Handbook of BRE

8/14/2019 Handbook of BRE

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November 30, 1995

Version 1.0Office of Information Technology (AIT)

Prepared by the Office of Information Technology

Integrated Product Team for Information Technology Services

Chapter 1. Purpose

Purpose of the Handbook

What is BPI/R

Terminology The Aim of BPI

What is the Vision for BPI?Chapter 2. Elements of Reengineering

Methodology

BPI Principles

Drivers of Corporate Culture Change

What are the Critical Success Factors?

Description of BPI Elements

What are the Generic Steps to a BPI Project Scope Task Areas

Chapter 3. Activity Analysis

Define Scope, Methods, Objectives, and Strategy

Process Analysis: Looking for Problems and Opportunities

Process Management

The Organization Activity Analysis -- Understanding the Organization Beneficial Traits of Problem Analysis Techniques Observation and Interviewing Benefits and Risks of Observation
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Modeling Techniques Facilitated Group Decision Making Techniques Performance Analysis Activity Modeling Characteristics of Business Activity Modeling Compared to Characteristics of Information Systems Modeling

Introduction to IDEF0 Modeling and Overview of IDEF0 Modeling Techniques IDEF0 Components ICOM Context Diagram Node Tree Decomposition Diagram Context, Purpose, and Viewpoint Benefits of IDEF0 Modeling Difficulties of IDEF0 Activity Modeling

Understand Our ProcessesChapter 4. Business Data Modeling

What is Data Modeling?

IDEF1X -- Information Model

FAA Enterpirse Model

Chapter 5. Activity Based Costing

Costing Organization Activities

Components of Activity Based Costing

Steps for Performing ABC

Analyze Activities Gather Costs Trace Costs to Activities Establish Output Measures Analyze Costs ABC Example

Chapter 6. The Business Case

What is a Business Case?

Developing the Alternatives

What is an Alternative?
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Developing Costs for the Alternative

Comparing Alternatives

Alternative Risk Cost Discounting

Simulation

What is Simulation? Why use Simulation?

Chapter 7. Implementing the Approved Changes

Issues to Consider When Implementing the Approved Changes

Funding

Building the New System

Change Management and Training the Staff

Chapter 8. The AIT BPI Program

Background and Scope

Relationship of Information Resources Management (IRM), Information Management (IM), and Corporate Information Management

Definition of Information Management Functional Process Improvement -- Criteria for Application

Roles and Responsibilities

Support Services/Points of Contact

Chapter 9. BPR On-Line Knowledgebase

Purpose

How to Access

What is it?/What's in it?

The BPR On-Line KnowledgeBASE is comprised of Five Major Parts

References
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Used in this Handbook

Other References and Reading List

Books Articles

Other Appendix A. AcronymsAppendix B. GlossaryAppendix C. CAMS Map (FAA Process Model)Appendix D. Sample Team Charter Appendix E. Generic Statement of Wo

CHAPTER 1 Purpose of the Handbook

The purpose of this Handbook is to provide the agency with the standards and guidelinesused by the Federal Aviation Administration's (FAA) Office of Information Technology (AIT)Business Process Improvement (BPI) Program. The Handbook also provides backgroundon BPI, information on the basic elements of a BPI project, sources of informationconcerning BPI, the responsibilities and services provided by the BPI Product Team, andhow to access additional information about what federal and state governments, andindustry, are doing concerning BPI.

The purpose of the BPI Program is to develop business process improvement as a keystrategy and a management tool capable of supporting the agency's Mission/Vision/ Goalsand Objectives and to promote the use of reengineering techniques and methodologies

throughout the agency. BPI's goal is to dramatically improve the quality, availability,effectiveness, and cost-effectiveness of business processes within the agency. BPI isfocused on completely understanding the customer's needs, identifying how best to meetthose needs, and then "reinventing" the value stream of processes that get you there.Three elements are essential to a BPI effort: the redesign of core business processes; theapplication of enabling technologies to support the new core processes; and themanagement of organizational change. Through reengineering, AIT strives to developradically more effective ways to better provide "the right information at the right time in theright format" to our employees, stakeholders and customers.

BPI is a vital tool to help the FAA improve the way in which it conducts its functions and

mission activities in order to reduce overall costs, provide more efficient use of scarceresources, and better support it's customers.

What is BPI/R?

Terminology

There are several terms that describe what we refer to as "business processimprovement," or reengineering. The Department of Defense (DoD) was an early federal
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government leader in this area, and now sponsors "functional process improvement" aspart of the Corporate Information Management (CIM) initiative under the Director of Defense Information. Standardized techniques-developed largely by DoD and its supportcontractors and research institutes-to conduct activity and data modeling, are importantingredients in a BPI effort. These techniques have been formalized in Federal InformationProcessing Standards (FIPS) publications 183 and 184, and are further described in

Chapters 3 and 4. AIT's standards and guidelines are based on the successfulreengineering experience derived from the DoD model.

The Aim of BPI

"America's business problem is that it is entering the twenty-first century with companies designed during the nineteenth century."

This is how Michael Hammer and James Champy, in their seminal work R eengineering the Corporation (1993), describe the hurdles facing many businesses in America today.They write about one of the most important topics in business circles today: reengineering-

the radical redesign of a company's processes, organization, and culture. Hammer andChampy's writings offer a new vision of how companies should be organized and managedif they are to succeed - even survive - in the l990s and beyond. Reengineering applies togovernment organizations as well as to private industry. It applies to all organizations,particularly those that perform complex tasks or conduct work activities in a multifunctionalenvironment. According to Hammer and Champy - "Reengineering does not seek to makebusinesses better through incremental improvements-10 percent faster here or 20 percentless costly there. The aim of reengineering is a quantum leap in performance-the 100percent or even tenfold improvements that can follow from entirely new work processesand structures.

"Today's workers and managers are prisoners of antiquated theories about organizingwork-theories that date back to the beginnings of the Industrial Revolution. These ideas-the division of labor into repetitive, discrete tasks; the need for elaborate controls; themanagerial hierarchy-no longer work in a world of global competition and unrelentingchange." Instead, Hammer and Champy introduce the notion of process orientation, of concentrating on and rethinking end-to-end activities that create value for customers, whileremoving unnecessary non-value added work (see Figure 3-1. - Activity Analysis ).

Some of the world's premier corporations have used the principles of reengineering tosave hundreds of millions of dollars a year, to achieve unprecedented levels of customer satisfaction, and to speed up and make more flexible all aspects of their operations. Thekey to reengineering is abandoning the most basic structural notions on which the modernorganization is founded.

More specifically, Business Process Improvement/Reengineering (BPI/R) is a systematicapproach to help an organization make significant advances in the way its businessprocesses operate. BPI defines an organization's strategic goals and objectives andproceeds to align its processes to better meet customer requirements. AIT's BPI programis designed to assist the FAA in streamlining operations and eliminating inefficiencies. Theapproach detailed in this handbook will help anyone to apply a structured methodology


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defining an organization's "AS-IS" environment and to model a "TO-BE" set of processesthat add value to the organization's mission and objectives. Improvements can be made,using these processes and data models as a "road map", and technology applied asneeded to enable the identified solutions.

What is the Vision for BPI?

Increase efficiency Improve customer service Reduce costs Share data and information Use of Information Technology (IT): right place at right time Reduce duplicate, stove-pipe systems

Reuse technologoy

CHAPTER 2: Methodology

BPI employs a structured methodology that reduces work processes to their essentialcomposite activities, and provides cost performance metrics to facilitate a business casefor dramatic improvements. Both functional and cross-functional processes are evaluatedthrough workflow analysis and activity based costing. In many cases, the application of new technology and industry best practices will enable quantum improvements in anorganization's cost and performance.

