Process Analysis & Reengineering

Process Analysis&Reengineering 2002.4.2 MAI Lab. Seminar Park Jung Joon

Process Analysis & Reengineering Armen Zakarian*, Andrew Kusiak** * Department of Industrial and Manufacturing Systems Engineering, University of Michigan, Dearborn, Dearborn, MI 48128-1491, USA ** Department of Industrial Engineering, Intelligent Systems Laboratory, The University of Iowa, Iowa City, IA 52242-1527, USA Computers & Industrial Engineering 41(2001) 135-150 Revised 2 May 2001; accepted 27 June 2001.

Contents • Introduction • IDEF methodology • Stream analysis approach • Analysis methodology • Dynamic analysis of processes • Conclusions

Introduction • Process reengineering is concerned with the redesign of strategic, value adding processes, systems, policies, and organizational structures to optimize the processes of an organization • Hammer* estimated that 50¯70% of companies that attempt to reengineer their processes fail • To increase the likelihood of a successful change, a comprehensive modeling methodology is required *Hammer, M.S. and Champy, J.Reengineering the corporation: a manifesto for business revolution (1993)

To perform the change process successfully, • Be flexible to be easy to learn • Ask a question all aspects of processes and their activities, both as they exist now, and later • Provide a mechanism to identify and evaluate the impact of the process changes incorporated as well as an alternative vision for process being reengineered Table.1 The differences between process improvements and process reengineering

To perform analysis and reengineering of processes Structured and unified approach is required Framework based on IDEF methodology Stream analysis approach Dynamic simulation

Methodologies & Tools • Process modeling methodologies • CIM-OSA methodology (European and Beekman) • O-O Modeling Methodology ( Kim, Kim & Choi, 1993) • MOSYS software tool ( Mertins, Rabe & Stiegennnroth, 1993) • Petri Nets ( Peterson, 1981) • IDEF (US Air Force 1981) • Process modeling tools • ARIS (Germany) • FirstStep (Canada) • PrimeObjects (Italy) • TEMAS (Switzerland)

Use IDEF(ICAM DEFinition) • IDEF0 (IDEF Function Modeling) • IDEF1 (IDEF Information Modeling) • IDEF1X (IDEF Data Modeling) • IDEF2 (IDEF Dynamics Modeling) • IDEF3 (IDEF Process Modeling) • IDEF4 (IDEF Object-Oriented Design) • IDEF5 (IDEF Ontology Description Capture)

IDEF methodology • Inputs (I) enter the box from the left, are transferred by the function, and exit the box to the right as an output (O) • Control (C) enters the top of the box and influences or determines the function performed • Replacing activity of the IDEF3 block in Fig. 1 with a function and entering a mechanism (M) interface from the bottom of box results in an IDEF0 block Fig. 1 IDEF activity box and interface arrows

IDEF Example (1/3) Fig.2 IDEF0 Function Box & Interface Arrows Fig.3 IDEF3 Process Description Diagram

IDEF Example (2/3) Fig.4 IDEF1 Diagram

IDEF Example (3/3) Fig.5 Organization of the IDEF4 Model

Stream diagnostic chart • In order to improve a process, it is important to identify the core problems causing its ineffective functioning • Road map is required • To guide the diagnosis of process deficiencies, to track down the core problem issues, and to set the stage for effective changes of the process • Stream analysis* approach • Be based on the systems theory and it assumes that a process is open, consisting of subsystems, each including a stream of variables, with many of these variables connected either causally or merely relationally within the same stream or across streams *Porras, J.I. Stream analysis: a powerful way to diagnose and manage organizational change (1990)

Fig.6 Stream diagnostic chart

The stream analysis approach is used for analysis, diagnosis, and management of process changes represented with an IDEF3 model • To evaluate the impact of changes considered, support the process analysis, and to model performance of the proposed process, a dynamic simulation is used Fig.7 Stream analysis and simulation applied to process models

Analysis methodology • System diagnosis • Planning intervention • Forming a change management team • Collecting data • Categorizing problems • Identifying interconnections • Analyzing the problem chart • Formulating an action plan

Illustrative example • Consider the IDEF3 representation of the research and development (R&D) process in a manufacturing company (see Fig. 8) • Assume that the team responsible for management of large scale R&D projects intends to redesign the project management process to minimize the time overruns Fig.8 IDEF3 model of an R&D project

Fig.9 Stream diagnostic chart corresponding to the IDEF3 model in fig.8

Fig.10 Stream diagnostic chart to the IDEF3 model in fig.8

Fig.11 Modified IDEF3 process model corresponding to the stream planning chart in Fig.10

Fig.12 The system flow diagram of the IDEF3 process model in Fig.11 represented with the notation of system dynamics

Dynamic analysis of processes • DYNAMO modeling language* • The model represents a set of linked differential equations describing a closed loop feedback system • Assumption • Project is divided into 45,000 tasks and the required completion date of the project is 30 months • Average person productivity is 30 tasks/person/month • Management wants to determine the optimal level of the initial personnel thus resulting in less hiring/firing and allowing completion of the project on time *Richardson, G.P. and Pugh, A.L. Introduction to system dynamics modeling with DYNAMO (1991)

