REVIEW (1-12 SESSIONS)

REVIEW
Business Organizations (Session 1-2)
A. Business Organizations - Six Principles
1. Business Organization is a “System”
2. Business Organizations want to increase their productivity, profit, performance, growth
◦ Note 1: A performance culture asks, “How much energy can we mobilize?” and the answer is only a finite amount.
◦ Note 2: A growth culture asks, “How much energy can we liberate?” and the answer is infinite.
3. To have productivity, profit, performance, growth, they become efficiency, effectiveness, competitiveness, sustainability
4. Efficiency, Effectiveness, Competitiveness, Sustainability are various forms of innovation
5. Business Organizations want to maximize the utility of the product/service for consumers
6. Change is only Constant – How to keep growing? Leavitt + DIKW Model, Utterback-Abernathy Model, Ansoff Matrix, BCG, and Product Life
Cycle
◦ Business Growth 1
◦ Business Growth 2
◦ Business Growth 3

B. Relationship between Business as System, Product, Project, Process, Function, Value Chain
 REVIEW

Business Process (Session 3-4)

1. Business Process – Why
 Two views of Business Organization - Function View, Process View (and now System View)

2. Business Process – What

 Business Process – Preliminary and Detailed Definition
 Ingredients of a Business Process
 What features make a business process good?
 Let us step back and think!

3. Business Process – How

4. Business Process – When and Where (Context)

5. Business Process – Who (Stakeholders)

 REVIEW
Business Process Management (5-
6)
 Business Process Management (BPM) - also known as Business Process Redesign, Business
Process Re-engineering, Business Process Improvement, and so on - What
 Business Process Management (BPM) – Why

 Business Process Management (BPM) – How

 Business Process Management (BPM) – When and Where

 Business Process Management (BPM) - Who

 REVIEW
Business Process Management (7-8) - Allroad
Case Study
 REVIEW
Business Process Modeling
Language (9-10)

Business Process Modeling Language

using BPMN
 REVIEW

Process Discovery (11-12)

Process
 Process Discovery – What? identification

Process architecture

 Process Discovery – Why? Process

Conformance and As-is process
performance insights discovery model

 Processs Discovery
Process
Method – How? monitoring and Process
analysis
controlling

Executable Insights on
process weaknesses and
model their impact

Process Process
implementation To-be process redesign
model
Business Process Re-
engineering and
Automation
SESSION 13
Process Analysis (13-15)
 Process Analysis – What Process
identification

 Process Analysis – Why Process architecture

Conformance and Process As-is process

 Process Analysis - How performance insights discovery model

Process
monitoring and Process
controlling analysis

Executable Insights on
process weaknesses and
model their impact

Process Process
implementation To-be process redesign
model
Process Analysis (What and
Why)
 Process Analysis (What) can be understood as the rational breakdown of the process into
different phases, that turns input into output.
• It refers to the full-fledged analysis of the business process, which incorporates a series of
logically linked routine activities, that uses the resources of the organization, to transform
an object, with the aim of achieving and maintaining the process excellence.
 Process Analysis (Why) is nothing but a review of the entire process flow of an organization
to arrive at a thorough understanding of the process.
• Further, it is also helpful to set up targets for the purpose of process improvement, which
is possible by “eliminating unnecessary activities, reduce wastage and increasing
efficiency.” Thus, it ultimately ends up improving the overall performance of the business
activities.
Process Analysis (How)
1. Process Analysis 3. Quantitative Analysis

1.1. Qualitative 3.1. Process Performance Measures

1.2. Quantitative 3.2. Quantitative Analysis Techniques

2. Qualitative Analysis – Purpose and Techniques 3.2.1 Quantitative Flow Analysis

2.1. Identify waste - Valued-added analysis 3.2.2. Process Simulation

2.2. Eliminate Waste – (7+1 Sources of Waste) 3.2.3 Queuing Theory

2.3. Analyze Stakeholders and Identify Issues -

Issue register
2.4. Understand Issues - Root-cause analysis
2.5. Prioritize Issues - Pareto analysis
Process Analysis – Qualitative Analysis and Quantitative Analysis

 While qualitative analysis is a

◦ systematic way to gain insights into a process, it does not always provide the detail
required for decision making.
◦ We have some qualitative analysis tools and techniques, such as value-added analysis,
issue register, root-cause analysis, and pareto analysis.
 In quantitative analysis of processes, we link the
◦ identified processes to measurable objectives and quantify the benefits of
improvement.
◦ A range of techniques (Quantitative Flow Analysis, Process Simulation, Queuing
Theory) for analyzing business process quantitatively in terms of performance
measures, such as cycle time, total waiting time, cost and quality.
Process Analysis (How)
1. Process Analysis 2.5. Prioritize Issues - Pareto analysis