BPI Principles

Organize around outcomes, not tasks

Process modernization precedes automation Use of benchmarking and other techniques to regularly assess the costs and

benefits of functional processes Establish process ownership (responsibility, accountability, and authority) Subsume information-processing work into the real work that produces the

information Put decision points where work is performed, and build control into the process Standardize similar processes Customer focus Capture information once, and at the source Move toward agency-wide standard data definitions CHANGE NOW, do not wait for a "perfect" solution Build new systems only as a "last resort"

Drivers Of Corporate Culture Change

Business Process Improvement is here to stay. Corporations and government agenciesthroughout the country are actively using BPI to find ways to do more with less and providea better product or service in the minimum amount of time. Speed, quality, and cost are thedrivers of BPI. In the government, we must become more focused on what these three


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drivers mean to us. Vice President Gore's National Performance Review features BPI as acentral theme, calling on all agencies to create a government that works better and costs less , to provide quality service at a reduced cost to the taxpayers. There will befewer people and dollar resources to fulfill future missions. We are facing the challengenow of improving customer service and sustaining public safety and confidence in anenvironment of declining resources.

What are the Critical Success Factors?

Strategic focus Resources Change management Top-down commitment Bottom-up (functional) support

A key to success in any BPI effort is strategic focus and top-down leadership. Additionally,there must be some "sense of urgency" due to drastic resource constraints, competition for

resources or customers, downsizing and consolidation, or a need for reductions in cycletime, or increases in volume of input or output.

A TQM approach can provide a methodology for team-based problem solving throughincremental changes. On the other hand, reengineering techniques at the highest end of the change spectrum call for taking out a "clean sheet of paper" to examine key businessprocesses and their inputs and outcomes, to achieve radical and rapid redesign where itwill improve performance and customer satisfaction. BPI delivers a clean slate approach,employing automated tools and methodologies where appropriate, and using performancemetrics to model, simulate, and assess activities, work flows, business rules, and processrelationships. BPI is more about innovation and reuse than efficiency and redo. Through a

structured framework for enterprise change, BPI is the means by which major, cross- functional components of the enterprise are reinvented.

A business process is defined as a collection of related structural activities that produces aspecified service or product (outcome) for a particular customer. BPI calls for those whoseek to enhance or reengineer business processes to think in "process streams," orientedaround end products, outcomes, or results, rather than individual process activities whichmay be separated from each other by the business's organizational or functional divisions.Process streams, focused on the outcome to the customer, follow related process activitiesacross, and regardless of, functional lines.


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Figure 2-1. - Reengineered Business Functions

BPI initiatives cover a continuum, from basic but critical changes to work activities withinbusiness processes, TQM enhancements, automation of process elements and/or employment of other information technologies, to radical redesign of process streams.

Description of BPI Elements

What are the Generic Steps to a BPI project?

Develop Strategic Vision Design New Process(es)

Identify and Select Process Develop a Business Case for Selection &

Implementation of Change Alternatives

Reengineering Opportunities Formulate Implementation Plan and/or Pilot

Program Identify IT Levers and Cost

Performance Metrics Review, Approval, and Execution

Design New Process(es) Training and Change Management for the

New Environment

Scope

A BPI team can approach its task in a number of different ways, depending on theresources that can be made available by the parent organization(s), the time available andthe requirements to continue to provide daily operational work. A BPI team of experiencedreengineers and which includes functional experts of the targeted process, or a team thatobtains sufficient training in BPI principles and methodologies (such as those contained inthis Handbook ), may undertake a BPI initiative by devoting themselves full time to theproject. Such a team may be assisted by outside consultants or facilitators, to smooth theBPI process or to provide expert advice or services in the completion of the reengineeringsteps listed above. An inexperienced team may require more outside assistance, or mayhave some of the steps be performed entirely with contract help. This is particularly useful


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where the teams can not devote their energies on a full time basis to the initiative due tooperational needs.

AIT has found that due to the tempo of operations in the FAA, the most successful teamstructure is composed of named personnel representing the key functional areas of expertise, who are committed to the end of the project, but who do not work full time on the

effort, instead coming together in brief, periodic workshops that move the work forward.They are assisted by expert contractors who facilitate the workshops and who performmuch of the technical details of the BPI process, such as constructing the actual activityand data models from the information developed during the workshops, applying activitybased costing to the models, and so forth.

Appendix E contains a sample Statement of Work (SOW) that defines those genericcontractor work tasks required to plan, review, facilitate, and implement BPI services andsupport, to assist FAA organizations mandated to achieve significant improvements inbusiness processes. The sample contract is an indefinite delivery/indefinite quantity typecontract with firm-fixed priced labor hours to acquire ADP support services as outlined. The

scope of the contract encompasses some of the following recommended activities insupport of BPI:

Strategic Planning Business Process Improvement Prototyping and System Development Implementation Education, Training and Change Management

Task Areas

The elements of a BPI initiative are shown in the following model or BPI cycle, anddescribed in the sections that follow:

REENGINEERING MODEL


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Strategic Planning. This Task Area covers both strategic business planning and strategicinformation systems planning. Strategic business planning sets the overall direction for thefuture that integrates an enterprises' processes, people, and technology into concrete,achievable business goals. Environmental assessment and development of theenterprises' vision, mission, goals, and strategies are the building blocks for linking visionwith strategic business plan.

In consonance with the Government Performance and Results Act, the strategic businessplan lays the groundwork for effective planning and management as it documents theguiding principles and critical success factors, specifies performance measures from theexecutive viewpoint, organizes and allocates resources necessary to achieve objectives,and provides a mechanism to monitor progress from an enterprise-wide perspective.

Strategic information system planning includes an information management strategy basedon the strategic business plan and a set of architectures to (1) document the currentsystems environment and guide future development of open, data sharing systems, (2)document a technical strategy for optimum use of new information technologies, and (3)implement continuous process improvement principles to ensure quality throughout thesystem life-cycle. Architectures include an information architecture to capture high-levelinformation requirements supportive of the strategic business plan, a system architecturedetailing major databases and applications needed to support business processes, and atechnical architecture that documents the technical infrastructure required for thedatabases and applications.


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This Task Area identifies the major business areas of the enterprise and establishes initialboundaries for business process improvement initiatives. Importantly, it also requiresfacilitation with the organizations senior business and information technologyrepresentatives to address infrastructure changes and business cultural transformation inaddition to process, organization, and technology changes.

Business Process Improvement. This major task involves the joint reengineeringof work process and supporting information systems. It may draw on Socio-Technical Systems (STS) design concepts and business process reengineering toassure that optimal human and technological systems performance is achieved inthe redesign. Typical components of BPI include:

o Scoping of the business areao Assessment of the current "AS-IS" business processo Gathering data from customerso Bench marking "best practices" in other organizationso Reengineering the "TO-BE" processo Developing the Business Case for the reengineered processo Generating an implementation plan for the new process which includes bothbusiness and information system changeso Establishing performance management capability in accordance with the

Government Performance and Results Act (GPRA)o Reengineering will involve the use of any of the following analytic methods

and tools:IDEF, IEM, ERD, and other modeling techniques for analyzing the oldand new processes, data, and business rules,Upper or integrated CASE tools such as IEF, ADW, BDF, andrepository tools such as Rochade for capturing and storing businessmodels,

Simulations tools such as I-think and Simprocess, cost benefitanalysis and activity-based costing tools such as TURBO FEA togenerate the business case for change,Variance analysis and statistical process control methods to identifykey problem areas,Functional Economic Analysis,GroupWare, workshops, focus groups, and interviews to generate andcollect data and conduct the re-engineering of the business process toincrease the specificity of the business case,Texas Instruments' Business Design Facility (BDF)'s implementationof IDEF diagrams and automatic export to Texas Instrument's

Information Engineering Facility (IEF).BPI can be used to redesign routine processes in which the steps are well ordered as wellas redesign non-routine processes where the order of steps and decisions made varywidely. BPI results in detailed measures and metrics for managers to determine if theredesign is worth pursuing further. It may involve piloting the process, organization andbusiness changes and prototyping new systems (Task Area c).