Fig.13 Simulation output for the initial level of PERSONNEL=10

Conclusion • Comprehensive modeling tool • Allow easy integration of IDEF3 methodology with the dynamic simulation approach • The significance of the results presented in the paper arises from the fact that many companies* *Lockheed-Martin, General Motors, Rockwell International, are using IDEF for representing their processes

Supply chain reengineering using a core process analysis matrix and object-oriented simulation S. Wesley Changchien, and Hsiao-Yun Shen Department of Information Management, Chaoyang University of Technology, 168 GiFeng E. Road, WuFeng, Taichung County, Taiwan, ROC Information and Management 39(2002) 345-358 Revised 13 April 2000; accepted 16 March 2001

Contents • Introduction • SCM & BPR • Inter-organizational relations • Approach • A case study of a motorcycle manufacturer • Discussions and conclusions

Introduction • Today, companies face severe competitive challenges • The agility of a company's response to customer demand • Supply chain management (SCM) • But, Companies to rethink the way they perform operations • Business process reengineering (BPR)

SCM & BPR • Both need fundamental rethinking and consideration of strategies and are process-based • Also they generally reduce the duration of the processes • Information technology is used as a catalyst for both

Inter-organizational relations(1/2) • Virtual organization • One of the advantages of forming a virtual organization is its flexibility • Creation or assembly of new production resources very quickly • Creation or assembly of new productive resources frequently and concurrently • Access to a wider range of world-class competencies • Information system + Computer Network

Inter-organizational relations(2/2) • Strategic alliances ( R.M. Kanter* , eight I's criteria) • Individual excellence • Important • Interdependence • Investment • Information • Integration • Institutionalization • and Integrity * R.M. Kanter, Collaborative advantage. Harvard Business Review 72 4 (1994)

Approach - BPR framework Fig.1 A proposed business process reengineering framework

7 steps in BPR framework • Creating vision • Identifying core processes to be redesigned -> CPAM* • Analyzing current core processes -> OOS • Designing for innovation -> IT structure process • Evaluating the new processes -> OOS • Selecting the best -> MCDM** • Transforming and implementing the resulting design * CPAM(Core process analysis matrix) ** MCDM(Multi-criteria decision-making method)

The core process analysis matrix(CPAM) < HOWs > Customer relationship Customer service Demand Order fulfillment Manufacturing flow Procurement Development & commercialization < WHATs > Strategic View Function View Logistics View Information - Management view Fig. 2. The structure of core process analysis matrix (CPAM)

WHATs criteria and viewpoints affecting business vision • HOWs candidate business processes • WHYs weighting factors on WHATs • The relative evaluation value • The adjusted criteria (WHATs) importance • WHATs versus HOWs

Target Mix • An index of importance for each business process can next be calculated • The raw importance index • where CI is criteria importance and CO is the correlation between business processes and perspectives • The importance index for business process

*Strong 9 Medium 5 Weak 1 Table 1. An example of CPAM (by a group member) associated with seven processes and four criteria views

Object-oriented simulation framework • A system consists of objects and processes in accordance with business rules • The system component perspective describes the static, structural components of the system • The system workflow perspective represents the processes during system execution • The system control perspective describes dynamic system state changes • The UML notation is used for implementing the simulation modeling method

O-O Modeling Method • Step 1 - Initialize objects in the system • Step 2 - Put objects into the object list ordered by their time attribute • Step 3 - Get the most recent object from the object list • Step 4 - Check its type • Step 5 - Process the object and perform tasks according to its type • Step 6 - Delete the processed object or add it into the object list, if necessary • Step 7 - If needed, create new objects and go to Step 2 • Step 8 - Check the condition for termination. If not termination, go to Step 3 • Step 9 - Terminate

Case study of motorcycle manufacturer • Motorcycle manufacturer in Taiwan • Companies face severe competitive challenges • Customer demand • Cost Reduction, Quality improvement, Competitors… • Production management division is the main concern • This example focuses on Steps 2¯6 of the framework

Fig. 3 The components of a simulation system

Fig. 4 Process described with an activity diagram

Identify core processes (CPAM) • Group decision making method • Product Development • Procurement • Demand Management Table 2. Averaged importance for each process

Analyze current core processes • Collected data on one specific motorcycle model • A decision making group is then formed of people from the production and marketing divisions • Demand Management – Forecasting activity • Mean absolute difference (MAD) between market sales and manufacturer forecasting is 209 units • MAD between manufacturing forecasting and sales to franchisee is 156 units • Procurement - Procurement process

Design innovation • Forecasting activity • Abandoning the old multi-stage forecasting process • Moving average • Exponential Smoothing • Factors decomposition • Bayesian methods • Procurement process • The original monthly procurement policy was changed to bi-weekly procurement • Quick response by adjusting purchasing orders or shortening the cycle time of the joint meeting during the procurement process

Evaluate new processes Fig. 5 MADs for current process and a number of forecasting methods

Fig. 6 Simulation data with exponential smoothing forecasting and real market demand (normal distribution) per month during 5 years

Innovation - the procurement processes • Policies • Current procurement • Adjusting orders in the current period(delay/cancel) • Shortening the cycle time of production¯marketing joint meeting and purchasing

Fig. 7 Cost impacts for current procurement process and two new policies at current safety stock level

Process Analysis & Reengineering