Logistics in Finland
Logistics is an old term that was first used in the 1950s in the United States. The Council of Logistics Management from the US defined the term as follows: “Logistics is a part of Supply Chain, where flow of goods and all the warehousing, services and information is controlled as efficiently as possible from the manufacturer to the end customer, so that the end customer’s needs are satisfied.” (Sakki, 2009, p. 16)
Reinikainen et al. (1997) stated that logistics were connected to business life in the 1960s. During the 1970s, logistics in Finland were still narrow in scope, and included only transportation and warehousing. Logistics were considered only part of material management and were examined only from the perspective of improving warehousing and transportation costs. In the 1980s, the logistics concept attracted more focus in Finland and was viewed from a broader and different perspective (Mäkelä, Mäntynen & Vanhatalo, 2005).
Developing the Logistics Position of Finland
Finland is located approximately two or three days further than its competitors from the main markets in central Europe. Distance is partly why logistics costs are higher in Finland; on the other hand, Finland’s logistics position in markets in the Russian Federation is more attractive in relation to its competitors, and should be used as a competitive advantage. Finland needs to reduce its costs and increase its access to international transportation networks; the development of infrastructure or more customised service solutions may be one answer to address its logistics position and high logistics costs (Suomen liikenne- ja viestintäministeriö, 2005).
The Ministry of Transport and Communication’s 2005 development plan for Finland’s logistics position stated that the electronic business processes found in the domestic market need to be developed for the transportation sector. The Ministry of Transport and Communication highlighted that the technology available must be used for development. New technology creates new opportunities. In most cases, old processes can be made by effectively implementing electronic working tools, but just one company making such changes will not help the entire industry. This is why the ministry’s study highlighted the need for development of the entire logistics industry in Finland. Logistics business processes need to be optimised at each company. After re-evaluation of its processes, a company may find unnecessary processes or duplicate processes in its supply chain; both are ineffective and do not result in cost savings. The previous study also recommended that each company stay updated on new technology possibilities and optimise its business processes at suitable intervals, and that it should hold internal workshops or development groups to support development (Suomen liikenne- ja viestintäministeriö, 2005).
Such workshops and development groups can already be seen in companies’ strategies. According to Laamanen and Tinnilä (2009), a popular development strategy in organisations and companies today is to hold workshops and development programs, but these are mostly concentrated on developing leadership skills and management approaches. The workshops are often formed because new ways of thinking and doing are desired, but leaders do not have ready solutions (Laamanen & Tinnilä, 2009).
The level of ICT and different technology tools is good and are available to businesses in Finland. However, benefitting from these tools and approaches in transportation and other logistics services is challenging. International companies with subsidiaries in Finland often decide on new technology tools at headquarters before deploying them to the subsidiaries (Suomen liikenne- ja viestintäministeriö, 2005).
Business Process Analysis and Optimisation
Over the years, different authors and studies have presented many business process modelling approaches and techniques. Each study had its own focus and took its own direction for examining and classifying business process modelling techniques (Majeed et al., 2008).
A good example is the research done by Cantrell, Davenport and Harris (2004). They conducted a survey of 163 organisations and in-depth interviews with 28 other organisations on an enterprise resource planning (ERP) system popular in the 1990s. The article provided examples of how an ERP system was implemented at companies. Some companies began using the system without first analysing its processes and, thus, failed to achieve its goal of improving optimisation processes. The companies that had successful ERP implementations first analysed the system and its capabilities and how it could be modified to fit the needs of the business. Successful companies also explored the type of data needed and how the system could be used to enhance company resources (Cantrell et al. 2004).
Each author has his or her own perspective in mind and promises many development possibilities. However, Vergidis, Tiwari and Majeed (2008) noted that results are presented only from the perspective of the ex ante business model and the ex post version. In other words, previous approaches and techniques were too narrow in scope (Majeed et al., 2008).
Mansar and Reijers (2005) also criticised different methodologies and approaches presented as manuscripts to develop wanted processes.
As previously noted, this study examines findings from a company’s point of view and focuses on the business side effects of process optimisation. Zairi (1997) recommends that companies create their own business process management (BPM) culture with the goal of solving reoccurring problems in a process or enhancing the quality of a process. A BPM culture should ensure that everyone in the company is aware of the corporate goals and should motivate employees to add more value to the core product and customers (Zairi, 1997).
Mansar and Reijers (2005) took an alternative point of view, sought increased accuracy, and looked at the operational level, in contrast with articles and approaches they criticised. They recommended that companies first create what they called the work-centred analysis framework (WCA) (Mansar & Reijers, 2005, p. 292).