1.1. Qualitative 3. Quantitative Analysis

1.2. Quantitative 3.1. Process Performance Measures

2. Qualitative Analysis – Purpose and Techniques 3.2. Quantitative Analysis Techniques

2.1. Identify waste - Valued-added analysis 3.2.1 Quantitative Flow Analysis

2.2. Eliminate Waste – (7+1 Sources of Waste) 3.2.2. Process Simulation

2.3. Analyze Stakeholders and Identify Issues - 3.2.3 Queuing Theory

Issue register
2.4. Understand Issues - Root-cause analysis
(e.g., cause-effect diagrams)
Identify Waste - Valued-added analysis
A. Decorticate the process/activity into steps

B. Classify each step into:

 Value-adding (VA)
 Business value-adding (BVA)
 Non-value-adding (NVA)
Value-adding (VA): Produces value or satisfaction to the
customer.
Business Value-Adding (BVA): Necessary or useful for the business to run
smoothly, or required due to the regulatory environment, e.g., checks, controls.
Non-value-adding (NVA) Please think about Handover
• E-Commerce – selling stuffs online wherein
goods are sent to purchaser directly from
manufacturer.
• Brick and Mortar Shop – selling goods through
brick-and-mortar retailer
Activity 1 (Value-Added Analysis)
In this example, we will show value-added analysis applied to an equipment rental process. We
will break down this process step by step, and then consider what steps add value for the
customer, add value for the business, or do not add value. The steps of the process are as follows.
◦ To get the equipment, the site engineer submits an equipment rental request.
◦ The request is sent to a clerk, who selects suitable equipment.
◦ The clerk then checks the availability of the equipment.
If the equipment is not available, the clerk seeks an alternative supplier. If available, the request is
forwarded for approval to the works engineer.
◦ If suitable, the manager approves the request.
◦ If not suitable, the request is rejected.
Consider the process described previously and represented by the model below. Based on what
you have learnt, what activities would you predict are value-adding (VA), business value-adding
(BVA) and non-value adding (NVA)?
Solution
The equipment rental process which occurs in BuildIT company has 3 distinct participants,
namely site engineer, clerk and works engineer, each of which is shown as a separate lane
containing activities performed by the participant in question. The tasks involved in each
activity along with their value-added classification are indicated. The process is described
below step by step. A step ends when the process flows to a different lane.

Step 1: The process starts with the start event labelled ‘New Equipment Needed’. Site engineer
performs the activity labelled ‘Submit equipment rental request’. This activity includes 2 tasks:

1. ‘Fill request’ (Value Adding),

2. ‘Send request to clerk’ (Non-Value Adding).

The request is sent to the clerk.

Step 2: Clerk performs the activity labelled ‘Select suitable equipment’. This activity includes 2
tasks:
1. ‘Open and read request’ (Non-Value Adding),
2. ‘Select suitable equipment—first time’ (Value Adding).
After that clerk performs the activity labelled ‘Check availability’. This activity includes 3 tasks:
3. ‘Check equipment availability—first time’ (Value Adding),
4. ‘Record recommended equipment’ (Business Value Adding),
5. ‘Forward request to works engineer’ (Non-Value Adding).
At this point there is an XOR gateway which forwards the request for approval to works
engineer if the equipment is available or goes back to the activity labelled as ‘Select suitable
equipment’ if the equipment is not available.
Step 3: Works engineer performs the activity labelled ‘Review rental request’. This activity
includes 3 tasks:
1. ‘Examine request’ (Business Value Adding),
2. ‘Communicate issues’ (Business Value Adding),
3. ‘Forward request back to clerk’ (Non-Value Adding).
At this point there is an XOR gateway which sends a request approval to the clerk if the request
is approved or triggers the end event labelled ‘Request Rejected’ if the request is rejected.
Step 4: Clerk performs the ‘Create PO’ activity. This activity includes 2 tasks:
4. ‘Produce PO’ (Business Value Adding),
5. 2. ‘Submit PO to supplier’ (Value Adding).
After that the end event labelled ‘PO Created’ is triggered.
Example – Equipment Rental
Process
VERY IMPORTANT NOTE:
Considering the classifications made to the tasks from the model above, we can make a few
generalizations:
• Handling of internal documents in the organization is generally not value-adding to the
customer.
• The essential steps of this process are value-adding the first time they are performed but
are generally not value-adding any subsequent times they may occur.
• Record-keeping and stakeholder communication activities in the process are generally
business value-adding, as they can be useful for auditing and identifying issues and
improvement opportunities.
• Another aspect of value-added analysis is considering what parts of a
process are considered waste. LET US UNDERSTAND.
Remark (VERY IMPORTANT)
• Having identified and classified the steps of the process as discussed above, one
can then proceed to determining how to minimize or eliminate NVA steps. Some NVA
steps can be eliminated by means of automation. This is the case of handoffs for
example, which can be eliminated by putting in place an information system that
allows all stakeholders to know what they need to do in order to move forward the
rental requests. When the site engineer submits a rental request via this information
system, the request would automatically appear in the to-do list of the clerk.
Similarly, when the clerk records the recommended supplier and equipment, the
works engineer would be notified and directed to the request. This form of
automation makes these NVA steps transparent to the performers of the steps. The
topic of process automation will be discussed in further detail (Bizagi Hands-on).

