Industry
Energy, Resources & Utilities
Rebalance the energy equation
Highlights
- As inflation continues to impact utilities, we look at how process mining could help businesses tackle this challenge.
- Process mining is a significant addition to the digital transformation toolkit that can be applied beyond manufacturing to other industries.
- By probing through the depths of process steps, process mining inspects the existing model and analyzes the as-is data to reveal data patterns and trends.
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Abstract
Increasing inflation continues to disrupt the utility industry.
Five out of eight gas utility operators missed Wall Street's EPS expectations for the second calendar quarter of 2023. Additionally, four companies saw their quarterly profit fall from a year ago, despite forecasts for just one company to report a year-over-year EPS contraction.
Process mining can aid utilities in tackling this challenge by offering deep insights into their existing processes to eliminate gaps, bottlenecks, risks, and superfluous costs. We discuss how process mining and process intelligence will accelerate digital transformation for utility players, helping them drive operational excellence.
The digital transformation agenda
Boosting process efficiencies and improving KPIs have always been key C-suite agenda items.
CFOs, business directors, and process owners continuously strive to reduce the cycle time for operations, minimize rework, discover trends, and realize process efficiencies.
As global macroeconomic changes, rapid technological advances, and the growing need to ensure process compliance and auditing lead organizations to seek a culture of continuous improvement (CI) and agile operations, what’s heartening to see is that the applications of CI are growing beyond the realm of manufacturing to other industries. The older notion of CI being applicable only to underperforming companies doesn’t hold good anymore.
Business success hinges on a comprehensive approach when considering CI and digital transformation. These all-encompassing, organization-wide changes are fueled by advanced process-level insights, which in turn drive operational excellence. This underscores the significance of the process mining software, a recent but critical addition to the digital transformation toolkit.
Deriving deeper insights
Process mining helps steer organizations in the right direction while ramping up digital transformation projects.
At its core, process mining uncovers the current state of processes, pinpointing inefficiencies and identifying opportunities for improvement for the targeted process. This involves analyzing data from multiple analytical fields like system intelligence and data analysis, as well as the detailed steps and variants, and then translating these inputs into actionable insights.
By delving into the depths of a process (as shown in Figure 1), this concept helps inspect the existing model and analyze the digitally stored as-is data to reveal data patterns and trends.
Figure1: How process mining works
Process mining aims to analyze real data to gain insights into and establish actionable steps for process enhancement. Unlike assumptions and ad-hoc feedback, process mining objectively examines performance, revealing bottlenecks, trends, and patterns. This identification of inefficiencies aids a comprehensive understanding of key performance indicators (KPIs) and facilitates intervention and automation integration. Moreover, process mining identifies opportunities for intervention and potential automation where relevant. Each process can be categorized by purpose across different levels – strategic, operational, and execution. This categorization helps arrive at anticipated benefits of the proposed alterations.
Figure2: The process mining approach
A case in point
Process mining needs to be embedded at the foundation of digital transformation programs.
Identifying process inefficiencies: A Fortune 40 US-based chip manufacturer wanted to boost its working capital by tackling the issues of non-visibility into cash flow, high non-PO spend, and fragmented and largely manual reporting. The company leveraged process mining to identify potential savings of $13.8 million through non-PO payment terms optimization, rationalization of vendor payment terms, and establishment of an account payable (AP) command center for real-time operational visibility. A real-time dashboard with digital KPIs helped the manufacturer significantly boost PO penetration and reduce payment block, cycle time, and rework.
Optimizing processes: A UK-based luxury vehicle and sports utility vehicle manufacturer identified that it could achieve up to two million euros ($2,201,920) worth of savings in working capital and labor productivity by leveraging process mining to streamline their procure-to-pay process. Organizational transformation is vital to maintain competitiveness and swiftly adapt to volatile market conditions. Gaining comprehensive process knowledge is the foundational step toward operational excellence, and process mining facilitates in-depth analysis, aiding operational decision-making. Using data to drive decisions helps overcome resistance to change by offering a more objective perspective. In addition, process mining tools identify core processes, establish end-to-end value chain networks, and enable benchmarking with industry best practices.
Facilitating automation : A leading UK-based electrical distribution firm leveraged process improvements and robotic process automation (RPA) to reduce inefficiencies such as cost overruns, delayed connections, pending payments, and more—up to $5 million in cost savings. Here’s how process mining plays a key role in an organization’s transformation journey (see Figure 3).
Figure3: Process mining drives business transformation
Reaping the benefits
Organizations must assess if they are ready and have sufficient internal process mining and data cleansing capabilities.
Often, 80% of the effort and time are spent on locating, selecting, extracting, and transforming the process data to make it fit to glean actionable insights. Process mining readiness implies having mature, well-documented processes to serve as the benchmark and source of truth for inputs, outputs, and KPIs.
Thriving in a VUCA (volatile, uncertain, complex, and ambiguous) global market demands ongoing risk reduction, process optimization, and seamless business continuation. The goal for utility players is revenue growth, coupled with rapid adaptation to manage shifts and meet changing customer demands. Swift business process and workflow modeling are imperative. Leveraging process mining and multi-way feedback loops for modeling and harmonization presents an optimal strategy for attaining the desired outcomes. This approach could transform VUCA into a mantra of vision, understanding, clarity, and agility for proactive and successful organizations.
