics of revolutionary and evolutionary change, see Section 2.4. However, in broad terms, a revolutionary implementation approach means rapid change with high costs, primarily caused by the need for external resources. It also implies a high potential for quick, dramatic improvements, as well as a high potential for failure. It requires a committed and decisive CEO and management team that can make harsh decisions to force the change through the organization.

An evolutionary change tactic typically requires a longer time horizon and does not offer the same potential for dramatic improvements in the short run. On the other hand, the costs are lower because the change is achieved primarily by using internal resources. An evolutionary approach also gives the organization time to adapt and embrace the change gradually. This reduces the risk of organizational collapse and destructive behavior, making it more likely that the introduced changes will last. The extended time horizon requires long-term management commitment to keep the vision alive. It also implies that the original blueprinted design probably will need to be revised as market conditions change. In other words, the original design is viewed as an ideal that typically needs to be modified in accordance with restrictions identified during implementation and considered too expensive to remove.

Regardless of the chosen implementation strategy, leadership is critical for success. Any form of significant change necessitates continued engagement on the part of senior executives and senior management. (See, for example, Sections 2.2 through 2.5.) Often, the design team, or part of it, also has the responsibility for implementing the new designs. This is particularly true in reengineering projects. However, support and buy-in from line managers are crucial pieces for successful implementation, given that these managers are accountable for delivering the expected improved performance. Training employees in supplemental skills needed in the new process is also important for successful implementation. Recall that many of the conceptual design principles discussed in Section 3.6.2 involve horizontal and vertical compression of work and responsibilities, which are contingent on workforce capabilities.

As a final note related to the discussion of the importance of measuring progress in Sections 2.1 and 2.2, after the implementation is completed, it is important to assess the effects of the change. When measuring the overall effects, the performance of the new process can be compared to that of the old process before the change. However, the new design also can be compared to the objectives specified in the beginning of the design project, many of which should be included in the mission statement. (See Section 3.1.) A comparison with the performance of the old process shows the effects compared to the status quo, and a comparison against the stated objectives gauges the performance against the specified goals.

It is also important to reflect on what can be learned from the process design and the implementation of projects. What worked, what did not, and why? What were the main challenges? What design ideas did not work out in practice and why not? If the implemented design is different than the original blueprinted design, simulation can be used to assess how far from the performance objectives this ideal design is. It is also important to ask why the blueprinted process design was not fully implemented. Was it because of flaws in the blueprinted design, which made it impossible to implement, or because of mistakes made in the implementation phase? This feedback is invaluable information for improving the activities related to designing and implementing a new process. Recall from Section 2.2 that an important activity in Six Sigma is for the improvement teams to share their experiences and success with the rest of the company, thereby transferring knowledge and maintaining momentum for change.

3.9 Summary

This chapter introduced a framework for structuring business process design projects, particularly emphasizing the usefulness of process modeling and simulation for analysis and evaluation of new process designs. The framework consists of eight major steps or issues that typically need to be addressed in process design projects. They range from the strategic vision of what needs to be done to the final blueprint of the new process design. (See Figure 3.12.) The framework also includes high-level implementation concerns. However, the detailed implementation issues are outside the scope of the framework and the process design project as defined here.

 

The framework starts at a strategic level with the case for action and vision statements. The former explains why it is necessary to change, and the latter specifies where to go and includes concrete, measurable objectives. These objectives provide a direction for the entire design project and in many cases also for the subsequent implementation project. After the overall objectives are in place, the next steps are to identify and select the process that needs a new design, and to obtain management commitment for the design project as well as for the subsequent implementation. Having chosen the process and secured management support, the actual design activities can begin with investigating potential design enablers and acquiring an understanding of the process to be designed. The most common enabler for new process designs is new (information) technology. Process understanding has two main elements: understanding what the process is supposed to do as defined by customer needs and desires, and understanding what the process is currently doing, if a process exists. A potential source of information for gaining process understanding as well as for generating design ideas and stimulating creativity is business process benchmarking.

With a profound understanding of available design enablers and the process to be designed, the design team must leverage its creativity to develop a new conceptual design. Ten general design principles were outlined that can help stimulate the team’s creativity and provide some guidance, but these are not set rules or a recipe for success. Common themes through the conceptual design principles are horizontal and vertical work integration and the use of information technology to improve coordination and avoid suboptimization of the process. This chapter also looked briefly at seven more technical and flow-oriented design principles to be investigated further in Chapter 4.

Having conceived a new conceptual design, the design team needs to test it to see if it will perform as intended and meet the stated objectives. Process modeling and simulation represent powerful methods for numerical evaluation of a given design. With them, it is easy to perform what-if analyses and test new ideas. Advantages compared to testing on the real-world system include low cost, no disturbance of current operations, and speed. It is important to recognize that to leverage the full potential of process modeling and simulation, it needs to be used interactively by the design team to test new ideas and to stimulate creativity.

3.10 References

Avni,T. 1999. Simulation modeling primer. IIE Solutions 31(9): 39—41.

