SUPERHIT YOUR BUSINESS OBJECTIVES
Why Business Process Optimisation (BPO) is key to digital transformation success
BUSINESS PROCESSES SERVE NO PURPOSE IF THEY ARE NOT FOLLOWED.
There’s a process behind everything an organisation does. From purchasing to selling, paying to collecting, manufacturing to shipping. Without processes, your supply chain and finance operations just wouldn't work. When processes run efficiently, so does the business.
Inefficient processes hinder organisations from performing at their full potential. But they are not often easy to spot.
HOW DO INEFFICIENT BUSINESS PROCESSES MANIFEST THEMSELVES?
- High number of processing errors
- Excessive manual intervention
- Document duplication
- Low workforce productivity & morale
- Audit failures
- Segregation of duties (SoD) conflicts
- Maverick activity
- Increased process costs
- Poor customer satisfaction
- Low Net Promoter Score (NPS)
- Decisions based on perceptions not reality
- Lack of process understanding and visibility
- Lack of regional disparity awareness and benchmarking
OPTIMISE PROCESSES ACROSS ALL LINES OF BUSINESS.
The business objectives & KPIs that matter across the enterprise:
- Supply Reliability: OTIF Rate, Lead Time Adherence
- Compliance & Sustainability: Maverick Buying, Approval Compliance, Fraud Detection
- Cost Reduction: 3-way match, Touchless Orders, Automation
- Spend Management: Cash Discount Optimisation, Duplicate Payments, Price Stability
- Working Capital Optimisation: Days Payable Outstanding (DPO), Payment Term Optimisation, Early Payments
- Revenue Increase: Underpayments, Rebate Optimisation, Bad Debt
- Working Capital Optimisation: Days Sales Outstanding (DSO), Late Billing, Late Payments, Cash Discount Optimisation, Payment Term Optimisation
- Labour Productivity: Touchless Invoices, 3-Way Match
- Customer Satisfaction: OTIF Rate, Complaints, Communication Effectiveness
- Labour Productivity: Touchless Orders, Delivery Blocks, Credit Blocks, Price Changes
- Revenue Increase: Order Rejections, Order Returns
- Working Capital Optimisation: Unbilled Orders, Late Deliveries
- Production & Planning: Order Fill Rate, Schedule Adherence, Scrap Rate, Cycle Times
- Inventory Management: Days of Cover, Turnover Rate, Material Availability, Days Sales of Inventory
- Logistics: OTIF Rate, Route Optimisation
- Warehouse Management: Transfer Order Cycle Times, Late Picking, Automation Rates
- Asset Efficiency: Predictive Maintenance Accuracy, Demand Forecasting, Spare Part Availability, On-Time Completion Rates
- Labour Productivity: Notification and Work Order Rejections, Rework, Cost Per Work Order, Workload / Capacity Planning
- Maintenance Compliance: Procurement Misalignments, Unfinished Work Orders, SLA Adherence
What is not defined, cannot be measured.
What is not measured, cannot be improved.
What is not improved will always degrade
WHAT IS BUSINESS PROCESS OPTIMISATION?
Today's economic turbulence and geo-political uncertainty places an even greater responsibility on organisations to seek opportunities to reduce costs and increase revenue and revenue. Operational inefficiencies across all lines of business, such as sales, purchasing, finance, manufacturing and logistics can often get in the way, and a lack of visibility and transparency presents a challenge for organisations to determine the health of their key processes and address issues which are harming the business.
Business process optimisation (BPO) refers to the systematic approach of enhancing an organisation's processes to improve efficiency, reduce costs, boost productivity and ultimately deliver better business outcomes. It involves analysing ‘as-is’ process workflows and activities, identifying bottlenecks and other improvement opportunities, and implementing the required changes to streamline operations. This can lead to significant benefits for an organisation such as increased automation, less rework, faster cycle times, improved resource allocation, better risk management & compliance, higher levels of customer satisfaction and retention, whilst also enhancing its agility in responding to changing market conditions.
