Improving Business Process Management Using Visio 2007
BPM Solution Summaries
Northwind Traders is a distributor of fine grocery products andserves over 200 high-end grocery store customers along the west coast of the United States. Northwind’s products include cheeses, local fresh fruits and vegetables, coffee, teas, imported beer and wine, and fine ethnic food products. Northwind’s sales revenue exceeded $20 million in 200X, a 10% increase over the previous year. However, due to competitive price pressures and operational inefficiencies, net income only increased by 2%.
Northwind’s Chief Operating Officer sought to determine the sources of Northwind’s operational inefficiencies. The previous year, the company had hired an operations consultant to perform a cursory analysis into Northwind’s operations. The consultant raised three issues:
- Northwind’s Order Management System was antiquated and required a great deal of manual labor from the sales staff to process and fill orders
- The cycle time required to fill an order occasionally caused order backlogs, which led to customer satisfaction issues and lost sales
- Northwind was losing approximately $500,000 annually (2.5% of annual sales revenue) in write-offs of expired perishable products
The COO decided to form a Business Process Management (BPM) team to quantify the business impacts of the issues that the consultant raised. The team was comprised of several managers and staff who worked on the project between their normally assigned tasks.
For the project, the team decided to use Microsoft Visio 2007 to perform the required process analysis and modeling tasks.
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1.Converting Static Process Diagrams to Visio 2007
As part of the deliverable, the consultant left the company with a number of process diagrams created in Microsoft Excel, PowerPoint, and Word. The COO saw some value in these diagrams, since he believed the diagrams accurately captured the workflow associated with each business process. However, in their native format, the diagrams were not useful for in-depth business process analysis or process modeling since they were static and not linked to any data source.
Importing Static Office Art into Visio for Analysis
The first stepto move the project forward was to convert the existing process diagrams created in other Office formats into Visio format so actual process analysis and modeling could be performed. At first this step seemed daunting, since the BPM team was still becoming familiar with the Visio platform. The BPM team leader estimated that recreating all of the diagrams in Visio could take two weeks or more. As the COO and the team leader debated the value of recreating the diagrams, another team member discovered that Visio had the capability to import diagrams directly from other Office formats. Using the Officeimport feature, the team quickly transferred all of the diagrams into Visio format in a matter of minutes.
Once the conversion to Visio format was complete, the team could quickly modify the diagrams. Team members began adjusting the formatting of the process diagrams, adding swim-lanes to represent the process stakeholder that performed a task. The team added process steps where necessary using the AutoConnect feature built in to Visio.Once the process diagrams were completed, the BPM team confidently proceeded to the analysis portion of their project.
Benefits of Converting Static Process Diagrams to Visio 2007
Using the new automated Office import feature of Visio, the BPM team saved an estimated 40 person-hours of labor time in recreating the process diagrams within Visio. At an average rate of $50 per hour in direct labor costs, the team saved $2000 by using the import feature. More importantly, they saved an estimated two weeks in cycle time, keeping their process improvement project ahead of schedule.
By using the Office import feature in Visio, the BPM team at Northwind was able to:
- Save valuable project time and effort
- Reuse existing diagrams in other Office formats
- Move static Office art into Visio for actual process analysis and modeling
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2.Discovering the Business Impacts of a Process
The team focused on Northwind’s Order Fill process, a process that the operations consultant had identified as having the most potential improvement value for the least improvement cost.
Known Process Pains
Within this process, the team was especially concerned with two known process pains:
- The cycle time to fill an order
- The labor cost to fill an order
The team knew that the cycle time to fill an order was excessive. Northwind prided itself on a quick order turnaround, but around 20% of orders were not filled in a single day.During periods of high sales volume, the long cycle time caused order backlogs, delaying shipments and forcing the sales department to decline potential orders. The lost sales and customer satisfaction issues represented a substantial opportunity cost for the company.
The labor time and cost to fill an order was thought to exceed benchmarked industry standards. This was partially due to Northwind’s antiquated Order Management System, which did not interface well Northwind’s sophisticated Inventory Management System and required unnecessary labor from the sales staff.