The WCA framework consists of customers (external and internal) and products and business processes (participants, information and technology). “A framework is not a model of a business process. It is rather an explicit set of ideas that helps in thinking about the business process in the context of reengineering.” (Mansar & Reijers, 2005, p. 284) Although they presented the WCA framework, they still argued for the need for technology in that framework, which is an interesting point of view in relation to this master’s thesis. After reading the article, something seemed missing, and perhaps Majeed et al. (2008) were correct in stating that many approaches promised a great deal but failed to go deeper or provide specific guidance for a company seeking to optimise its processes to reduce costs and increase efficiency and profits.
Several previous approaches and techniques continued to analyse and refine process models after the initial modelling, and took process development to next level of quantitative analysis. However, according to Majeed et al. (2008), only few such approaches resulted in improvements. The primary data research revealed surprisingly little information on process optimisation as a theory and what process optimisation is really about.
Numerous articles were found on process optimisation, but these mostly scientific approaches used only one theory for a specific type of optimisation, for example, performance measurement, assignment optimisation or workflow optimisation. None of the scientific articles explained process optimisation and the type of information and effort needed to initiate the optimisation process. Instead, most of these articles adopted a problem that was studied from the beginning, did not write about who those problems were found.
Majeed et al. (2008) stated their opinion that process optimisation has received very little attention from researchers and that most current studies on methodologies talked about reengineering but not actual structured process optimisation; they also stated that no methodology exists that could be adopted by companies. The article by Majeed et al. (2008) was the only article to discuss process optimisation from a general point of view without focusing on specific cases related to process optimisation; it simply explained the processes that exist and how these processes can be modelled, analysed and optimised. Using the Majeed et al. (2008) article, other scientific articles were found, enabling an easier understanding of the theory of process optimisation. This resulted in easier access to and an understanding of different theories for modelling, analysing and optimisation of business processes.
Business process modelling and analysis play a crucial role in understanding processes from a broad perspective and help companies create the process thinking in the business environment. Different business process modelling techniques and analysis approaches concentrate on different process frameworks, and these existing techniques enable an examination of different aspects of processes (Majeed et al. 2008).
Zakarian (2001) discussed different modelling tools and methods for analysing processes and highlighted the importance of having a thorough understanding of all of the processes before attempting to model and analyse the inputs and outputs, as many other authors also discussed in their articles. Zakarian (2001) stated that all data, functions and resources should be known before beginning to model the processes. (p. 444) Majeed et al. (2008) discussed the importance of having general knowledge of the process activities and stated, “real-life business processes should be classified according to their structural characteristics and their capabilities for analysis and optimisation.” (p. 2)
Conceptually, process optimisation sounds easy, and companies might find it easy to implement at a surface level; however, they often fail to take process analysis far enough to achieve a level of optimisation. Companies often create a process model and analyse processes from just one angle. To optimise processes within a company, they must first be modelled. Previous research cannot add further value to the modelling process or to the optimisation phase if the steps are not done correctly and in the correct order (Majeed et al., 2008).
Majeed et al. (2008) defined three different categories of business processes based on the features of the process. Figure 2 illustrates three different modelling techniques.
The diagrammatic modelling technique is used when business processes need to be visualised. Mathematical modelling is a modelling technique for business processes that consist of mathematical groundwork. The business process language (BPL) technique is a software tool that supports the execution of processes (Majeed et al., 2008).
Majeed et al. (2008) also categorised different approaches to analyse business processes in the three categories previously noted. Figure 3 shows the analysis approaches for the three modelling sets.
Figure 3 shows that diagrammatic models can be analysed using observational analysis techniques. BPL process models can be analysed using performance evaluation algorithms. Mathematical business models can be analysed using performance evaluation, validation and verification methods. Simulation is used when different business processes exist that contain more than one of these modelling sets; in this case, a combination of different analysis methods is needed (Majeed et al. 2008).
Business Process (BP) Modelling – Static Modelling
Many articles found on primary data research recommended different software programs to model business processes and then continue on to analysis after modelling. How should a company attempt to optimise its business process using software if it lacks adequate knowledge about its business processes? Before using software to model business processes, the processes in focus need to be analysed; otherwise, no software can assist in modelling if the user does not understand the activities and the relevant information needed related to the processes (Hlupic & Robinson, 1998).
Static modelling is diagrammatic modelling of business processes, as shown in Figure 3 above. Absent software, static diagrammatic modelling is similar to the flowcharts used before technology. Static diagrammatic modelling enables visualisation of the chosen process or processes using the information that flows between processes (Majeed et al., 2008).