Digital transformation presents a necessary but golden opportunity for organisations to optimise processes and truly transform one's business. BPO is essentially the cornerstone to digital transformation success.
Capitalise on the opportunity
The quintessential component for digital transformation success
Where synergy makes a real difference
You cannot improve what you cannot see
The cornerstone for a successful transition to SAP S/4HANA
Track and measure progress throughout the transformation journey
Process optimisation is an ethos the whole workforce must buy into
WHY IS DIGITAL TRANSFORMATION SO IMPORTANT?
Digital transformation presents a wealth of opportunities for companies to set and achieve their business objectives. So what are companies expecting digital transformation to facilitate?
- To help the organisation become more agile and resilient and be able to quickly adapt to changing market conditions
- To help drive growth and increase revenue and margins
- To help embed new and more collaborative ways of working
- To help drive better productivity and efficiency
- To help reduce operational costs
- To manage business risk and ensure compliance
- To embrace new technologies, drive innovation and improve integration
- To improve the customer experience
- To drive talent acquisition and retention
But there is one common factor that binds most, if not all of these objectives – and that is ‘Business Process’. Without highly optimised and efficient business processes, the chances of maximising the full potential of your digital transformation will be significantly compromised. The likelihood is that your organisation is already experiencing enterprise wide inefficiencies that are holding it back. Digital transformation presents that opportunity to fix the problem, but it has to be done right. Too many digital transformation programmes have failed to stay on time, on budget, or deliver the desired outcomes.
Some of the biggest and most common challenges to a successful digital transformation are:
WHY IS BUSINESS PROCESS OPTIMISATION SO IMPORTANT?
Companies today need to become more resilient and seek opportunities to reduce costs and increase margins and revenue, whilst also keeping their customers happy.
They are becoming increasingly aware that their business processes hold the key, and that inefficient processes act like a ball and chain, hindering them from achieving their business objectives. This is why business process optimisation has become so relevant and imperative for organisations today looking to gain that competitive advantage. This is especially prevalent across the supply chain, from order management to logistics, sourcing to procurement, production and planning to inventory management, but also in operational finance such as accounts payable and accounts receivable where organisations are keen to improve cash flow.
Business process optimisation essentially refers to the practice of improving the efficiency, effectiveness and overall performance of a company’s processes.
Here are the main business goals and objectives that optimised processes can help achieve:
- Improve working capital and cash flow:
‘paying vendors early and receiving customer payments late impacts operating working capital’
Working capital is used to fund operations and meet short-term obligations. If a company has enough working capital, it can continue to pay its employees and suppliers and meet other obligations, such as interest payments and taxes, even if it runs into cash flow challenges. The efficiency of business process execution has a direct impact cash flow. When processes run efficiently, goods get to customers on time, orders are processed faster, payments are made and received promptly, operational costs are kept low, and working capital gets freed up.
Revenue protection & growth:
‘inefficient processes can hit revenue by up to 30%’
Revenue growth is a key indicator of a company's financial health and success and often serves as the foundation for future investment, expansion, and other growth opportunities. By optimising business processes, companies can improve overall performance, increase profitability, and generate sustainable revenue growth over time. Efficient processes are scalable, meaning they can handle increased volumes of work without a proportional increase in costs, and it helps companies respond quickly to market conditions, adapt to customer needs, and innovate more effectively.
Increase productivity & reduce costs:
‘increased operational costs are a good barometer of inefficient processes’
Increasing productivity over time allows businesses to produce more goods and services per unit of input. Business process optimisation can significantly help increase workforce productivity and reduce process costs by eliminating bottlenecks and non-value added tasks and rework, freeing up resources for more productive activities. This also helps improve employee retention reflected in a happier workforce.
‘customers are let down by late deliveries and ineffective communication’
Positive customer experiences are crucial to a company’s reputation, customer loyalty and repeat business and can help maintain a high Net Promoter Score (NPS).
