J. EATOCK et al: A STUDY OF THE IMPACT . .A STUDY OF THE IMPACT OF INFORMATIONTECHNOLOGY ON BUSINESS PROCESSES USINGDISCRETE EVENT SIMULATION: A REPRISEJULIE EATOCKRAY J. PAULALAN SERRANODepartment of Information Systems and ComputingBrunel UniversityUxbridge UB8 3PH, Middlesex, United KingdomAbstract: Advocates of Business Process (BP) approaches argue that the real value of IT is that it provokesinnovative changes in business processes. Despite the fact that many BP and IT academics and practitionersagree on this idea, BP and IT design are still performed separately. Moreover, there is very little research that isconcerned with studying the ways in which IT supports BP. The ASSESS-IT project examined this domain andproposed the use of simulation techniques to achieve BP and IT integration. The outcome of this project givesindication that describing the dynamic behaviour of IT could be very helpful for BP modellers in predicting theimpact that the insertion of IT may have on organisational processes. This paper describes the rationale of thesimulation framework used in the ASSESS-IT project and analyses the results obtained when applying thisframework to a case study in order to reflect about the advantages and limitations of this approach and toidentify possible areas for further research in this domain.Keywords: Business Process, Simulation, IT1.processes, however, is not isolated and has alwaysbeen related to Information Technology (IT). IT isconsidered one of the most important enablers ofprocess change. In one of the first articles aboutBPR, Davenport and Short  argue thattogether, processes and information technology canbe seen as a new industrial engineering that mayrevolutionise the way in which organisationsoperate. Similarly, Hammer and Champy claim, in one of the most renowned books on BPR,that IT is part of any reengineering effort, and theyposition IT as “an essential enabler”.INTRODUCTIONBusiness processes (BP) became the focus ofcontinuous improvement efforts in the mid-40’s[Davenport and Stoddard, 1994]. It is argued,however, that process analysis started far before in1911, when Frederick Taylor first advocated thesystematic study of work procedures. From thattime, the concept of process became very important.For example, process control and process techniqueshave been outlined in the quality movement [Juran,1964; Garvin, 1988]. Process skills and processconsultancy have been very important in humanrelations and management of change schools[Schein, 1969]. Operations management isconcerned with the management of processes,people, technology, and other resources in theproduction of goods and services [Armistead et al.,1995].Most of the advocators of the business processreengineering movement highlight the importance ofthe role that IT plays in the reengineering process.Many argue that IT should be seen as an enabler oforganisational change rather than as a tool toimplement business processes [Davenport, 1993].Childe et al. , for example, state that theinitiative to move towards BPR in many casesoriginates from the IT departments. In one of thefirst empirical studies on IT-enabled BPR, Grover etal.  claim that the success of IT to enable BPRlies on IS-strategy integration. They contend that thesuccess of IT-enabled BPR efforts will succeed onlyIt was at the beginning of the 1990’s when theprocess movement became very strong. BusinessProcess Reengineering (BPR) also named ProcessRedesign, or Process Innovation is one of the mostpopular concepts in business management[Davenport, 1993, Hammer and Champy, 1993,Kettinger et al., 1997]. The study of businessI. J. of SIMULATION Vol. 2 No. 230ISSN 1473-804x online, 1473-8031 print
J. EATOCK et al: A STUDY OF THE IMPACT . .if they are directed through a strong integration withstrategy.efforts in a highly co-ordinated fashion, there hasbeen little success to date in achieving this attempt.This relationship, however, is not fully explored inmost of the existing business process methodologies.To illustrate this point, let us consider two BPRapproaches proposed by Davenport  andKettinger .To address this problem, Painter et al. propose a simulation-based methodology, namedBPR-II, for change impact assessment, enablingsimultaneous consideration of changes to businessprocesses and the infrastructure mechanisms thatsupport those processes. They argue that the BPR-IImethodology and an accompanying automatedsupport environment will provide the ability to linkmodels of both, business process and the supportingIT iesInformation Technology as one of the three mainenablers of business change and provides a detailedpicture of how IT provides opportunities of changeand advocates that the design of IT should be donetogether with the business processes. The majorcontribution of Davenport’s  framework isthat it is one of the first BPR efforts that attempts toco-ordinate process and IT design and givessufficient evidence to help identify different waysthat IT can be used to improve process performance.A major