BA 302 - Process Reconstruction & Information Flows

BA 302 - Process Modeling

Learning outcomes:

Break down the cycle time of a process in its various time components.

Characterize these time components as value added and nonvalue added.

Learn how to model a process with charts and recognize different chart types.

Learn the core characteristics of models.

Identify process bottlenecks and waste.

Learn how to model processes with activity diagrams.

Recall from Fitzsimmons & Fitzsimmons Ch. 3: Business processes MUST support the business strategy:

Select or determine processes for improvement/alignment.

Carefully manage their execution.

This implies measuring their performance and cost.

Continuously improve or, if needed, redesign: Business Process Reengineering (BPR)

Improved quality.

Better customer experience.

Better worker experience.

Overall: better use of space, time and other resources.

==> better product(s), higher productivity, lower cost.

==> competitive advantage.

To be able to evaluate and assess a process, we must measure it:

First, model the process; e.g., Arnold Palmer Hospital video (7 minutes).

Determine process performance measures:

inputs, outputs.

time: up/down time; idle/slack time, etc.

yield; scrap; overages; stockouts.

quality.

Problem: what would be some of Netflix's process performance measures?

Measure.

Problem: How would Netflix measure its measures?

Study the results and modify the process if needed ==> (continuous) feedback loop (Refer to DMAIC in the upcoming lectures on 'quality'!!)

Some common process performance measures:

Cycle time: total time a process takes from begin to end.

Cycle time = setup time + wait time + move time + queue time + process time + other time:

Setup time: time needed to change existing capacity so it can accept and process the new work. Examples?

Wait time: job is waiting for the next process step to start. Examples?

Move time: job has to be physically moved elsewhere. Examples?

Queue time: job is waiting on another job ahead of it to complete. Examples?

Problem: difference between wait time and queue time?

Process time: job is being worked on.

Note: typically, !!only process time adds value!! ==> strive to reduce nonprocess time to zero.

Problem: How do we characterize the time a cheese, wine, whiskey or cognac sits waiting in a cellar, sometimes for years, to ripen?

Problem: As you go for a flu shot, the nurse asks you to fill out a form listing any sort of allergies you might have. You must wait a bit for the nurse to check on the results. What sort of time is this wait?

Problem: When new wind turbines are added to the wind tower field in northern California, their parts get loaded on a truck at the manufacturing site in Oregon after which they get shipped to the California site where they are assembled. What would we call the trucking time?

Process modeling is standard in industrial engineering.

Often neglected in services ==> great potential for process improvement (and hence, productivity) in services.

Information technology as process improvement enabler.

Magal & Word, Ch. 1:

p.4: "Global competition puts pressure on companies to be more efficient and productive. ...they must develop strategies to tightly integrate their operations."

Operational processes are often rather complex:
- Metters et al. pp. 162-163: Blockbuster video checkout process.
- Magal & Word Chs. 3, 4, 5: Procurement, Fulfillment, Production.
- Complexity involves:
  - Lots of parts, components & subsidiary jobs.
  - Lots of partners; e.g., suppliers/customers.
  - Multiple components of the functional organizational structure (M&W pp. 9-10) (cross-functional processes):
Lack of formal descriptions makes it hard to know how processes interact and link to each other.

We know that some things are broken, but we don't know the underlying causes.

We want to improve things, but we don't know how or where to start.

Problem: Are broken processes common? Do you have any experience with broken or poorly functioning processes?

Problem: Why is this happening? Why are so many processes not functioning properly?

Processes grow organically and incrementally.

Exceptions become new rules.

Unawareness of effects up and down the value chain.

Lack of process control and oversight.

Lack of performance data and metrics.

Organizational inertia.

Etc.

Magal & Word: We need information systems that coordinate the flow of information between the various parts of the organization ==> Enterprise Resource Planning (ERP) systems.

But first, we need process models:

Problem: what's a 'model?'

Problem: when is a model a 'good' model?

Good correspondence.

Parsimony.

Problem: what does a good process model do for us?

Provides insight into the complexity of processes.

Shows actors, actions and information exchanges.

Provides a common (shared) 'language' and symbolism ==> provides common understanding (intersubjectivity).

Easier to find opportunities for improvement.

Documents the process ==> persistent record of the process.

Types of process models:

Process Flow chart:

Service blueprint: separates customer-facing from noncustomer-facing process components (Metters et al., Figure 5.4, p. 84).

