MODULE 2 –

BUSINESS
PROCESS
Dr. Tuan Truong

ANALYSIS
CONTENTS
Qualitative process analysis
 Value-added analysis
 Waste analysis
 Stakeholder analysis and issue register
 Root-cause analysis

Quantitative process analysis

 Flow analysis
 Queue analysis
 Process simulation
QUALITATIVE
PROCESS
ANALYSIS
 VALUE-ADDED ANALYSIS
Decorticate the process into steps
 Steps performed before a task
 The task itself, possibly decomposed into smaller steps
 Steps performed after a task, in preparation for the next task

Classify each step

 Value-adding (VA)
 Business value-adding (BVA)
 Non-value-adding (NVA)
 Produces value or satisfaction to the customer.
Criteria:
VALUE- 

Is the customer willing to pay for this step?
Would the customer agree that this step is necessary to
ADDING 
achieve their goals?
If the step is removed, would the customer perceive that

ACTIVITIE the end product or service is less valuable?

Examples:
S  Order-to-cash process: Confirm delivery date, Deliver
products
 University admission process: Assess application, Notify
admission outcome

5
BUSINESS VALUE-ADDING
ACTIVITIES
Necessary or useful for the business to operate.
Criteria
 Is this step required in order to collect revenue, to improve or grow the business?
 Would the business (potentially) suffer in the long-term if this step was removed? Does
it reduce risk of business losses?
 Is this step required in order to comply with regulatory requirements?

Example
 Order-to-cash process: Check purchase order, Check customer’s credit worthiness,
Issue invoice, Collect payment, Collect customer feedback
 University admission process: Verify completeness of application, Check validity of
degrees, Check validity of language test results

6
 Everything else besides VA
and BVA

NON- Incudes:
• Handovers, context switches
VALUE- • Waiting times, delays

ADDING • Rework or defect correction

Examples
ACTIVITIE • Order-to-cash: Forward PO to

S warehouse, Re-send confirmation,

Receive rejected products
• University admission: Forward
applications to committee, Receive
admission results from committee

7
EXTRACT OF EQUIPMENT
RENTAL PROCESS
Fill request (VA)
Send request to clerk
(NVA)

Check equipment availability (VA) – 1st

time
Record recommended equipment (BVA)
Forward request to works engineer (NVA)

Open and read request (NVA)

Select suitable equipment (VA) –
1st time Produce PO (BVA)
Submit PO to supplier
Open and examine request (BVA) (VA)
Communicate issues (BVA)
Forward request back to clerk
(NVA)
EQUIPMENT RENTAL PROCESS –
VA ANALYSIS
 EXERCISE 2.4
Customers drop off their prescriptions either in the drive-through counter or in the front counter of the pharmacy. Customers can request that their prescription be filled immediately. In

this case, they have to wait between 15 min and 1 h depending on the current workload. However, most customers are not willing to wait that long, so they opt to nominate a pickup time at a

later point during the day. Generally, customers drop their prescriptions in the morning before going to work (or at lunchtime) and they come back to pick up the drugs after work, typically

between 5 p.m. and 6 p.m. When a prescription is dropped off, a technician asks the customer for the pick-up time and puts the prescription in a box labeled with the hour preceding the pick-

up time. For example, if the customer asks to have the prescription be ready at 5 p.m., the technician will drop it in the box with the label 4 p.m. (there is one box for each hour of the day).

Every hour, one of the pharmacy technicians picks up the prescriptions due to be filled in the current hour. The technician then enters the details of each prescription (e.g., doctor details,

patient details and medication details) into the pharmacy system. As soon as the details of a prescription are entered, the pharmacy system performs an automated check called Drug

Utilization Review (DUR). This check is meant to determine if the prescription contains any drugs that may be incompatible with other drugs that had been dispensed to the same customer in

the past, or drugs that may be inappropriate for the customer taking into account the customer data maintained in the system (e.g., age). Any alarms raised during the automated DUR are

reviewed by a pharmacist who performs a more thorough check. In some cases, the pharmacist even has to call the doctor who issued the prescription in order to confirm it.

After the DUR, the system performs an insurance check in order to determine whether the customer’s insurance policy will pay for part or for the whole cost of the drugs. In most cases,

the output of this check is that the insurance company will only pay for a certain percentage of the costs, while the customer has to pay for the remaining part (also called the co-payment).