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Prototyping and Systems Development. This Task Area is tightly intertwined withb. Business Process Improvement . It involves an evolutionary prototyping approachto system development which is appropriate when the work system and/or theinformation systems are substantially new and untested. This Task Areaemphasizes rapid solutions to enable improvements to business processes. Itfrequently involves the use of commercial off-the-shelf (COTS) products such as

document management and workflow products; in addition to techniques such asRapid Prototyping, it may involve the use of upper, lower, or integrated CASE tools. Implementation. This Task Area addresses the actual implementation of the

information system and/or organizational changes. It includes assessingimplementation needs and issues, developing an implementation strategy, trainingusers, integrating the system with existing systems, migrating to the new system,introducing the business process, information system and organization changes,documenting processes, establishing the needed maintenance and supportstructures, and evaluating effectiveness of the solution.

Education and Change Management. The purpose of this Task is to communicateto FAA managers and staff approaches to strategic planning and BPI, redesign of

processes, create information technology solutions and/or organizational changesand related activities. The focus of the training includes methods, techniques, andtools used in the other Task areas. Since BPI can dramatically impact theorganization, advanced learning techniques which provide the agency with a broad,multi-faceted understanding of the implications of their activities will be preferred.

Data Management. This Task Area is linked to all others. It is included to highlightthe importance of managing data as a strategic resource in the development andimplementation of new business processes. It includes all aspects of datamanagement including, planning, development of procedures and guidelines,metrics, and standards, and awareness training. It involves the use of supportinganalytic methods and tools such as:

o

IDEF and other modeling techniques that analyze the processes by whichdata is created, used or needed by the organization,o Data dictionaries or repositories and associated tools such as Rochade for

storing data models and metadata on the organization's data entities andattributes,

o Information warehouse tools for storing and accessing strategic businessdata,

o Data quality engineering tools to monitor the quality of data on a continuousbasis.

In addition to proficiency in the above task areas, the contractor's proposed staff must

have experience/expertise in the following areas: Operations Research/Economics JRP/JAD Facilitation Workshop Design BPI/IE Seminars FAA BPI Projects Open Systems Architecture Relational Data Base Management Systems


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Enterprise Modeling Team Building Executive Coaching Interactive Design Methods Project Management Client/Server Architecture

Chapter 3. Activity Analysis

Define Scope, Methods, Objectives, and Strategy


Process Management

The Organization Activity Analysis -- Understanding the Organization Beneficial Traits of Problem Analysis Techniques Observation and Interviewing Benefits and Risks of Observation Modeling Techniques Facilitated Group Decision Making Techniques Performance Analysis Activity Modeling Characteristics of Business Activity Modeling Compared to Characteristics of Information Systems Modeling Introduction to IDEF0 Modeling and Overview of IDEF0 Modeling Techniques IDEF0 Components ICOM Context Diagram Node Tree Decomposition Diagram Context, Purpose, and Viewpoint Benefits of IDEF0 Modeling Difficulties of IDEF0 Activity Modeling Understand Our Processes

Back

Defining Scope, Methods, Objectives, and Strategy


This chapter and the two that follow discuss the basic elements of baselining anorganization through process and data modeling and activity-based costing; and how
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these techniques can be used to identify process improvement opportunities in anyorganization. This discussion will illuminate why IDEF0, Activity Modeling, IDEF1X, DataModeling, and Activity-Based Costing (ABC) are the techniques used most often by theFAA and many other Federal and private sector organizations.

Before we begin the discussion on activity analysis, it is important to understand what we

are going to analyze. We will first look at the central focus of our efforts in BusinessProcess Improvement, the functional process.

Process Management

The Organization

Before discussing process management, we should know where processes come from. Todo that we must talk about the basics of the organization. Organizations comprise afundamental part of our society and our lives. In addition to our involvement in naturalhuman groupings, such as families and friendship groups, we are typically born in

organizations, educated by organizations, and spend our working lives employed byorganizations.

An organization may be simply defined as a human grouping established to accomplishspecific objectives. It is expected to perform a mission or turn out products or services, andas members of that organization, undertake to do the work involved, several observablecharacteristics of an organization emerge, including:

Division of work and specialization, Coordination of varied activities (processes), Communication,

Definition of relationships between activities, or people.The word organization comes from the word organism , which is defined as a structure withparts so integrated that their relationship to each other is governed by their relationship tothe whole. This definition emphasizes the two basic elements of an organization, parts andrelationships. Parts are defined as the activities (or processes) necessary to accomplishthe work and the people assigned to these activities. Parts should relate to each other, asthe complimentary tasks of production and sales in a manufacturing firm. If they do notrelate, it is beneficial to determine why; however, the most significant relationships ariseamong the people performing the activities.

Activity AnalysisUnderstanding The OrganizationThis section begins a discussion of the steps and techniques used to analyze a functionalprocess. Activity analysis and activity modeling help an organization understand how itcurrently does business, and this understanding is the first step in improving anorganization's business practices. The focus is on documenting the current baseline (the"AS-IS") and projecting functional process improvements in the future (the "TO-BE").


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One of the objectives of activity analysis will be to decompose broad work tasks intodiscrete activities, and then be able to separate the value added work from that which doesnot provide something directly to the customer or the desired outcome. Non-value addedwork is not, however, always unnecessary; it may be required in order for the organizationto more effectively manage its operations, be required for safety reasons, or due toregulation. A BPI goal is to eliminate unnecessary non-value added activities:

Figure 3-1. - Activity Analysis

Different kinds of problems require different kinds of techniques; different aspects of anyparticular problem may require different kinds of techniques; and there are no panaceas. Infact, most activity analysis methodologies are collections of different techniques that onlyaddress certain portions of activity analysis. When an analyst is seeking activity analysistechniques, they should encompass the following traits.

Beneficial Traits of Problem Analysis Techniques:

Facilitate communication, Provide a means of defining boundaries, Encourage the analyst to think and document in terms of the problem as opposed to

the solution, Allow for opposing alternatives but alert the analyst to their presence, Make it easy for analysts to modify the knowledge structure.

Some of the identified general activity analysis techniques can be grouped into four different categories and are as follows:

Observation and Interviewing,

Performance Analysis, Modeling, Facilitated Group Decision Making,

The categories of techniques are not mutually exclusive and are not sequential and inmany situations, we utilize all four categories of techniques in the analysis of a problem.

Observation and Interviewing

The analyst should have proposed an initial definition of the problem and specified thepurpose of the analysis before the observation and interview process begins. The different

viewpoints from which the problem is to be analyzed should be documented. The problemdefinition, purpose, and viewpoints should be reviewed and validated with the sponsors of the analysis. In the Structured Analysis and Design methodology, the purpose is defined byexplicitly stating the questions to be answered by the creation of the activity model, and theviewpoint is defined by selecting the proper perspective from which to describe the system.

Note that activity analysis is an iterative process. The initial problem definition, purpose,and viewpoints are useful in organizing the activity analysis but may be modified based onnew information.