• A more radical approach to eliminate NVA steps in this example is to eliminate the
clerk altogether from the process. This means moving some of the work to the site
engineer so that there are less handoffs in the process. Of course, the consequences
of this change in terms of added workload to the site engineer need to be carefully
considered. Yet another approach to eliminate NVA (and BVA) steps would be to
eliminate the need for approval of rental requests in cases where the estimated cost
is below a certain threshold. Again, this option should be weighted against the
possible consequences of having less control steps in place. In particular, if the site
engineers were given full discretion to rent equipment at their own will, there would
need to be a mechanism in place to make them accountable in case they rent
• While elimination of NVA steps is generally considered a desirable goal,
elimination of BVA steps should be considered as a trade-off given that BVA
steps play a role in the business.

• Prior to eliminating BVA steps, one should first map BVA steps to
business goals and business requirements, such as regulations that the
company must comply to and risks that the company seeks to minimize.

• Given a mapping between BVA steps on the one hand and business goals
and requirements on the other, the question then becomes the following:
What is the minimum amount of work required in order to perform the
process to the satisfaction of the customer, while fulfilling the goals and
requirements associated to the BVA steps in the process? The answer to
this question is a starting point for process redesign.
Process Analysis (How)
1. Process Analysis 3. Quantitative Analysis

1.1. Qualitative 3.1. Process Performance Measures

1.2. Quantitative 3.2. Quantitative Analysis Techniques

2. Qualitative Analysis – Purpose and Techniques 3.2.1 Quantitative Flow Analysis

2.1. Identify waste - Valued-added analysis 3.2.2. Process Simulation

2.2. Eliminate Waste – (7+1 Sources of Waste) 3.2.3 Queuing Theory

2.3. Identify Issues - Issue register

2.4. Understand Issues - Root-cause analysis
(e.g., cause-effect diagrams)
2.5. Prioritize Issues - Pareto analysis
 Eliminating Waste
"All we are doing is looking at the
timeline, from the moment the
customer gives us an order to the
point when we collect the cash. And
we are reducing the timeline by
reducing the non-value-adding
wastes”
Taii-chi Ohno
Eight (7+1) Sources of Waste
1. Unnecessary Transportation (send, receive)
2. Inventory (large work-in-process)
3. Motion (drop-off, pick-up, go to)
4. Waiting (waiting time between tasks)
5. Over-Processing (performing what is not yet needed or might not be needed)
6. Over-Production (unnecessary cases)
7. Defects (rework to fix defects)
8. Resource underutilization (idle resources)
Source: Seven Wastes defined by Taiichi Ohno, and 8th waste coined by Ben
Chavis, Jr.
Admission Process
Consider the following process for the admission of graduate students at a university. In order
to apply for admission, students first fill in an online form. Online applications are recorded in
an information system to which all staff members involved in the admissions process have
access to. After a student has submitted the online form, a PDF document is generated and the
student is requested to download it, sign it, and send it by post together with the required
documents, which include: 1. Certified copies of previous degree and academic transcripts. 2.
Results of English language test. 3. Curriculum vitae.

When these documents are received by the admissions office, an officer checks the
completeness of the documents. If any document is missing, an e-mail is sent to the student.
The student has to send the missing documents by post. Assuming the application is complete,
the admissions office sends the certified copies of the degrees to an academic recognition
agency, which checks the degrees and gives an assessment of their validity and equivalence in
terms local education standards. This agency requires that all documents be sent to it by post,
and all documents must be certified copies of the originals. The agency sends back its
assessment to the university by post as well.
Assuming the degree verification is successful, the English language test results are then checked
online by an officer at the admissions office. If the validity of the English language test results
cannot be verified, the application is rejected (such notifications of rejection are sent by e-mail).
Once all documents of a given student have been validated, the admission office forwards these
documents by internal mail to the corresponding academic committee responsible for deciding
whether to offer admission or not. The committee makes its decision based on the academic
transcripts and the CV. The committee meets once every 2 to 3 weeks and examines all
applications that are ready for academic assessment at the time of the meeting.

