Business Process Analysis for Agriculture Supply Chains Improvement

Business Process Analysis for Agriculture Supply Chains Improvement Somnuk Keretho, PhD Director, Institute for IT Innovation... Kasetsart University, Bangkok UNNExT Workshop on Promoting Cross-border Agricultural Trade for Sustainable Development Quality--Food Safety--Sustainability--Business Processes Markets 28-30 November 2016 United Nations Conference Centre, Bangkok

Objectives of this presentation To briefly introduce Business Process Analysis, a methodology for analyzing the as-is international supply chain processes, and proposing improvement recommendations [based on the UNNExT Business Process Analysis Guide to simplify trade procedures]. To discuss some BPA case studies for agriculture supply chains improvement. BPA guide and online course are available at unnext.unescap.org http://www.unescap.org/our-work/trade-investment-innovation/trade-facilitation/bpa-course Page 2

Agenda 1. BPA for Analyzing and Proposing International Supply Chain Improvement 2. Introduction into Unified Modeling Language (UML) i.e. two types of diagrams: Use-Case Diagrams & Activity Diagrams 3. Three Phases of a BPA Project 4. Case Studies Page 3

What is a Business Process? A Business Process is a collection of related and structured activities or tasks that produce a specific service or product. Example Procedures of issuing Phytosanitary Certificates in Bangladesh Export procedures of garments from Dhaka, through port operations & customs clearance at Chittagong Port Import Customs clearance procedures at the border check point of Phuentsholing, Bhutan Import procedures and documentation of Lentils from Nepal, through Kakarvitta-Panitanki-Fulbari-Banglabandha borders, until the cargo arriving at Dhaka, Bangladesh. Page 4

What is a Business Process Analysis (BPA)? A modeling and analysis of business processes for capturing as-is (current) conditions and proposing better to-be (target) business processes For example, it may include... Documenting existing regulatory procedures in an agency Describing a standard procedure, e.g. a common case Identifying related quantitative indicators, e.g. number of steps Collecting information about time and cost at different steps Providing a specification for simplification or automation of the process (to be implemented in the future) Page 5

Applying BPA for International Supply Chain BPA can be used to analyse for The international supply chain of trade facilitation, or A subset of these supply chain procedures Buy-Ship-Pay Model Page 6

Rice Export BPA (Thailand) (from purchase order until the cargo container leaving the sea port) 36 Documents involving 15 parties, and 1,140 data elements to be filled in 1. Proforma Invoice (35) 2. Purchase Order (39) 3. Commercial Invoice (51) 4. Application for Letter of Credit (24) 5. Letter of Credit (32) 6. Packing List (25) 7. Cargo Insurance Application Form (20) 8. Cover Note (23) 9. Insurance Policy (24) 10.Booking Request Form Border Crossing (25) 11.Booking Confirmation Border Crossing (30) 12.Booking Request Form Inland Transport (16) 13.Booking Confirmation Inland Transport (18) 14.Bill of Lading (42) Commercial/ Financial Docs Transport Docs 15.Empty Container Movement Request (TKT 305) (20) 16.Request for Port Entry (TKT 308.2) (27) 17.Equipment Interchange Report (EIR) (24) 18.Container Loading List (28) 19.Container List Message (32) 20.Outward Container List (34) 21. Master Sea Cargo Manifest(17) 22. House Sea Cargo Manifest (37) 23. Export Declaration (114) 24. Goods Transition Control List (27) 25. Application for Permission to Export Rice (KP. 2) (24) 26. Sales Report (KP 3) (21) 27. Application for the Collection of the Permit for the Export of Rice (A. 3) (35) 28. Permit for the Export of Rice (A. 4) (35) 29. Application for Certificate of Standards of Product (MS. 13/1) (44) 30. Certificate of Analysis (17) 31. Certificate of Product Standards (MS. 24/1) (45) 32. Certificate of Fumigation (21) 33. Application for Phytosanitary Certificate (PQ. 9) (29) 34. Phytosanitary Certificate (33) 35. Application for Certificate of Origin (42) 36. Certificate of Origin (38) * Number in parenthesis is the no. of data elements Regulatory Docs Page 7

16 days are required for Thai Rice export process Ref: BPA Guide to Simplify Trade Procedures, UNESCAP/UNECE, 2012 Page 8

Why we should conduct a Business Process Analysis? Business Process Analysis is a practical study to understand attributes of business processes, and their relationships Who involved Procedures and Documents required Related Rules and Regulations Some quantitative indicators Page 9

