College of Computing and Informatics

Information Technology

Enterprise Systems
Enterprise Systems
Week 3
Characteristics of Business Processes
Required Reading
1. Chapter 2 (Enterprise Process Management Systems:
Engineering ProcessCentric Enterprise Systems using
BPMN 2.0 by Vivek Kale)
Recommended Reading
1. Dunn, C., Cherrington, J., & Hollander, A. (2005). Enterprise
information systems: A pattern-based approach (3rd ed.)
Weekly Learning Outcomes

1. Describes the framework for measuring business process

performance in terms of the dimensions of timeliness, cost,
and quality.
Contents

1. Business Process
2. Process Performance
3. Process Cycle Time
4. Process Costs
5. Process Quality
6. Measuring Process Performance
1. Business Process
1. Business Process
• A business process is a set of logically related tasks performed to achieve a
well-defined business outcome.

• A business process defines:

➢ The results to be achieved,
➢ The context of the activities,
➢ The relationships between the activities,
➢ The interactions with other processes and resources.

• A business process may produce events for input to other applications or

processes.

• A business process is a coordinated and logically sequenced set of work

activities and associated resources that produce something of value to a
customer.
1. Business Process – Cont.
A business process has the following behaviours:
1. It may contain defined conditions triggering its initiation in each
new instance and defined outputs at its completion.

2. It may involve formal or relatively informal interactions

between participants.

3. It has a duration that may vary widely.

4. It may contain a series of automated activities and/or manual

activities.
1. Business Process (cont.)

5. It exhibits a very dynamic nature.

6. It is widely distributed and customized across boundaries within and

between enterprises.

7. It is usually long-running—a single instance of a process may run for

months or even years.
2. Process Performance

Process-oriented enterprises consider any enterprise as a process that converts

input into output characterized by:

1. Input and outputs:

• Inputs are any tangible or intangible items that flow into the process from the
environment.
• Outputs are any tangible or intangible items that flow from the process back
into the environment.

2. Flow units:
• A flow unit or job is an item that flows throughout the process.
2. Process Performance – Cont.

3. A network of activities and buffers:

• An activity is the simplest form of transformation; it is actually a
miniprocess in and of itself.
• A buffer stores flow units that have finished one activity but are
waiting for the next activity to start.

4. Resources
• Resources are tangible assets that are usually divided into
two categories: capital and labour.
2. Process Performance – Cont.

5. Information structure
• describes the information that is needed and available in order
to perform activities or to make managerial decisions.
2. Process Performance – Cont.

▪ The process flow is a dynamic process that starts when an input

enters a process and continues processing throughout different kinds
of process activities and ends when it leaves the process as its
output.
2. Process Performance – Cont.
Three key measures of the process flow:
1. Cycle time or flow time, which is the time it takes to complete an
individual flow unit or job from start to finish.
➢ Processing time
➢ Inspection time
➢ Transporting time
➢ Storage time
➢ Waiting time
2. Flow rate or throughput, which is the number of jobs per unit of
time.
2. Process Performance – Cont.

3. Inventory, which is the total number of flow units present within

the process boundaries.

• The inventory within the framework of the process depends on the difference
between the inflow rate and outflow rate.

✓ R(t) means the flow rate at a certain point of time t.

✓ Ri(t) means inflow; this is the flow rate of flow units that enter the
process through its entry points.
✓ Ro(t) means outflow; this is the flow rate of flow units that leave the
process through its exit points.
2. Process Performance – Cont.

4. Little’s Law For a stable process:

It defines the fundamental relationship between average
inventory, average flow rate, and average cycle time in a
stable process.
• Average flow rate or throughput is the average number of flow units that
flow through the process per unit of time.

• A stable process is one in which the average inflow rate is the same as the
average outflow rate across an extended period of time; that is R = Ri = Ro
2. Process Performance – Cont.

• The average cycle time is the average across all flow units that exit the
process during a specific period of time.

• Average inventory is the number of flow units within the process boundaries
at any point in time.

➢ The average inventory equals the average flow rate times the average cycle time;
that is, I = R*T.

➢ Example.
3. Process Cycle Time
1. Theoretical cycle time
• The theoretical cycle time of a process is the minimum amount of time
required for processing a typical flow unit without any waiting.
• It is the sum of the times of those activities that the flow unit passes through and
where specific kinds of tasks are undertaken to process it.

