How to Make Business Processes More Efficient - Solutions that take your Processes from Functional to Optimal

Introduction

A business’s processes are the lifeblood of the organisation. When these processes are merely functional rather than optimal, then real value is left on the table. For example:

• A slow order-to-cash process results in unhappy customers and delayed or even lost revenue (due to cancelled orders).
• A procure-to-pay process that is unnecessarily fast can put pressure on working capital management, as cash leaves the business’s bank account earlier than it needs to.
• A record-to-report process that is unnecessarily complex and time-consuming eats up staff resources that could be more fruitfully applied elsewhere

Turning these processes from functional to optimal can therefore create real value for an organisation, and that is why there has been an increasing trend towards process analysis, management and transformation in recent years.

But how do you make business processes more efficient, optimal instead of functional? Many tools have been developed to help process owners, internal process transformation teams and external consultants do just that. In this article we will explore two historical solutions - process mapping and process mining, and one more recent solution - Business Process Simulation (BPS).

Process Mapping

Process mapping is a methodology by which a qualitative “map” of a process is built, according to certain standards. Such a map of an order-to-cash process can be seen below:

Process maps can be built on the basis of interviews with staff involved in the process. The map will generally describe the “ideal process” or the process as it exists in the head of the process owners/operators.

Mapping a process can be an important step towards optimising it because it allows for process owners/transformation teams to spot clear inefficiencies in the process. For example, a process map of a lead-to-order process might reveal that both the sales team and marketing team are entering data about the same pool of potential clients. Assigning this responsibility to one team rather than both can help to reduce duplicate work and free up staff time for other tasks.

Process Mining

Whilst process mapping describes the process as it is perceived by process owners and/or operators, process mining is a more objective tool for discovering what the process actually looks like. By tracing the “digital footprints” of invoices, purchasing orders, and other similar “cases” which pass through your business processes, process mining software allows you to see all the different paths that make up the process as it actually is, and to quantify what % of cases went down each path.

In other words, process mining reveals what your process actually looks like, rather than what you think it might look like. It reveals the presence of inefficient process paths to process owners/managers, which in turn allows them to take steps to reduce them.

For example, process mining might reveal that although 60% of invoices received by the business are being paid on the deadline, 40% of them are being processed in such a way that the invoices are paid just 5 days after being received, despite the fact that the payment terms allow for payment within 30 days. This is a functional process but not an optimal one, as it unnecessarily reduces working capital available. Such a dynamic can be nearly impossible to spot or quantify without process mining software. Once highlighted, process owners/managers can take corrective action so that more and more of these invoices are processed in the more optimal way.

This is how process mapping and mining allow for process optimisation.

Analysis Paralysis

Process mapping and mining are very useful tools for optimising processes. However, many organisations that go through the process of mapping or mining can often be left thinking:

“What’s next? I’ve done lots of analysis, but I’m not sure what to do with it. How can I know for sure what the best action to take is? My analysis has shown me many opportunities to improve my process, but I have limited resources and so can’t take action on all of them. So how do I know which inefficiencies to focus on first, and the best way to solve them? And how do I convince other stakeholders in my organisation that it is worth the effort to do so?

This is a classic example of being stuck in analysis paralysis. You’ve done the analysis and generated some valuable insights. But for that analysis to translate into actual business value, you need to take action.

So how do you prioritise among all the potential opportunities for improvement in your process, and how do you know the most effective solution for each opportunity?

Thankfully, most organisations are aligned on the principle that the best decisions to take are the ones that will have the greatest impact on KPIs such as revenue, profits and customer satisfaction. However the challenge up until now is that there hasn’t been a way to quantify what the impact of different process changes would be, and so there hasn’t been a way to prioritise among these actions. This leaves some organisations stuck in the process analysis and insight phase. A lot of the hard work has been done, but it hasn’t been translated into actual business value yet. That’s where Business Process Simulation comes in.

Business Process Simulation (BPS)

BPS builds on the work done in process mapping and mining but goes further by allowing you to simulate processes into the future. These simulations allow you to see the impact of different decisions related to the processes being studied: decisions such as which inefficiencies to focus on (the bottleneck at our order delivery stage, or our order receival stage?) as well as the best way to address those opportunities/inefficiencies (100% automation of a certain step? 50% automation? Higher headcount? Better staff allocation?). Without simulation, it’s hard or even impossible to prioritise among these actions.

For example, your analysis might reveal a significant bottleneck at the order reviewing stage of an order-to-cash process. Common sense might say that automating this step will remove the bottleneck and therefore improve the KPIs. So, you might think, let’s just do that.

But simulation might reveal that automating order reviewing will increase the speed at which orders arrive at the order delivery stage, which won’t be capable of dealing with this increased volume. The end result might be that the bottleneck simply shifts from order reviewing to order delivery. This would mean that lead times and cash flow don’t actually improve, and that the efforts and expenses to automate had no real value, i.e. no real impact on KPIs. Foreseeing this with simulation allows you to avoid this outcome, and find more optimal ways to change your process - perhaps also automating the delivery stage of the process, shifting resources from the reviewing stage to the delivery stage, or implementing training of staff to reduce touch times. Each combination of solutions have their associated costs and impacts on KPIs, which in turn helps to identify the optimal combination to implement.

Think of it this way. Knowing that you have 50 opportunities for improvement in your process doesn’t lead you to a decision. But knowing the relative ROI of each combination of solutions is going to lead you to action, as you now have evidence to prioritise between those solutions. This evidence base also helps gather essential stakeholder buy-in, so that the business can gain the necessary momentum to begin implementing those solutions. This means that all the potential value generated in the previous stages is actually realised. Without this stage, a lot of resources (staff time, software licences, consulting fees) have been invested in analysis without any action being taken, and any real return of value being generated for the business.

At the same time, process mining and mapping often focuses on how your business processes have been. They are not designed for looking at how your processes could be. BPS, on the other hand, can be used to simulate the impact of completely changing your process. For example, implementing a new ERP system often requires a near total redesign of the processes they are used to manage. BPS can help quantify the ROI of investing in different ERP systems, accounting for all the downsides (new licence fees, consulting fees, training times that take staff away from core activities) as well as all the upsides (better process KPIs in the long term). This allows businesses to take real evidence-based decisions about major process transformation projects, such as an ERP transformation.

Conclusion

To conclude, in this blog post we’ve discussed how the historical tools of process mapping and mining can help turn your processes from functional to optimal. However, many clients who have gone through these analyses can find it hard to actually take action on the basis of these tools alone. BPS can be extremely valuable at this stage, as it helps businesses to gather an evidence base upon which to prioritise among these actions, gather stakeholder buy-in, and bring the business towards taking action and realising real improvements in business processes and KPIs.

Book a demo today to explore the how BPS can help you make your functional processes, optimal.