The rules for determining how much the insurance company will pay and how much the customer has to pay are very complicated. Every insurance company has different rules. In some

cases, the insurance policy does not cover one or several drugs in a prescription, but the drug in question can be replaced by another drug that is covered by the insurance policy. When such

cases are detected, the pharmacist generally calls the doctor and potentially also the patient to determine if it is possible to perform the drug replacement. Once the prescription passes the

insurance check, it is assigned to a technician who collects the drugs from the shelves and puts them in a bag with the prescription stapled to it. After the technician has filled a given

prescription, the bag is passed to the pharmacist who double-checks that the prescription has been filled correctly. After this quality check, the pharmacist seals the bag and puts it in the pick-

up area. When a customer arrives to pick up a prescription, a technician retrieves the prescription and asks the customer for payment in case the drugs in the prescription are not fully
WASTE ANALYSIS
"All we are doing is looking at the timeline, from the moment the customer
gives us an order to the point when we collect the cash.
And we are reducing the timeline by reducing the non-value-adding wastes ”
Taiichi Ohno

Read more in Chapter 06 – Qualitative

Process Analysis of Fundamental of
BPM 2nd edition
SEVEN SOURCES OF WASTE
Move
• Unnecessary Transportation
• Motion
Hold
• Inventory
• Waiting (and idleness)
Over-do
• Defects
• Over-Processing
• Over-Production
12
IDENTIFYING AND
DOCUMENTING
PROCESS ISSUES
Stakeholder analysis: allows us to collect issues
from complementary perspectives.
Issue register: allows us to document issues
and their impact in a structured manner
Pareto analysis and PICK charts: allow us to
select a subset of issues for further analysis
and redesign.

Slide 13
 STAKEHOLDER ANALYSIS
Stakeholder analysis is about gathering data from multiple sources by interviewing
stakeholders of different types and reconciling their viewpoints
In BPM, stakeholder analysis is commonly used to gather information about issues
that affect the performance of the process from different perspectives.
There are typically five categories of stakeholders:
The customer(s) of the process.
The process participants.
The external parties (e.g., suppliers, sub-contractors) involved in the process.
The process owner and the operational managers who supervise the process
participants.
The sponsor of the process improvement effort and other executive managers who
have a stake in the performance of the process.
Slide 14
 TYPICAL
STAKEHOLDER
CONCERNS
Customers are often concerned about slow cycle time, defects, lack
of transparency, or lack of traceability (inability to observe the current
process status).

Process participants might be rather concerned about:

 High resource utilization, working under stress.
 Defects arising from handoffs in the process and wastes.

External parties (e.g. suppliers and sub-contractors) are generally

concerned about having a steady or growing stream of work from the
process, being able to plan their work ahead, and being able to meet
contractual requirements.

The process owner is usually concerned with performance, be it

high cycle times or high processing times. Also be concerned about
common defects and wastes, and compliance with internal policy and
external regulations.

The sponsor and other high-level managers are generally

concerned with the strategic alignment of the process and the
contribution of the process to key performance indicators. Also
concerned about the ability of the process to adapt to evolving
customer expectations, competition, and market conditions. Slide 15
ISSUE REGISTER
Purpose: to maintain, organize and prioritize
perceived weaknesses of the process (issues)
Sources of issues:
 Input to a process modelling project
 Collected as part of ongoing process improvement
actions
 Collected during process discovery (modelling)
 Value-added/waste analysis
ISSUE REGISTER
STRUCTURE
Can take the form of a table with:
 Issue identifier
 Short name
 Description
 Assumptions
 Impact: Qualitative and Quantitative
 Possible improvement actions

Larger process improvement projects may require issue trackers

17
 Issue name

• Equipment kept longer than needed

EXAMPLE Description

OF AN • Site engineers keep rented equipment

longer than needed by asking for deadline
extensions
ISSUE Assumptions

DOCUMEN • 3000 pieces of equipment rented p.a.

• In 10% of cases, equipment is kept two days

TATION more than needed

• Average rental cost is 100 per day

Quantitative impact

• 0.1 × 3000 × 2 × 100 = 60,000 p.a

18
ISSUE REGISTER EXAMPLE
Name Explanation Assumptions Qualitative Quantitative
Impact Impact

Equipment Site engineers keep 3000 pieces of equipment rented p.a. 0.1 × 3000 ×
kept longer equipment longer In 10% of cases, equipment kept two 2 × 100 =
than needed than needed via days longer than needed. 60,000 p.a.
deadline extensions Rental cost is 100 per day

Rejected Site engineers reject 3000 pieces of equipment rented p.a. Disrupted 3000 × 0.05
equipment delivered equipment 5% of them are rejected due to an schedules. × 100 =
due to non- internal mistake Employee 15,000 p.a.
conformance to their For each equipment rejected due to an stress and
specifications internal mistake, BuildIT is billed 100. frustration