At the end of the committee meeting, the chair of the committee notifies the admissions office
of the selection outcomes. This notification includes a list of admitted and rejected candidates. A
few days later, the admission office notifies the outcome to each candidate via e-mail.
Additionally, successful candidates are sent a confirmation letter by post.
Process Analysis (How)
1. Process Analysis 3. Quantitative Analysis

1.1. Qualitative 3.1. Process Performance Measures

1.2. Quantitative 3.2. Quantitative Analysis Techniques

2. Qualitative Analysis – Purpose and Techniques 3.2.1 Quantitative Flow Analysis

2.1. Identify waste - Valued-added analysis 3.2.2. Process Simulation

2.2. Eliminate Waste – (7+1 Sources of Waste) 3.2.3 Queuing Theory

2.3. Analyze Stakeholders and Identify Issues -

Issue register
2.4. Understand Issues - Root-cause analysis
2.5. Prioritize Issues - Pareto analysis
Stakeholder Analysis
Stakeholder analysis is a widely used technique in the field of project management. This analysis
is generally undertaken at the start of a project in order to understand who has an interest in the
project and could therefore contribute to, affect, or be affected by the project’s execution, and
how. In the field of BPM, stakeholder analysis is commonly used to gather information about
issues that affect the performance of the process from different perspectives. In this context,
there are typically five categories of stakeholders:
• The customer(s) of the process.
• The process participants.
• The external parties (e.g., suppliers, sub-contractors) involved in the process.
• The process owner and the operational managers who supervise the process participants.
• The sponsor of the process improvement effort and other executive managers who have a
stake in the performance of the process.
Consider the equipment rental process discussed in previous examples. The owner of this
process is BuildIT’s purchasing manager. The purchasing manager is concerned by the
growing volume of equipment rental expenses. In the past year, these expenses have
grown by 12% whereas the overall volume of construction activity (measured by revenue)
has grown by only 8%. The purchasing manager launches an improvement effort to bring
down the rental expenses by 5%. This objective is in line with overall target set by the CFO
of 5% of company-wide cost reductions. An analyst is asked to review the rental process.
The analyst identifies the following stakeholders:
• Customer: the site engineers.
• Process participants: the clerks, the works engineers and the accounts payable team at
the financial department (who handle the invoice).
• Process owner and operational managers: purchasing manager, construction project
managers, accounts payable team lead.
• Upper management: the CFO, acting as the business sponsor as part of the broader
mandate for cost reduction.
• External party: the equipment rental suppliers.
After interviewing the process owner, the analyst notes two perceived issues in the
process:
• Equipment is often hired for longer than needed, leading to inventory waste.
• Penalties are often being paid to the suppliers due to: (i) equipment being returned upon
receipt because it was not suitable for the job; and (ii) late invoice payments. In both cases,
these penalties arise from wastes of type defect.
Identify Issues - Issue Register (VERY IMPORTANT)

Employee
Customer Feedback

Another typical source of issues is process discovery. While we are discovering and an in
particular modelling a business process, we conduct interviews, we conduct focus groups and as
we start asking stakeholders to describe the process to us, they are also going to start raising
issues. You know, complaints, weaknesses that they see every day in the process.

57
Example of Issue Register (Equipment Rental)
Name Explanation Assumptions Qualitative Quantitative
Impact Impact

Equipment Site engineers keep the BuildIT rents 3000 pieces of equipment p.a. In 0.1 × 3000 × 2 ×
kept longer equipment longer than 10% of cases, site engineers keep the equipment 100 = 60,000
than needed needed by means of two days longer than needed. p.a.
deadline extensions On average, rented equipment costs 100 per day

Rejected Site engineers reject BuildIT rents 3000 pieces of equipment p.a. Each Disruption to 3000 × 0.05 ×
equipment delivered equipment due to time an equipment is rejected due to an internal schedules. 100 = 15,000
non-conformance to their mistake, BuildIT is billed the cost of one day of Employee p.a.
specifications rental, that is 100. stress and
5% of them are rejected due to an internal frustration
mistake

Late BuildIT pays late payment BuildIT rents 3000 pieces of equipment p.a. Each 0.1 × 3000 × 4 ×
payment fees fees because invoices are equipment is rented on average for 4 days at a 100 × 0.02 =
not paid by the due date rate of 100 per day. 2400 p.a.
Each rental leads to one invoice.
About 10% of invoices are paid late.
Penalty for late payment is 2%.
So, what do issue registers look like? We’ll use our equipment rental process
to illustrate this. If we consider our chosen issue to be instances where site
engineers keep rented equipment longer than needed, then we might enter
this into an issue register as follows.
Issue register — quantitative
impact
Issue name Description Assumptions Quantitative impact

Equipment kept Site engineers keep •3000 pieces of 0.1 × 3000 × 2 ×100 =
longer than needed rented equipment equipment rented 60 000 p.a.
longer than needed each year i.e. the company
by asking for deadline •In 10% of cases, loses $60 000 each
extensions to the equipment is kept year due to this issue
supplier two days more than
needed
•Average rental cost is
100 per day
• The issue documented above has an impact on the business that is easy to
capture, as it is quantitative in nature.
• These qualitative impacts are harder to estimate.
• In the long run, employee frustration can lead to low staff motivation or loss
of staff. But in the short term, these impacts do not have measurable effects.
Issue register quantitative and qualitative impact
Issue name Explanation Assumptions Qualitative Quantitative impact
impact

