Lecture 9

Business Process Redesign

Part 2: Heuristic Process Redesign

1
Learning Objectives

• Identify and document business processes at different levels of detail using

contemporary process modelling techniques
• Understand how IT can be used to deliver value by automating business processes,
and how transactional data can be exploited to build insightful process analytics
• Apply qualitative and quantitative techniques to analyse process performance and to
assess the impact of process changes
Content

• Deals with the methods that help to rethink and re-organize business processes to
make them perform better
• Clarify the motivation for redesign and delve deeper into what improving process
performance actually means.
• Present the spectrum of redesign methods and discuss representative sample
methods in some detail.
• Distinguish between transactional and transformational methods.
Exercise 8
Process Redesign

Management Processes

Define Vision Develop Strategy Implement Manage Risk

Strategy

Core Processes

Process
Manage
Procure Procure Market Deliver
Customer
Materials Products Products Products
Service

identification
Support Processes

Manage
Manage Personnel Information Manage Assets

Process architecture

Conformance and Process As-is process

performance discovery model
insights

Process Process
monitoring analysis

Executable Insights on
process weaknesses and
model their impact

Process Process
implementation To-be process redesign
model
Process redesign approaches

Transformation Redesign

• Puts into question the fundamental assumptions and principles of the existing
process structure
• Aims to achieve breakthrough innovation
• Example: Business Process Reengineering (BPR)
Transactional Redesign
• Doesn’t put into question the current process structure
• Seeks to identify problems and resolve them incrementally, one step at a time
• Example: Heuristic redesign (next week)
Heuristic process redesign

• A method to identify changes to an “as is” process based on a collection of heuristics

that strike tradeoffs between:
• Cost
• Time
• Quality
• Flexibility
Performance measures: the Devil’s Quadrangle

Cost

Time
Flexibility

Quality
Flexibility

• Ability to react to changes in:

• Workload
• Customer demands and expectations
• Resource and business partner availability and performance

• Example: Following natural disasters (e.g. storms), the number of home insurance
claims increases by tenfold
• To address this surge, flexibility is required at:
• Resource level: Staff redeployment, faster performance
• Process level: Performing tasks differently to speed up the front-end
• Management: Relaxing business rules and controls where possible
Redesign heuristics

• Task elimination
Task-level • Task composition/decomposition
• Triage

• Re-sequencing
Flow-level • Parallelism enhancement

• Specialization & standardization

• Resource optimization
Process-level • Communication optimization
• Automation
Task-level redesign heuristics

1. Task elimination
2. Task composition/decomposition
3. Triage
H1. Task elimination

Eliminate non-value-adding steps wherever these can be isolated

• Forward, send, receive, …

Consider reducing manual control steps (checks & approvals) by:

• Skipping them where feasible
• Replacing them with statistical controls
• Skipping them selectively

+ Statistical
Control
H1. Task elimination (T+, C+/-, Q-)

Consider trade-off between the cost of the check and the cost of not doing it

Examples:
• Procure-to-pay process: some types of employees are empowered to trigger isolated
purchases below $500 without supervisor approval
• Order-to-cash process: invoices from trusted suppliers under $1000 are not checked
on a one-by-one basis
• University admission process: authenticity check is very expensive, yet it leads to
only 1% of applications being rejected
H2. Task composition/decomposition

• Consider composing two tasks to eliminate transportation and reduce “context

switches”, OR
• Consider splitting a task into two and assign to separate, specialized resources
H2. Task composition and decomposition

Composition example:
• Procure-to-pay process: Merging two checks: “Check necessity of purchase” and
“Check budget”

Decomposition example:
• Make-to-order process: Separate a single thick “prepare quote” task into “prepare
bill of materials”, “prepare production plan” and “estimate costs and delivery time”

Composition: (T+, C+/-,

F+)
Decomposition: (T-, C+,
F-)
H3. Triage

• Specialize a task: divide a general task into two or more alternative tasks
• Generalize tasks: integrate two or more alternative tasks into one general task
H3. Triage

Specialization example:
• Procure-to-pay process: Separate approvals of small purchases, medium purchases
and large purchases

Generalization example:
• Make-to-order process: Integrate quote preparation for two product lines into one
single task

Specialization: (T+, C+/-,

F-)
Generalization: (T-, C+/-,
F+)
Flow-level redesign heuristics

4. Re-sequencing
5. Parallelism enhancement
H4. Re-sequencing

Re-order tasks according to their cost/effect ratio to minimize over-processing

• Postpone expensive tasks that may end up not being necessary until the end
• Put knock-out checks first in order to identify problems early
H4. Re-sequencing (T+,C+)

Examples:
• Make-to-order process: If “Prepare production plan” is time-consuming, postpone
it until after the quote price has been tentatively accepted by the customer
• Procure-to-pay process: If “Check necessity of purchase” leads to 20% of knock-
outs and “Check budget” leads to 2%, perform “Check necessity of purchase” first
• University admission process: authenticity check (very slow) leads to 1% of
applications being rejected while committee’s check leads to 80% of applications
being rejected. Put committee’s check first
H5. Parallelism enhancement

Parallelize tasks where possible in order to reduce cycle time

H5. Parallelism enhancement (T+,C
-)
Examples:
• Procure-to-pay process: Parallelize “Approve budget” and “Approve necessity of
purchase”
• Make-to-order process: After “Prepare bill of materials”, perform “Prepare
production plan” and “Estimate costs” in parallel
Process-level redesign heuristics

6. Process specialization & standardization

7. Resource optimization
8. Communication optimization
9. Automation
H6. Process specialization/standardization

Process specialization
• One process is split into multiple ones: by customer class, by geographic location,
by time period (winter, summer), etc.
• Resources are split accordingly

