Chapter 7: Quantitative Process Analysis

Contents
1. Performance Measures
2. Flow Analysis
3. Recap

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 Process Analysis in the BPM Lifecycle

Management Processes

Define Vision Develop Strategy Implement Manage Risk

Strategy

Core Processes

Manage
Procure Procure Market Deliver
Customer
Materials Products Products Products
Service

35h B 30h Support Processes

15h Manage
Manage Personnel Information Manage Assets

A E
D
5m 3m 5m 10m 30m 2h 10m

15m 1.5h 10min

Chapter 7: Quantitative Process Analysis

Contents
1. Performance Measures
2. Flow Analysis
3. Recap

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Performance Measures

 Process performance measures

 Balanced Scorecard

4
Process performance measures

 A process performance measure is a quantity that can be

unambiguously determined for a given business process —
assuming of course that the data to calculate this performance
measure is available (time, cost , quality and flexibility) .

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Process performance measures

Time:
 Cycle time is the time that it takes to handle one case from start to end.
 The aspects of the time dimension come into view when we consider the
constituents of cycle time, namely:
1. Processing time (also called service time): the time that resources (e.g.
process participants or software applications invoked by the process) spend
on actually handling the case.
2. Waiting time: the time that a case spends in idle mode. Waiting time includes
queueing time—waiting time due to the fact that no resources available to
handle the case—and other waiting time, for example because
synchronization must take place with another process or because input is
expected from a customer or from another external actor.
Process performance measures
Cost:
 Process redesign is more often associated with reducing cost. There are
different perspectives on cost.
 Fixed costs are overhead costs which are (nearly) not affected by the intensity
of processing (fixed costs follow from the use of infrastructure and the
maintenance of information systems).
 Variable cost is positively correlated with some variable quantity, such as the
level of sales, the number of purchased goods, the number of new hires, etc
 Operational costs can be directly related to the outputs of a business process.
A substantial part of operational cost is usually labor cost, the cost related to
human resources in producing a good or delivering a service. Within process
redesign efforts, it is very common to focus on reducing operation cost,
particularly labor cost. The automation of tasks is often seen as an
alternative for labor.
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Process performance measures

Quality:
 The quality of a business process can be viewed from at least two different angles:
from the client’s side and from the process participant’s side (also known as the distinction
between external quality and internal quality).
 The external quality can be measured as the client’s satisfaction with either the product
or the process. Satisfaction with the product can be expressed as the extent to which a
client feels that the specifications or expectations are met by the delivered product. On the
other hand, a client’s satisfaction with the process concerns the way how it is executed. A
typical issue is the amount, relevance, quality, and timeliness of the information that a
client receives during execution on the progress being made.
 The internal quality of a business process related to the process participants’
viewpoint. Typical internal quality concerns are: the level that a process participants feels
in control of the work performed, the level of variation experienced, and whether working
within the context of the business process is felt as challenging.
 It is interesting to note that there are various direct relations between the quality and other
dimensions. For example, the external process quality is often measured in terms of time,
e.g., the average cycle time or the percentage of cases where deadlines are missed.

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Process performance measures

Flexibility :
 Flexibility can be defined in general terms as the ability to react to changes. These
changes may concern various parts of the business process, for example:
• The ability of resources to execute different tasks within a business process setting.
• The ability of a business process as a whole to handle various cases and changing
workloads.
• The ability of the management in charge to change the used structure and allocation
rules.
• The organization’s ability to change the structure and responsiveness of the business
process to wishes of the market and business partners.
 Another way of approaching the performance dimension of flexibility is to distinguish
between run time and build time flexibility. Run time flexibility concerns the opportunities
to handle changes and variations while executing a specific business process. Build
time flexibility concerns the possibility to change the business process structure.

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Balanced Scorecard

 Balanced Scorecard is another way of classifying and defining performance

measures.
 The Balanced Scorecard is essentially an approach to align the goals and
measures that are used to evaluate the work of managers.
 The main argument behind the Balanced Scorecard is that it is not sufficient to
use financial metrics, such as Return-On-Investment (ROI) or operating margin,
when evaluating managers. An extreme focus on these measures is in the long-
term detriment to the company as it neglects fundamental sources of value,
namely the customer, the company’s internal structure and the company’s
employees.