What are the benefits of Business Process Analysis? Page 10

Why international supply chain procedures in some countries are more difficult, time consuming and expensive? Procedures and documents handling remain largely paper dependent. Missing and incorrect documentation slows progress through the supply chain Keeping documents & freight in sync is complex and costly Multiple parties capturing the same data is inefficient and error prone We acknowledge other factors that makes trade in developing countries more difficult, including infrastructure, lack of adequate laboratory facilities, corruption, land-locked, (but these are not the main scope of discussion in this workshop) Page 11

BPA to understand the current trade processes, and then propose improvement. BPA is the first technical step in preparing for trade facilitation measures including process simplification and automation. It provides Inventory of processes, documents, data, parties, rules & regulations Description of the processes Specifications for harmonizing data and development of electronic documents Specifications to develop software for the automation of procedures Business Models for the operation of Single Window environment A basis for maintenance and improvement Page 12

Several UN Recommendations for International Supply Chains Improvement Establishment of Single Window and Paperless Trading Environment Document Simplification and Data Harmonization Business Process Simplification UN/CEFACT Recommendation No. 33 Manual for the Design of Aligned Trade Forms UN Trade Document Toolkit Draft APEC Handbook for Data Harmonization and Core-Component Based Electronic Message Development UN/CEFACT Core-Component Library UN/CEFACT Recommendation No. 18 Business Process Analysis (BPA) Business Process Analysis Guide to Simplify Trade Procedures 13 Page 13

Agenda 1. BPA for Analyzing and Proposing International Supply Chain Improvement 2. Introduction into Unified Modeling Language (UML) i.e. two types of diagrams Use-Case Diagrams & Activity Diagrams 3. Three Phases of a BPA Project 4. Case Studies Page 14

What Business Process Modeling A technique for documenting a business process and its attributes Activities that come in a specific order and decision points Actors who perform those activities Defined inputs and outputs of each activity Criteria for entering and exiting the business process Relationships among actors Information flow Associated rules and regulations Quantitative indicators such as number of steps as well as time and cost required to complete a particular business process Why To establish a common understanding about a business process that is shared by all relevant parties To communicate better all aspects of a business process Page 15

Unified Modeling Language (UML) A set of standard graphical notations for documenting a business process and business requirements Is widely recognized and used among practitioners in business community as well as those in IT and software industry Allows business domain experts to communicate procedural and documentary requirements with IT implementation or software development team http://en.wikipedia.org/wiki/unified_modeling_language Page 16

UML Diagrams for BPA Importer Buy - Conclude sales contract and trade terms Exporter or Representative Use Case Diagram (What) A frame of reference illustrating a high level business process and its associated actors Exporter or Representative Quote price and term of trade Proforma Invoice Prepare the shipment of goods Importer Acceptable Confirm the intent to purchase Purchase Order Not acceptable Cancel Activity Diagram (How) A detailed elaboration of a use case diagram A graphical representation of a business process and its attributes Activities that come in a specific order and decision points Actors who perform those activities Defined inputs and outputs of each activity Criteria for entering and exiting the business process Relationships among actors Information flow Page 17

UML Notations for Use Case Diagram Notation Actor/Role Use case Description Actor Represents a role in a particular business process Is labeled with a role name Use Case Represents a business process Is labeled with a descriptive verb phrase Relationship Association Link actors with business processes that they participate in Boundary Subject Boundary Represents a process area Includes the name of a subject boundary on top Page 18

Exercise Read the Use Case Diagram Thailand Export Process of Frozen Shrimp 2) Ship 2.1) Have product sampled and examined Authorized Private Inspector Insurance Company 2.2) Arrange transport 2.3) Prepare export permit Inland Haulage Importer Importer s Bank 1) Buy 3) Pay Exporter or Representative 2.4) Apply for cargo insurance 2.5) Prepare and submit customs declaration 2.6) Stuff container and transfer to port of departure Customs Bank Customs Department of Fisheries Carrier (Shipping Line) Exporter s Bank 2.7) Clear goods through customs Port Authority 2.8) Handle Container and stow it on vessel 2.9) Prepare documents required by importers Department of Foreign Trade The Central Islamic Committee Office Thailand Department of Consular Affairs Page 19

