Business Process Simulation
Process simulation modeling--predicting the ROI of change
By ExecutiveBrief Staff, ExecutiveBrief
How valuable is Process Simulation Modeling (PSIM)?
Process Simulation Modeling (PSIM) can provide real business value to organizations
that are trying to change processes. When companies use the appropriate software
simulation designed for their industry to evaluate process performance, these
organizations can improve their operations and achieve higher levels of process
maturity with the integration of CMMI. However, regardless of what changes a
company is considering, there are always costs and risks involved with any type
PSIM allows a company to examine the changes it want to make, analyze these
changes, and determine the impact the change will have on a company's process.
"Any changes that have a significant impact on the product outcome can
cause a risk exposure -- especially if the organization is investing a significant
amount of money in terms of tools, technologies and the training or retraining
of people," says David M. Raffo, PhD, a full professor at Portland State
University with joint appointments in the Business Administration, Engineering
and Computer Science Departments.
As the co-author of Moving up the CMMI Capability and Maturity Levels Using
Simulation, he has extensively studied the benefits of using PSIM to improve
organizations and to keep these companies focused. Dr. Raffo's report, itself,
is aimed at practitioners, especially software and systems project managers.
Dr. Raffo focuses on how PSIM can be used to evaluate issues related to process
strategy, process improvement, project management, technology and tool adoption,
and control and process design. He stresses that PSIM is a flexible tool that
can aid in quantitatively testing ideas such as how to configure a process --
or how to configure a software acquisition supply chain. Moreover, this model
fulfills the requirements for Process Performance Models (PPMs) that are essential
for high maturity organizations as specified by the CMMI.
Who should use PSIM?
When a company has expensive processes or when a company is developing safety
or mission critical products, PSIM should be considered. "Recent developments
in PSIM tools have drastically cut the costs to develop models for evaluating
such issues, and new methods have been developed to apply PSIM -- enabling it
to rapidly provide greater business value," he says. "At the same
time, trends within the software industry towards improving operations and reducing
costs have heightened the need for tools to better plan and manage processes."
Dr. Raffo notes that competition in the software industry, and the continuing
pressure from low-cost economies, is pressing companies to improve their efficiency
-- and to find ways to optimize their development and quality assurance activities
-- locally and globally. "Furthermore," he adds, "as companies
improve their operations and establish metrics in order to achieve higher levels
of CMMI, the data collected can facilitate the construction of quantitative
Today, certain industries such as healthcare, automotive, aerospace and software
system development, as well as world governments and the U.S. Department of
Defense are using PSIM to determine if their processes are efficient, and to
reduce the risk associated with any changes. Dr. Raffo believes that in most
cases, process simulation more than pays for itself on large projects when this
tactic is used to evaluate even one decision.
"What is amazing about simulation is that you can try before you buy,"
Dr. Raffo says. "You can see what a new tool or improvement would be like
on your process and predict your overall performance benefit before you expend
the resources to deploy it. That's where your real value comes in. Why spend
$100,000 on something that will not work?"
Company pitfalls if PSIM is not used
Many times, vendors claim a tool will provide a savings or performance improvement.
However, when a company uses software simulation to see if that claim is true,
this simulation can determine if the tool is right for the company. PSIM can
determine if the tool will provide a sufficient benefit even if it does not
perform as well as promised -- or if the tool is only half as effective as the
original claim. At that point, a company can decide if the purchase of the tool
will still provide a return on the investment in training, cost, and time.
Any company can receive benefits by using PSIM, but as with any tool, it is
important to know how to use PSIM in order to gain the maximum benefit. The
key to using PSIM is to follow a good methodology while creating the model.
Most organizations find that working with people who have experience creating
process simulation models is a highly effective way to get started. After all,
a company needs individuals with experience, and individuals that can transfer
that experience to a specific project.
Using PSIM allows a company to evaluate their work flows and quality assurance
activities down to a detailed level if necessary. For instance, by using PSIM,
a company can evaluate the impact of sending a portion of their product through
very specific testing processes while other portions of the product receive
standard testing or quality assurance. PSIM then predicts the overall impact
on project performance. PSIM also allows a company to implement other "what
if" analyses in order to view different scenarios -- including best-case,
worst-case, and expected case scenarios.
Two real world company scenarios
There are many examples of organizations in the aerospace, automotive, telecommunication
and medical software and systems industries that benefitted substantially from
the use of PSIM. The following two examples from Dr. Raffo's experience reveal
the potential power of applying PSIM.
In the first situation, applying simulation models to evaluate the software
development process saved an organization from a potential disaster and quality
assurance risk. "If an aerospace organization that we worked with had applied
the automated code analysis tool as it originally intended, a major quality
exposure would have occurred. Instead," Dr. Raffo points out, "We
were able to identify specific project conditions and specific places in the
process where the tool could be applied and actually give it value."
In a second case, Dr. Raffo worked with a company that adopted a requirement
analysis tool. Everyone at this organization believed that adopting this tool
would provide a great benefit -- and all of these individuals were correct.
However, when Dr. Raffo and his team performed the analysis, they were able
to show the managers that if the tool was placed at an entirely different point
in the process, the organization could save an additional $400,000 to $500,000
per large-scale project.
The benefits of PSIM implementation
Organizations can gain many benefits when they utilize PSIM before implementing
considerable business changes.
- PSIM improves bottom-line profits and it can be used to estimate project
costs from the bottom up
- PSIM can reveal how to streamline processes within an organization
- PSIM provides higher quality assurance
- PSIM reduces cycle times
- PSIM lowers the risk of making a costly error
- PSIM provides a deeper understanding of the many factors that influence
success for complex software development projects.
For instance, PSIM allows an organization to evaluate strategic issues such
as optimizing its quality assurance strategy as well as its validation and verification
strategy. By adding specific quality assurance activities, a company can pinpoint
where, how much, and what portions of the product should be inspected or tested.
This situation enables a company to be very specific about its quality assurance
activities, instead of using a broad brush or shotgun approach.
PSIM offers a company a way to gain control of its processes. For example,
tools can be inserted in specific places in specific parts of the process --
or tools can be used under specific project conditions. As Dr. Raffo says, "PSIM
provides a handle on metrics and gives added business value. More software manufacturers
and companies are turning to PSIM to support achieving higher CMMI levels or
to support their Six Sigma activities."
In addition, PSIM can be used to evaluate the number of sites a company may
want to possess and determine if all of these sites are economically feasible.
Other benefits of PSIM include assessing the cost of new tools and technology
and planning a company's processes.
PSIM is truly an educational software tool, and these models can be tailored
to suit an organization or a specific project. An organization simply only needs
to look at the data to discover the impact on a particular project. PSIM can
be used to process simulation to bring your lessons learned to life. "The
whole idea is to see the impact that changes to the process have on project
performance. We learned this lesson on one project. Here is what will happen
if we apply it to your project," says Dr. Raffo. One of the important facts
about process simulation is to realize that ideas that work well for a group
in one division may or may not work on the processes in another division of
the company. Using PSIM, employees can see the impact if the same change is
made on their own project. That's true business value."
The time is now
Dr. Raffo believes that the time for PSIM technology is the present. "PSIM
is the perfect fit for organizations that want to improve process planning,
speed technology adoption, optimize process improvement, step up to quantitative
project management and move to the higher levels of CMMI," he says.
More by ExecutiveBrief Staff
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