Companies are becoming increasingly aware of the need to align business processes with the needs and expectations of their customers and ensure this leads to the provision of a high level of service. Improved on-time-delivery and timely communication can reduce order rejections, returns and complaints, and in turn improve working capital and increase revenue.
Risk & compliance:
‘early detection of non-compliant activity is difficult without process transparency’
Business process optimization is important for risk and compliance as it helps with the early detection and mitigation of compliance risks, enhanced data security, streamlined auditing processes, establishing standard processes and practices, and enables agility in adapting to regulatory changes.
Fraudulent and non-compliant activity can often lead to damaging repercussions for companies in terms of audit costs, regulatory & financial penalties, not to mention reputation. Full transparency of end-to-end process execution can help with early detection of such activity, and help facilitate the implementation of measures and controls within processes and how they are run to minimise risk and avoidance of SoD conflicts.
In the next section we will explore how Process Mining has become a core component in the BPO arsenal, and is a fundamental discipline in the quest for digital transformation success.
WHAT DOES BPO INVOLVE?
We now know why business process optimisation is the crucial for enabling companies to fulfil their business objectives. But how do they go about improving those processes? There are a number of core guiding principals which when applied collectively can truly result in tangible and sustainable improvements. Successful business process optimisation requires a holistic approach and although all of the next pillars will be relevant to most companies to a greater or lesser extent, it will largely depend on the unique needs, priorities and goals of each organisation. Let’s explore:
Process visibility & analysis:
‘you cannot improve what you cannot see’
An essential first step in business process optimisation is being able to see and understand what your existing processes are across the enterprise. It’s important that companies know what is really happening in their systems and not rely on what they think is taking place. By analysing the ‘as-is’ process and gaining insights into how they are being executed will reveal bottlenecks, inefficiencies and compliance issues, the extent and/or distribution of which may already help to establish the groundwork and prioritisation of any future optimisation efforts.
Process standardisation & simplification:
‘doing the same unnecessary things a hundred different ways’
Process standardisation is a discipline which aims to both establish a consistent and best practice set of procedures, but also to ensure that employees adhere to them. By simplifying end to end processes, eliminating non-value-added or redundant steps and bottlenecks, companies can reduce processing errors, non-compliant activity and costs whilst improving cycle times and productivity.
‘repetitive, labour intensive tasks hit productivity hard’
Simplifying and regulating processes can open up the potential for introducing automation. This discipline involves leveraging technologies such as RPA and AI to automate manual and repetitive tasks, particularly those which provide no added value the organisation. This not only helps to reduce human error and increase turn around speeds, but frees up resources to perform more productive tasks, which can also have a positive effect on employee satisfaction and retention.
‘process insights on their own do not realise value’
This pillar essentially supports the previous three, by actually ensuring that the required changes and improvements that have been identified are implemented.
‘a disengaged workforce will be reluctant to accept and adopt change’
Despite the benefits of implementing improvements, sustainability and long term benefits only come about when people buy into, support and adopt the change. Collaboration helps to break down departmental silos, encourages knowledge sharing and gives stakeholders a sense of ownership over processes and how they are executed. Companies often establish a CoE or leverage on collaborative tools to centrally manage and document processes, whilst providing a platform for communicating insights and changes. Collaboration also fosters creativity and helps to streamline and synchronise process improvement initiatives.
- Continuous monitoring & improvement:
‘process optimisation is not a project, it’s a mindset’
Once a process improvement has been actioned, it is not only important to monitor and evaluate its effectiveness over time, but also seek out further improvement opportunities. It involves regularly analysing performance, setting targets and measuring whether those targets are being met and are sustainable. Continuous monitoring and improvement increases companies’ agility and ability to adapt to changing market conditions, customer demands or industry trends, and also increases the likelihood of quickly identifying issues before they become a big problem.