Camp, R. 1995. Business process benchmarking. Milwaukee, WI: ASQ Quality Press.

Champy, J. 1996. Reengineering management—The mandate for new leadership. New York: Harper Business.

Chase, R. B., N. J. Aquilano, and F. J. Jacobs. 1998. Production and operations management: Manufacturing and services, 8th edition. New York: McGraw-Hill/Irwin.

Cohen, S. L. 2000. The supermarket in 2010. IIE Solutions 32(4): 38-41.

Cross, K. F., J. J. Feather, and R. L. Lynch. 1994. Corporate renaissance: The art of reengineering. Cambridge, MA: Blackwell Business.

Davenport, T, and N. Nohria. 1994. Case management and the integration of labor. Sloan Management Review (Winter): 11-23.

Hammer, M. 1990. Reengineering work: Don’t automate, obliterate. Harvard Business Review 71(6): 119-131.

Hammer, M., and J. Champy. 1993. Reengineering the corporation: A manifesto for business revolution. New York: Harper Business.

Hyer, N., and U. Wemmerlov. 2002. Reorganizing the factory: Competing through cellular manufacturing. Portland, OR: Productivity Press.

Lester, D. 1994. Reengineering methodology and case study. In Beyond the basics of reengineering: Survivaltactics for the 90’s. Norcross, GA: Industrial Engineering and Management Press.

Lowenthal, J. N. 1994. Reengineering the organization: A step-by-step approach to corporate revitalization. Milwaukee, WI: ASQC Quality Press.

Roberts, L. 1994. Process reengineering: A key to achieving breakthrough success. Milwaukee, WI: ASQC Quality Press.

Robinson, A. 1991. Continuous improvement in operations: A systematic approach to waste reduction. Cambridge, MA: Productivity Press.

Tumay, K. 1995. Business process simulation. In Proceedings of the 1995 Winter Simulation Conference, http://www.informs-cs.org/wscpapers.html, editors C. Alexopoulos, K. Kang, W. R. Lilegdon, and D. Goldsman, 55-60.

Van Gigch, J. P. 1978. Applied general systems theory, 2d edition. New York: Harper and Row.

3.11 Discussion Questions and Exercises

1. Telsol, a telecommunications company, faces new competition in the local telephone service industry due to deregulation. The company operated as a monopoly for many years, but now it has to compete for customers in the local market. Cable TV companies have started to offer telephone services using their existing coaxial cable and are quickly gaining market share. Telsol can no longer afford to irritate customers, because these customers are now able to obtain telephone services from other companies. Executives at Telsol believe that the quality of service must increase drastically to avoid losing many of Telsol’s customers. Customers have identified two critical service areas: (1) response to repair calls, and (2) response to requests for new lines. Currently, repair calls take an average of 4 days (from the time the call is received until the repair job is completed) to satisfy. Requests for new lines are currently taking an average of 7 days to fulfill. This is the average elapsed time from when the request is made until the new line is operational.

   Telsol would like to redesign its processes and dramatically improve its efficiency (especially in the aforementioned service areas). Write a vision statement and a case for action that Telsol could use to launch a redesign project.

2. Customer relationship management (CRM) has emerged as one of the hottest applications in business software. It has been defined as a “horizontal business strategy that focuses on customer-facing portions of business processes.” CRM software is designed to integrate a company’s sales, marketing, and customer support functions in order to serve the customer better, while at the same time making the information available throughout the organization. Search the Web for an application of CRM software that enabled a company to achieve higher levels of customer service and improve profitability while redesigning key business processes.
3. What are some of the important considerations when selecting a process for a design project? How might the scope of the process influence the relative importance of the criteria used? Are all processes with poor performance top candidates for redesign? How does this relate to the discussions regarding differences between incremental continuous improvement and process design in Chapters 1 and 2?
4. In most improvement programs, top-management commitment is emphasized as a key success factor. Why do you think this is? Is the role of top management different in a situation with a revolutionary implementation strategy than it would be under an evolutionary change tactic? How?
5. What is the difference between process design or redesign and automation?
6. Explain in your own words the difference between inductive and deductive thinking.
7. Give an example of the application of the following disruptive technologies in a setting familiar to you.
   1. Shared databases
   2. Wireless communications
   3. Handheld computing
8. What are the main issues in understanding a process? Are there any differences between a design project and a redesign project? How does the concept of “analysis paralysis” fit in?
9. Discuss how benchmarking can be a useful tool in business process design projects.
10. Discuss the difference between stated and real (or hidden) customer needs. Why is this distinction important in the context of business process design? Give an example.
11. Identify similarities and differences among the 10 conceptual design principles discussed in Section 3.6.2. How would you summarize the underlying ideas or themes? Do the principles make sense? Why or why not?
12. Describe a potential application of case management in the following organizations:
    1. Dell Computers
    2. A telecommunications company
    3. A community hospital
13. Discuss the advantages and disadvantages of using quantitative process modeling and simulation for testing new designs. How would you relate process modeling and simulation to pilot tests on the real system?