Rejected Site engineers 3000 pieces of equipment Disrupted 3000 × 0.05 × 100 = 15
equipment reject delivered rented p.a. schedules 000 p.a.
equipment due i.e. the company loses
to non- 5% of them are rejected Employee $15 000 each year due to
conformance to due to an internal mistake stress and this issue
their frustration
specifications For each rental rejected
due to an internal mistake,
the company is billed $100
The table below represents an incomplete record in an issue register. What would you
suggest is the qualitative and the quantitative impact of this issue, based on the information
given and your own thinking? Look right to share on the discussion, using #issueRegister.
Issue name Explanation Assumptions
Late payment fees Late payment fees incurred because 3000 pieces of equipment rented
invoices are not paid by their due p.a. Average rental time is 4 days
date Rental cost is $100 per day Each
rental leads to one invoice About
10% of invoices are paid late
Penalty for late payment is 2%

A likely qualitative impact is poor reputation with suppliers. Qualitative impact can be
calculated as follows: 0.1 × 3000 × 4 × 100 × 0.02 = 2400 p.a.
A caution: Let us think over it

Risk Management (Risk Register) vs. Issue Management (Issue log)

Process Analysis (How)
1. Process Analysis 3. Quantitative Analysis

1.1. Qualitative 3.1. Process Performance Measures

1.2. Quantitative 3.2. Quantitative Analysis Techniques

2. Qualitative Analysis – Purpose and Techniques 3.2.1 Quantitative Flow Analysis

2.1. Identify waste - Valued-added analysis 3.2.2. Process Simulation

2.2. Eliminate Waste – (7+1 Sources of Waste) 3.2.3 Queuing Theory

2.3. Analyze Stakeholders and Identify Issues -

Issue register
2.4. Understand Issues - Root-cause analysis
2.5. Prioritize Issues - Pareto analysis
Root Cause Analysis Tools

1. The Ishikawa Fishbone Diagram

(IFD)
2. 5 Whys
3. Pareto Chart
4. Failure Mode and Effects
Analysis (FMEA)
5. Scatter Diagram
6. Affinity Diagram
7. Fault Tree Analysis (FTA)
Cause-Effect (Fishbone) Diagrams
Let’s return to the example we’ve used in this topic—the equipment rental process.
Using a 6 Ms framework and a given issue of ‘equipment rejected at delivery’, what
causal factors can you identify? Create your own fishbone diagram, or create a list of
factors using the 6 Ms.
Cause-Effect Diagram (Rejected Equipment)
A cause-effect diagram consists of a main horizontal line (the trunk) from which a number of
branches stem. At one end of the trunk is a box containing the issue, which is Equipment
rejected at delivery. The trunk has a number of branches corresponding to the 6 categories of
factors, namely Machine, Method, Material, Man, Measurement and Milieu. The identified root
causes involved in the issue are written in the sub-branches of their corresponding categories.
• The identified primary factor in the Method category is “site engineer does not know what
equipment will be rented”.
• The identified secondary factor for this primary factor is “clerk is entirely responsible for
equipment selection”.
• The identified primary factor in the Material category is “clerk selected equipment with
incorrect specs”.
• The identified secondary factor for this primary factor is “inaccurate equipment description
in provider’s catalogue”.
• The identified primary factor in the Man category is “clerk misunderstood site engineer’s
requirement”.
• The identified secondary factor for this primary factor is “Incomplete or inaccurate
requirements from site engineer”.
Why-Why Diagram
Why-Why diagram (Equipment
Rental)
 Site engineers keep equipment longer, why?
◦ Site engineer fears that equipment will not be available later when
needed, why?
◦ time between request and delivery too long, why?
◦ excessive time spent in finding a suitable equipment and approving the
request, why?
◦ time spent by clerk contacting possibly multiple suppliers
sequentially;
◦ time spent waiting for works engineer to check the requests;
Milieu: a person's social environment.
Process Analysis (How)
1. Process Analysis 3. Quantitative Analysis