PROCESS MINING FOR OPERATONAL EXCELLENCE
Process mining is the number one tool in BPO's armoury. It works by extracting data from event logs which are stored in transactional systems such as ERP, CRM. This data is then modelled to produce a digital twin (DTO), an X-ray or MRI scan if you will of business processes in these systems and how they are executed. Observers can then visualise exactly what's going on and quickly identify inefficiencies, bottlenecks and non-conformant activities.
Without visibility of your processes and how they are executed, the chances of identifying improvement opportunities and making informed business decisions becomes near on impossible. Let's quickly remind ourselves of the challenges of poor process visibility and understanding:
- Inefficiencies: Poor process visibility often leads to inefficiencies in business operations, such as bottlenecks or excessive manual intervention which can result in higher costs, longer cycle times, and reduced productivity.
- Inaccurate data: Incomplete or inaccurate data can lead to poor decision-making, increased risk, and missed opportunities.
- Compliance issues: Difficulty in complying with regulations and standards such as GDPR can result in fines, legal action, and damage to the organisation's reputation.
- Limited innovation: Poor process visibility can prevent organisations from identifying opportunities for innovation, automation or process improvement, which can impact their ability to stay competitive in their market.
- Customer dissatisfaction: Inconsistent, delayed or poorly executed processes can negatively impact customer satisfaction and loyalty, leading to lost business and reduced revenue.
Don't be confused in thinking that the benefits of process mining can be replicated in other technologies:
Shortfalls of other applications:
- Business Process Management (BPM):
Business process management and business process modelling tools on their own are very useful in defining how a process should run, but they don't tell you how it is actually run.
- Robotic Process Automation (RPA):
RPA can help reduce man hours and eliminate manual errors, but a process that is not optimised to begin with will only generate poor outcomes but more efficiently.
- Business Information (BI):
BI tools are essential for management and performance reporting and provide historical data insights. But they do not identify root causes and therefore pinpoint value opportunities. Process mining provides the necessary insights to drive corrective actions that will in turn improve the quality of data and results in BI systems.
Process mining is not just another BI tool.
At first glance, process mining tools are often mistaken for Business Intelligence tools. Yes, they are both designed to help business improve operations and boost performance, but they serve different, albeit complimentary purposes.
BI tools are primarily used for analysing and visualising data to provide insights into business performance. They allow users to create reports, dashboards, and data visualisations from various sources of data, such as ECC or CRM systems, spreadsheets, and cloud-based applications. BI tools help businesses to monitor their strategic KPIs, track progress towards objectives, and identify trends and patterns in their data. Results are often published on a monthly, quarterly or even annual basis.
On the other hand, process mining tools are designed to analyse business processes to identify inefficiencies, bottlenecks and other insights and reveal opportunities for improvement. Process mining tools use algorithms and data mining techniques to automatically discover and visualise process flows and analyse and monitor process data to identify process improvement opportunities. Results are usually published weekly, daily or even in real time.
Where BI may show that something has happened, process mining will reveal how and why it happened.
A final thought:
The difference between how the process is designed to run, how the organisation thinks the process runs, and how the process actually runs in reality can be enormous.
PROCESS MINING FOR DIGITAL TRANSFORMATION
Process mining is an integral part of business process optimisation. While Business Process Management (BPM) is focused on making sure processes are designed and managed in keeping with an organisations requirements, process mining is used to ensure that those same processes are executed correctly and in the most efficient way possible. In the of transformation for SAP-centric organisations, process mining important for the transition to S/4HANA for several reasons:
Visibility into Current Processes: S/4HANA transformation often involves significant changes to business processes. Process mining allows organisations to gain a comprehensive understanding of their current processes, including bottlenecks, inefficiencies, and variations. This visibility is essential for making informed decisions about which processes to redesign or optimise.
- Process & Workflow Standardisation:
By modelling the process happy path or desired end-state, you can quickly determine the number of process deviations and non-compliant variants and begin to eliminate them in order to achieve process standardisation.
