Business Process Modeling, Simulation and Design

Manuel Laguna, Johan Marklund

• Publisher: Chapman and Hall/CRC
• Year: 2018
• ISBN:
  9781351667258
• Edition: 3
• Topic: Business
• Subtopic: Financial Accounting
• Index: Business

Business Process Modeling, Simulation and Design, Third Edition provides students with a comprehensive coverage of a range of analytical tools used to model, analyze, understand, and ultimately design business processes.

The new edition of this very successful textbook includes a wide range of approaches such as graphical flowcharting tools, cycle time and capacity analyses, queuing models, discrete-event simulation, simulation-optimization, and data mining for process analytics.

While most textbooks on business process management either focus on the intricacies of computer simulation or managerial aspects of business processes, this textbook does both. It presents the tools to design business processes and management techniques on operating them efficiently.

The book focuses on the use of discrete event simulation as the main tool for analyzing, modeling, and designing effective business processes. The integration of graphic user-friendly simulation software enables a systematic approach to create optimal designs.

1

Introduction to Business Process Design

Booming competition in an increasingly global marketplace leaves no room for successful companies to harbor internal inefficiencies. Even more importantly, customers are becoming more demanding; if one product or service does not live up to their expectations, there are many more from which to choose. The stakes are high, and so is the penalty for not satisfying the right customers with the right products and services. The quest for internal efficiency and external effectiveness means that organizations must align their internal activities and resources with the external requirements, or to put it differently, business processes must be designed appropriately. To that end, the main objective of this book is to provide the reader with a comprehensive understanding of the wide range of analytical tools that can be used for modeling, analyzing, and ultimately designing business processes. Particular emphasis is placed on discrete event simulation, as it represents one of the most flexible and powerful tools available for these purposes. However, an important message is to choose tools that are appropriate for the situation at hand, and simulation is not always the best choice.

Before investigating the different analytical tools in Chapters 4 through 11, we need to understand what business processes and process design are all about. To that end, this first chapter provides a general discussion and definition of business processes and business process design. Important concepts include process hierarchies, process architecture, and incremental process improvement versus process design. Moreover, an important distinction is made between the activities of designing a process and implementing the design; the former being the focus of this book.

This introductory chapter also discusses the importance of business process design for the overall business performance and the organization’s business strategy. An interesting question is why inefficient and ineffective business processes come to exist in the first place.

Chapter 2 deals with the important issues of managing and improving processes, including challenges of implementation and change management. Chapter 3 then discusses a framework for structuring business process design projects. This can be construed as a road map for the remaining eight chapters of this book, which focus on tools and modeling.

1.1 What Is a Business Process?

From a pragmatic point of view, a business process describes how something is done in an organization. However, for a more in-depth analysis and design of business processes, the theme of this book, further examination is needed.

Let us start by dissecting the words business and process. Most people probably would say that they have a clear notion about what a business is. In broad terms, we will define a business as “an organizational entity that deploys resources to provide customers with desired products or services.” This definition serves our purposes, because it encompasses profit-maximizing firms and supply chains, as well as nonprofit organizations and governmental agencies.

A process is a somewhat more ambiguous concept with different meanings, depending on the context in which it is used. For example, a biologist or medical doctor refers to breathing as a life-sustaining process. In mathematics or engineering, the concept of random or deterministic processes describes event occurrences. In politics, the importance of election processes is obvious, in education a key concept is the learning process, and so on. Merriam Webster’s Dictionary defines process as (i) a natural phenomenon marked by gradual changes that lead to a particular result, (ii) a continuing natural or biological activity or function, or (iii) a series of actions or operations conducing to an end. The last of these definitions is of particular interest, as it leads into the traditional high-level definition of a process used in the operations management literature, illustrated in Figure 1.1: A process specifies the transformation of inputs to outputs. The transformation can be of many different forms, but a broad classification into four different types is commonly used:

• Physical, for instance, the transformation of raw materials to a finished product

• Locational, for instance, the transportation service provided by an airline

• Transactional, for instance, banking and transformation of cash into stocks by a brokerage firm

• Informational, for instance, the transformation of financial data into information in the form of financial statements

The simple transformation perspective, illustrated in Figure 1.1, forms the basis for the so-called process view of an organization. According to this perspective, any organizational entity or business can be characterized as a process or a network of processes.

FIGURE 1.1
The transformation model of a process.

The process view makes no assumptions about the types of processes constituting the organization. However, often, a process is automatically thought of as a manufacturing or production process. We employ the term business process to emphasize that this book is not focusing on the analysis and design of manufacturing processes per se, although they will be an important subset of the entire set of business processes that define an organization. Table 1.1 provides some examples of generic processes other than traditional production/manufacturing processes that one might expect to find in many businesses. For the remainder of this book, the terms process and business process will be used interchangeably.

Table 1.1
Examples of Generic Business Processes Other Than Traditional Production and Manufacturing Processes

Accounts payable	Inventory management
Accounts receivable	Order fulfillment
Admissions (e.g., hospitals and universities)	New employee training
Auditing	Performance appraisal
Billing	Product approval (e.g., pharmaceuticals)
Budget planning	Product development
Business planning	Purchasing
Client acquisition	Receiving
Continuous improvement	Shipping
Credit approval	Vendor certification
Human resource planning and hiring	Warranty and claims processing

The simple transformation model of a process depicted in Figure 1.1 is a powerful starting point for understanding the importance of business processes. However, for purposes of detailed analysis and design of the transformation process itself, we need to go further and look behind the scenes, inside the “black box,” at process types, process hierarchies, and determinants of process architecture.

1.1.1 Process Types and Hierarchies

Based on their scope within an organization, processes can be characterized into three different types: individual processes, which are carried out by separate individuals; vertical or functional processes, which are contained within a certain functional unit or department; and horizontal or cross-functional processes, which cut across several functional units (or, in terms of supply chains, even across different companies). See Figure 1.2 for an illustration.

FIGURE 1.2
Illustration of individual, vertical, and horizontal processes.

It follows that a hierarchy exists between the three process types in the sense that a cross-functional process typically can be decomposed into a number of connected functional processes or subprocesses, which consist of a number of individual processes. Moving down even further in detail, any process can be broken down into one or more activities that are comprised of a number of tasks. As an illustration, consider the order-fulfillment process in Figure 1.2, which in its entirety is cross functional. However, it consists of functional subprocesses (e.g., in the sales and marketing departments) that receive the order request by phone, process the request, and place a production order with the operations department. The order receiving itself is an activity comprised of the tasks of answering the phone, talking to the customer, and verifying that all necessary information is available to process the order. If we assume that the order-receiving activity is performed by a single employee, this constitutes an example of an individual process.

In terms of process design, cross-functional business processes that are core to the organization and include a significant amount of nonmanufacturing-relat...