UML Notations for Activity Diagram Notation Description Notation Description Initial State Process Participant 1 Process Participant 2 Process Participant n Swimlane Represents the beginning of a set of activities Final Activity State Indicates the completion of the business process Final Flow State Is used to break up individual actions to individuals/ agencies that are responsible for executing their actions Is labeled with the name of the responsible individual or agency Indicates that further activities cannot be pursued Activity Transition Line Indicates a sequential flow of actions and information in an activity diagram Fork (Splitting of Control) Visualizes a set of parallel or concurrent flow of actions Join (Synchronization of Control) Indicates the end of parallel or concurrent flow of activities Represents a non-decomposable piece of behavior Is labeled with a name that 1) begins with a verb and ends with a noun; and 2) is short yet contain enough information for readers to comprehend Decision Represents the point where a decision has to be made given specific conditions Object Represents a document or information that flows from one activity to another activity (labeled with the name of a document) Attached with labels addressing the condition on each transition line that comes out of an activities and connects to a decision point or vice versa Page 20

Exercise Read the Activity Diagram Exporter or Representative 2.1) Have product sampled and examined Authorized Private Inspector Department of Fisheries (DoF) Authorized Private Inspector Additional examination not required Exporter (or Representative) Have product ready for sampling Schedule the sampling date Department of Fisheries (DoF) Notify the date for sample collection Additional examination required Collect sample Submit Request for Sampling Examine sample Deliver sample Request for Sampling Collect sample Record the result of examination Test Report Collect Test Report Record sampling result Examine sample Record result of examination Collect Test Report Test Report Page 21

BPA should be conducted as a project [A BPA Project in Three Phases] I. Scope setting/planning Specify a scope of processes to be analyzed II. III. e.g. Phytosanitary Certificate issuance (export) procedures, or Phytosanitary Certificate import procedures at a particular sea port. Data collection and process documentation Define and document a sequence of steps in actual practices and their attributes Who involved (stakeholders/actors) Procedures and documents required (input to/output from) Related rules and regulation Process analysis Locate bottlenecks, examine what causes them, and develop measurable and quantitative process indicators (e.g. the number of steps, time and costs required to fulfill those processes) Recommendation development Determine how to eliminate each bottleneck and prioritize improvement actions Page 23

Three Phases of a BPA Project Phase I 1) Define a project scope 2) Develop a detailed plan and secure resources Project Sponsor Project Manager/ Project Leader Phase II 3) Acquire background information 4) Conduct interviews and document captured data Phase III 5) Analyze the as-is process and identify bottlenecks 6) Develop and propose recommendations Process Analysts Process Participants/ Business Domain Experts Page 24

Outputs of BPA Phase I Phase II Phase III Step Step 1: Define project scope Step 2: Develop a detailed plan and secure resources Step 3: Acquire background information Step4: Conduct interview and document captured data Step 5: Analyze the as-is processes and identify bottlenecks Step 6: Develop and propose recommendations Deliverable Use case diagram illustrating business domain, process areas, process participants, and key business processes Detailed project plan including an estimation of human resources required, schedules, and software supported tools A list of potential interviewees and their contact information A folder of background information about the business processes under the investigation A list of guiding questions for the interview A set of activity diagrams illustrating activities that come in a specific order and decision points, actors who perform those activities, defined inputs and outputs of each activity, criteria for entering and exiting the business process, relationships among actors, and information flow A set of business process descriptions that describes activity diagram and lists all related rules and regulations Activity diagram illustrating integrated processes in the business domain Time-Procedure chart displaying time required to complete each business process A set of observations of the as-is business processes that have the potential for improvement Final report with recommendations which may include diagrams of to-be business processes Page 25

Tips & Techniques for Process Analysis & Improvement Recommendation Identify any bottlenecks, redundancies, and non-value-added activities in procedural and documentary requirements Make those procedures & documentary requirements transparent and easy for stakeholders to access to Merge some procedures, and/or documents(forms) Eliminate redundant procedures and unnecessary documentary requirements Automate procedures and promote the sharing of trade and transport data among relevant stakeholders Modify related laws and regulations to facilitate the operation of the newly designed business processes Reform the regulatory-related organizational structures Page 26

Example: Identify Bottlenecks and Redundancies (the as-is process) Office of Commodity Standards Exporter or Representative Customs Department of Foreign Trade Thailand s Export Process of Jasmine Rice Verify the accuracy/authenticity of exported cargo Exporter or Representative Example of redundant procedural and documentary requirements Customs Department of Foreign Trade Office of Commodity Standards Acknowledge the provided information Acknowledge the provided information Prepare documents to declare the actual amount exported Permit for the Export of Rice (A.4) with actual quantity exported Certificate of Standards of Products (MS. 24) with actual quantity exported Evidence of Sales (Purchase Order or Sales Contract) Prepare documents for submitting to Customs at port of exit Permit for the Export of Rice (A.4) with actual quantity exported Certificate of Standards of Products (MS. 24) with actual quantity exported Record the actual quantity exported and released date Acknowledge the provided information Page 27