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Benefits and Risks of Observation

Benefits:

Gain firsthand knowledge about day-to-day operations; provide basis for questionformulation and problem verification.

Risks:

Too much observation can lead to identifying too closely with the way things arecurrently done; this loss of objectivity can inhibit the identification of alternate waysto describe and accomplish system activities.

Modeling Techniques

To perform activity analysis, activity modeling is an essential component. Because systemsare usually difficult to understand, often they are large, complex, and confusing, and it is

difficult to remember all that is known about a system - a model can provide a method for capturing, organizing, and documenting the information about a system.

It is difficult to know if the conception of a system is correct. A model provides a means for understanding and visualizing a system and validating the system through discussions withusers.

Facilitated Group Decision Making Techniques

Facilitated group decision-making techniques provide a different approach to gathering theinformation required to perform an activity analysis and to construct an activity model. In

this approach, structured group sessions and a workshop environment are used to extractinformation from users in a compressed time frame. The essence of this approach is theinteraction of users and analysts working cooperatively as a team to address systemrequirements.

Some Of The Strengths And Weaknesses Of This Approach Are:

Strengths:

Encourages commitment of senior management and participants. Because theapproach depends on the commitment of senior management, participants should

feel that their contribution to requirements definition and analysis is importantbecause of the organization wide impact. Condenses and accelerates activity analysis tasks. By combining the numerous

activities that comprise the traditional requirements analysis process, facilitatedgroup decision making techniques accelerate the process for significant timesavings.

Enforces top down analysis by a joint team. Fosters a spirit of cooperation between functional and technical staff. Participants

gain a sense of "ownership" of the system.


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Enhances understanding and analysis of the overall system through sharing of knowledge and communication. Both functional and technical knowledge of theoverall system is increased through open communications during the workshopsessions. Participants often uncover things during the sessions that traditionalprocedures would have missed, such as redundancies, overlapping procedures,and commonalities with other functional areas.

Weaknesses:

Requires dollar and time commitment. Depends upon strong management and user commitment. A lack of management

commitment may result in poor participation during the process. Increases procedural and logistical difficulties. Procedural difficulties arise when

scheduling session times that are convenient for all participants and in whenincluding all participants in all sessions.

Requires trained facilitators, analysts, and scribes.

Performance Analysis

Another activity analysis type that may be used to define and bound activities isperformance analysis. Measures of performance, i.e., cost, time, and quality, can help anorganization set its priorities for detailed activity analysis and components of performanceanalysis include cost, time, and quality.

Cost analysis allocates budgets by cost element across the activities performed in theorganization. Cost analysis reveals the high cost drivers within the organization andreveals where the most significant impact can be made.

In many instances, certain activities within the business do not appear to be cost driversand are not labor intensive, but may impact the ability of the business to operate.

Timeline analysis allows the analyst to locate the bottlenecks within a system.

A function may not cost a lot of time or contribute significantly to lead time, but it mayconsistently generate poor quality output, which indirectly undermines the effectiveness of the organization.

Quality analysis determines which activities have the greatest bearing on overall productquality.

Activity Modeling

What is activity modeling and why do you need to do it?

A Model is a representation of a complex reality. Modeling is the act of developing anaccurate description of a system. Activity Modeling is the act of developing an accuratedescription of the activities performed by a system. It is important to emphasize thatSYSTEM does not connote "automated system", but refers instead to a business system,


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which will be a combination of manual and automated components. In high level activitymodeling, the distinction between manual and automated components is not important.

When a process is modeled, we can easily see the interrelationships of the specificactivities that make up a process at any level of detail we desire. This allows us to criticallyanalyze each activity (task) that comprise the process in our search for improvement

opportunities. Because the facts about activities are displayed in both graphical andnarrative form, this analysis can be objective, rather than subjective. If there are problemswith an activity, these problems will be highly visible.

Activity models are hierarchical in nature. This means that we can start with a high-levelview of our process, then successively break it down (decompose it) into layers of increasing detail. The following are general steps in performing activity modeling:

Identify Describe Bound

Validate Analyze

Why do we build both baseline "AS-IS" and target "TO-BE" activity models?

A baseline "AS-IS" activity model provides an accurate description of the way activities arecurrently performed. In addition to providing a means for bounding, validating, andanalyzing activities, the model permits accurate performance measures of the activity'scost, time, and quality to be developed. Without such a baseline, it is impossible to analyzealternative methods of performing the activities.

A target "TO-BE" activity model provides a description of how the activities will beperformed in the future. The boundaries of the target activity model should correspond tothe boundaries of the baseline activity model (or differences should be clearly delineated).Performance measures for the target activity model are estimated to compare to thebaseline activity model.

In an ideal situation, separate and complete baseline and target activity models would bedeveloped for a system. However, often resource and time constraints often do not permittwo models to be built and maintained.

How can models be used to compare alternative methods of fulfilling requirements?

There is no easy answer. In an ideal situation, a complete model of each alternativesystem for fulfilling a set of functional requirements would be constructed. Then thesealternative models would be compared to the baseline and target models and to eachother. This process argues for an automated procedure for performing the comparisons.Some CASE toolsenable users to compare models and identify differences, but thisanalysis is done at such a minute level of detail that the results are difficult to interpret. Inperforming comparisons that are meaningful, there is no substitute for the astute analyst.


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In reality, time and resources are usually not available to construct complete models of each alternative. One possible approach is to model only those portions of each alternativethat represent the greatest potential payoff in terms of improved business practices. Thisapproach has a number of advantages:

Assists in defining and understanding the alternative,

Alternatives can be defined in equivalent terms, Focuses on and bounds the change, Facilitates definitive comparisons, Reduces the time and resources required to perform the comparisons.

What is the difference between business activity modeling and information systemsactivity modeling? What are the relationships, and why is it necessary to do both?

This question can raise controversy, especially among information systems (IS) personnel,who may believe that IS modeling techniques are as sufficient for modeling the businessas they are for the modeling they have been doing for years. In addition, there is really no

black and white distinction between business activity modeling and information systemsactivity modeling.

Characteristics of Business Activity Modeling

Models the business from a functional perspective, Focuses on understanding and changing business practices, not automation of

business practices, Inputs and Outputs do not represent data, Provides a complete description of a set of activities.

Compared to: Characteristics of Information Systems Modeling Models the business from an Information Systems perspective, Focuses on automation of business practices and development or modification of

automated systems, Inputs and Outputs represent data, Does not provide a complete description of a set of activities.

Introduction to IDEF0 Modeling and Overview of IDEF0 Modeling Techniques

As the FAA reegineering methodology is primarily based on the DoD-derived model and

FIPS Publications 183 and 184, the following section is taken from the DoD CIM course onfunctional process improvement and its Functional Process Improvement Project Book.

What is IDEF?

IDEF0 is the FAA recommended activity modeling technique. It has been proven effectiveand easy to use by functional people. Many automated modeling tools based on IDEF0have been developed by reengineering experts in industry to create the models and


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supporting documentation. These tools also allow activity model data to be loaded intorepositories for support of Computer-aided Software Engineering (CASE) tools.

IDEF is an acronym for Integrated DEF inition Language (or sometimes, ICAM Def inition;see Chapter 4). It is a structured methodology for functional process analysis which has along history of successful application.

There are two activity models. The first is the "AS-IS" model, which shows the current(baseline) structure of a functional process. The second is the "TO-BE" model whichshows the objective (target) structure of a functional process. The difference between eachcan be thought of as a set of improvements. The "AS-IS" model plus improvement actionsequals the "TO-BE" model. Since improvement proposals are represented by the FEA, wecan also say the "AS-IS" plus all FEAs equals the "TO-BE" model.