- Optimisation and Redesign:
Process mining provides insights into how processes can be optimised and redesigned using BPM tools to align with best practices and take full advantage of the capabilities of S/4HANA. It helps organisations identify areas where automation or simplification can lead to efficiency improvements.
Predictive analysis and scenario testing: Process mining permits you to create ‘digital twin’ (DTO) scenarios of your processes, which then allows you to evaluate the business impact of modifying processes and how they are executed. This is turn can help make predictive forecasts to drive better informed decisions.
- Change Management: S/4HANA transformation often involves significant changes for employees. Process mining can help organisations understand how these changes will impact daily work routines and provide a basis for designing effective change management strategies. By involving employees in the process, it can also reduce resistance to change.
- Compliance and Auditing: Many organisations need to adhere to regulatory requirements and maintain audit trails. Process mining can help in ensuring that processes are compliant and that audit trails are properly established within the S/4HANA environment.
Monitoring and Continuous Improvement: S/4HANA transformation is not a one-time event; it's an ongoing journey. Process mining tools provide continuous monitoring capabilities, allowing organizations to track how well processes are performing within the S/4HANA environment and make adjustments as needed.
Performance Measurement: With S/4HANA, businesses can generate a wealth of data. Process mining tools have become quite sophisticated in helping companies measure process performance, providing valuable insights into key performance indicators (KPIs) and helping organisations track their progress and results through management reports and dashboards.
Resource Allocation: During an S/4HANA transformation, it's crucial to allocate resources effectively. Process mining can identify which processes consume the most resources and help in making informed decisions about where to invest resources for maximum impact.
Process Documentation: S/4HANA transformation often requires extensive documentation of processes. Process mining tools can automatically generate process documentation, saving time and ensuring accuracy.
In summary, the ultimate goal of digital transformation is to create a more agile and responsive organisation that can quickly adapt to changing customer needs and market conditions. A successful transformation to S/4HANA can lead to increased productivity, revenue growth, and competitive advantage. Process mining is an essential tool for digital transformation because it provides organisations with the insights they need to optimise their processes and take full advantage of digital technologies. By providing insights into process inefficiencies, aligning technology investments with business goals, monitoring process performance, optimising end-to-end processes, and ensuring compliance, process mining can help organisations fully leverage the benefits of their transition to S/4HANA. It also highlights the importance of getting to grips with existing processes before taking on a transformation project, to minimise risk and offer the best chance of success.
HOW DO KNOW IF BUSINESS VALUE IS BEING REALISED?
The need for intelligent solutions to support business process optimisation and digital transformation has led to one of the fastest growing enterprise software categories in the market. And for a very good reason, as we’ve already seen. Leading players have evolved beyond process mining and process management solutions to offer comprehensive process intelligence platforms with tools that enable value to be realised throughout every stage of your digital transformation journey. But this doesn't mean that organisations are arbitrarily snapping up process mining solutions. Full license contracts can be pricey, and so it's vitally important that in order to get a process optimisation initiative off the ground, a robust business case and tangible value realisation potential is established. Making the case can often stem from different sources and can often depend on the culture and structure of the organisation in question.
Top-down: A top-down approach involves starting with the organisation's strategic objectives and using process mining to identify areas where improvements can be made to achieve those objectives. This approach typically involves executives or senior managers who set the goals and priorities for the organisation, along with KPI’s, and then use process mining tools to help achieve those objectives.
Bottom-up: A bottom-up approach on the other hand, is typically driven by front-line employees or process owners who identify issues and seek to improve specific aspects of their workflows. They often stem from known pain-points, but their root cause and magnitude are harder to identify, and this is where process mining comes in.