Analyzing the Business Impacts of theCurrent State Process
While the process pains were quite obvious, the business impacts of the pains were not. In order to determine the true business impacts of the Order Fill process, the team turned to the Order Fill process maps that they had imported into Visio. The team sought to quantify the total labor cost and cycle time of a single process iteration.Using this data, they would then be able to calculate the full business impact of the current process.
The team collected process performance data for each step in the process. The observational data they collected included:
- Average cycle time to complete a process step
- Average labor time to complete a process step
- Average number of staff to complete a process step
The team began adding observed data to the process diagram using the Shape Data feature. The team then exported the data to Excel using a custom built Visio Report template so that they could determine the aggregate business impact of the current state process performance.
Using the Visio process model in conjunction with the Excel report, the team calculated that the Order Fill process took on average 6.5 hours of cycle time to complete. The excessive cycle time meant that 20% of all orders were shipped late. The team also found that during times of high backlog in the Order Fill process, sales activity was halted and new orders were declined, leading to $1 million in lost sales annually.
The team multiplied the average labor time for each step by the staff labor rate and number of staff to determine the labor cost for each step. Summing these costs yielded a total process labor cost of$300 per iteration. Considering that the company processed 16 orders a day, or over 4000 orders a year, this equated to an estimated $1.2 million in labor cost associated with the Order Fill process.
Benefits of Discovering the Business Impacts of a Process
By using Visio as a process analysis surface, the BPM team at Northwind was able to:
- Discover the business impacts of Northwind’s current state processes
- Quickly communicate process issues both internally and to external consultants in order to foster innovation
- Support important initiatives for process improvements using detailed data and analysis
3.Customizing and Standardizing the Visio BPM Environment
The visibility of the Order Fill process improvement project led to greater interest in Visio as a BPM tool in other parts of the company. Unfortunately, different working groups within the company used different methods to present data using Visio. This led to inconsistent formats for diagrams and duplicated efforts to create DataGraphics, report templates, and custom shapes for diagrams. Northwind’s management sought to standardize the way Visio documents were created, and turned to the original BPM team for guidance.
The BPM team discovered that a large amount of the effort to build their original process diagrams could be captured and stored within the Visio environment itself, giving future process improvement teams a head start when they began preparing their own Visio documents.
The team began by creating a custom stencil of diagram shapes exclusively for Northwind’s processes analysis and process monitoring tasks. The team had invested hours in determining which process data metrics to capture using the Shape Data feature in Visio. They customized the Process shape – part of the Basic Flow Chart Shapes stencil – to include data inputs for the observations they collected. A team member added this shape to the Northwind stencil simply by dragging the shape from the completed Order Fill diagram onto the stencil.
Next the team created a custom process analysis template, called “Northwind BPA Template”, from the original Order Fill process Visio document. The template contained all of the distinct formatting the team had used in the original Order Fill process improvement project. When a new drawing was created from the template, the Northwind stencil and all of the Data Graphics associated with the stencil shapes were automatically loaded.
The team saved the report template that they had used to transfer data from Visio to Excel. The report, which the team named “Northwind BPA Report”, contained all of the settings required to quickly generate process analysis reports in Excel using the Visio shape data in the Northwind BPA Template.
Finally, the BPM team placed all of the documents in a shared folder on the corporate intranet so that teams across the organization could use the files in their own process analysis projects.
Benefits of Customizing and Standardizing the Visio BPM Environment
By customizing and standardizing the Visio process analysis environment, Northwind was able to save valuable project time. Process improvement teams were able to spend less time creating and formatting documents and more time analyzing and improving processes.
By customizing the Visio environment, the BPM team at Northwind was able to:
- Capture the customization effort the team had invested through a custom shape stencil with company specific shapes and Data Graphics
- Capture the formatting effort the team had invested through a custom drawing template
- Capture the reporting and analysis effort the team had invested through a custom report template
- Reduce future process improvement project effort through reuse of custom Visio stencils and templates
- Standardize the way BPM projects were conducted and reported to managementby disseminating custom Visio stencils and templates throughout the organization
4.Enabling Business Process Improvements
The next phase of the process improvement project was to recommend impactful business process improvements and support those improvements through greater process awareness and visibility at the staff level.
