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Taming complexity with analytics
Executives underestimate back-office process variability by a factor of 100
Unnecessary complexity and unintended variability in business processes are pervasive challenges in large organizations. Even with large-scale ERP projects and huge investments intended to automate and standardize business processes, the problem persists and is increasing in scope and consequence. While the existence of the problem is widely accepted, determining precisely how, where, when, and why the complexity and variability are occurring has been difficult if not impossible.
Quality, speed, and complexity are the three fundamental drivers of process efficiency. In this article we are delving into complexity. We define it as the variability and interrelatedness of discrete process elements including products, customers, vendors, locations, business units, process steps, policies, and IT applications.
We have identified three primary types of process complexity within back-office processes:
- Input complexity
- Output complexity
- Workflow complexity
Zero in on root causes
Today, we can get to the data and provide a picture of what is really happening in end-to-end business processes throughout an enterprise. Working with proprietary analytics software (Process X-rayTM) we have analyzed the actual process data at dozens of companies. The results were eye opening for our clients: They discovered that process variation is at least 100 times greater than what they imagined. In fact, 5,000 or more variations are common in most end-to-end processes. Such high levels of variability are a natural enemy of scalability, efficiency, and process control.
To eradicate complexity, businesses need an advanced analytic capability to zero in quickly on root causes and assure that corrective actions will have the needed impact. Process X-ray has provided that capability for many organizations. It enables the insights needed to understand the root causes of issues through a single version of the truth that aligns the organization around improvement efforts.
Success story: Taming 53,000 process variations
A large global manufacturing company found that, compared to industry benchmarks, its performance on several processes was fair to middling. In response, the organization launched several process improvement efforts to drive scalable efficiency across its complex operations. As part of the effort, the organization used Process X-ray to examine and improve its order-to-cash process.
After Process X-ray unlocked ERP data, company leaders were shocked to find more than 50,000 variations in the order-to-cash process.
Closer inspection found three root causes that accounted for 55 percent of rework and process interruptions:
- A programming bug was automatically blocking many invoices, which required users to manually unblock them
- The system was miscalculating many customers’ current balances, triggering unnecessary credit checks
- Individual credit departments were putting customers with similar credit histories into different risk categories—a large number were classified as high risk, which added even more unnecessary credit checks
By understanding the precise source, volume, and causes of the issues, the company created a roadmap calling for new policies, such as updated risk thresholds, to accelerate and simplify processing. The organization was also able to target its change management and training efforts to specific issues and users.
What is Process X-ray?
Process X-ray is a proprietary process intelligence tool that uses advanced analytics software to mine data captured in existing ERP systems to identify the root causes of process inefficiency. Using an intuitive interface, Process X-ray provides a complete view of how processes are actually performed so it can intelligently guide companies from analysis to answers.
To learn more:
- Watch a short video that demonstrates how the tool works
- Watch a replay of the webcast, “Process intelligence: Taming business process complexity through analytics.”
- Check out other perspectives on Process Intelligence, which draws upon time-tested techniques like Lean Six Sigma that are enhanced with proprietary analytical tools and deep experience to help clients make breakthrough improvements.