1.1. Qualitative 3.1. Process Performance Measures

1.2. Quantitative 3.2. Quantitative Analysis Techniques

2. Qualitative Analysis – Purpose and Techniques 3.2.1 Quantitative Flow Analysis

2.1. Identify waste - Valued-added analysis 3.2.2. Process Simulation

2.2. Eliminate Waste – (7+1 Sources of Waste) 3.2.3 Queuing Theory

2.3. Identify Issues - Issue register

2.4. Understand Issues - Root-cause analysis
2.5. Prioritize Issues - Pareto analysis
Pareto Chart
The impact assessment conducted while building the issue register can serve as input for Pareto
analysis. The aim of Pareto analysis is to identify which issues, or which causal factors of an issue
should be given priority. Pareto analysis rests on the principle that a small number of factors are
responsible for the largest share of a given effect. In other words: A small subset of issues in the
issue register are likely responsible for the largest share of impact. For a given issue, a small subset
of factors behind this issue are likely responsible for the largest share of occurrences of this issue.
 Useful to prioritize a collection of issues or factors behind an issue
 Bar chart where the height of the bar denotes the impact of each issue
 Bars sorted by impact
 Superposed curve where the y-axis represents the cumulative percentage impact
Sometimes this principle is also called the 80-20 principle, meaning that 20% of issues are responsible
for 80% of the effect. One should keep in mind however that the specific proportions are only
indicative. It may be for example that 30% of issues are responsible for 70% of the effect.
A typical approach to conduct Pareto analysis is as follows:
1. Define the effect to be analyzed and the measure via which this effect will be quantified. The
measure might be for example: Financial loss for the customer or for the business, Time loss by
the customer or by the process participants, Number of occurrences of a negative outcome, such
as number of unsatisfied customers due to errors made when handling their case.
2. Identify all relevant issues that contribute to the effect to be analyzed.
3. Quantify each issue according to the chosen measure. This step can be done on the basis of the
issue register, in particular, the quantitative impact column of the register.
4. Sort the issues according to the chosen measure (from highest to lowest impact) and draw a so-
called Pareto chart. A Pareto chart consists of two components:
a. A bar chart where each bar corresponds to an issue and the height of the bar is proportional
to the impact of the issue or factor.
b. A curve that plots the cumulative percentage impact of the issues. For example, if the issue
with the highest impact is responsible for 40% of the impact, this curve will have a point with
a y-coordinate of 0.4 and an x coordinate positioned so as to coincide with the first bar in the
bar chart.
Pareto Diagram Example
The following example comes from a cellular telephone service provider. The data
is collected from customer review forms that were submitted following their
choice to leave the cellular carrier. The company decides to perform a Pareto
analysis on the data to try and figure out what they should focus on first to
improve their offering.
As you can see, the majority of complaints (about 80%) stem from either long hold times
or rude customer service. The 80% can be seen in the graph below highlighted by the
dotted line.

From a business strategy perspective, those two problems should be addressed first to
achieve maximum impact. Judging by the comments, we can assume that hiring more
staff and/or training them better would be the best course of action.
Pareto Chart (Excessive Rental Expenses)
PICK Chart
It is worth highlighting that Pareto analysis focuses on a single dimension. In the example above, the
dimension under analysis is the impact in monetary terms. In other words, we focus on the
estimated payoff of addressing an issue. In addition to payoff, there is another dimension that
should be taken into account when deciding which issues should be given higher priority, namely
the level of difficulty of addressing an issue. This level of difficulty can be quantified by the
investment required to change the process, such that the issue in question is addressed. A type of
chart that can be used as a complement to Pareto charts in order to take into account the difficulty
dimension is the PICK chart. PICK is an acronym standing for Possible, Implement, Challenge, and
Kill. These are the names of the four quadrants of a PICK chart. In a PICK chart, each issue appears
as a point. The horizontal coordinate of a point captures the difficulty of addressing the issue (or
more specifically the difficulty of implementing a given improvement idea that addresses the issue).
Meanwhile, the vertical coordinate of an issue captures its potential payoff. The horizontal axis
(difficulty) is split into two sections (easy and hard) while the vertical axis (payoff) is split into low
and high. These splits lead to four quadrants that allow analysts to classify issues according to the
trade-off between payoff and difficulty:
• Possible (low payoff, easy to do): issues
that can be addressed if there are
sufficient resources to do so.
• Implement (high payoff, easy to do):
issues that should definitely be
implemented as a matter of priority.
• Challenge (high payoff, hard to do):
issues that should be addressed but
require significant amount of effort. In
general one would pick one of these
challenges and focus on it rather than
addressing all or multiple challenges at
once.
• Kill (low payoff, hard to do): issues that
are probably not worth addressing or at
least not to their full extent.
PICK chart - visualizing the payoff and difficulty of
addressing each issue
Question#1
Admission Process
Consider the following process for the admission of graduate students at a university. In order to apply for
admission, students first fill in an online form. Online applications are recorded in an information system to
which all staff members involved in the admissions process have access to. After a student has submitted
the online form, a PDF document is generated and the student is requested to download it, sign it, and send
it by post together with the required documents, which include: 1. Certified copies of previous degree and
academic transcripts. 2. Results of English language test. 3. Curriculum vitae.

When these documents are received by the admissions office, an officer checks the completeness of the
documents. If any document is missing, an e-mail is sent to the student. The student has to send the missing
documents by post.