In practice though, the most effective approach may be a combination of both angles. Executives can set strategic goals and priorities for the organisation, while also empowering operational employees to identify process inefficiencies and work towards continuous improvement. Process mining can serve both as an exploratory and confirmatory means of identifying areas for improvement, and also provide a valuable feedback loop to help companies track progress and ensure initiatives are continuously aligned with strategic goals.
Ultimately, whether the business case for process mining grows from a top-down or bottom-up approach depends on the organisational culture, structure and goals of an organisation. Both approaches can be effective in driving operational excellence and continuous improvement.
As an organisation looking to optimise processes as a key motivator for digital transformation, ask yourself these fundamental questions:
How do you establish a strong business case for transformation?
- Quantify the value using Business Value Calculators
- Assess suitability & cost savings for RPA and other automations
- A strong business case ensures executive and stakeholder buy-in
How do you embark on transformation without full understanding of your as-is processes?
- Get 100% visibility of all processes and their variants
- Understand the ‘As-Is’ processes based on real, objective data taken from digital footprints
- Drive process standardisation and harmonisation
How do you know if your documented processes are complete & accurate?
Save As-Is process variants as process models
Store and adjust SAP Best Practice process models
Monitor process model versioning and track changes
Easily integrate BPMN models from BPM tools into your chosen platform
How do you know what the impact of a process change will be?
- Simulate and compare ‘As-Is’ and ‘To Be’ scenarios
- Understand the potential impact of a process change on throughput times, process costs and resources
How do you ensure that test scenarios are reflective of the true process?
- Generate testing scenarios that reflect reality
- Minimise testing efforts
- Monitor test execution based on actual data from the test system
How do you determine if Return on Investment (ROI) is being achieved?
- Monitor performance over time with dedicated management dashboards
- Set targets and track if they are being achieved
- Keep stakeholders informed with automated performance reports
IS YOUR ORGANISATION ENABLED AND READY?
One of the biggest failings of many organisations in realising true business benefits from process mining and other optimisation initiatives is the lack of organisational structure, advocacy and embedment. It’s the elephant in the room. There is a tendency to see process mining as a software implementation or short-term project - its success measured on whether the tooling has been delivered on time and within budget. The software has been implemented and handed over to the business. Job done, right?
'Process optimisation is a change journey – not just an implementation project'
No matter how good the software is, or how powerful the insights are, they are meaningless unless they lead to actions. And these actions are not just a one-off exercise either, it requires continuous application to ensure long term, sustainable improvements. To achieve this, both business leaders and their workforces need to change their mindset, so that process optimisation becomes a working culture, an ethos which everyone in an organisation both understands and has bought in to.
'Process optimisation must become a working culture, an ethos all employees buy into'
In order to drive adoption and long-term value realisation, the setup of a Centre of Excellence (CoE) or Business Process Competency Centre (BPCC) is essential. It’s where clear ownership and responsibility lies, where centralised know-how and best practices are defined and held, and the single source of truth for measuring and gauging success is established. How the CoE interacts with the rest of the organisation, such as sponsors and Global Process Owners (GPO) is just as important, and each has their role to play in ensuring business value is realised.
'A CoE or BPCC is essential to drive adoption and ensure long-term value realisation'
Here's how the three main stakeholders should work together:Executive Sponsor:
- Provides strategic direction and tangible target setting
- Requests and monitors value realisation progress
- Facilitates senior level buy-in and resource allocation
Centre of Expertise (CoE):
- Agrees and initiates use cases
- Coordinates with stakeholders to leverage insights and improve process execution
- Drives adoption through change management, user enablement
- Communicates achievements
- Adopts insights and leverages the process mining or intelligence platform for daily usage
- Implements process changes and improvements
- Drives continuous improvement to realise business value
The market leading process mining and process analysis tools, often collectively referred to these days as process intelligence applications are at the fulcrum of BPO efforts for most organisations that have deployed them. They go way beyond mere process discovery and analysis to provide a platform for taking action, for collaboration, for measuring progress and ultimately having real, tangible impacts to business outcomes.