• Activity time is the time required by a typical flow unit to complete the
activity once.

2. Critical path
A process flow is presented using a diagrammatic technique like a
flowchart. The longest path in the process flowchart is the critical
path.
• All activities that constitute the critical path of the process flowchart are
called critical activities.
3. Process Cycle Time – Cont.
3. The critical path method is based on calculating a variable called the
slack time of activity.

• Slack time: is the extent to which activity could be delayed without

affecting process flow time(i.e., cycle time).

• A critical activity: is an activity whose slack time is equal to 0.

➢The critical path consists of all those activities for which the
slack time is equal to 0.
3. Process Cycle Time – Cont.
➢ To determine the critical path, two schedules have to be calculated:

A. Forward schedule - calculates the earliest possible start time (ES) and
the earliest possible finish time (EF) of each activity within the process.
1st activity, ES = 1, where 1 means 1-time unit.
Other activities, ES = 1 + max(EF) of immediate predecessor
activities. EF = ES + d + 1, where d is duration time of the activity

B. Backward schedule - calculates the latest possible start time (LS) and
the latest possible finish time (LF) for each activity of the process.

1st activity, LF = EF

Other activities, LF = min(LS) of immediate successor activities −1

LS = LF − d + 1, where d is the duration time of the activity.
3. Process Cycle Time – Cont.

4. Slack time (S): The slack time of an activity is the amount of time
that could be spent in addition to the duration time of the activity,
without causing a delay to the start times of immediate successor
activities.
S = LF − EF = LS − ES

5. Cycle-time efficiency: the ratio between the theoretical cycle

time and the average cycle time.

Cycle-time efficiency = theoretical cycle time/average cycle

time
3.1 Computing Cycle Time
1. The sum of the theoretical and waiting times.

Cycle time = theoretical cycle time + waiting time

Average cycle time of a process can be obtained by:

• Treating waiting in each buffer as an additional (passive) activity with an

activity time equal to the amount of time in that buffer.

• Adding waiting times to the theoretical cycle time of the appropriate path.

• Obtaining the average cycle time of the process by finding the path whose
overall length (activity plus waiting) is the longest.
3.1 Computing Cycle Time – Cont.
2.Using value-adding and non-value-adding activities.

• Value-adding activities are those activities that increase the

economic value of a flow unit because the customer values
them.

• Non-value-adding activities are activities that, while required

by the firm’s process, do not directly increase the value of a
flow unit.

Cycle time = value-adding cycle time − non-value-adding cycle time

3.1 Computing Cycle Time - Cont.

3.Computing the cycle time using Little’s law.

• Computing the average cycle time of a process by finding the

longest cycle time of the process flowchart—that is, by finding
the critical path of the process.
3.2 Process Flow Aspects
1. Rework
• A process flowchart may contain one or more segments of a number of sequential
activities whose execution needs to be repeated several times, depending on a
decision activity, where the value of a certain condition is defined.
• This is known as a rework or execution loop; each repetition of a rework loop is called a
visit.
2. Multiple Paths
• There are a number of cases in a process flowchart where, after a decision activity, the
process flow splits into two or more paths.
• This formula can be used to compute the average cycle time for a process flow that
splits into multiple paths after a decision activity:
T = p1*T1 + p2*T2 + … + pm*Tm
pi is the probability of following the flow of path i
Ti is the sum of times of activities within path i
m is the number of paths
3.2 Process Flow Aspects - Cont.
3. Parallel Paths
• The process flowchart may contain one or more segments that are
constructed from parallel activities.
• The cycle time of the part of the process with parallel paths is represented by
the maximum sum of times of activities in the parallel paths.

T = max( T1, T2, … , Tm)

Ti is the sum of times of activities within path i

m is the number of paths
3.3 Process Capacity

• Considering that the average flow rate or throughput is defined as

the average number of flow units or jobs that flow through the
process per unit of time, the processing capacity is the maximum
sustainable flow rate of a process.
3.3 Process Capacity - Cont.
1. Resources - the capacity of a process depends on the resources
that are used in the process. Performing any activity requires one
or more resources, and every resource may be involved in
performing one or more activities.

• Resource pool - a collection of interchangeable resources that

can perform an identical set of activities.