limitation is that despite the fact that thisframework points towards what needs to be doneand where, it barely mentions how to do it.Davenport acknowledges that the tools andtechniques for achieving process objectives aredistinct in use from those for developing informationsystems. Despite this fact, however, he advocatesthat IS requirements and data structures should fitwith the corresponding business processes, and thatthe implementation of IS should be closely coordinatedwithcorrespondingprocessimplementations efforts. In an attempt to help in thisdirection, the author outlines extant technologies thatcan play an important role in the implementation ofprocesses. Davenport’s framework, however, doesnot supply information that indicates how to studythe IT impact on BP.The role of Information Systems in enabling changeis pursued in more detail in the S-A framework inKettinger et al.  work. The S-A frameworkspecifies an activity (S4A4) to analyse and designIS, and other activity (S5A2) to implement IS. Theframework in this paper clearly specifies modellingtechniques and tools that can be used in each of theS-A framework stages and activities. Despite thisfact, the S-A framework has a similar problem toDavenport’s framework: it focuses almost entirelyon identifying techniques and tools that can be usedin each of the stages and forgets to mention how theco-ordination between process and informationtechniques can be achieved. Although theidentification of modelling techniques for processand information system design is more detailed,there is no integration between process and ISmodelling techniques.Painter et al.  propose the insertion of a‘middle’ layer between BP and CN which consistsof models that depict the IT applications that run onthe CN and support the BP (Figure 1).Business Process SimulationBPSInformation SystemsModellingComputer Network SimulationCNSFigure 1 BPS and CNS Integration (derived fromPainter et al., 1996)The authors propose the use of the IDEF3 ProcessDescription Capture method as the key mechanismfor process knowledge capture and organisation.IDEF3 process descriptions are used in thismethodology to capture a definition of the process atall three levels, namely business process, applicationand network processing, and to directly generate thestructure and logic of simulation models reflectingthese levels.Probably one of the major contributions of Painter etal.’s  paper is that it recognises the need tointegrate process and information technology designand identifies an intermediate layer, informationsystems, as the link between process and computernetworks. The approach, however, has somelimitations. IDEF3 is a modelling technique that canbe used to depict how a particular system ororganisation works. IDEF3 however, is not veryappropriate for process change initiatives, as it offersvery limited capabilities to portray the organisationaland behavioural perspectives. Moreover, the tools toderive BP and IS models from IDEF descriptions donot necessarily produce a final integrated model andfurther design and development may be neededtowards this integration.One of the few papers that address the integration ofBP and IT modelling domains, is presented inPainter et al.’s work . The authors argue thatAnother possible disadvantage of this methodologydespite the fact many people advocate conductingis that in order to achieve model integration itBPR and Information Technology modernisationI. J. of SIMULATION Vol. 2 No. 2ISSN 1473-804x online, 1473-8031 print31
J. EATOCK et al: A STUDY OF THE IMPACT . .produces an elaborate net of models with a highlevel of complexity, which in a large exercise wouldbe almost impossible to follow. Other BP simulationtools, such as Business Process simulation (BPS),have proved to offer a friendlier user-environmentthat makes the elaboration of BP models simplerthan the one proposed in this paper. Finally, IDEF3is a static technique whereas simulation is a dynamicmodelling technique. Data interchange betweendynamic and static techniques adds another degreeof complexity.Despite the fact that both process design andinformation systems approaches argue that IT playsa key role on process and IT design, most of theBPR approaches do not provide any clear guidanceof how this could be achieved, or any indication ofwhich modelling techniques could be used to detecthow IT supports organisational processes.Painter et al’s work suggest that it is very unlikely tofind a single modelling tool that would help tomodel process and IT interactions. A major problemof the approach proposed in their work is concernedto the modelling techniques suggested, since theymay not be appropriate to cope with the problem,mainly due to the diversity of the techniques used(dynamic and static).This paper describes a modelling approach that aimsto combine business process and computer networksimulation (CNS) to portray the interactions betweenprocess and IT. The approach attempts to provide asolution to the problem of measuring the impact ofIT on