Business Process Analytics: Modeling, Simulation, and Design, Fourth Edition by Manuel Laguna and Johan Marklund

By

Business Process Analytics: Modeling, Simulation, and Design, Fourth Edition

Manuel Laguna and Johan Marklund

Business Process Analytics_ Modeling, Simulation and Design

Contents

Preface……………………………………………………………………………………………………….xv

  1. Introduction to Business Process Design……………………………………………1

1.1 What Is a Business Process?………………………………………………………..2

1.1.1 Process Types and Hierarchies………………………………………..3

1.1.2 Determinants of the Process Architecture……………………….5

1.1.3 Workflow Management Systems……………………………………11

1.2 The Essence of Business Process Design……………………………………12

1.2.1 Incremental Process Improvement and Process Design………………………………………………………………14

1.2.2 An Illustrative Example…………………………………………………15

1.3 Business Process Design, Overall Business Performance, and Strategy………………………………………………………………………………19

1.3.1 Business Process Design and Overall Business Performance…………………………………………………………………..19

1.3.2 Business Process Design and Strategy…………………………..20

1.4 Why Do Inefficient and Ineffective Business Processes Exist?…………………………………………………………………………21

1.5 Summary…………………………………………………………………………………..24

Discussion Questions and Exercises……………………………………………………25

References…………………………………………………………………………………………..31

  1. Data Analytics and Process Improvement………………………………………..33

2.1 Process Management and a Process View…………………………………33

2.1.1 An Illustrative Example: Managing a Document Distribution Process………………………………………………………35

2.1.2 Summary and Final Remarks………………………………………..41

2.2 Data-Driven Process Improvement……………………………………………42

2.2.1 Data Collection………………………………………………………………43

2.2.2 Data Visualization…………………………………………………………45

2.3 Six Sigma Quality Programs……………………………………………………..51

2.3.1 Six Sigma Definitions…………………………………………………….51

2.3.2 The Six Sigma Cost and Revenue Rationale…………………..52

2.3.3 Six Sigma in Product and Process Design………………………57

2.3.4 The Six Sigma Framework……………………………………………..58

2.3.5 Control Charts……………………………………………………………….63

2.3.6 Key Reasons for the Success of Six Sigma………………………72

2.4 Business Process Management………………………………………………….72

2.4.1 Types of BPM…………………………………………………………………75

2.4.2 BPM Lifecycle………………………………………………………………..76

2.4.3 BPM Potential Benefits…………………………………………………..77

2.4.4 Typical Areas of Application………………………………………….77

2.5 Revolutionary versus Evolutionary Change………………………………78

2.6 Summary…………………………………………………………………………………..82

Discussion Questions and Exercises……………………………………………………84

References…………………………………………………………………………………………..91

  1. A Framework for Business Process Design Projects…………………………94

3.1 Step 1: Case for Action and Vision Statements…………………………..97

3.2 Step 2: Process Identification and Selection……………………………….99

3.3 Step 3: Obtaining Management Commitment………………………….101

3.4 Step 4: Evaluation of Design Enablers………………………………………102

3.4.1 Example: The Internet-Enabling Change at Chase Manhattan Bank……………………………………………104

3.4.2 Example: New Technology as a Change Enabler in the Grocery Industry……………………………………………….105

3.5 Step 5: Acquiring Process Understanding……………………………….107

3.5.1 Understanding the Existing Process…………………………….108

3.5.2 Understanding the Customer……………………………………….111

3.6 Step 6: Creative Process Design……………………………………………….112

3.6.1 Benchmarking……………………………………………………………..113

3.6.2 Design Principles…………………………………………………………116

3.6.3 The Devil’s Quadrangle……………………………………………….124

3.7 Step 7: Process Modeling and Simulation………………………………..124

3.8 Step 8: Implementation of the New Process Design…………………127

3.9 Summary…………………………………………………………………………………129

Discussion Questions and Exercises………………………………………………….130

References…………………………………………………………………………………………133

  1. Basic Tools for Process Design…………………………………………………………135

4.1 Process Flow Analysis……………………………………………………………..137

4.1.1 General Process Charts………………………………………………..138

4.1.2 Process Flow Diagrams………………………………………………..139

4.1.3 Process Activity Charts………………………………………………..143

4.1.4 Flowcharts……………………………………………………………………144

4.1.5 Service System Maps……………………………………………………147

4.2 Workflow Design Principles and Tools…………………………………….152

4.2.1 Establish a Product Orientation in the Process…………….152

4.2.2 Eliminate Buffers…………………………………………………………154

4.2.3 Establish One-at-a-Time Processing……………………………..155

4.2.4 Balance the Flow to the Bottleneck………………………………156

4.2.5 Minimize Sequential Processing and Handoffs…………..161

4.2.6 Establish an Efficient System for Processing of Work………………………………………………………………………..162

4.2.7 Minimize Multiple Paths through Operations……………..168

4.3 Additional Diagramming Tools……………………………………………….168

4.4 From Theory to Practice: Designing an Order-Picking Process……………………………………………………………..170

4.5 Summary…………………………………………………………………………………172

Discussion Questions and Exercises………………………………………………….172

References…………………………………………………………………………………………179

  1. Managing Process Flows………………………………………………………………….180

5.1 Business Processes and Flows………………………………………………….180

5.1.1 Throughput Rate………………………………………………………….182

5.1.2 Work-in-Process…………………………………………………………..184

5.1.3 Cycle Time……………………………………………………………………186

5.1.4 Little’s Law…………………………………………………………………..187

5.2 Cycle Time and Capacity Analysis…………………………………………..189

5.2.1 Cycle Time Analysis…………………………………………………….189

5.2.2 Capacity Analysis………………………………………………………..195

5.3 Managing Cycle Time and Capacity………………………………………..200

5.3.1 Cycle Time Reduction………………………………………………….201

5.3.2 Increasing Process Capacity…………………………………………203

5.4 Theory of Constraints………………………………………………………………205

5.4.1 Drum–Buffer–Rope Systems………………………………………..211

5.5 Summary…………………………………………………………………………………212

Discussion Questions and Exercises………………………………………………….213

References…………………………………………………………………………………………221

  1. Introduction to Queuing Modeling…………………………………………………223

6.1 Queuing Systems, the Basic Queuing Process, and Queuing Strategies……………………………………………………………226

6.1.1 The Basic Queuing Process………………………………………….227

6.1.2 Strategies for Mitigating the Effects of Long Queues……………………………………………………………233

6.2 Analytical Queuing Models…………………………………………………….234

6.2.1 The Exponential Distribution and Its Role in Queuing Theory…………………………………………………………..236

6.2.2 Terminology, Notation, and Little’s Law Revisited………242

6.2.3 Birth-and-Death Processes…………………………………………..247

6.2.4 The M/M/1 Model………………………………………………………259

6.2.5 The M/M/c Model………………………………………………………264

6.2.6 The M/M/c/K Model………………………………………………….268

6.2.7 The M/M/c/∞/N Model……………………………………………..272

6.2.8 Queuing Theory and Process Design…………………………..278

6.3 Summary…………………………………………………………………………………288

Appendix 6A: Mathematical Derivations and Models with Generally Distributed Service Times………………………………………..289

6A.1 Mathematical Derivations of Key Results………………………………..290

6A.1.1 The Exponential Distribution (Section 6.2.1)………………..290

6A.1.2 Birth-and-Death Processes (Section 6.2.3)…………………….290

6A.1.3 The M/M/1 Model (6.2.4)…………………………………………….291

6A.2 Queuing Models with Generally Distributed Service Times……………………………………………………………………………………….292

