CHAPTER 1 Business Process Modeling With SIMPROCESS

Understanding what a business does and how it does it requires documenting the inputs, processes, outputs, and resources. This is called process mapping. Process mapping combines the simplicity of flowcharting with the documentation features of word processing.

Typically, executives and managers of industrial and service enterprises have managed their businesses by executive summaries and organizational charts without understanding the processes and their performance. However, executives and managers who are successful now are the ones that understand their business processes in detail. Process mapping includes several missing pieces from the organizational chart: the customers, the products, and the workflow. Process mapping shows how work actually gets done, which is through processes that cut across functional boundaries. The definition of boundaries provides managers with ability to define customer-supplier relationships through which products and services are produced.

Process simulation is the technique that allows representation of processes, people, and technology in a dynamic computer model. There are essentially four steps in doing business process simulation. They are: 1) building a model, 2) running a model, 3) analyzing the performance measures, and 4) evaluating alternative scenarios. A model, when simulated, mimics the operations of the business. This is accomplished by stepping through the events in compressed time while displaying an animated picture of the flow. Because simulation software keeps track of statistics about model elements, performance metrics can be evaluated by analyzing the model output data.

Re-engineering gurus, Michael Hammer and James Champy, note in their book that only about 30 percent of the re-engineering projects they have seen were successful. One of the primary reasons for this low success rate is that often the analysis behind performance estimates of re-engineered processes have been prepared with flowcharts and spreadsheets. Business processes are much too complex and dynamic to be understood and analyzed by flowcharting and spreadsheet techniques. Although flowcharts and spreadsheets are adequate in answering "what" questions, they are inadequate for answering "how," "when," or "where" questions. This has resulted in overly optimistic performance benefits such as cost savings, throughput and service level increases that were promised by BPR (Business Process Reengineering).

These principles clearly offer answers to the question of "What needs to be done?" to achieve the desired BPR objectives. But, re-engineering business processes involves changes in people, processes and technology over time. The key phrase here is "over time." The interactions of people with processes and technology over time result in a large number of scenarios and outcomes that are impossible to comprehend and evaluate without the help of a computer simulation model. This is where simulation provides the greatest value for achieving BPR objectives. By tweaking decision variables in a model without the cost and risk of disrupting existing operations, or building a new system, one can accurately predict, compare, or optimize the performance of the re-engineered process.

For example, the BPR professionals, who are designing the customer service process for a call center, must understand the random nature of calls arriving at the center, the random nature of processing times, the interdependencies between customer representatives, the alternative routing schemes. They must take into account the dynamic nature of these behavior in a model. If the performance goal is to achieve 100 percent service level or eliminate customer waiting times, a simulation of the process is absolutely necessary to accurately determine staffing requirements, telecommunications technology requirements, and how services are provided to the callers.

Activity Based Costing (ABC) is a technique for accumulating cost for a given cost object (i.e. product, service, customer) that represents the total and true economic resources required or consumed by the object. Activity Based Costing occurs in two phases. First, cost data is reorganized into activity cost pools. In other words, costs of significant activities are determined. This first phase is sometimes referred to as activity based process costing. Then, the amounts in the cost pools are assigned to products, services or other cost objects. The second phase is referred to as activity based object costing.

The goal of ABC is to model the causal relationships among resources, activities, and entities in assigning overhead costs. "The fundamental belief behind this costing approach is that cost is caused and causes of cost can be managed. The closer you can come to relating the costs to their causes, the more helpful your accounting information will be in guiding the management decisions of your business." states the Ernst & Young Guide to Total Cost Management (Ernst & Young, 1992). Enterprises use resources to conduct activities. Resources perform activities to benefit products and services. The key to understanding cost dynamics in any enterprise is modeling the relationship between activities and their causes; and the relationship between activities and costs. If cost dynamics are not modeled (which is usually the case with traditional management accounting information systems), the performance information provided is incomplete or misleading.

SIMPROCESS is a hierarchical and integrated process simulation tool that radically improves productivity for process modeling and analysis. SIMPROCESS is designed for BPR and IT professionals of industrial and service enterprises who need to reduce the time and risk it takes to service customers, fulfill demand, and develop new products.

Unlike other tools, SIMPROCESS integrates process mapping, hierarchical event-driven simulation, and activity-based costing into a single tool. The architecture of SIMPROCESS provides an integrating framework for ABC. The building blocks of SIMPROCESS, namely processes, resources, and entities (flow objects), bridges ABC and dynamic process analysis. ABC embodies the concept that a business is a series of inter-related processes, and that these processes consist of activities that convert inputs to outputs. The modeling approach in SIMPROCESS manifests this concept, builds on it by organizing and analyzing cost information on an activity basis.

