Lecture 2 Quantitative

Process Analysis I

1
Process Analysis
Process
identification

Process architecture
Process architecture

Conformance and
Conformance and Process As-is process
As-is process
performance insights
performance insights discovery model
model

Process
monitoring and Process
controlling analysis

Executable
Executable Insights on
Insights on
process
process weaknesses and
weaknesses and
model
model their impact
their impact

Process Process
implementation To-be process
To-be process redesign
model
model
 Process Analysis Techniques
Qualitative analysis
Value-Added & Waste Analysis
Root-Cause Analysis
Pareto Analysis
Issue Register
Quantitative Analysis
Flow analysis
Queuing analysis
Simulation
 Process performance
If you had to choose between two
services, you would typically choose the
one that is:

F
C
B
 Process performance
If you had to choose between two
services, you would typically choose the
one that is:

Faster
Cheaper
Better
 Process performance
A great deal of BPM is about
continuously assessing and
Time improving process performance,
particularly across three
dimensions
time,
Process
performance cost and
quality.
In order to improve performance,
we first have to measure it, and this
Quality
Cost is where process performance
measures come into play.
Identifying which performance
measures are most relevant for a
given process is an art on its own.
Time measures Time between start
Time taken by and completion of a
value-adding process instance
activities
Processing
time

Cycle
time
Waiting
time
Time taken by
non-value-adding
activities
7
Cycle time efficiency

Processing Cycle Time

Cycle Time
Time Efficiency

8
Cost measures
Cost of value-
adding Cost of a process
activities instance
Processing
cost

Per-
Instance
Cost
Cost of
waste
Cost of non-
value-adding
activities
9
Typical components of cost

Material cost
Cost of tangible or intangible
resources used per process instance

Resource cost
Cost of person-hours employed per
process instance
10
Resource utilization

Time spent Time

per resource available per Resource
on process resource for utilization
work process work

Resource utilization = 60%

on average resources are idle 40% of their
allocated time

11
Resource utilization vs. waiting time

Resource
utilization Waiting time

Typically, when resource utilization > 90%

Waiting time increases steeply

12
Quality

Product quality
Defect rate

Delivery quality
On-time delivery rate
Cycle time variance
Customer satisfaction
Customer feedback score

13
Identifying performance measures

For each process, formulate process performance objectives

Customer should be served always in a timely manner

For each objective, identify variable(s) and aggregation

method performance measure
Variable: customer served in Aggregation method: Measure: ST30 = % of
< 30 min. percentage customers served in < 30 min.

For each performance measure, define targets

ST30 > 99%

14
Balanced scorecard
Cost Quality &
measures time
measures

Financial Customer

Internal
Innovation
business
& learning Technology
Quality & time process leadership,
measures Staff
satisfaction

15
Process performance reference models

Supply Chain Operations Reference Model (SCOR)

Performance measures for supply chain management
processes

American Productivity and Quality Council (APQC)

Performance measures and benchmarks for processes in the
Process Classification Framework (PCF)

IT Infrastructure Library (ITIL)

Performance measures for IT service management processes

16
Flow analysis

Process
model

Process
performance

Performance
of each
activity

17
Flow Analysis
Flow analysis a technique to estimate and understand the
performance of a process, given a process model and performance
measures of the activities in the process.

For example if we are given a process model and the cycle time of
each activity in the process, we can use flow analysis to calculate the
performance of the process.

In doing so, we can understand where the performance of the

process is coming from, that is, which activities in the process affect
the most to the performance of the overall process.

In the following, we will show how flow analysis works using time
measures, but we can do the same for cost and quality measures as
discussed in the recommended readings.
Flow analysis of cycle time

1 day 1 day

1 day 3 days

3 days 2 days

Cycle time = X days

19
Sequence Example

What is the average cycle time?

Cycle time = 10 + 20 = 30

20
Example: Alternative Paths

What is the average cycle time?

50%
90%

50%
10%

Cycle
Cycle time
time = 10
= 10 + (20+10)/2 = 25
+ 0.9*20+0.1*10 = 29
Example: Parallel paths

What is the average cycle time?

Cycle time = 10 + 20 = 30
Example: Rework loop

What is the average cycle time?

80%
100%
1%

0%
99%
20%

Cycle
Cycle timetime
= =+10
10 + 20 ==30
20/0.01 2010
Cycle time = 10 + 20/0.8 = 35
Flow analysis equations for cycle time

T1 T2 ... TN
CT = T1+T2++ TN

T1
p1

T2
p2
CT = p1*T1+p2*T2++ pn*TN
pn ...

TN

T1

T2 CT = max(T1, T2,, TN)

...

TN

1-r
CT = T / (1-r)
T

r
Flow analysis of cycle time

1 day 1 day
20% 60%

80%
1 day 3 days 40
%
3 days 2 days

1/0.8 max(1,3) 3 0.6*1+0.4*2

Cycle time = 1.25 + 3 + 3 + 1.4 = 8.65 days

25
Flow analysis of processing time

0.5 2
hour hours
20% 60%

80%
2 2 40
hours hours %
3 hours 0.5 mins.

2/0.8 max(0.5,3) 2 0.6*2+0.4*0.5

Processing time = 2.5 + 3 + 2 + 1.4 = 8.9 hours

Cycle time efficiency = 8.9 hours / 8.65 days = 12.9% 26
Exercise: Calculate CTE of the following
process
Flow analysis: scope and limitations

Flow analysis for cycle time calculation

Other applications:
Calculating cost-per-process-instance
Calculating error rates at the process level
Estimating capacity requirements
But it has its limitations
Limitation 1: Not all Models are Structured
Limitation 2: Fixed arrival rate capacity

Cycle time analysis does not consider:

The rate at which new process instances are created (arrival rate)
The number of available resources
Higher arrival rate at fixed resource capacity
high resource contention
higher activity waiting times (longer queues)
higher activity cycle time
higher overall cycle time
The slower you are, the more people have to queue up
and vice-versa
Cycle Time & Work-In-Progress
WIP = (average) Work-In-Process
Number of cases that are running (started but not yet completed)
E.g. # of active and unfilled orders in an order-to-cash process
WIP is a form of waste (cf. 7+1 sources of waste)
Littles Formula: WIP = CT
= arrival rate (number of new cases per time unit)
CT = cycle time
Exercise
A fast-food restaurant receives on average 1200
customers per day (between 10:00 and 22:00). During
peak times (12:00-15:00 and 18:00-21:00), the restaurant
receives around 900 customers in total, and 90 customers
can be found in the restaurant (on average) at a given
point in time. At non-peak times, the restaurant receives
300 customers in total, and 30 customers can be found in
the restaurant (on average) at a given point in time.
1. What is the average time that a customer spends in the
restaurant during peak times?
2. What is the average time that a customer spends in the
restaurant during non-peak times?
Exercise (cont.)
3. The restaurant plans to launch a marketing campaign to attract more
customers. However, the restaurants capacity is limited and
becomes too full during peak times. What can the restaurant do to
address this issue without investing in extending its building?