6A.2.1 The M/G/1 Queuing Model…………………………………………293

6A.2.2 The M/G/∞ Queuing Model………………………………………..293

Discussion Questions and Exercises………………………………………………….295

References…………………………………………………………………………………………307

  1. Introduction to Simulation………………………………………………………………308

7.1 Simulation Models…………………………………………………………………..310

7.2 Monte Carlo Simulation…………………………………………………………..313

7.3 Discrete-Event Simulation……………………………………………………….317

7.4 Getting Started in Simulation Modeling………………………………….321

7.4.1 Step 1: Defining the Problem………………………………………..321

7.4.2 Step 2: Understanding the Process……………………………….322

7.4.3 Step 3: Determining Goals and Objectives…………………..322

7.4.4 Step 4: Obtaining Support from Management……………..323

7.4.5 Step 5: Choosing Simulation Software…………………………324

7.4.6 Step 6: Determining Data Requirements and Availability………………………………………………………………….324

7.4.7 Step 7: Developing Assumptions about the Problem………………………………………………………………….325

7.4.8 Step 8: Determining Desired Outputs………………………….325

7.4.9 Step 9: Building the Simulation Model…………………………326

7.4.10 Step 10: Project Kickoff…………………………………………………326

7.5 An Illustrative Example…………………………………………………………..327

7.6 Spreadsheet Simulation of a Process………………………………………..335

7.7 Successful Simulation in Practice…………………………………………….337

7.8 When Not to Simulate……………………………………………………………..340

7.9 Summary…………………………………………………………………………………344

Discussion Questions and Exercises………………………………………………….345

References…………………………………………………………………………………………350

  1. Modeling and Simulating Business Processes with ExtendSim………………………………………………………………………………………..351

8.1 Developing a Simulation Model—Principles and Concepts…………………………………………………………………………..352

8.1.1 Model Verification………………………………………………………..354

8.1.2 Model Validation………………………………………………………….355

8.2 ExtendSim Elements………………………………………………………………..355

8.3 ExtendSim Tutorial: A Basic Queuing Model…………………………..360

8.4 Basic Data Collection and Statistical Analysis………………………….364

8.5 Adding Randomness to Processing Times and the Use of Attributes…………………………………………………………………………….370

8.6 Adding a Second Underwriting Team……………………………………..378

8.7 Modeling Resources and Resource Pools…………………………………381

8.8 Customizing the Animation…………………………………………………….386

8.9 Calculating Activity-Based Costs…………………………………………….387

8.10 Cycle Time Analysis………………………………………………………………..392

8.11 Modeling Advanced Queuing Features…………………………………..396

8.11.1 Blocking……………………………………………………………………….396

8.11.2 Balking………………………………………………………………………..397

8.11.3 Reneging……………………………………………………………………..399

8.11.4 Priorities and Priority Queues……………………………………..401

8.12 Modeling Routing in Multiple Paths and Parallel Paths…………..403

8.12.1 Multiple Paths………………………………………………………………404

8.12.2 Parallel Paths……………………………………………………………….408

8.13 Model Documentation and Enhancements………………………………410

8.14 Summary…………………………………………………………………………………411

Discussion Questions and Exercises………………………………………………….412

References…………………………………………………………………………………………425

  1. Input and Output Data Analysis……………………………………………………..426

9.1 Dealing with Randomness………………………………………………………427

9.2 Characterizing Probability Distributions of Field Data……………430

9.2.1 Goodness-of-Fit Tests…………………………………………………..434

9.2.2 Using Stat::Fit for Distribution Fitting………………………….434

9.2.3 Choosing a Distribution in the Absence of Sample Data…………………………………………………………………439

9.3 Random Number Generators…………………………………………………..442

9.3.1 The Runs Test………………………………………………………………444

9.4 Generation of Random Variates……………………………………………….446

9.5 Analysis of Simulation Output Data………………………………………..450

9.5.1 Nonterminating Processes…………………………………………..452