SIMPROCESS is the first integrated tool that is specifically designed for business process modeling and analysis. SIMPROCESS combines process capture and event-driven simulation with activity-based costing. Here are some of the other features that distinguish SIMPROCESS from other modeling and analysis tools.

SIMPROCESS is based on Java and XML (Extensible Markup Language). These underlying technologies provide hierarchical and event-driven simulation capabilities for modeling large scale applications. Unlike the hierarchical representations of processes using attached diagrams or files, SIMPROCESS offers true hierarchy based on object-orientation.

The breakthrough activity-based modeling paradigm and resource constructs of SIMPROCESS offer a natural fit for its powerful activity-based costing engine., Activity-based costing is designed into SIMPROCESS, unlike other simulation tools, providing automatic cost reports. One of the major challenges in successful implementation of ABC is finding the appropriate level of detail for the business process analysis. The organization of business processes is critical to reorganizing the cost data into activity pools. The hierarchical modeling approach of SIMPROCESS facilitates this organization and accommodates varying levels of detail for ABC analysis.

Some of the process modeling tools require learning a new methodology such as IDEF or systems dynamics. SIMPROCESS provides a flexible process modeling environment that is adaptable to any methodology. The process documentation features of SIMPROCESS are far superior to typical flowcharting or simulation tools because it is specifically designed for business process modeling and analysis.

SIMPROCESS utilizes a breakthrough activity-based modeling paradigm. Real-world behavior of activities such as copying, assembly, transformation, batching, and branching are built into SIMPROCESS. These activities can be connected or embedded into processes using simple flowcharting techniques making process documentation quick and meaningful. These built-in activity blocks can even be customized to represent the operational characteristics of the business processes.

Reusable templates can be created from the basic building blocks and activities of SIMPROCESS. These templates can be saved in a library and made available to a cross functional team for reuse. This capability is a tremendous advantage for organizations that want to capture and maintain the most valuable asset of a business - the process knowledge.

Most BPR tools that provide simulation functionality use simplistic modeling constructs. When modeling the dynamics of real-world business processes, powerful functions such as attributes, expressions, and IF-THEN-ELSE logic are needed. SIMPROCESS provides these advanced modeling functions and eliminates the limitations of simplistic tools.

Accurate resource modeling requires model building blocks that define the shared and consumable behavior of real-world resources. The powerful SIMPROCESS resource engine has flexible allocation schemes that provide realistic representation of real-world resource behavior.

SIMPROCESS contains links to other tools. This suite of tools can be used to fit input data to a distribution and to analyze the results from multiple simulation runs. ModelFit is used to automatically fit distributions to sample data during a simulation. ExpertFit is a Windows only comprehensive data analysis tool developed by Averill M. Law & Associates. It can be used to fit analytical distributions to user data. Also, simulation results can be exported to a MS Access database for detailed analysis.

SIMPROCESS runs under Windows and Linux operating systems. (See "Hardware and Software Requirements" on page 26.) Models are fully compatible across platforms-providing the flexibility to run large simulations on faster computers and take advantage of existing hardware. As hardware and operating system technology moves forward, SIMPROCESS will take advantage of them.

Because SIMPROCESS is an integrated process capture and analysis tool, it eliminates the need to purchase multiple products from multiple vendors. This combined with the availability of reusable templates significantly reduces the cost of product ownership over time.

Significant value of the ABC analysis in SIMPROCESS comes from the dynamic analysis of costs based on the event-driven simulation. Because SIMPROCESS keeps track of resource interdependencies and captures the random nature of processes, the cost statistics provided by SIMPROCESS are far more accurate than results obtained from static analysis. Benefits of ABC in SIMPROCESS:

One of the most important benefits of ABC is the focus it provides for estimating the key causes of costs. Executives can use these estimates to prioritize and monitor improvement efforts. For example, understanding the cost of poor quality can justify the investment in a quality program. Likewise, understanding the cost of complex or diverse products and services can help streamline the product and service offerings.

Life cycles of product and services are becoming shorter and shorter. The up-front costs of developing, testing, and marketing are not recouped until revenue is generated. Understanding the cost trade-off between life cycle stages is critical to strategically pricing the products. That is, understanding when the total investment in product development can be recouped is valuable information for strategic pricing. ABC with SIMPROCESS allows simulation of the process changes during the life cycle of a product/service for strategic or time-based pricing.

Reengineering business processes requires a trade-off between the benefits and costs of making process improvement changes. Without the trade-off, executives and managers are faced with making large investment decisions based on gut feel. ABC with SIMPROCESS provides an analytical tool for accurate evaluation of capital investments.