The following Seven Fundamental Concepts of IDEF0 is used in the DoD CIM course,"Functional Process Improvement Project Book," based on material from a major reengineering consultant, Wizdom Systems, Inc.:

Seven Fundamental Concepts of Activity Modeling as Implemented with IDEF0

1. To solve a problem you must understand it!

IDEF0 attacks a problem by building a model of the subject. The model answers questionsabout the subject.

2. Analysis of any problem is: top-down, modular, hierarchical, and structured.

3. IDEF0 provides an activity model independent of both organization and time.

It is not an organization chart!

It is not a flow diagram!

4. IDEF0 is a diagramming technique that shows component parts, inter-relationshipsbetween them , and shows how they fit into a hierarchical structure.

5. IDEF0 methods support disciplined, coordinated teamwork.

This does not mean you model by committee.

This does mean that an IDEF project is a team effort.

This does mean that the results will reflect the best thinking of a team.

6. IDEF0 is structured and rigorous!

IDEF0 methods follow rules and require all analysis and design decisions and commentsto be in written form.


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7. IDEF0 follows the principle of gradual exposition of detail.

This last concept is a very important one that deserves more explanation:

Keep the top levels simple!

IDEF0 diagrams progress from high level to more specific. An IDEF0 model starts byrepresenting the whole system as a simple unit in a single box. The single box has ageneral name and the interface arrows are general. (see Figure 3-2.)

The single box is decomposed into its, sub-activities, which will have more specific names,and in turn the arrows will be more specific.

Each of those boxes will be decomposed into its sub-activities, which will have morespecific names and their interfaces will be more specific.

Even though the diagrams may have fewer activities and interfaces, the information they

contain will become more detailed.IDEF0 Components

Each of the components of an activity model as presented below apply to both"AS-IS" and "TO-BE" models. The components are:

ICOMs of the activities in a process (see Figure 3-2.) Node Trees, which graphically portray activities in a hierarchical format (see Figure

3-3.) Context Diagram, a single diagram that illustrates the highest level activity and its

information or materials Decomposition Diagrams, which represent refinements of an activity by showing itslower level activities and their information relationships

FEO (For Exposition Only) Diagrams, which highlight a particular portion of a NodeTree, Context, or Decomposition Diagram

ICOM

The basic building block used in IDEF modeling is the ICOM, which stands for Input,Control, Output, and Mechanism. Here is a generic ICOM (Figure 3-2.) that shows therelationships of the Input, Control, Output, and Mechanism to the activity.


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Figure 3-2. - ICOM

INPUT That which will be transformed by the activity or process. These include material and information.

CONTROL Those elements related to the activity that constrain or govern how the activity will be conducted. Examples include policy, budget constraints, and customer requirements.

OUTPUT The result of the activity. This is the input after it is transformed by the activity.

MECHANISM Those things that accomplish or support the activity. The mechanism may be people, systems, facilities or equipment necessary to accomplish the activity. The direct costs of doing an activity are associated with the mechanisms.

An Enterprise Model of an organization is developed using the IDEF modeling approach.

The activity itself is "what" is done. Its interfaces are depicted as arrows entering or leavingthe activity box. As in other modeling methods, inputs enter from the left and outputs leavefrom the right of the box; the activity transforms inputs into outputs. Arrows entering at thetop are controls; they provide direction and constraints. Typical controls in the FAA are

policy and guidance . Arrows entering from the bottom are mechanisms. Mechanismsrepresent the means used to perform the activity. For example, an information system isa mechanism, as are the staff who conduct the activity.

A model of an enterprise is developed through a top-down process of decomposition,through a series of boxes such as the one at the highest level of the enterprise such as theabove, or through node trees. (see Figure 3-3.) The fundamental mission of the enterpriseis established as the first activity. This activity is decomposed into several subordinateactivities, whose interfaces must be consistent with those in the parent process.Successive levels in the model are developed in the same way, until it is judged to besufficiently detailed to allow for identification and analyses of potential areas for improvement.

Context Diagram


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The first step in constructing an IDEF0 function model is to create the Context Diagram.The Context Diagram sets boundaries for the scope of the modeling effort. It is a model of the function at the highest level and the highest level of inputs, controls, outputs, andmechanisms are shown. An enterprise model is developed within a certain context andfrom a particular point of view. The context can be within a larger enterprise. For example,the FAA mission is part of the larger Federal government mission. The point of view may

be that of an organization or leader; the FAA Enterprise Model was developed from theviewpoint of the agency, and is included in Appendix C.

Node Tree

The next step in IDEF Modeling is to perform a functional decomposition of the contextdiagram. In IDEF, the Node Tree is used to show that decomposition. This step is just likea work breakdown structure used by project managers. Each of these activities could befurther decomposed as needed for analysis. When an activity is decomposed, it is brokendown into three to six sub-activities. Activities are identified by a number that indicates their level in the model and relationship to the parent activity. The node tree is the basis for the

next step of modelingthat is constructing decomposition diagrams. An example follows:

Figure 3-3. - Node Tree

Decomposition Diagram

Once the Node Tree has been constructed, a Decomposition Diagram of a model usingICOMs can be built. First, four boxes are arranged in a descending, stair step fashion. Thisarrangement facilitates drawing lines on the diagram. (Note the diagram does notnecessarily indicate the sequence of events nor time.) Once we have the boxes, ICOMsare added (Input, Control, Output, and Mechanisms) for each activity. The ICOMs from thecontext diagram are reflected on the decomposition diagram. The mechanism, "owner",supports three of the activities. The same process is used to build decomposition diagramsat each level as the models are further decomposed.

Based on the decomposition diagram, the context diagram should be updated. BuildingIDEF models is an iterative process. The model will be continually refined until it has thelevel of detail that is needed.


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Context, Purpose, and Viewpoint

The CONTEXT establishes the subject of the model as part of a larger whole. Itcreates a boundary with the environment by describing external interfaces.

The PURPOSE establishes the intent of the model or the goal of communication itserves. Purpose explains why the model is created (functional specification,

implementation design, customer operations, etc.). The VIEWPOINT determines what can be "seen" within the context, and from what"slant." It states the author's position as an observer of or participant in the systemfor the benefit of an audience.

Benefits of IDEF0 Modeling

1. IDEF0 provides an understanding of the "AS-IS" environment.

The model answers the questions "What do I do?" and "What resources do I need, to dowhat I do?"

2. IDEF0 provides a means for communicating and presenting results.

Everyone is looking at the same model. Everyone is using the same definitions. Everyone is talking about the same thing!

3. IDEF0 identifies and categorizes information entities that form the foundation for information modeling.

The IDEF0 arrows represent things. Entities in data modeling represent those things

we wish to store information about. Therefore, the arrow labels in IDEF0 diagrams form a list of potential data entities

for IDEF1X.

4. IDEF0 provides a tool for managing projects.

It structures the team organization. It enforces a step-by-step approach. It tracks the evolution from problem to solution. It requires strict documentation, overseen by the project librarian.

5. IDEF0 establishes a forum and a structure for interviewing people. You must obtain specific information and follow a specific agenda. The diagram provides a way to depict (and verify) the information gained from the

interviews.

6. IDEF0 identifies opportunities for improvements.

The IDEF interview and modeling process bring opportunities to the surface.


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7. IDEF0 reveals information flow relationships and incongruities.

You often find that the people who need the information are not getting it, and thosewho get it don't need it!

8. IDEF0 reveals redundant activities.

Often, the same activity is unnecessarily performed in more than one place in theorganization!

9. IDEF0 documents the "AS-IS" for baseline evaluation and further analysis.

You must know what you have in order to fix it!