9.5.2 Terminating Processes…………………………………………………454

9.5.3 Confidence Intervals…………………………………………………….456

9.5.4 Sample Size Calculation……………………………………………….461

9.5.5 Comparing Output Variables for Different Process Designs……………………………………………………………464

9.6 Modeling and Analysis of Process Design Cases…………………….467

9.6.1 Process Design of a Call Center for Software Support………………………………………………………………………..467

9.6.2 Design of a Hospital Admissions Process…………………….472

9.7 Summary…………………………………………………………………………………484

9.8 Training Cases…………………………………………………………………………484

9.8.1 Case 1: Improving the X-Ray Process at County Hospital……………………………………………………………………….484

9.8.2 Case 2: Process Modeling and Analysis in an Assembly Factory…………………………………………………………489

9.8.3 Case 3: Redesign of a Credit Applications Process…………………………………………………………………………492

9.8.4 Case 4: Redesigning the Adoption Process in a Humane Society…………………………………………………………..493

9.8.5 Case 5: Performance Analysis and Improvement of an Internet Ordering Process…………………………………..496

Appendix 9A: Hypothesis Testing, Confidence Intervals, and Statistical Tables……………………………………………………………….499

9A.1 Goodness-of-Fit Tests (Section 9.2.1)…………………………………………499

9A.1.1 The Chi-Square Test…………………………………………………….499

9A.1.2 The Kolmogorov–Smirnov Test……………………………………503

9A.2 Confidence Interval for a Population Proportion (Section 9.5.3)……………………………………………………………………………506

9A.3 Hypothesis Testing (Section 9.5.5)……………………………………………507

9A.4 Statistical Tables………………………………………………………………………511

Exercises……………………………………………………………………………………………513

References…………………………………………………………………………………………518

  1. Prescriptive Analytics for Process Performance Optimization……………………………………………………………………………………519

10.1 Identifying the Main Drivers of Process Performance……………..520

10.1.1 Factorial Design for Simulation Models……………………….521

10.1.2 Illustrative Example of Design of Experiments…………….523

10.2 Business Process Optimization………………………………………………..525

10.3 The Role of Simulation Optimization in Business Process Management……………………………………………………………………………528

10.4 Simulation Optimization with ExtendSim……………………………….533

10.4.1 Tutorial: Process Optimization with ExtendSim…………..537

10.4.2 Alternative Optimization Models………………………………..546

10.5 Optimization of Process Simulation Models……………………………548

10.5.1 Configuring a Hospital Emergency Room Process…………………………………………………………………………548

10.5.2 Staffing Levels for a Personal Insurance Claims Process…………………………………………………………………………551

10.6 Summary…………………………………………………………………………………553

Appendix 10A: Evolutionary Computation……………………………………..554

Exercises……………………………………………………………………………………………555

Simulation Optimization Projects……………………………………………………..557

References…………………………………………………………………………………………566

  1. Business Process Analytics………………………………………………………………567

11.1 Competing on Analytics………………………………………………………….570

11.2 Business Process Management Systems…………………………………..575

11.2.1 Business Rules……………………………………………………………..576

11.2.2 Monitor and Control…………………………………………………….578

11.2.3 Process Mining…………………………………………………………….579

11.3 Machine Learning……………………………………………………………………583

11.3.1 Support Vector Machines…………………………………………….584

11.3.2 k-Nearest Neighbor Classifier………………………………………587

11.3.3 Neural Networks…………………………………………………………591

11.3.4 Classification Problems in Business Processes……………..597

Discussion Questions and Exercises………………………………………………….598

References…………………………………………………………………………………………602

Epilogue………………………………………………………………………………………………….603

Index……………………………………………………………………………………………………….605

This book is US$10
To get free sample pages OR Buy this book


Share this Book!

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.