BP and is tested using a case study. The paperis divided into 5 major sections. Section 2 brieflyrevises discrete event simulation, and in particular,Business Process Simulation (BPS) in order tojustify the use of this technique in our approach.Section 3 is an introduction to the case study. Itdescribes the case study background, the scope andobjectives of the case study, the problemidentification phase, and finally, explains in detailthe as-is business processes. Section 4 describes themethod proposed to model the interactions betweenBPS and CNS. Section 5 reports the experimentsperformed and the results obtained. Conclusions andfurther research are described in section 6.2.MODELLINGPROCESSANDINFORMATION TECHNOLOGY USINGDISCRETE EVENT SIMULATIONDiscrete-event simulation (DES) can be described asa technique that is concerned with the modelling ofsystems in which the state variable (the collection ofvariables necessary to describe the system at anytime) changes only at discrete points in time [Bankset al., 2000]. It is in these points at which an eventoccurs, where an event is defined as aninstantaneous occurrence that might change the sateof the system [Law and Kelton, 2000]. Both authorsI. J. of SIMULATION Vol. 2 No. 2argue that despite the fact simulation can be, inprinciple, performed by hand calculations, thenumber of calculations that are needed to modelreal-world systems are considerably high andtherefore discrete-event simulations are mostlydesigned with the aid of a computer system.Discrete-event simulation has been largely used byoperational research and system analysts. Thecircumstances under which simulation is consideredan appropriate tool have been discussed by manyauthors [Naylor et al., 1966, Banks et al., 2000, Lawand Kelton, 2000] and are included in the followinglist:·Simulation enables the study of, andexperimentation with, the internal interactionsof a complex system, or a subsystem within acomplex one. By changing simulation inputsand observing the resulting outputs, valuableinsight may be obtained into which variables aremost influential and how variables mental changes can be simulated and theeffect of these alterations can be observed.·A simulation model may be of great value tosuggest improvement in the system underinvestigation.·Simulation can be used to experiment with newdesigns or policies before implementation toprepare for what may happen.·Simulation can be used to verify analyticsolutions.Discrete event simulation is one of the modellingtechniques most commonly used in the processdomain. The following list includes the views ofsome authors [Gladwin and Tumay, 1994,MacArthur et al., 1994, Warren et al., 1995, Hlupicand Robinson, 1998, Giaglis, 1999] that considersimulation as an appropriate tool for businessprocess re-design.·Simulation provides ways to model the dynamicbehaviour of business processes.·Simulation can be used to model, in a morerealistic way, the randomness, uncertainty, andinterdependencies of resources.·Simulation can help to contribute to understandand improve the analysis and study of theinherent complexities of business process.·Simulation can be used to assess the potentialvalue and feasibility of alternative processdesigns.It can be said that simulation is one of the modellingtools that are able to overcome some of thelimitations found in static modelling techniques.Static modelling tools produce deterministic modelsISSN 1473-804x online, 1473-8031 print32
J. EATOCK et al: A STUDY OF THE IMPACT . .which are independent of process sequence,therefore, they do not enable the evaluation ofalternative process [Hlupic and Robinson, 1998].Simulation, on the other hand, is able to model thedynamics of the process (system behaviour).3.1Scope and Objectives of the SimulationExerciseDue to the nature of the products, Org-B, as thecompany in charge of delivering products, has tooperate within rigorous deadlines. The agreementbetween the companies, stipulates that each orderhas to be fulfilled within 24 hours for productsdelivered within the city of Thessaloniki, or within48 hours for the rest of northern Greece.The fact that simulation has been successfully usedin the process domain positions this technique as oneof the most suitable candidates to address thebusiness process and information technologyintegration problem defined before. Additionally, thecircumstances under which simulation is consideredan appropriate tool fit naturally to the description ofthe previous mentioned problem.Org-A management has noted, however, that thesetargets are rarely met in practice. A brief analysis bythe companies seemed to attribute the problems tosome inefficiencies within the ordering system aswell as difficulties being experienced by Org-B inmaintaining their inventory at an optimal level. Inaddition to this the communication system betweenthe two companies was also seen as slow andcumbersome. The effects that these inefficienciescaused were seen as a major source of customerdissatisfaction, so an in-depth analysis of