Unquestionable Value: Process Modeling and Simulation for Business Executives

Written by Robert Osborne, ProcessModel, Inc.

At first glance, the title itself might seem to be a misnomer or oxymoron. One might ask why business executives and managers should care one whit about process modeling or simulations. And the obvious reply might be that they shouldn’t, that process models and simulations should be left to the engineers, Six Sigma teams and/or statisticians who work at the operational levels of the organization.

However, if one assumed the previous statement to be true, they would be wrong – dead wrong, and very expensively wrong. In this article, you’ll see why executives and managers should and can use simulation to outthink and outmaneuver the competition with faster, more effective (and lower-risk) decision-making.

Before we go any farther, however, let’s lay some groundwork and common language for discussion.

What are Process Models?

Process models are depictions, usually graphical, of information and material flow through the business. Processes are generally thought of as work performed to produce products. But processes are used throughout the business, whether it’s defining the mission of the organization, creating a business plan, updating the budget, or making a strategic decision. All activity is a process, and as such it can be modeled, simulated and probably improved.

Process models require inputs (information, current situation, raw materials) and through a transformation the process produces results (new/updated information, changed/resolved situation, products/components). Processes require resources (people, equipment, tools, facilities or systems) to do the work, and are performed according to business rules whether they’re informal/ad-hoc or formally defined and documented procedures.

A process model is therefore a visual representation of how the business processes information and materials and produces results. They can be documented in a variety of “styles” or methodologies, some of which are more complex or formally defined than others. For the purpose of this article, let’s keep flowcharts in mind, since they’re easy to create and understand, and most people have used them in the past.

What are Simulations?

Wikipedia defines Simulations this way: ”A simulation is an imitation of some real device or state of affairs. Simulation attempts to represent certain features of the behavior of a physical or abstract system by the behavior of another system.”

Simulation is used in many ways, including the modeling of organic systems, business systems or manufacturing operations. Simulation is used to increase understanding and to run risk-free tests of possible scenarios and the potential impact of specific decisions. Simulations produce invaluable data for improved decision making, and can quickly summarize and sift through volumes of information to help prioritize areas of need and solutions to produce optimal improvements in areas like cycle time, cost, quality, and throughput.

The Business Value for Process Modeling and Simulation

In the complex world we live in, there are simply too many things to keep track of when trying to anticipate the impact of most business decisions. Process modeling provides a method for clear and unambiguous communication of business activities and connections across departments. Process modeling alone is invaluable in providing a framework and basis for understanding and managing business processes and value chains.

The unfortunate truth is that only a small percentage of decision makers are leveraging these types of tools, in spite of the huge potential.

The skepticism about the validity of process modeling and simulation is based on many factors:

• Lack of knowledge about simulation and what it can deliver
• Modeling and simulation are still perceived as “technical tools” by the majority of business people, usable only by engineers and statisticians
• People are alienated by the complexity, the steep learning curve and the expensive price tags associated with many of these products
• Steep learning curves and very complex programming-type environments
• For too many years, managers have been “sold” technology solutions that didn’t pan out
• A belief that people are doing the best they can and that another technology tool will not really make a difference

The Value – NOT Too Good to be True

The proven fact is that simulation provides managers and executives with a way to gain insight into the operational aspects of their business, enables the testing of possible scenarios as part of decision making, and perhaps most importantly of all, depicts the downstream and future impact of decisions before making a choice among alternatives.

The combination of process modeling and simulation is a lethal one-two punch for more effective and less risky decision making. Most managers agree that it would be foolhardy not to leverage this technology if it were available. It certainly makes sense. This ability to leverage “what if” scenarios of future impacts is certainly worth exploring further.

The best “proof” that process modeling and simulation provides real, measurable, quantifiable results is through case studies – companies and individuals that have seen real successes and tangible returns on investment. Here are two successes to prove the point that process modeling and simulation go far beyond technical areas and provide clear options for making business decisions and reducing risk:

Success Case # 1

Problem: Making Decisions about Restructuring & Improved Productivity:
To meet the demands associated with increasing application volume, an opportunity to restructure the originations area of GE Capital Auto Financial Services area existed. Two key areas of focus were credit manager productivity and capacity. A cross-functional team set out to model the existing credit process and define a new workgroup structure.

Solution:
Measure the three critical customer requirements:

• turnaround time of applications
• accessibility of credit managers, and
• predictability of credit decisions.

Evaluate the options and test different organizational models

Results – 60% Reduction in Turnaround Time:
Using ProcessModel, various organizational and work-cell models were tested. The end result was dramatic, and positive. “The pod model allowed us to reduce turnaround time nearly 60%, which was well below our targeted percentage. This permitted greater flexibility in servicing existing customers and opened the door for increased loan applications.”

Success Case # 2

Problem – Where and How to Best Leverage Capital Investments:
Custom Windows needed to expand their facilities from one plant to two and wanted to do it in the most efficient, cost-effective manner possible.

Solution:
Models were built and lean manufacturing concepts were implemented in the process that included:

1. Unbatching all operations.
2. Creating a flow line for eliminating movement and handling time.
3. Flowing one window at a time.
4. Eliminating sorting operations throughout the line.
5. Adding three employees to the production process.
6. Doubling the capacity of the glass washing operations.

Results – 28% More Throughput:
When the baseline model was built in ProcessModel, the weekly output of 1,945 windows was being met at full-production capacity. Using ProcessModel simulations to test and apply lean manufacturing principles, the weekly output increased to 2,400 windows – a 28% increase in productivity with few additional resources.

Overcoming the Arguments – It’s a No-Brainer

When it comes down to it, executives and managers want to make better decisions. Process modeling and simulation provide the capability to see “into the future”, to view the impact that decisions will have, and thus choose between options and easily select the path of greatest profitability and lowest risk. Increasing the probability of success, without a PhD in statistics or industrial engineering, and making the best decisions regularly – it’s a no-brainer, isn’t it?

To read about more successes and the real-world value of simulation, click here