Process modelling should be done simply and clearly to allow for further analysis and optimisation. Sadiq and Orlowska (2000) presented the objects that should be used when modelling the process map. Figure 4 shows simple, clear and easy-to-use objects that can be understood by others when examining a process map. Two types of objects exists, node and transition, where the node object is divided into two, as shown in Figure 4 (Sadiq & Orlowska, 2000).
Although each technique has advantages and disadvantages, static modelling remains popular, with over 80 percent of companies wanting to learn the technique to visualise their processes (Gladwin & Tumay, 1994; Hlupic & Robinson, 1998). The advantage to using static modelling (Figure 5) is that it assists a company in more thoroughly understanding its processes and the core idea of each activity in the process flow. The disadvantage is that the technique fails to provide a clear view of the outcome and the outputs of the process visualised (Hlupic & Robinson, 1998).
Role Activity Diagram (RAD)
Role activity diagram (RAD) is a diagrammatic business process modelling technique. The RAD allows for visualisation of business process activities and enables the quantitative analysis of the processes in focus (Phalp & Shepperd, 2000).
In process analysis, RAD can be used in two different ways, and it facilitates two different types of analysis: performance analysis and observational analysis. Ould (1995) stated that RAD could be used as software as well as a simple visualisation technique to clarify an understanding of process activities and to allow for a discussion of further phases in process development. This simple technique enables an in-depth understanding and analysis of behaviours and interactions related to the business process (Phalp & Shepperd, 2000).
To clarify their point, Phalp and Shepperd (2000) refer to Ould (1995) and Miers (1994). According to Ould (1995) a “simple qualitative approach can support the investigation of business processes and is complementary to the usual qualitative means of analysis.” (Phalp & Shepperd, 2000, p. 106)
Miers (1994) stated that RAD is a good method for visualising information and performance flows within a process. Miers (1994) highlighted that RAD also demonstrates the power given to workers; in other words, RAD clarifies how much workers can do without communicating with the manager at every stage in the process (Phalp & Shepperd, 2000). RAD enables a company to reduce double activities, save money and increase productivity and efficiency. For example, different roles and their activities in the process can be calculated using different algorithms (Phalp and Shepperd, 2000). Figure 6 provides an example of a role activity diagram (RAD).
Business Process (BP) Optimisation
Zhou and Chen (2003) stated that business process optimisation is about reducing lead time and costs, improving quality and enhancing customer and employee satisfaction; in short, it contributes to maintaining or strengthening the competitive advantage of an organisation. Majeed et al. (2008) presented general business process optimisation theories, but also criticised because of a lack of existing theory in this field of business. They also noted that diagrammatic business processes cannot be optimised because optimisation requires quantitative measures of process performance that cannot be evaluated or applied to diagrammatic process models (Majeed et al., 2008). Figure 7, which presents different process optimisation approaches in relation to the three modelling sets presented earlier, shows that there are no business process optimisation approaches for process language models (Majeed et al., 2008).
Table of Contents:
PART I: AN OVERVIEW
1.4 Perspective and Limitations of the Study .
2.1 Methodological Perspective
2.2 Scientific Approach
2.3 Research Methods and Design
2.4 Selection of Respondents .
2.5 Data Collection
2.6 Analysis Method
2.7 Reliability and Validity
3. Theoretical Framework
3.1 Literature introduction
4. Logistics in Finland
4.1 Developing the Logistics Position of Finland
5. Business Process Analysis and Optimisation
5.1 Business Process (BP) Modelling – Static Modelling
5.2 Role Activity Diagram (RAD)
5.3 Business Process (BP) Optimisation
5.4 Graph Reduction Technique
5.5 Summary of Theoretical Part
6. Empirical Framework
6.1 A Challenging Country – FINLAND
7. History and present – HAVI Logistics Finland
7.1 HAVI Logistics Finland
7.2 Global Lead Logistics Provider
7.3 Value Added Services
7.4 Current Process Map in the Company
7.5 Results of the Second Empirical Interview
8. Case Company’s Processes After Process Modelling
8.1 Employee View
8.2 Thesis View
9. Findings and Analysis of Theoretical and Empirical Sections
9.1 General Findings and Analysis
9.2 Research Question 1
9.3 Research Question 2
10.1 General Conclusion
10.2 Research Questions
10.3 Future Research
10.4 Potential Criticism
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Process optimisation An empirical study of process optimisation in Finland