10. IDEF0 begins the roadmap from the "AS-IS" to the "TO-BE."

You now know where you are starting from so you can go to where you want to be!

Even if you know where you want to go, you can't get there if you don't know whereyou're starting from. Ask any pilot!

Difficulties of IDEF0 Activity Modeling

When utilizing IDEF techniques the reengineer should be aware of some drawbacks:

Complexity of diagrams. Distinguishing and separating the "AS-IS" from the "TO-BE." Distinguishing and separating different viewpoints. Identifying and distinguishing between controls and inputs. Establishing the proper boundaries for the model.

Activity models ("AS-IS" form) help us understand and visualize what we are actually doingto carry out our organizational mission and business objectives. These models aredeveloped by the functional community working in facilitated decision teams.

Understand our Processes

IDEF modeling greatly facilitates the development of a new perspective of anorganization's activities. From understanding the processes conducted in an organization,we can develop improvement options or alternatives that will add value to the process

and/or lower the cost of the process. "TO-BE" models are constructed with this valuableinformation, which test and/or illustrate the proposed changes and make it possible tosimulate the proposed set of changes to verify their effectiveness.

CHAPTER 4: What is Data Modeling?

A data model is a fully-attributed business rule model, the purpose of which is to design or document a physical database. Data modeling is used to document the information


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requirements of the functional activity, to identify reuse requirements and opportunities, toassist in identification of redundant processes, and to guide consistent data administration.

IDEF1XInformation Model

In the mid-seventies, the U.S. Air Force first recognized the need for semantic data models

as a result of the Integrated Computer Aided Manufacturing (ICAM) Program. Theobjective of the program was to increase manufacturing productivity through thesystematic application of computer technology. The ICAM Program identified a need for better analysis and communication techniques for people involved in improvingmanufacturing productivity. As a result, a series of techniques known as the IDEF (ICAMDefinition) Methods which included IDEF1, were used to produce an "information model."

In 1981, the ICAM Program published the initial approach to IDEF information modeling.Dr. E. F. Codd's work on relational theory and Dr. P. P. S. Chen's work on entityrelationship models provided the theoretical roots for this approach.

Under the ICAM program, the U.S. Air Force initiated the Integrated Information S upportS ystem (I2S2) project in 1983. The project's objective was to provide the enablingtechnology to logically and physically integrate a network of heterogeneous computer hardware and software. The need for an enhanced technique for information modeling wasrecognized as a result of the project and industry experience.

In 1982, R. G. Brown of the Database Design Group developed a Logical DatabaseDesign Technique (LDDT). LDDT introduced enhanced semantic and graphical constructs,and addressed information modeling enhancement requirements identified under the I2S2program. In 1985, under the technical leadership of Dr. M. E. S. Loomis of D. AppletonCompany, a subset of LDDT was combined with the methodology of IDEF1 and the

technique was called IDEF1 Extended or better known as IDEF1X.One of the principal objectives of IDEF1X is to support integration. I2S2's approach tointegration focuses on the capture, management, and use of a single semantic definition of the data resource referred to as a "Conceptual Schema." It is independent of how the datais physically stored or accessed, and provides a single application of data within anenterprise that is unbiased toward any single application of data. The Conceptual Schemaprovides a consistent definition of the meanings and interrelationship of data that is used tointegrate, share, and manage the integrity of the data, and it must have three importantcharacteristics:

be consistent with the infrastructure of the business and be true across allapplication areas,

must be extendible, so that new data can be defined without altering previouslydefined data, and

must be transformable to both the required user views and to variety of data storageand access structures.

IDEF1X is a semantic data modeling technique and was developed to meet the followingrequirements; support the development of conceptual schemas, be a coherent language,


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be teachable, be well tested and proven, and be capable of being automated. The basicconstructs of an IDEF1X model are:

things about which data is kept e.g., people, events, etc., represented by a box, relationships between those things, represented by lines connecting the boxes, characteristics of those things represented by attribute names within the box.

Function models (IDEF0) show what is done and information models (IDEF1X) define theinformation needed to accomplish the functions. Business rules are also provided byinformation models.

Information models are made up of things that we call entities, characteristics of thosethings , called attributes, and the relationships among the entities. Entities are identified bya name. Each entity is uniquely identified by a key-attribute . Additional attributes may beneeded to further describe the entity. A strong relationship between the information modeland the function model should exist. Entities come from the lines joining the activities onthe function model. The two models validate each other, and the building of each should

be an iterative process.

Figure 4-1. - Example of Data Model

IDEF0 function and information modeling have most of the features of the typical modelsused to support business process reengineering. IDEF can be used for a wide range of applications and requires minimal training. The key points in IDEF modeling are:

The analysis must reflect a specific viewpoint, The ICOM is the working element of the IDEF0 diagram, IDEF0 diagramming follows a structured approach form the A0 level through

decomposition to the lowest level needed for the analysis, IDEF1X models show entities and their relationships.


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Modeling is an iterative process. The first attempt need not be perfect. Subsequentiterations of the analysis will continue to improve the model at all levels.

FAA Enterprise Model

An enterprise model shows the basic, fundamental functions, processes or activities of anenterprise or organization, often boiled down to just one, two or three key activities at thetop (depending on the complexity of the organization), and then decomposed to sub-activities to the desired level of detail. A high level functional model showing FAAenterprise activities was developed in 1994, as part of a project to demonstrate afoundation for data administration planning, and as an approach for defining an FAAproject management architecture. The FAA Enterprise Model consists of six major highlevel functions which together make up the FAA enterprise. These functions were titled:Airspace Management; Regulations/Standards/Compliance; Airport Planning and Grants;Aviation Security; Agency Support; and Executive Direction (see Figure 4-2).

The functional analysis showed six high level functions that constitute what the FAA does.They are further decomposed into sub functions, which may be further decomposed intoprocesses as the Enterprise Model is developed in more detail down to basic activities.

Under the Cost Activity Measurement System (CAMS) initiative, an intra-agency workgroup separately developed a high level enterprise model that mirrored the functionspreviously identified, using slightly different nomenclature (see the working draft documentin Appendix C). The CAMS initiative seeks to prepare the agency for the requirements of the Government Performance and Results Act, by helping organizations to identify thecosts and resources associated with their total business activities, to serve as amanagement tool and to allow them to devise better performance measures.

The FAA Enterprise Model can be viewed also as having six strategic data entities,sometimes called "data buckets." Each high-level data entity represents a correspondingdata requirement from the high-level Activity Model . Data buckets are physical locationsfrom which data, common to one theme or subject can be stored, quickly accessed, andquickly returned to the same location.

The FAA Data Model constitutes the data component of the overall FAA Enterprise Modelwhich joins process and data into one cohesive and coherent frame of reference. Thefundamental objective of the FAA Data Model is to provide the basic data architecture for effective data administration across the agency. Both models should be considered the

cornerstone for future FAA BPI/R efforts. Organizations will develop their own enterprisemodels and decompose them to the level of useful detail to reengineer processes andprovide effective performance or output measures. Specific data model objectives would:

provide the FAA data structure needed to establish responsibilities for shared data, serve as the basis for FAA standard data elements, maximize the utility, integrity, and cost-beneficial sharing of data that facilitates

cross-functional integration of FAA activities, assist data stewards in resolution of cross-functional data sharing issues,


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serve as an integration vehicle for functional area and component data models, and guide migration of existing data to new shared data structures.

