Modeling business processes with simulation tools

This tutorial provides an overview of business process modeling tools for re-engineering, demonstrates the suitability of simulation for BPR and highlights the modeling considerations. A simulation exercise is presented to illustrate how ServiceModel, a populm modeling tool, may be used to simulate the financial, human resource, and production elements of a business. The model is aimed at returning the simulated business to profitability by smoothing out the work backlog, maximizing resource utilization, and reducing expenses. 1 BUSINESS PROCESSES& RE-ENGINEERING In the past 15 years, simulation efforts have focused on production processes. This has contributed to significant productivity and quality improvements in manufacturing processes. In the next five to ten years the real payoff for simulation will come from simulating business processes. The increasing competitive pressure to minimize the “time” it takes to service customers, increase profits, and develop new products promises a broad range of applications for simulation in Business Process Re-engineering. Before delving right into simulation and the use of modeling tools , it is important to define what a business process is and summarize the principles of business process re-engineering. All service processes and processes that support production (e.g. order management, engineering changes, payroll, product design) can be considered business processes. A business process consists of a group of lopicallv related tasks that use the resources of the organization to provide defined results in support of the organization’s objectives (Barrington, 199 1). Some typical examples of business processes are listed below: ● Product Development Processes Product design, testing, configuration, and documentation processes. ● Order Management Processes Purchasing, contracts. receiving, shipping, storage, materials management ● Financial Management Processes Payroll, ledger control, taxes, accounts receivable, accounts payable ● Information Management Processes Database management, networking, client-server applications ● Human Resource Processes Hiring, placement, personnel services, training Re-engineering begins with a basic assumption that the hierarchical, departmentalized structure of most businesses today is fundamentally flawed and doomed to fail. And, only through a radical reinvention of the value-added processes required to produce a product or service can a company hope to survive the intense competition of the future. Re-engineenng business processes involves people, processes and technology. Mark Youngblood, in his book “Eating the Chocolate Elephant”, lists 32 ways to improve business processes. Most of these principles are fundamentals of Industrial Engineering which have been applied to production problems for decades. Nevertheless, it is worthwhile to mention some of them because they are the main reasons for why we want to simulate business processes. ● Eliminate duplicate activities ● Combine related activities ● Eliminate multiple reviews and approvals ● Eliminate inspections ● Simplify processes ● Reduce batch sizes ● Process in parallel ● Implement demand pull ● Outsource inefficient activities