The traditional view of simulation in BPM is to test drive process models as they are designed and tested for business and technological suitability. Simulation pays for itself alone on this basis, but there is more
Simulation for Operating Processes
If you have a running process that happens to be in a BPM technology, simulation can be used with live process results leveraging audit logs and work lists/queues to wring costs out of processes. This is generally aimed at leveraging process resources thus lowering costs. In addition simulation can be mated to process discovery that can tap into non BPM activities that may compose a process to measure unstructured and/or shadow processes.
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Simulation for Cost Cuts
Today organizations are given the unsavory assignment to axe X percent or a large amount out of their budget. For instance, Arizona was forced to cut 1.2 billion dollars out of its state budget. These kinds of cuts are also mandated in the private sector, but are hidden from public view. Quite often the cuts are made arbitrarily based on large numbers and what seem to be discretionary spends. Some of these cuts have downstream effects that are never considered or underestimated. Simulation can be used to try different options of cost cutting and resource deployment to minimize long term damage thus encouraging intelligent cuts without randomness,
Simulation for Scenarios/Decisions
Managers are faced with making more difficult decisions in shorter time periods. Simulation can play a significant role in a decision management effort and/or platform. Management can test drive decisions under different conditions and even various economic scenarios. Smart managers over value and supply chains can even balance the effect of a change that could impact all partners of a value chain to avoid overburdening any one link in the chain causing it to eventually break.
8 responses so far ↓
1 Gary // Feb 13, 2009 at 12:35 pm
Jim – A lot of this is common sense: “Use something that can identify costs and waste to drive out costs and waste”.
The question I would ask is “If this is something that can help in the current economic environment, why is it that common sense isn’t being applied?”. Is there a reason companies (large and small) are not falling over themselves to simulate their existing processes and drive the costs out?
It would seem to be a no brainer to me. So why isn’t it happening?
2 Jim Sinur // Feb 13, 2009 at 12:44 pm
It is common sense for folks who have exposure to simulation and have used succesfully, but our inquiries indicate that it is not as widespread as you or I would like. It’s grown from about 5% of our client base to near 25% in the past few years, so there is still lots of folks who are not using simulation.
3 Gary // Feb 16, 2009 at 5:30 am
That’s an interesting statistic, Jim.
What steps would you recommend to increase that 25% to a higher figure? Any thoughts on that?
Also what has caused the 5-fold leap from 5%, do we know?
Gary
4 Jim Sinur // Feb 17, 2009 at 10:06 am
What Steps:
I think a greater awarenes of the benefits of simulation (The reason I wrote the blog), more case studies for people to grasp the potential for business benefits, the drive for lower costs, the drive for scenario planning and finally some press. There is no receipe, but these are some of the ingredients. The vendors and solutions providers actually help here as well.
The 5% to 25% increase:
It was the new epmhasis on process improvement (BPM), the scope and importance of the processes attempeted, the need for material facts before buidling a process and the move towards more measurement and optimization of running processes all contributed. These factors will still be there, but the steps above are additional tributaries to the eventual river of simulation flow. It’s a process not an event.
5 The Hype about Simulation and Optimization « Leadership BPM // Mar 2, 2009 at 10:03 am
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6 Marty Grubin // Mar 3, 2009 at 10:55 am
Jim,
I have been doing simulations of business processes for over 20 years. Starting in manufacturing and moving on to banking, financial services and logistics. I have trained a number fo people on simulation, data gathering etc. Here are my observations:
1) The amount of time that is required to gather accurate process data to feed into a process model is often more than most business owners will tolerate ($$$).
2) Many BPM analysts do not correctly measure task time or understand how to use cost accounting data. They do not have the training or statistical knowledge to do it accurately. You must also know how to cross check your simulation results with the “real world” to ensure its validity.
3) The data gathered from “round trip” BPM systems is usually not detailed enough to discover where resources are being consumed. The measure of individual work elements within a job or task is just not captured in enough detail. To truly understand how resources are being consumed you need more detailed information.
4) Often the BPM vendors overstate the capability of their modeling and simulation tools. In fact, many of their employees do not fully understand the concepts of modeling and simulation.
I am firm believer in modeling and simulation. It does and can deliver extremely valuable insights. However, like anything else this complex, it must be used by well trained people with plenty of experience.
7 Jim Sinur // Mar 3, 2009 at 3:01 pm
Some BPM vendors have provided guard rails to make sure you can only play with resources, resource costs, process duration with simple simulations to gain business benefit,s so it is not alsways so complex. A number of comapnies have combined this with resource scheduling to produce nice savings. Simulating the mortgage melt down before it happend accross multiple coutires, indiustries, companies and products is a different story. I take your point about being real accurate on complex interactions, however.
8 Justin Lyon // Apr 20, 2009 at 10:01 am
It seems that many people think that simulation is “too hard and requires too much set up.” Simudyne’s evidence and case studies suggest that simulation is extremely cost-effective with ROI of 10X very common. So, those that are complaining it is too expensive, are most likely bogged down with legacy simulation systems which are hard-to-use and expensive compared to today’s simulation platforms.
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