Process charts: integration of time, space, and activity types:

Magal & Word (naive) activity diagrams: e.g., Fig. 1.5

Process in two dimensions: actors on the horizontal (swim lanes); time on the vertical.

Actor/time points show when an actor is involved in the process.

Different symbols for different actions & results; e.g., activities. decisions, documents, delays, etc..

Actions can be refined in sub-diagrams.

However, in the Magal & Word examples, sequences of actions and results not clear enough.

e.g., Fig 1.5 is rather (too) abstract; must show more detail.

Some comments on Magal & Word:

Are interested in managing complexity, not process improvement (automation rather than process change).

==> don't model beyond the narrative.

Their interest: complexity management through the use of information technology (ERP).

Do a nice job describing standard business production; e.g., procurement (Ch. 3), fulfillment (Ch. 4), production (Ch. 5).

Nicely show how centralized information systems can coordinate and manage all information exchanges.

We will return to this issue of managing existing complexity vs. business process reengineering when we discuss Magal & Word Ch. 2.

Towards a better activity diagram. Example process: ABC Manufacturer:

Process description:
1. ABC's Purchasing department writes a Purchase Order (P.O.).
2. ABC's Purchasing department mails (snail mail) a copy of the P.O. to its supplier.
3. The Purchasing department sends a paper copy of the P.O. to ABC's Accounts Payable department.
4. The Supplier delivers materials to ABC's Material Receiving department.
5. The Supplier mails (snail mail) an invoice to ABC's Accounts Payable department.
6. ABC's Material Receiving department delivers a paper receipt of the delivery to the Accounts Payable department.
7. The Accounts Payable department manually checks if 14 data items associated with the receiving document, the P.O., and the invoice all match up.
8. If all 14 data items match, the Accounts Payable department mails (snail mail) payment to the Supplier.
Notes on the process:
- Several actors (cross-functional processes).
- Fair amount of paper documents involved.
- Information exchanges between actors.
- Same actor can have multiple actions, separated in time.
- Process follows a specific sequence of actor/action combinations.
- Accounts Payable must make a decision (to pay or not to pay).
- Decision depends on required information being available.
Activity diagram (Magal & Word: physical flow & document flow):

Actions or activities (rectangles); decisions (diamonds); paper documents (wavy rectangles). For full set refer to Flowchart Symbols:

Activity
Paper document
Computer-
based data Decision
Delay
Continue on
next page
Connector or
stop Inventory
External
data
Setup
Information or
material flow

next page

----->

Notice how actors appear multiple times in the process.

Relation between actor's multiple activities and process easy to see.

Notice how the time lines indicate when actors engage in the process and when documents are generated.

Problem: What is the information's form (data type) in each of the ABC company process steps? Text? Number? Date? Boolean (Yes/No)? Something else?

Is this information transient (used once, then discarded) or persistent (must be kept)?

Problem: Careful study of an activity diagram makes you ask good questions; e.g., Does or doesn't the Purchasing department still have a copy of the purchase order? If so, is it in paper or electronic form?'

Problem: Make an activity diagram (physical & document flows) of SSB's procurement process (Magal & Word, Ch. 3). Make sure that your activity diagram tracks all documents and document exchanges. For two or three documents that are part of the procurement process, specify the associated data.

ABC company automates:

ABC Company decides that the current procurement process is inefficient and error prone. It decides to automate all internal(!) procurement.

e.g., Although Purchasing still sends a paper copy of the P.O. to its supplier, internally the P.O. is stored centrally in a computer system. ==> Activity diagram for steps 1, 2 and 3 of ABC's automated process.

Includes the Information System as an actor !!!

Replaces (some) paper documents with electronic data

Notice how Accounts Payable retrieves the PO from the information system at the time of checking.

Homework

Test Questions

What is 'cycle time' and what are its components?

what's the difference between waiting time and queue time?

Can you, for any service business process, recognize its cycle time and its cycle time's components?

What do we mean with the term 'business process modeling?' What constitutes a good business process model?

What are some of the benefits of business process modeling?

What sort of things can we learn from an activity diagram that we do not learn from a process flow diagram?

Recall ABC Company's procurement process above. After spending some time studying its procurement process, ABC Company decides to automate its internal(!!) information exchanges and storage with a computerized information system. Information exchanges with the Supplier will remain based on snail mail.
In the notes above, you find a diagram of the automated steps 1-3 of the process. Complete the diagram of the process AFTER(!!) the reorganization of the business process has taken place.