Assuming the application is complete, the admissions office sends the certified copies of the degrees to an
academic recognition agency, which checks the degrees and gives an assessment of their validity and
equivalence in terms local education standards. This agency requires that all documents be sent to it by
post, and all documents must be certified copies of the originals. The agency sends back its assessment to
the university by post as well.
Assuming the degree verification is successful, the English language test results are then checked
online by an officer at the admissions office. If the validity of the English language test results
cannot be verified, the application is rejected (such notifications of rejection are sent by e-mail).
Once all documents of a given student have been validated, the admission office forwards these
documents by internal mail to the corresponding academic committee responsible for deciding
whether to offer admission or not. The committee makes its decision based on the academic
transcripts and the CV. The committee meets once every 2 to 3 weeks and examines all
applications that are ready for academic assessment at the time of the meeting.

At the end of the committee meeting, the chair of the committee notifies the admissions office
of the selection outcomes. This notification includes a list of admitted and rejected candidates. A
few days later, the admission office notifies the outcome to each candidate via e-mail.
Additionally, successful candidates are sent a confirmation letter by post.
Please fill in Value Added Analysis of the following
Activity Value Added Analysis (VA, BVA, NVA)
Check completeness
Receive physical documents from students
Academic recognition agency check
Receive online application
Evaluate academic admissibility
Forward documents to committee
Notify students service of outcomes of academic admissibility
Send notification to student
English test check
Remark
• Having identified and classified the steps of the process as discussed above, one
can then proceed to determining how to minimize or eliminate NVA steps. Some NVA
steps can be eliminated by means of automation. This is the case of handoffs for
example, which can be eliminated by putting in place an information system that
allows all stakeholders to know what they need to do in order to move forward the
rental requests. When the site engineer submits a rental request via this information
system, the request would automatically appear in the to-do list of the clerk.
Similarly, when the clerk records the recommended supplier and equipment, the
works engineer would be notified and directed to the request. This form of
automation makes these NVA steps transparent to the performers of the steps. The
topic of process automation will be discussed in further detail (Bizagi Hands-on).

• A more radical approach to eliminate NVA steps in this example is to eliminate the
clerk altogether from the process. This means moving some of the work to the site
engineer so that there are less handoffs in the process. Of course, the consequences
of this change in terms of added workload to the site engineer need to be carefully
considered. Yet another approach to eliminate NVA (and BVA) steps would be to
eliminate the need for approval of rental requests in cases where the estimated cost
is below a certain threshold. Again, this option should be weighted against the
possible consequences of having less control steps in place. In particular, if the site
engineers were given full discretion to rent equipment at their own will, there would
need to be a mechanism in place to make them accountable in case they rent
• While elimination of NVA steps is generally considered a desirable goal,
elimination of BVA steps should be considered as a trade-off given that BVA
steps play a role in the business.

• Prior to eliminating BVA steps, one should first map BVA steps to
business goals and business requirements, such as regulations that the
company must comply to and risks that the company seeks to minimize.

• Given a mapping between BVA steps on the one hand and business goals
and requirements on the other, the question then becomes the following:
What is the minimum amount of work required in order to perform the
process to the satisfaction of the customer, while fulfilling the goals and
requirements associated to the BVA steps in the process? The answer to
this question is a starting point for process redesign.
Question#2
Identify wastes in the university admission process and classify them according to the seven
types of waste.
Consider the following additional information. Each year, the university receives in total 3,000 online
applications. There are 10 study programs. Each study program has 30 study places. The top-5 applicants in
each study program are offered scholarships in addition to a study place. Applicants initially ranked in positions
6 to 30 in their study program are offered a study place but without a scholarship. After the committee has
examined the applications, each application is either: (i) accepted with a scholarship, (ii) accepted without
scholarship, (iii) admissible but not accepted unless a study place is freed up by a higher-ranked applicant, or
(iv) rejected due to low scores or plagiarism. Successful applicants must accept or decline the offer at most
two weeks after notification. If an applicant declines the offer, his or her study place is allocated to the next
admissible non-admitted applicant in the ranking of his or her study program. If an applicant with an allocated
scholarship rejects his or her study place, the scholarship is allocated to the next applicant in the
corresponding ranking who does not yet have an allocated scholarship. Applications are rejected or discarded
for the following reasons:

• 20% of applications are rejected initially due to deficiencies in the online application form (e.g., missing
documents). In half of the cases, the applicant manages to fix the identified issues and the application
passes the administrative check after the second try.
• 10% of applications are rejected because the hard copy is not received on time.
• 3% rejected due to a negative advice from the academic recognition agency.
• 2% rejected due to invalid English language test.
• 5% rejected due to plagiarized motivation letter.
• 5% rejected due to poorly written motivation letters.
• 15% rejected due to low GPA.
• 20% of applicants are offered a place but decline it. In 60% of these cases, the applicant declines
because he or she expected to get a scholarship, but his or her score was insufficient. In another
30% of cases, applicants decline because they had already accepted an offer elsewhere. The rest
of cases where applicants decline an offer are due to personal reasons.
• 20% of applicants are declared admissible but do not receive an offer due to lack of study places.
The admissions office handles circa 10,000 emails from applicants concerning the application
process, including questions about the application form, the required documents, the eligibility
conditions, the application status, etc.

