BPM, Six Sigma and Simulation for Today's Tough Business Environment

During the 1980s and 1990’s the use of flowcharts began to evolve. Next Business Process Management (BPM) came along to more formalize their use and combine their use with computer systems technology. Also in this timeframe, Six Sigma came into play as a means to improve processes by minimizing variability. Next, Lean six sigma evolved as a further means of reducing waste in processes.

BPM provides us with the tools to create the model/flowchart of our critical business processes. It allows us to understand how the processes operate in our business. Six Sigma gives us a set of tools to make significant improvement to those processes by applying statistical methodology to the models. Once we have applied those methodologies the next logical step is to use this knowledge and add simulation to our tools.

Today’s technology has provided us with an even more effective and useful tool: simulation modeling. If a picture (flowchart) is worth a thousand words, then one that logically simulates tasks and collects data has to be worth a million. Simulation models have the capability of considering complex interrelated tasks and structurally projected outcomes in a matter of seconds, providing users with validated, and usually quite reliable, results.

Simulation provides a less expensive means of experimenting with a detailed model of a real process to determine how the process will respond to changes in its structure, environment, or underlying assumptions. As we attempt to improve or streamline our processes to meet current business conditions, simulation provides us with another tool. It allows for a better understanding of process changes with a goal of improving performance, while having no disruption to normal business activity. Simulation modeling provides a structure and a method to evaluate, redesign, and measure, process changes, while minimizing time spent, resource utilization, and risk.

When you combine Six Sigma and Lean methodology with process simulation you have a powerful means by which new or existing processes may be designed, evaluated, and visualized without running the risks associated with conducting tests on a functioning business process. Dynamic process simulation allows organizations to study their processes from a systems perspective, thereby gaining a better understanding of cause and effect in addition to predicting outcomes. Simulations strengths and capabilities make it an ideal tool in Six Sigma process redesign. It aids in evaluating, redesigning, and measuring:

• Improved Cycle time
• Effective use of resources/Improved productivity
  • Non value added work
  • Wait times / Queues
• Identifying critical process parameters
• Modifying critical process parameters
• Improving Critical to Quality Parameters
• Improving Customer Satisfaction

During A Six Sigma Design/Redesign project, simulation can assist in the following areas:

• Feasibility analyses.
• Examining the viability of new processes while looking at various constraints.
• Conducting a cost-benefit analysis or process evaluation.
• Exploring the possibilities for the system in the future state.
• Examining the performance metrics of a system either in both current and future state
• Prototyping. Once a future state vision for a redesigned process is generated.
• Implementation planning, risk assessment, and process design can be modeled.
• Disseminating information about the new reengineered process to the organization

Simulation can assist in creative problem solving by providing a less expensive way of testing ideas. Fear of the high cost of failure prevents people from coming up with creative ideas. Simulation allows for experimentation and testing, followed by selling the idea to management. The use of simulation can help to predict outcomes. For example, it could help in predicting the response to increases or decreases in market demands placed on a business process, analyzing how the existing infrastructure can handle the new demands placed on it. Simulation can help determine how resources may be effectively and efficiently allocated.

Six Sigma will allow you to understand process variation. But, conventional analytical methods, using static mathematical models, don’t effectively address variation because calculations are made from constant values. Simulation looks at process variation, by taking into consideration the interaction among components, the appropriate statistical distribution and time. It allows for a more sophisticated analysis of all the variables.

This approach of Six Sigma and simulation promotes total solutions by modeling entire process. It provides insight into a process’s capabilities, and the effect process changes will have on the inputs and outputs. The biggest bonus comes from using a simulation model for experimenting with process parameters without making changes to the functioning process as it exists. It allows the practitioners to test more alternatives, lowering risk, increasing the probability of success, and generates information for decision support.

The biggest plus for applying simulation can be cost effectiveness. As organizations try to respond quickly to rapid changes in their markets, a good working simulation model can be an excellent tool for prototyping and evaluating rapid changes. For example, a sudden change in market demand for a product or service can be modeled using a validated process model to determine whether the existing process can meet the new demand either up or down.

Another use for simulation can be validating performance metrics. For example, the aim of a key business process may be to satisfy the customer in a specified timeframe. Using a simulation model, this requirement could be translated to the time required to respond to a customer’s request, which can then be designated as a key performance measure resulting in customer satisfaction. Simulation can help test the tradeoffs associated with process designs and allow for further analysis on parameters’ such as, time to market, service levels, cycle time, production costs, inventory levels, staffing levels, etc. Simulation can provide a quantitative approach to establishing key performance metrics.

Simulation can also provide an effective communication tool. It can be used to introduce a new or redesigned process in a dynamic fashion. Using simulation to display the functioning process provides a powerful means of explaining the function of various components to those who will work in the new process, and in turn help them understand how it work and fits together in the big picture.

Businesses don’t lose customers over typical performance; it is the extremes and variation in performance that makes customers unhappy - e.g., your business commits to answer the phone on or before the third ring 95% of the time, and it typically is taking six to eight rings. Simulation modeling is the most effective way to do the type of analysis required. This will allow you to develop a staffing plan that will allow you to answer the phone in three rings 95% of the time.

The synergy between BPM and Six Sigma has been discussed previously, now the addition of simulation to tool kit will allow for the type of improvements needed in this tough business environment that we are facing today.