The Professional edition contains all the features and capabilities of SIMPROCESS. There are no limits on model size for models built with SIMPROCESS Professional. The University edition also contains all the features and capabilities of SIMPROCESS. Model sizes are limited to no more than 50 processes and activities. Models built in the Demonstration edition are limited to no more than 25 processes and activities, 5 entity types, and 5 resource types. Also, none of the advanced features are available. The Runtime edition can run any model built in SIMPROCESS edition. However, models build or edited in the Runtime edition cannot be saved.

SIMPROCESS modeling constructs can be categorized into three major categories. The basic modeling constructs are the minimum functions needed to have a working model. The activity modeling constructs are used for defining the behavior of processes. The advanced modeling functions are the features needed for customization and more complex modeling. A brief overview of the SIMPROCESS constructs are presented below.

A key distinguishing feature of SIMPROCESS is its hierarchical process modeling capability. This allows decomposition of a process into as many levels of detail as required. The Process construct creates the hierarchy. A process may have several sub-processes and activities. For example, an inspection process that consists of a BRANCH activity and two DELAY activities can be defined as a hierarchical process template.

Resources are the second important modeling construct of SIMPROCESS. In the real world, the performance of business processes are usually constrained by the limited availability of resources or by resource interdependencies. SIMPROCESS defines the costs, capacity, usage, and interdependencies associated with resources. It automatically keeps track of the resource's utilization and costs. Schedules and Downtimes can be modeled to mimic the dynamic behavior of resources.

The third building block of a SIMPROCESS model is the Entities (or flow objects) that flow through the process model. Entities can be used to represent physical things (orders, paperwork), or logical things (signals, flags). Entities may be assigned attributes to define such characteristics as order size and customer type. Entities are created using the GENERATE activity and disposed using the DISPOSE activity.

Connectors are the links between processes or activities. They are used for defining the flow of entities. Connectors are objects in their own right with characteristics such as selection and attributes, and they can have duration to represent travel time.

Pads are the objects used for linking connectors between processes or activities. A process may have multiple pads for input or output. Pads have three sizes: small (default), medium, and large. The default pad size can be set in the Preferences.

Activity modeling constructs are the objects at the lowest level of the SIMPROCESS hierarchy and they are used for modeling the behavior of a process. Activities are non-decomposable. The SIMPROCESS Layout Toolbar contains 17 built-in activity blocks; however, re-usable activity templates can be created and added to the Library Toolbar. Below is a basic overview of the SIMPROCESS activity modeling constructs.

A GENERATE activity generates the arrival of entities into the model. Arrivals may be random, deterministic or conditional. An example of a GENERATE activity is the arrival of patients in a clinic. A GENERATE activity may have values for arrival time, quantity, frequency and occurrences.

A DELAY activity defines value added or non value added activity times. It is one of the most commonly used activities in SIMPROCESS. A DELAY activity with resource constraints provides queue statistics that can be used for analyzing wait times.

An ASSEMBLE activity assembles multiple entities coming from multiple sources to create a single entity. For example, the development of a business proposal may contain three documents that are merged using an assembly activity.

A BRANCH activity allows for defining alternative routings for flow objects. Branching may be based on a probability or a condition. For example, the outcome of an inspection process may be modeled using probabilistic branching.

A SPLIT activity takes an incoming entity and creates clones of that entity as well as providing an output of the original entity. For example, clones of a purchase order may be created with a SPLIT activity and sent to accounts payable and shipping.

A JOIN activity takes the clones and original entity that were split up, and matches them to produce the original one. For example, a JOIN activity may be used for matching the paperwork with the shipment.

A TRANSFORM activity converts an incoming entity into another entity. For example, a prospective buyer is transformed into a customer when an order is placed. This activity can be modeled using the transform construct.

A CLONE activity makes multiple copies of the original entity. Note that this activity is not on the Layout Toolbar. It is only on the Create menu in order to support pre-SIMPROCESS version 4 models.

A GATE activity holds entities in a queue, until a signal is received. For example, a GATE activity would be used to model orders held in inventory until a signal is received from the distributor to fulfill the demand.

Advanced modeling functions are very important for realistically modeling the complex behavior of business processes. These functions of SIMPROCESS differentiate it from other BPR tools that are based only on simplistic modeling functions. The advanced modeling functions combined with programming capabilities provide the power and flexibility to accurately analyze the dynamic behavior of real-world business problems.

Entity Types, Entity Instances, Resources, Activities and Processes, and the Model itself can have user defined attributes. User defined attributes can be used as tags attached to entities that travel through the model. Attributes can be used for conditional branching, sequencing, or decision making in expressions or logic. For example, order quantity may depend on which customer the order came from. Furthermore, order processing time may depend on the size of each order. By defining an attribute named "order quantity" and writing an expression that multiplies "order quantity" by "process time per order," the order processing delay can be accurately modeled.

These attributes keep track of the states of model elements so that expressions can be written to deal with complex business situations. For example, the number of customers waiting for a service representative is a system attribute that changes over time. In a typical service process, the number of servers would be increased if the customers in line reach a certain number.