Late Late payment fees 3000 pieces of equipment rented p.a. Poor 0.1 × 3000 ×
payment incurred because Average rental time is 4 days reputation 4 × 100 ×
fees invoices are not Rental cost is 100 per day. with 0.02 = 2400
paid by their due Each rental leads to one invoice. suppliers p.a.
date About 10% of invoices are paid late.
Penalty for late payment is 2%.
 EXERCISE 2.5
Use the business scenario in Exercise 2.4. Identify and document at
least two issues in an issue register
PARETO CHART
Useful to prioritize a collection of issues
Bar chart where the height of the bar
denotes the impact of each issue
Bars sorted by impact
Superposed curve of cumulative
percentage impact
PARETO CHART EXAMPLE
ROOT-CAUSE ANALYSIS

Why-why diagram

Factor Issue
s
Cause-
effect
diagram
WHY-WHY
DIAGRAM
Five levels of nesting

“Five Why’s”
WHY-WHY DIAGRAM
EXAMPLE
Site engineers keep equipment longer,
why?
Site engineer fears that equipment will not be
available later when needed, why?
 time between request and delivery too long, why?
 excessive time spent in finding suitable equipment and
approving the request, why?
 time spent by clerk contacting possibly multiple suppliers
sequentially;
 time spent waiting for works engineer to check the
requests;
 CAUSE-
EFFECT
(FISHBON
E)
DIAGRAM
 CATEGORIES OF
CAUSES: SIX MS
1. Machine: factors stemming from technology used
 Lack of suitable functionality in the supporting software
applications
 Poor User Interface (UI) design
 Lack of integration between systems

2. Method: factors stemming from the way the process is

designed, understood or performed
 Unclear assignments of responsibilities
 Unclear instructions
 Insufficient training
 Lack of timely communication

3. Material: factors stemming from input materials or data

 Missing, incorrect or outdated data

27
CATEGORIES OF
CAUSES: SIX MS
4. Man: factors stemming from wrong
assessments or incorrect performance of steps
attributable to:
 Lack of training and clear instructions
 Lack of motivation
 Too high demands towards process workers

5. Measurement: factors stemming from reliance

on:
 Inaccurate estimations
 Miscalculations

6. Milieu: factors outside the scope of the process

 Delays caused because of unresponsive
external actors
 Sudden increases of workload due to special
circumstances
28
 CAUSE-
EFFECT
DIAGRAM
EXAMPLE
EXERCISE 2.6
Use previously identified issues in exercise 2.5 and analyze it using
a why-why diagram & Fish-bone diagram
QUANTITATIVE
PROCESS
ANALYSIS
FLOW ANALYSIS
Process
model

Process
performa
nce
Performan
ce of each
activity

32
REFRESHER: PROCESS
PERFORMANCE MEASURES
Time

Process
performan
ce

Quality Cost
COMMON TIME-RELATED
MEASURES
Time taken
by value-
Processi adding
ng time

Cycl
activities
Time between start
and completion of a
process instance

e
Waiting
time
time Time taken by
non-value-
adding 34
activities
CYCLE TIME EFFICIENCY

Cycle
Processi Cycle Time
ng Time Time Efficienc
y

35
FLOW ANALYSIS OF CYCLE
TIME
1 day 1 day

1 day 3 days

3 days 2 days

Cycle time = X days

36
SEQUENCE – EXAMPLE
• What is the average cycle time?

Cycle time = 10 + 20 = 30

37
EXAMPLE: ALTERNATIVE
PATHS
•What is the average cycle time?

50 90
% %

50 10
% %

Cycle time = 10 + (20+10)/2 = 25

Cycle time = 10 + 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% 1%
100%

20% 99%
0%

Cycle time = 10 + 20 = 30
Cycle time = 10 + 20/0.01 = 2010
Cycle time = 10 + 20/0.8 = 35
 FLOW ANALYSIS EQUATIONS FOR
CYCLE TIME
Sequence
Tuần tự CT = T1+T2+…+ TN

Alternative path
Phân nhánh OR CT = p1*T1+p2*T2+…+ pn*TN

Alternative path CT = max(T1, T2,…, TN)

Phân nhánh AND

Rework
Lặp lại CT = T / (1-r)
FLOW ANALYSIS OF CYCLE
TIME 20%
1 day

60
1 day

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
42
FLOW ANALYSIS OF
PROCESSING TIME 20%
0.5 hour

60
2 hours

80%
2 hours 2 hours 40
%
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%
43
INTERLUDE: 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)

Little’s Formula: WIP = ·CT
  = arrival rate (number of new cases per time unit)
 CT = cycle time
RESOURCE UTILIZATION
Time
Time spent available
per resource per Resource
on process resource for utilization
work process
work