• Resource-pooling - associating different resource pools into a joint

resource pool in order to carry out a set of activities within a process.
3.3 Process Capacity – Cont.
2. Theoretical Capacity - The theoretical process capacity is the
maximum sustainable throughput rate for the process operating
without interruption.

The actual process capacity will always be less than the theoretical
capacity due to:
• Resource breakdowns: A machine may become unavailable due to a
breakdown or a human resource may be absent.
• Preventive maintenance: Machines require regular maintenance to operate at
maximum efficiency; this scheduled preventive maintenance makes the resource
unavailable for processing.
• Process flow inefficiencies: A resource may become idle due to the
unavailability of work.
• Demand variation: As described earlier, the mismatch between demand and
capacity can cause underutilization.
3.3 Process Capacity – Cont.
The flow unit on its way through different activities is processed by a number of
resource pools with predetermined capacities;
• The pool with the lowest capacity is termed the resource bottleneck of the process.
• Since the capacity of a process cannot be better than the process’s bottleneck
resource pool, this effectively makes it the defining capacity of the whole process.

• Assuming that we have a resource pool p with cp resource units,

Rp = cp / Tp
✓ Rp is the theoretical capacity of the resource pool
✓ cp is the number of resource units in the pool
✓ Tp is the unit load of the resource pool
3.3 Process Capacity – Cont.
If the resource units in a certain resource pool do not have the same
theoretical capacity
➢the theoretical capacity of the resource pool is computed as the sum of all of the
theoretical capacities of its constituting resource units, provided the following
conditions are true:
1. The flow units are performed by resource units sequentially one by one.
2. The resource units are available in the same quantity of time.
• Load-batching and scheduled availability are important factors that have a
real effect on the theoretical capacity of the process.
• Load batching is the ability of a resource unit to process a number of flow units
simultaneously
• Scheduled availability as the quantity of time in which a resource unit is scheduled to
perform a determined work
• Thus, the theoretical capacity of resource pool p with cp resources is,
Rp = cp / Tp * load batch * scheduled availability
3.3 Process Capacity – Cont.
3. Capacity Utilization
It measures the degree to which resources are effectively utilized
by a process.
• It indicates the extent to which resources, which represent invested capital,
are utilized to generate outputs.

• For each resource pool, capacity utilization of the process is defined as

the capacity utilization of the bottleneck resource pool.

ρp = R / Rp
R is the throughput
Rp is the theoretical capacity of a resource pool
3.3 Process Capacity – Cont.
The theoretical capacity can be improved by:
1. Decreasing the unit load on the bottleneck resource pool (i.e.,
work faster, work smarter)

2. Increasing the loaded batch of resources in the bottleneck

resource pool (i.e., increase the scale of the resource)

3. Increasing the number of units in the bottleneck resource pool

(i.e., increase the scale of the process)

4. Increasing the scheduled availability of the bottleneck

resource pool (e.g., work longer)
4. Process Costs
A cost component:
It is any activity for which a separate cost measurement is desired (e.g.
the materials consumed, inventory, labour, or overhead of the process).

Ways to classify costs include:

1. Direct cost - costs that can be directly and exclusively attributed to a
particular cost object. These are traced to the work unit and
assigned.

2. Indirect costs - costs that cannot be directly and exclusively attributed to a

particular cost object. These cannot be traced to the work unit because
they are common in many work units.
4. Process Costs – Cont.
Other ways to classify the process cost components are:
1. Fixed costs, which remain constant for all levels of output.

2. Variable costs, which are the costs per work unit and therefore
vary with the number of sales.
5. Process Quality
Quality can be defined from the two different perspectives:

1. Customer’s perspective - the degree to which a product or service

satisfies the needs and expectations of the customer.
2. Enterprise’s perspective - the degree to which a product or service
conforms to
the specifications designed for the product or service.

• Quality-by-Design means that – A product or service cannot meet

customer needs unless the enterprise perceives that customer
needs and designs a product or service to fulfil those needs and
designs a product or service to fulfil those needs.
5. Process quality - Cont.
To institute quality processes, an enterprise performs three
main functions:
1. Design quality products and services by understanding customer need
and translating them into product and service specifications.

a. A quality functional deployment methodology and tools translate the

customer needs into the attributes of a product or service. The primary tool
of quality functional deployment is:

➢The house of quality, a matrix that denotes the strength of the

association between a product or service attribute and customer
expectations using a range from 0 to 9, with 9 indicating a very strong
association.