When modeling real-world business processes, there will inevitably be situations which will require modeling functionality that is not built-into a BPR tool. SIMPROCESS provides the capability to write user-defined expressions and use them for modeling or customizing the performance measures. For example, service level may be an important performance measure for a business that is trying to fulfill orders within a 12 hour window from the time orders are placed. Using system attributes, user-defined attributes and user-defined expressions, the cycle time for each order can be compared with the 12 hour target and the service level of the process calculated.

Although the built-in functionality and the ability to customize models with attributes, expressions, and distributions offer plenty of power for modeling most business processes, there may be situations where added flexibility is needed that can only be achieved by a programming environment. For these complex business process applications, SIMPROCESS has a built-in programming environment.

SIMPROCESS comes with 26 standard probability distributions and allows the creation of empirical distributions based on raw data. One of the powerful features of SIMPROCESS is its data analysis (curve fitting) functionality using ExpertFit. ExpertFit accepts a number of data points and then provides the distribution that best represents the data set.

One of the most powerful features of SIMPROCESS is modeling templates can be created that can be stored in a library and used over and over. For example, an inspection process template using three SIMPROCESS activity blocks such as DELAY (inspection activity), BRANCH (probabilistic outcome of inspection), and DELAY (rework activity) can be created. A favorite inspection graphic can then be attached to the template and the inspection template saved in a library. When needing to model an inspection process, simply click on the inspection graphic, drop it in the model diagram, and double-click on it to customize its parameters. One extremely powerful use of this feature is in creating templates that represent the operational behavior of automated process equipment.

Event logs are built-in features for tracking custom performance measures. Timestamp event logs can be used for monitoring statistics such as makespan and in-process inventory. Recorder event logs can be used for monitoring statistics such as arrival and departure rates.

The experiment manager runs models automatically. SIMPROCESS loads the model, runs the replications, and places the results in the database. Multiple models can be setup for simulation, and initial conditions can be varied for each model run. In addition, a text file of the results from each run can be automatically created.

Creating a process model using SIMPROCESS is as easy-as 1-2-3. First, graphically select activities and processes from the Layout Toolbar and link them using connectors to define the process flow. Second, define the entities (or flow objects) and resources used in the model. Third, customize the behavior of the model and create a realistic model of the business process by filling in the dialogs. It's that simple!

Before simulating the model, select the performance measures of interest. For example, throughput and cycle time reports for entities, activity costs for processes, and utilization reports for resources might be of interest. When the simulation is run, SIMPROCESS automatically verifies the model and begins advancing the simulation clock. During the simulation, SIMPROCESS displays an animated picture of the flow that helps to visualize the process in motion. SIMPROCESS can also generate real-time graphs, which display key performance measures, during the simulation.

When the simulation is over, bring up the model results and analyze the performance measures of interest. In addition to the automatically generated cycle time, throughput, waiting time, resource utilization and cost reports, custom reports for tracking service levels or in-process inventory can be generated. All SIMPROCESS reports can be viewed within SIMPROCESS or exported to other software packages.

The primary purpose of using SIMPROCESS is to evaluate alternative business decisions. To facilitate this important decision support activity, SIMPROCESS provides a unique function called "Alternative Sub-processes". The "Alternative Sub-processes" function creates alternative representations of a business process utilizing its object-oriented interface. This powerful function is used to setup business alternatives. When simulations are run, the alternatives can be compared to choose the one that maximizes service levels and profits.

SIMPROCESS provides a rich array of integrated functions for modeling and analysis of business processes. From customer service to product development, from administrative to production processes, for every business process, SIMPROCESS offers the ability to visualize and evaluate the results of process changes before expensive resources, time, and money are expended. Below are three applications where SIMPROCESS was used for effective business decisions.

A major Fortune 100 industrial enterprise was faced with a problem in one of its computer products business due to high inventory and low service levels. The proposed solutions included reduction of channel inventory and building product to order. SIMPROCESS was used in the reengineering project that resulted in a 50 percent reduction in inventory and a 63 percent increase in service level.

A State Government hired CACI to help reengineer its business processes that suffered from long service time and high cost per transaction. The proposed solutions included implementation of an automated workflow and imaging system as well as a full service counter. SIMPROCESS helped analyze the alternative solutions that increased throughput time from 80 days to 56 days, and reduced cost from $70 to $46 per transaction.

A major European automotive manufacturer was trying to shorten the time required for design changes in its product development process. The design changes originated in Europe and were implemented in South America. The business processes involved resources from designers to process engineers to purchasing agents. First, SIMPROCESS was used to create process maps and simulations of the As-Is process. Then, To-Be alternatives including policy changes and workflow automation were simulated to determine impact on cycle times.