The Data Model was developed in conjunction with the activity modeling, throughcomprehensive analysis of the Activity Modelthe inputs, controls, outputs, and mechanismsof the individual activitiesand a thorough review of the fundamental guiding documents for

that model and the agency. It was through these analyses that strategic entities and their relationships, which reflect and support FAA missions, functions, and FAA dataarchitecture, were derived. The FAA Data Model should be extended down to the level of data elements or attributes and relationships, in concert with the definition of more detailedFAA activities.

High level functions were developed considering both current and future states of the FAA.Primary sources of the future FAA vision were the 1994 FAA Strategic Plan, the 1993Airway Facilities Strategic Plan, and the 1994 draft of Airway Facilities Concept of Operations for the Future. High level functions were developed and confirmed by staff members of AIT. Data subject areas were derived from information requirements defined in

system documentation relating to current and proposed applications supporting Operationsand Maintenance, Air Traffic Management, Air Traffic Control, Registration, andCompliance and Certification.

CHAPTER 5: Costing Organizational Activities

Activity Based Costing (ABC) is an accounting technique that allows an organization todetermine the actual cost associated with each product and service produced by theorganization without regard to the organizational structure (reference Appendix B.Glossary ). This chapter explains some of the uses and benefits of Activity Based Costing.We use IDEF0 activity modeling in conjunction with ABC to enable more effective business

process design decisions.In order to achieve the major goals of business process improvement, processsimplification and improvement, FAA managers need to fully understand the cost, time,and quality of activities performed by employees or machines throughout an entireorganization. ABC methods enable managers to cost out measurements to businesssimplification and process improvement.

Included in Vice Presidents Gore's NPR is the need for government to be more productivewith less resources. Productivity can be improved when waste is eliminated or reducedand when information replaces the expenditure of capital; for example, when computer-

based product definitions are available for the creation of parts on demand instead of physical parts in storage awaiting possible future demand. Productivity also can beimproved when costs, risks, and rewards are shared among organizations - the case whenbusiness functions and rules are shared and data are integrated. Productivity is ameasurement of the performance of activities.

Activities can be defined as a named process, function, or task that occurs over time andhas recognized results. Activities use up assigned resources to produce products andservices. Inputs are transformed into outputs under the perimeters set by controls


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performed by the organization's employees and their tools. Activities can be perceived asconsumers of resources in production of materials, services, events, or information.Activities are the common denominator between business process improvement andinformation improvement. The IDEF0 model, as previously discussed under Chapter 3,

Activity Analysis , displays these characteristics for the analyst, and is used in the ABCprocess.

Documenting and understanding activities is necessary in order to improve the businessprocess, since activities are the building blocks of business processes. When employeesunderstand the activities they perform, they can better understand costs based on theactivities. Traditional financial information is reorganized by ABC into a form that makessense to the casual functional user; in addition to the usual information that tells them howthey spend money, it also tells them what to do with the money. This ability to place costson activities and their outputs provides a clear metric for improvement, whether for determining improvement priorities in the long-term or for measuring near-term success.ABC allows functional users to characterize the value of, or need for, each activity, gettingrid of the waste before automating (or reautomating) activities.

Components of Activity Based Costing

Before performing ABC, a baseline or a starting point is needed for business processimprovement ["AS-IS" model], and a baseline can be expressed in some form of model. Abaseline is a documentation of the organization's or agency's policies, practices, methods,measures, costs and their interrelationships at a particular location at a particular point intime. Through baselining, activity inputs and outputs across functional lines of businesscan be identified. ABC is the only improvement methodology that provides output or unitcosts.

A structured approach to identification and analysis of the activities is provided by theIDEF0 activity modeling techniques. ABC can be attempted without the use of IDEFmodeling, however, ABC accomplishes the most complex task of identifying discreteactivities and then identifying the primary output measure for each activity.

An important function of ABC is for the organization's activities to be defined as valueadded or non-value added. Value added activities are those for which the customers areusually willing to pay (in some way) for the service. Non-value added are activities thatcreate waste, result in delay of some sort, add costs to the product/s, or for which thecustomer is not willing to pay.

Resources are assigned to activities to allow them to be conducted; performing the activityresults in a cost that can be priced, which can be assigned to the primary output. It isthrough ABC, that an organization can begin to see actual dollar costs against individualactivities, and find opportunities to streamline or reduce the costs, or eliminate the entireactivity, especially if there is no value added.

Financial Analysis Techniques


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Activity Based Costing (ABC)

Captures the current cost of performing an activity Targets High Cost activities Provides a context for establishing and monitoring performance measures Provides the link between activity modeling and economic analysis Is useful for forecasting financial baselines

Business Case Development

Focuses on "bottom line" results (savings vs. investment) Adjusts for future risks

Identifies performance measures

Steps for Performing ABC

The CIM Process Improvement Methodology for DoD Functional Managers identifies fiveactivities that need to occur in order to determine activity costs using IDEF0;

1. Analyze Activities2. Gather Costs3. Trace Costs to Activities4. Establish Output Measures5. Analyze Costs

These steps should be performed by the core BPI team - which the FAA identifies as asmall group of people, committed by top management to work on a BPI project full time if available, or part time on the effort with possible support from BPI contractors. Thisprocess can take anywhere from a few days to a few months, depending on level of detail,complexity of an organization's processes, and commitment of team resources.

Analyze Activities

First the scope of the activities to be analyzed must be identified. It is suggested that theprogram include at least a half-dozen organizational units having a common functionalorientation, and preferably also a common budget somewhere in the reporting chain. Thedepth and detail of analysis will be determined by activity decomposition, since activitydecomposition is complete when one common or homogeneous primary output per activityis reached. Any prior work captured in IDEF0 models and their related definitions isconsidered here. This is where the core team can use activity models as a basis for selecting and interviewing key people associated with the business process.

A determination then is made if an activity is value or non-value added; also if the activity isprimary or secondary, and required or not needed. Value added is determined if the outputof the activity is directly related to customer requirements, service or product, as opposedto an administrative or logistical outcome that services the providing organization. For


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instance, if the output of an activity were an inventory report or update for products (for which there are customers), the output would be non-value added, but necessary to theorganization, i.e., "overhead." A major goal of reengineering is to reduce non-value addedactivities and eliminate those that are not necessary. Primary activities directly support theorganization's mission while secondary activities support primary activities. Requiredactivities are those that must always be performed while discretionary activities are

performed only when allowed by the operating management.Gather Costs

In this step costs are gathered for the activity producing the products or services providedas the outcome. These costs can be salaries, expenditures for research, machinery, officefurniture, etc. These costs are used as the baseline activity costs. When documents for thecosts incurred are not available, cost assignment formulas may be used.

Trace Costs to Activities

In this step the results of analyzing activities and the gathered organizational inputs andcosts are brought together, which produces the total input cost for each activity. A simpleformula for costs is provided - outputs consume activities that in turn have consumed costsassociated with resources. This leads to a simple method to calculate total costsconsumed by an activity - multiply the percent of time expended by an organizational unit,e.g., branch, division, on each activity by the total input cost for that entity. Here we are notcalculating costs, just finding where they come from.

Establish Output Measures

In this step the actual activity unit cost is calculated. Even though activities may have

multiple outputs, only one is identified as the primary output. Activity unit cost is calculatedby dividing the total input cost, including assigned costs from secondary activities, by theprimary activity output volume; the primary output must be measurable and its volume or quantity obtainable. From this, a bill of activities can then be calculated which contains or lists a set of activities and the amount of each activity consumed. The amount of eachactivity consumed is extended by the activity unit cost and is added up as a total cost for the bill of activity.