Simulating Improvements to the Order Fill Process
The COO and the BPM team met with a sales consultant from an Order Management Systemvendor to discuss potential improvements to Northwind’s Order Fill process. The team was able to quickly communicate the process pains to the sales consultant using the Visio process modelswith ShapeData that they had developed.
Working with the sales consultant, the team quickly modeled how the process would change if Northwind upgraded its current Order Management System to one that better integrated with the company’s modern Inventory Management System. Labor time for certain process steps was reduced, while the step to manually query Northwind’s inventory on-hand was removed altogether.
The team modified the Visio model and generated a future state report in Excel using theNorthwind BPA Report template. Comparing the future state to the current state, the team calculated that labor costs would decrease by $70 for each process iteration once the new Order Management System was in place. Extrapolated over the 4000 orders Northwind processed each year, the process labor cost savings equated to an annual reduction in labor cost of $280,000. Using this cost savings alone, the team created a business case to justify the $400,000 upfront cost in hardware, software, and services to install and deploy the new system. Their business case based on labor savings alone showed a net present value of $194,000 and a rate of return of 36% after three years, and a payoff period of a little over two years.
Next, the team used the Visio process model to estimate the impacts of hiring additional warehouse staff. Using the same process model, the team updated the ShapeData to reflect the increase in productivity of different staffing scenarios.Again, the team created Excel reports in order to analyze the results of the different scenarios. They found that it was optimal to hire one additional warehouse staff. This staff level would further reduce the Order Fill process cycle time by 1.15 hours, saving an estimated$100,000 in opportunity costs from lost sales while only adding $60,000 in wages and benefits to the company’s expenses.
Promoting Process Performance Awareness throughout the Company
The COO chargedthe BPM team with addressing how Northwind managed their perishable product inventory. With Northwind’s existing Inventory Management System, Northwind had powerful tools at its disposal to track the expiration dates of products in its inventory, but pushing that valuable information out to decision makers proved complicated. Northwind’s staff and managers lacked the time and skills necessary to use the inventory data in impactful ways.
The BPM team sought to develop a means to quickly disseminate important inventory information toboth sales and warehouse staff. Presenting the data to sales staff in a clear and concise way would allow representatives to quickly make product promotion decisions and sell more products that were nearing expiration. Likewise, providing the data in a usable form to the warehouse staff would allow workers to better select older products to fill orders, further reducing the percentage of products that expired while in inventory.
The BPM team relied on Visio to create a Perishable Product Inventory Dashboard that was hosted on the corporate intranet and available to all Northwind staff. Within Visio, the team prepared a Pivot Diagram that pulled data from an Excel workbook and graphically displayed the data in a format which was immediately discernable. Business rules, like the recommended product discount rates for sales staff and product picking rules for the warehouse staff, were built directly into the diagram and further reduced staff decision time.
The dashboard data was automatically refreshed daily so that decisions were based on the most current data available. Using the dashboard, Northwind was able to reduce inventory write-offs by over 50%, or $125,000 annually.
Benefits of Enabling Business Process Improvements
Using the Visio process models, the COO was able to build internal support for both the Order Management System software acquisition and for hiring an additional warehouse worker. Together, these initiatives saved the company nearly $300,000 annually in real costs and allowed Northwind’s sales representatives to pursue new sales even during high volume periods. The Perishable Product Inventory Dashboard saved the company an additional $125,000 in inventory write-off expenses, and Northwind’s customers responded well to the new product promotions.
By using Visio as a process modeling and monitoring surface, the BPM team at Northwind was able to:
- Quickly model process improvements and determine the business impacts of proposed solutions
- Monitor important business processes through data connected diagrams
- Provide process performance visibility throughout the organization
- Enhance business decision making
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