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Balanced Scorecard

The Balanced Scorecard is based on four performance dimensions—each one covering a

fundamental concern of a company:
1. Financial Measures, e.g. cash flow, to ensure survival, operating margin to ensure
shareholder satisfaction.
2. Internal Business Measures, e.g. cycle time, to ensure efficiency and low levels of
inventory in the case of manufacturing organizations.
3. Innovation and Learning Measures, e.g. technology leadership, to ensure competitive
advantage and to attract and retain talent.
4. Customer Measures, e.g. on-time delivery, to ensure customer satisfaction and loyalty.
( Balanced Scorecard is a useful tool for identifying process performance measures
across an entire organization. This is in contrast with the process performance measures,
as it is geared towards identifying performance measures for one given process. Thus,
this latter method and the Balanced Scorecard are complementary).

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Flow Analysis

 Flow analysis is a family of techniques that allow us to estimate the overall

performance of a process given some knowledge about the performance of its
activities.
 For example, using flow analysis we can calculate the average cycle time of
an entire process if we know the average cycle time of each activity. We can
also use flow analysis to calculate the average cost of a process instance
knowing the cost-per execution of each activity, or calculate the error rate of a
process given the error rate of each activity.

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Flow analysis

Process
model

Process
performance

Performance
of each
activity
Refresher: Process performance measures

Time

Process
perform
ance

Quality Cost
Common time-related measures
Time taken by
value-adding
Processing activities
time Time between start
and completion of a

Cycle
process instance

time
Waiting
time
Time taken by
non-value-adding
activities
Cycle time efficiency

Cycle
Processi Cycle Time
ng Time Time Efficienc
y

A cycle time efficiency close to 1 indicates that there is little room

for improving the cycle time unless relatively radical changes are
introduced in the process. A ratio close to zero indicates that there
is a significant amount of room for improving cycle time by reducing
the waiting time, for example due to handovers between participants.
Flow analysis of cycle time

1 day 1 day

1 day 3 days

3 days 2 days

Cycle time = X days

Sequence – Example

• What is the average cycle time?

Cycle time = 10 + 20 = 30
Example: Alternative Paths

• What is the average cycle time?

50%
90%

10%

50%

Cycle time = 10 + 0.9*20+0.1*10 = 29

Cycle time = 10 + (20+10)/2 = 25
Example: Parallel paths

• What is the average cycle time?

Cycle time = 10 + 20 = 30
Example: Rework loop

• What is the average cycle time?

80%
100%
1%
20%

0%
99%

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

T1 T2 ... TN
CT = T1+T2+…+ TN

T1
p1 T1, T2, etc. :XOR-block.

CT = p1*T1+p2*T2+…+ pn*TN
T2
p2

pn ...

TN
p1, p2, etc.: branching probabilities
T1

T2 CT = max(T1, T2,…, TN)

...
T1, T2, etc. :AND-block.
TN

1-r
T
CT = T / (1-r)
r
r : rework probability
Flow analysis of cycle time

1 day 1 day
20% 60
%

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
Flow analysis of processing time

0.5 hour 2 hours

20% 60%

80%
2 hours 2 hours 40%

3 hours 30 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%
8.65 days = 69.2 working hours
Flow analysis: scope and limitations

 We have seen how to use flow analysis for processing & cycle time
calculation
 Flow analysis can also be applied to calculate:
 The average cost of process instances (assuming we know the cost of each activity)

 The number of times on average each activity is executed

 Can be used to calculate the “unit load” of each task, the resource utilization of
each resource pool, and the theoretical capacity of an “as is” process

 But flow analysis has some fundamental limitations…

Limitation 1: Not all Models are Structured


Limitation 2: Fixed arrival rate capacity

 Cycle time analysis does not consider:

 The rate at which new process instances are created (arrival rate)
 The number of available resources
 Higher arrival rate at fixed resource capacity
 high resource contention (Resource contention occurs when there is more work to be
done than resources available to perform the work).
 higher activity waiting times (longer queues)
 higher activity cycle time
 higher overall cycle time
 The slower you are, the more people have to queue up…
 and vice-versa
Recap

 Assuming we have performance measures for each activity in a process, flow

analysis allows us to calculate the following performance measures for an “as is”
process:
 Cycle time, processing times, cycle time efficiency of a process
 Average cost per process instance
 It can also be used to calculate the theoretical capacity of an “as is” process and
the resource utilization of resource pools
 But it is not suitable for “what if” analysis
 Queing analysis is a suitable technique for “what if” analysis of waiting times and
cycle times, suitable for analyzing individual activities performed by one resource
pool
 Simulation is a versatile technique for “what if” analysis of entire processes,
covering waiting times, cycle times, and costs.
 Particularly useful for identifying bottlenecks

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