Resource utilization = 60%

 on average resources are idle 40% of their
allocated time

45
RESOURCE UTILIZATION VS.
WAITING TIME
Resourc
e
utilizatio Waiting
n time

Typically, when resource utilization > 90%

 Waiting time increases steeply
46
HOW ABOUT MEASUREMENT
FOR PROCESS COST?
Time

Process
performan
ce

Quality Cost
 QUEUING ANALYSIS
Capacity problems are common and a key driver of
process redesign
 Need to balance the cost of increased capacity against the gains of
increased productivity and service
Queuing and waiting time analysis is particularly
important in service systems
 Large costs of waiting and/or lost sales due to waiting

Example – Emergency Room (ER) at a Hospital

 Patients arrive by ambulance or by their own accord
 One doctor is always on duty
 More patients seeks help  longer waiting times
 Should we increase the capacity from one to two doctors?

48
DELAY IS CAUSED BY JOB
INTERFERENCE
If arrivals are regular or sufficiently spaced apart, no
queuing delay occurs

Deterministic traffic

Variable but
spaced apart
traffic

49
BURSTINESS CAUSES
INTERFERENCE
 Queuing results from variability in processing times and/or
interarrival times

50
HIGH UTILIZATION
EXACERBATES INTERFERENCE
The queuing probability increases as the load increases
Utilization close to 100% is unsustainable  too long queuing
times

© Dimitri P. Bertsekas
51
THE POISSON PROCESS
Common arrival assumption in many queuing and
simulation models
The times between arrivals are independent, identically
distributed and exponential
 P (arrival < t) = 1 – e-λt

This distribution is applicable when the next arrival (i.e.

the next creation of a case) does not depend on how
long ago the previous arrival occurred
 In other words, the creation of a case is independent of the creation of
other cases.

52
NEGATIVE EXPONENTIAL
DISTRIBUTION

53
QUEUING THEORY: BASIC
CONCEPTS
arrivals waiting service

l
c m
Basic characteristics:
l (mean arrival rate) = average number of arrivals per time unit
m (mean service rate) = average number of jobs that can be
handled by one server per time unit:
c = number of servers

54
QUEUING THEORY
CONCEPTS (CONT.)
l
c m
Wq,Lq

W,L

Given l , m and c, we can calculate :

occupation rate: r
Wq = average time in queue
W = average time in system (i.e. cycle time)
Lq = average number in queue (i.e. length of queue)
L = average number in system average (i.e. Work-in-Progress) 55
M/M/1 QUEUE
l
1 m
Assumptions:
• time between arrivals and
processing time follow a Capacity Demand λ
negative exponential
ρ 
Available Capacity μ
distribution
• 1 server (c = 1)
L=/(1- ) Lq= 2/(1- ) = L-
• FIFO
W=L/=1/(- ) Wq=Lq/=  /( (- ))

56
EXAMPLE – ER AT COUNTY
HOSPITAL
 Situation
 Patients arrive according to a Poisson process with intensity  ( the time
between arrivals is exp() distributed.
 The service time (the doctor’s examination and treatment time of a patient)
follows an exponential distribution with mean 1/ (=exp() distributed)
Þ The ER can be modeled as an M/M/c system where c = the number of doctors
 Data gathering
Þ  = 2 patients per hour
Þ  = 3 patients per hour
 Question
– Should the capacity be increased from 1 to 2 doctors?

57
QUEUING ANALYSIS –
HOSPITAL SCENARIO
Interpretation
 To be in the queue = to be in the waiting room
 To be in the system = to be in the ER (waiting or under treatment)

Characteristic One doctor (c=1) Two Doctors (c=2)

 2/3 1/3
Lq 4/3 patients 1/12 patients Wq = average time in queue
W = cycle time
L 2 patients 3/4 patients
Lq = length of queue
Wq 2/3 h = 40 minutes 1/24 h = 2.5 minutes L = Work-in-Progress
W 1h 3/8 h = 22.5 minutes

Should we increase the capacity from one to two doctors?

58
PROCESS SIMULATION
Versatile quantitative analysis method for
 As-is analysis
 What-if analysis
In a nutshell:
 Run a large number of process instances
 Gather performance data (cost, time, resource usage)
 Calculate statistics from the collected data

59
PROCESS SIMULATION
Define a
Model the Run the
simulation
process simulation
scenario

Analyze
Repeat for
the
alternative
simulation
scenarios
outputs

60
EXAMPLE OF BP SIMULATION
https://www.bpsimulator.com/
run/