➢This matrix indicates the degree of correlation between product

attributes as either weak, medium, or strong.
5. Process quality - Cont.
b. Poka-yoke: To design quality into the product, the process that produces the product
should be failproof.
➢ In manufacturing, parts may be designed so that they can only be assembled in the
correct way, thus removing the need for the worker to think about how the parts go
together and possibly making an error.
➢ In service industries, checklists are used to remind the person to do all of the procedures for
every customer.
• Poka-yoke designs the process so as to eliminate the possibility of quality problems
before they can happen.

c. Taguchi method: Any deviation from the target is undesirable. Normally, any value
that fell within the lower and upper specifications was considered good.
➢ The quadratic loss function says that any deviation from the target value results in a loss.
5. Process quality - Cont.
2. Deliver quality products and services by having processes that produce no
defects and demonstrate little variability.
• The underlying principle of statistical quality control is that all processes
exhibit variation in their output.
• Some of the variations are called common cause variations and are due
to the inherent characteristics of the process.
• Another variation is the result of special causes that can be attributed
to a specific problem.
• Statistical process control uses control charts to monitor processes.
• The design of a quality process involves instituting the correct feedback loops
so as to constantly monitor and control the process.
• The usage of control charts helps to maintain process variability within a small
range of values within which the variability is explained only by common
cause variation.
5. Process quality - Cont.
3. Improve the quality of their processes by establishing continuous
process improvement programs (e.g. DMAIC, Six Sigma) that run parallel to
the core business processes.
The analysis teams need to identify improvement opportunities to:
• Eliminate waiting time (a waste)
• Eliminate wasted movement or effort
• Minimize inventory
• Eliminate repair and rework
• Minimize material movement
• Minimize inspections
• Reduce the variety of inputs, processes, and outputs
• Reduce cycle time
• Improve machine reliability
• Improve flexibility of resources
6. Measuring Process Performance
A process performance measurement system focuses on an
individual business process, rather than on the entire
company or an organizational unit.
6. Measuring Process Performance – Cont.

Figure 2.1: Process performance measurement systems

6.1 Concepts for Performing Measurement

1. Process performance measurement based on indicators,

measures, and figures.

• Two performance indicators can be identified: time (as an input factor) and
service quantity (as an output factor).

• Performance measures represent the operationalization of each

identified performance indicator.

• Performance figures enable the summarization and representation of large

amounts of data in a condensed and precise manner.
6.1 Concepts for Performing Measurement – Cont.
2. Measurements to determine process performance

• Performance figures are highly dynamic. The selection of strategically

important performance indicators are related to the notion of “critical
success factors”.

• Quality indicators describe the degree to which the actual product attributes
and properties conform to the underlying product specifications.

• Time indicators are considered to be an indicator of competitiveness and

process performance.

• Flexibility indicators describe the degree to which a production or service

process can be modified, including the timeline and costs associated with
the restructuring of a production or service process.
6.2 Frameworks for Measuring Process Performance
• The performance pyramid framework stresses a hierarchical view of
performance. It considers the relationship between:

• Strategic performance
(e.g., fulfilling the vision)

• Process performance
(e.g., quality, cycle time)

• The layer connecting the two hierarchical levels depicts those performance
indicators that impact both levels (e.g., customer satisfaction, flexibility, and
productivity).
6.2 Frameworks for Measuring Process Performance - Cont.

Figure 2.2: Performance pyramid

6.2 Frameworks for Measuring Process Performance - Cont.
• This framework constructs a process-oriented performance
measurement system that highlights the distinction between input,
throughput, and output that is considered for determining
performance indicators according to this classification.
6.2 Frameworks for Measuring Process Performance - Cont.

Figure 2.3: Framework for constructing a process-oriented performance measurement system.

Main Reference
1. Chapter 2 (Enterprise Process Management Systems:
Engineering Process-Centric Enterprise Systems using
BPMN 2.0 by Vivek Kale)

Additional References
1. Dunn, C., Cherrington, J., & Hollander, A. (2005). Enterprise
information systems: A pattern-based approach (3rd ed.)
Thank You