Process standardization
• Two processes are integrated
• Resources are pooled together
H6. Process specialization & standardization

Specialization example:
• Procure-to-pay process: One process for Direct procurement (e.g. raw materials)
and one for Indirect procurement (MRO - Maintenance, Repair and Operations)
• Claims handling process: One claims handling process for the summer season
(stormy season - peak) and one for the winter season (off-peak)

Standardization example:
• Claims handling process: Integrate claims handling for motor insurance across
different brands of a group

Specialization: (C+/-, Q+/-,

F-)
H7. Resource optimization

Use resources of a given type as if they were in one room

• Avoid one group of people overloaded and another (similar) group idle
Let people do work that they are good at
• However, avoid inflexibility as a result of specialization
When allocating work to resources, consider the flexibility in the near future
• Allocate work to specialized resources first
Avoid setups as much as possible
• Chain multiple instances of the same task [sequential]
• Batch multiple instances of the same task [parallel]
H7. Resource optimization

Resource integration example:

• Claims handling process: Share resources across different types of claims (e.g.
motor and personal insurance)
Batching example:
• Claims handling process: Batch all claims for a given geographic area and assign
them to the same resources
• University admission process: Batch all applications and handle them to the
assessment committee

(T+, C+,
F+/-)
H8. Communication optimization

 Automate handling, recording and organization of messages

Monitor customer interactions, record exceptions
Optimize
1. Number of interactions with customers and business partners
2. Type of interaction (synchronous vs. asynchronous)
3. Timing of interactions

(T+,Q+,C+/-,F-)
H8. Communication optimization

Optimize number of interactions

• Gather sufficient information to get to the next milestone (reduce external
interactions)

Optimize type of interaction

• Synchronous interactions effective to resolve minor defects
• Asynchronous to notify, inform, resolve major defects, request additional
information to reach next milestone
H8. Communication optimization

Optimize timing of interactions:

• Front-loaded process: bulk of information exchange and processing happens
upfront
• Complete-kit concept
• Back-loaded process: bulk of information exchange and processing happens
downstream
• Example: Ford procurement process in the late 80s (see Lecture 8)
H8. Communication optimization

Complete-Kit Concept: “Work should not begin until all pieces necessary to complete
the job are available”
Boaz Ronen

Principles for complete-kit process design:

• Provide complete and easy-to-follow instructions for those who will initiate the process.
• If a process cannot start, the client should be notified of all defects that could be reasonably
identified at the onset of the process
• Consider the tradeoff between “incomplete-kit” process initiation vs. roundtrip to revise and
resubmit a request
H9. Automation

Use data sharing (Intranets, packaged enterprise systems) to:

• Increase availability of information to improve visibility and decision-making (subject to
security/privacy requirements)
• Avoid duplicate data entry and transportation

Use network technology to:

• Replace physical flow (e.g. paper documents) with information flow
• Enable self-service via e.g. online forms and Web data services
H9. Automation

Use tracking technology to identify and locate materials and resources

• Identification: Bar code, RFID
• Location: GPS, indoor positioning

Use business rules technology to automate information processing tasks (including

decisions)

Automate end-to-end processes with a dedicated BPM system or automation module

in an ERP/CRP system

(T+,C+/-, Q+/-, F-)

Technologies for BP Execution
Coordination
Decision Tech Data Tech Connectivity Tech Cyberphysical Tech
Tech

• BPM System • BRMS • DB engines • Online self-service • Digital-physical linking:

• Automation • ML/Analytics • Big Data portals • Bar/QR codes
platform • Chatbots platforms • EDI, Web •RFID
• RPA services, Web • Location tracking
APIs •GPS
• Indoor positioning
• Display, Tactile, AR/VR
• Sensing and acting:
• IoT
• Auton. Robots
Applying redesign heuristics
Example: Equipment rental process
Applying redesign heuristics
Example: Equipment rental process

Heuristic 1: Task elimination

• Eliminate “Request for approval” for small equipment
Applying the redesign heuristics
Example: Equipment rental process
Heuristic 1: Task elimination
• Eliminate request for approvals for small equipment
• Replace approval in all cases, with empowerment and statistical controls
Applying the redesign heuristics
Example: Equipment rental process

Heuristic 2: Task composition

• Merge equipment selection, availability check and rental request creation
Applying the redesign heuristics
Example: Equipment rental process

Heuristic 6: Process specialisation and standardisation

• Separate the process for small versus large equipment and streamline the process for
small equipment
Small
Large equipment
Applying redesign heuristics
Example: Equipment rental process
Heuristic 8: Communication optimisation
• Inform the site engineer when the equipment is dispatched
Applying the redesign heuristics
Example: Equipment rental process

Heuristic 8: Communication optimisation

• Inform the site engineer when the equipment is dispatched
• Add interaction to handle extensions
Applying the redesign heuristics
Example: Equipment rental process

Heuristic 9: Process automation

• Use self-service for the equipment search and availability checking
Applying the redesign heuristics
Example: Equipment rental process

Heuristic 9: Process automation

• Use self-service for the equipment search and availability checking
• Use process automation to coordinate handovers

Process Support System

Redesign heuristics for Equipment rental process

Heuristic 1

• I1. Eliminate request for approvals for small equipment

• I2. Replace approval with empowerment & stat. controls

Heuristic 2

• I3. Compose equipment selection, availability check and rental request creation

Heuristic 6

• I4. Separate process for small vs. large equipment, streamline “small” process
Redesign heuristics for Equipment rental process

Heuristic 8

• I5. Inform site engineer when equipment dispatched

• I6. Ask site engineer if extension required

Heuristic 9

• I7. Use self-service for equipment search and availability checking

• I8. Use process automation to coordinate handovers