Note. Please treat the entire agency check as BVA. Part of this agency check consists in the
admissions office sending the documents to the agency and the agency sending back the documents
and their assessment to the admissions office. These two sub-steps could be treated as NVA.
However, if we assume that the agency requires the documents to be sent by post to them, these
sub-steps cannot be easily separated from the agency check itself. In other words, it would not be
possible to eliminate these handoff steps without eliminating the entire agency check. Thus, the
entire agency check should arguably be treated as a single step.
Please write appropriate waste type of the following description
Description of Waste Waste Type
Right from the start of the process, we can spot transportation waste in the form of physical documents sent by the student to the
admissions office, emails from the admission office to the student, and further documents sent by the applicant if the initial
application is incomplete. The latter events can also be seen as defect waste. We also note that there is a handoff from the
admissions office to the committee and back. These handoffs are transportation wastes too. Other transportation wastes come
from the interactions between the admissions office and the external academic recognition agency.

When the admissions office finds that an application is incomplete, an email is sent to the student asking for the missing
information or documents. The fact that the application is put on hold until additional input is received
from the candidate is waiting waste. Later in the process, the committee batches the applications and examines them every three
months. This batching generates waiting waste. There may also be idleness waste during the period when the admissions office is
waiting for the decisions of the academic committee, but without further information, it is not possible to assert that this idleness
indeed occurs in practice (it may be that the office handles other work in the meantime).

Given the committee meets every three months, we can hypothesize that at a given point in time, there are several hundred
applications in a pending state. This constitutes inventory waste.
When an incomplete application is sent back to the applicant, the application needs to be checked again after the student
resubmits a revised application. This second verification of completeness is rework, hence defect waste.
Officers in the admissions office spend time verifying the authenticity of around 3,000 diplomas and language test results submitted
by the applicants. In the end, however, only 5% of cases reveal any issues. Later on in the process, three quarters of the applications
are passed on to the admission committees. The university ends up making a study place offer to only 20% of the applications that
they receive. The fact that the document authenticity was verified for all the applications rejected by the committee is an example
of overprocessing.

We can see two sources of overproduction waste: cases where an applicant rejects the admission offer he or she receives (20% of
cases) and cases where the applicant is declared admissible but does not receive a study offer due to lack of places (20%).
Question#3
Question#4
Question#5
A purchase-to-pay process starts when an employee (the ‘originator’), fills in a purchase requisition and
attaches one or several quotes. The purchase requisition goes through two approvals: a ‘conformance
approval’ by a purchasing officer and a financial approval by the owner of the financial account from
which the purchase is made. Which of the following items is/are over-production waste(s)?
Question#6
In an order-to-cash process, which of the following situations represents a waste of type ‘defect’? Select
all that apply.
Question#7
In an order-to-cash process, when the supplier confirms the PO, they have to deliver the products
within the agreed delay (usually 15 days). Sometimes, however, this delay is not achieved, and the
customer has to be compensated. Which of the following would be identified as a direct cause of
delivery delays?
Question 8
The following example comes from a cellular telephone service provider. The data is collected
from customer review forms that were submitted following their choice to leave the cellular
carrier. As a business analyst, please perform a Pareto analysis on the data (Draw Pareto
Chart) to try and figure out what they should focus on first to improve their offering.

Customer Reasoning to leave (A) Payoff (in Lakhs) if issue addressed (B)
Long hold time 165
Rude customer service 89
Cost of phone 35
High call failure 25
Lack of accessories 15
Lack of selection 13
High spam call 12
Cost of cellular plan 8
Phone malfunction 7
Long checkout time 6
Difficulty in switching plan 2
Global roaming not available 1
Output will be similar to this
 Draw PICK Chart
Customer Reasoning to Payoff (in Lakhs) if issue Impact (1-3) Effort (1-3)
leave addressed
(A) (B) (C) (D)
Long hold time 165 3 1

Rude customer service 89 3 2

1. Type the issues you want to prioritize into column A
Cost of phone 35 3 3
2. Estimate the payoff if issue addressed into column B
High call failure 25 2.5 1
3. Estimate the Business Impact of each idea in Column C, on
Lack of accessories 15 2 2
a scale of 0 to 3. Note: You do not have to use whole
Lack of selection 13 2 3 numbers. You can use values such as 1.5
High spam call 12 2 1.5 4. Estimate the Effort to implement each idea in Column D, on
Cost of cellular plan 8 1 1 a scale of 0 to 3. (Note: You do not have to use whole
Phone malfunction 7 1 2 numbers. You can use values such as 1.5)
Long checkout time 6 1 3 5. Drop the column B
Difficulty in switching plan 2 0.5 0.5 6. Draw PICK chart
Global roaming not 1 0.5 2
available
Output will be similar to this