Analyze Costs

In the final step, the calculated activity unit costs and bills of activity are used to identifycandidates for improving the business processes. Managers can use the information bystratifying, for a Pareto analysis, the activity costs and identifying a certain percentage of activities that consume the majority of costs. The thing to keep in mind is that theidentification of non-value added activities occurs through this process with a clarity thatallows us to eliminate them, and at the same time permits the product or service to beprovided to the customer with greater efficiency.

ABC Example


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ABC is a powerful tool for measuring business performance, determining the cost of business process outputs, and is used as a means of identifying opportunities to improvebusiness process effectiveness and efficiency. The CIM Process Improvement Methodology for DoD Functional Managers provides one version of the detailed ABCprocess, and was used by AIT as outlined in the following FAA example from a FY-1995BPI effort:

Below is a process diagram with the sub-activities shown in a sequential activity order for FAA's Controlled Correspondence process, which comes under the Executive Secretariatin the Office of the Administrator, AOA-3. For the ABC, the sub-activities were thenanalyzed and a cost derived.

Figure 5-1. - High level View of Controlled Correspondence

To arrive at individual activity costs, the fully loaded cost of labor was the primary focus indetermining the cost incurred by the existing process (because the total labor cost was solarge and the other related costs so small in comparison, the total labor cost was used as aclose approximation of the total process cost-this will be true for many governmentalfunctions). For some efforts, the costs of equipment, software, floor space, depreciation,etc. might be factors.


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Figure 5-2. - Costs of Controlled Correspondence Sub-processes

The labor costs were collected for each of the offices involved, both for AOA-3 controlledcorrespondence, and other, non-AOA-3 correspondence. The labor costs were thenapplied by using FTEs and GS levels in the nine regions (refer to the table above). In thisexample, it costs approximately $985 to completely process each piece of controlledcorrespondence.

CHAPTER 6

What is a Business Case?

The Business Case pulls together all the data and analysis performed by the BPI team andlogically presents the "case" to management for the major viable alternatives that will getto the envisioned "TO-BE" state. The established "AS-IS" environment is used as abaseline. The business case includes the following: an analysis of functional processneeds or problems posed from the "AS-IS" position; significant alternativerecommendations for improvement; proposed solutions based on the "TO-BE" position;assumptions and constraints; life-cycle costs and benefits of the baseline and alternatives;and investment risk analysis. The business case is a separate document, but very muchdependent on the previous steps conducted in the BPI process. It is used by managementas a tool to determine and document the costs and benefits of functional processimprovements, and of related investments in information technology. Another term for thebusiness case is the Functional Economic Analysis (FEA).

The business case provides essential information to FAA managers or decision makers toimprove the way they perform their functional activities. The business case analysispresents the information needed by functional managers to choose the best alternative,


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comparing the baseline to the alternative costs, and presents the case for investments inprocess changes by collecting information relevant to the decision and displaying thatinformation in standard formats. As stated in the FEA Guidebook, "The FEA document[business case] is designed to "carry" all the information needed to make good businessdecisions."

The business case is prepared with direct input from the impacted functional manager(s)and the BPI core team, often with the assistance of contractor expertise. The businesscase may include or be accompanied by a simulation model of the old and new processes.The business case and the simulation models incorporate:

an analysis of the activity and data models as they describe the "AS-IS" and "TO-BE" environments,

activity costing (ABC), best practices, quick hits identified to improve processes in the short term, performance measures,

alternatives, and the cost of implementing each one.

The purpose of the business case is to permit a decision that will permit the BPI team to goon and develop an Implementation Plan, which will then lay out the selected alternative,sometimes including optional implementation strategies or timelines.

So far we have covered the basic elements of a BPI project. We will now discuss how inthe Business Case alternatives are developed, compared, and costs formulated. We willalso briefly discuss Simulation and its purpose in the Business Case.

Developing the Alternatives

What is an Alternative?

An alternative is the slate of initiatives that will achieve a functional activity's intended "TO-BE" state. As data and activity models are developed and analyzed, BPI team membersstart to develop and conceptualize alternatives. In order to ensure that all options havebeen considered and that a full range of alternatives is presented to the decision makers,the BPI Program recommends that at least three alternatives to the baseline be developed(but variable depending on the complexity of the process; we realize that certain projects

will lend themselves to three or more, but there may be the possibility where only onecomes to the forefront).

The main objective of developing alternatives is to provide functional managers with insightinto the financial and operational impact of proposed improvement changes, with tradeoffsfor customer impact, costs, benefits, and time for implementation. The BPI program hasadopted the DoD definition of improvement opportunities, or implementation alternatives:


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Improvement opportunities are wat needs to be done to the current "AS-IS"environment to move toward one or more of the future, or "TO-BE", functionalobjectives. Functioal experts discover improvement opportunities throughobservation, intuition, analysis of "AS-IS" activity and data models; from functionaldirection, and personal experience.

Improvement opportunities are what needs to be done to the current "AS-IS" environmentto move toward one or more of the future, or "TO-BE", functional objectives. Functionalexperts discover improvement opportunities through observation, intuition, analysis of "AS-IS" activity and data models; from functional direction, and personal experience.

In past BPI projects we have used facilitated workshops to generate and documentimprovement opportunities. A core team of functional experts and customers supported byBPI contract analysts develop and analyze IDEF process and data models (referenceChapters 3 and 4). The team prepares a comparison of the alternatives, which can bepresented in graphs, tables, or whatever method best suits the objective.

Alternatives can then be ranked as to potential benefits and the investments required toachieve each opportunity and the degree of support for functional goals. This informationprovides the basis for initial evaluation and prioritization. These improvement opportunitiesare extended and refined during the analysis of the business case.

Developing Costs for the Alternatives

Below are a variety of methods that can be used to estimate the cost changes associatedwith an initiative, each of which could be used in conjunction with the ABC done on the

activity models by the BPI team; the appropriate choice depends on the nature of theinitiative. Possible approaches include:

Best Practices. If the initiative is based on a best business practice, what were thesavings documented by other organizations? What were the implementation costs?

Analogy (Historical). This method is similar to best practices, but applies to caseswhere there is no widely accepted standard. Historical cost estimates are probablythe most common source of cost estimates. Cost data bases exist for everythingfrom office supplies to software maintenance.

Expert Opinion. This is useful when cost sources or data bases are not available.This applies to new types of equipment, buildings, software, technology, etc.

Consult the experts or reference sources in the specific field for their estimate of investment costs and future savings. Prototypes. Prototypes or pilots are most useful for large expense changes, when

there is major uncertainty about proposed process, procedure, or supportinginformation system changes. Under these circumstances, other means of estimatingmay not be satisfactory, because there are not enough details and information onwhich to base an informed estimate.

Parametric Cost Estimating. This offers a scientific, yet simplistic approach todeveloping costs. In parametric cost estimation, the initiative's components are


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broken down to a level for which cost data are readily available. The costs of thecomponents are summed to arrive at a total cost. For example, if a house consistsof 38,000 bricks and 5,000 shingles, the cost of the house can be estimated byfinding out the cost of bricks and shingles, and the cost to install (labor) per unit.

In choosing between different alternatives, it is important that the functional manager not

only know the estimated cost for each alternative but also have some idea of the risksassociated with each proposal.

Comparing Alternatives

A major function of the Business Case is to document the "AS-IS" and develop alternativeswith which to compare to the baseline. One automated application that is used is theFunctional Economic Analysis Model developed by the Defense Technical InformationCenter (DTIC). When using the FEA Model, most of the information required to utilize ithas been developed in the preceding sections of a BPI project. The baseline activities

have been modeled and the costs determined through activity based costing. At this point,it is a simple matter to array costs for use in the economic analysis of alternatives;depending on the project, the cost categories a

Documents

Handbook of BRE