theproblem was commissioned. The main objectives ofthis study were:The approach described in the following sectionsaims to overcome the limitations found in currentapproaches by using simulation throughout theanalysis and design of both business process andinformation technology. To this end, the approachproposed in this paper uses business processsimulation to address the organisational andinformational views and a computer networksimulation model to measure the impact that IT mayhave on the business processes.3.a) To examine the existing business processes thatwere felt to be responsible for long lead times fororder fulfilment.CASE STUDYThe case study presented here consists of twocollaborating organisations in Greece. One companyis a branch of a major multinational pharmaceuticalsorganisation (we will refer to this company as 'OrgA'), while the other is a small-sized regionaldistributor of Org-A’s products (we will refer to thiscompany as ‘Org-B’).b) To determine the sources of problems andpropose alternative solutions.c) To evaluate the potential of introducingappropriate IT to improve communication betweenthe two companies.3.2Problem FormulationAs stated before, business process and computernetwork simulation techniques will be usedthroughout the case study. According to Banks et al. and Law and Kelton , any simulationexercise should begin with the definition of theproblem.The case study to be analysed in this paper wascarried out within a single business unit, which dealswith hospital consumables. Its major customers are,mostly, relatively large public sector organisations,such as hospitals, health care organisations,networks of physicians, and the government. Thebusiness unit does not produce products but importsthem from other Org-A production sites acrossEurope. The goods are stored in a warehouse thatoperates as a central despatch point for all products,which are then distributed to the company’scustomers via a network of collaboratingdistributors. One of these distributors is Org-B.This sub-section presents the problems that Org-Aand Org-B managers identified after a series ofdiscussions and a brief analysis of the currentprocesses.a)Org-B is a small company that has signed anagreement to act as Org-A’s exclusive distributor ofMedical unit products. The agreement that Org-B’sresponsibilities include:a)Receiving orders from Org-A customers.b) Maintaining an adequate inventory of productsthat fulfil the orders.c)b) Inappropriate inventory replacement policy. Totry to reduce the number of backorders, Org-Awarehouse managers implemented a generousreplenishment policy for Org-B’s warehouse.However this has caused considerable holdingcosts for Org-B as well as problems arising dueDistributing the ordered products to customerpremises.I. J. of SIMULATION Vol. 2 No. 2Excessive Order Lead Times. Orders werefulfilled much slower than the agreed targets of24 and 48 hours (see section 3.1). This problemis intensified by the fact that the levels of stockin Org-B’s warehouse are not appropriatelymaintained and in many cases, a back order hasto be placed which in turn, lengthening theoverall order fulfilment time.33ISSN 1473-804x online, 1473-8031 print
J. EATOCK et al: A STUDY OF THE IMPACT . .c)to sensitive medical products reaching theirexpiry date.and second, it recently offers capabilities to modelsoftware applications.Poor customer service. Due to the problemsoutlined above, a considerable rise in thenumber of customer complaints, regardingdelivery delays, were received.Based on the literature review and on the steps for asimulation study suggested in Banks et al.  asimulation framework to assess the impact of new ITin a BP model was proposed, namely ASSESS-ITsimulation framework. The following steps are arésumé of each of the steps suggested in Banks et al.:d) Excessive Invoice Lead Times. The time it takesfor invoices to reach customers is unnecessarilylong, resulting in poor cash-to-cash cycle forboth Org-A and Org-B.e)f)Data and Work Duplication. Org-A need toknow the Org-B’s stock levels in order to planand schedule replenishment shipments. Org-B’ssend their stock levels (not electronically) toOrg-A. This results in duplication of work(double typing the same information), and onmany occasions the data reported in Org-B andOrg-A systems do not match.Information Sharing. Org-B and Org-Ainformation infrastructures are incompatible.Consequently, the companies have to rely onpaper forms to share information, which in turncauses duplication of data and effort, as well asslow processing times.It has been identified that one of the majorcontributors to the problems faced by
Process Reengineering (BPR) also named Process Redesign, or Process Innovation is one of the most popular concepts in business management [Davenport, 1993, Hammer and Champy, 1993, Kettinger et al., 1997]. The study of business processes, however, is not isolated and has always been related to Information Technology (IT). IT is
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