Example: Remove Redundancies (the proposed to-be process) Office of Commodity Standards Exporter or Representative Customs Department of Foreign Trade Thailand s Export Process of Jasmine Rice Verify the accuracy/authenticity of exported cargo Exporter or Representative Customs Department of Foreign Trade Office of Commodity Standards Acknowledge the provided information Prepare documents for submitting to Customs at port of exit Permit for the Export of Rice (A.4) with actual quantity exported Certificate of Standards of Products (MS. 24) with actual quantity exported Evidence of Sales (Purchase Order or Sales Contract) Record the actual quantity exported and released date Acknowledge the provided information Page 28

Case Study 1 Describe the meaning of the following Use Case Diagram and Activity Diagrams Page 30

A Use Case Diagram: Showing main procedures for exporting Rice from Thailand (through a sea port) 2) Ship 2.1) Obtain Export Permit 2.2) Arrange transport 2.3) Arrange the inspection and fumigation Insurance Company Authorized Private Inspector Inland Haulage Board of Trade of Thailand Importer Importer s Bank 1) Buy 3) Pay Exporter or Representative 2.4) Obtain cargo insurance 2.5) Provide customs declaration 2.6) Stuff a container or a lighter Office of Commodity Standards Department of Foreign Trade Exporter s Bank 2.7) Transfer to port of departure 2.8) Clear goods through customs 2.9) Handle cargo and stow on vessel Customs Department of Agriculture Carrier (Shipping Line) 2.10) Prepare documents required by importer Port Authority 2.11) Verify the accuracy/authenticity of exported cargo Department of Disease Control Thai Chamber of Commerce Department of Consular Affairs Page 31

An Activity Diagram: Showing detailed procedures and document requirements for obtaining a Rice Export Permit 2.1) Obtain export permit Exporter or Representative Department of Foreign Trade Prepare documents for the application of export permit Application for Permission to Export Rice (KP. 2) Sales Report (KP 3) Application for the Collection of the Permit for the Export of Rice (A. 3) Draft Permit for the Export of Rice (A. 4) Evidence of Sales (Purchase Order or Sales Contract) Verify submitted information Correct Sign and authenticate A. 4 Incorrect Collect A. 4 Permit for the Export of Rice (A. 4) 32 Page 32

An Activity Diagram describing the 2.3) Arrange Inspection and Fumigation Process Page 33

A BPA Case Study II Cambodia BPA

Cambodia BPA (since 2010) The analysis of the Cambodia BPA was initiated by H.E. Dr. Hang Chuon Naron, Permanent Vice Chairman of the Supreme National Economic Council (SNEC) in mid 2010 following the holding of a National Workshop on Advancing Trade Facilitation under a thematic Business Process Analysis for Trade Facilitation: Operationalising the Rectangular Strategy for Growth on 1-2 June 2010 in Phnom Penh. Page 35

Cambodia BPA (since 2010) The workshop was organized jointly by the General Department of Customs and Excise, the Ministry of Commerce, and SNEC and supported by the UNESCAP and UNECE. The workshop laid the foundation for ESCAP s support, a tailored Business Process Analysis (BPA) training of analysts course followed by application of BPA techniques to four key import and export products identified under Cambodia s economic diversification strategy. BPA on rice, cashew, silk and pharmaceuticals Page 36

A Case of Rice Export prior to the launch of the Rice Export National Policy in August 2010 To export rice below 200 ton, the Private Sector needs to write a letter to ask for permission from MoC and GDCE (General Department of Customs and Excise). However, even though the MoC agrees, the Private Sector still needs to negotiate with the GDCE. This takes time and the buyer contract time is limited i.e. from 3-4 weeks only. Exporting more than 200 ton of rice is even more difficult and expensive. For example: the Private Sector (PS) need to go to Green Trade (GT) which has the monopoly to export rice; ask them to write a letter to MoC and then the MoC writes another letter to GDCE to ask for facilitation on this export operation. At each stage, the concerned authorities can create difficulties, delay unless the PS agrees to pay informal fees. Expenses occurred are as follows: (i) 50$ for CO, 0.1 % for export tax, (official); (ii) 170$ for export permit from GDCE; (iii) GDCE charges 55$ per container for checking and so does the CAMCONTROL; (iv) Ministry of Agriculture, Forestry and Fisheries (MAFF) charge 24$ to check a container; (v) When loading merchandises into the container, the MoC charge 40$ per container. Page 37

A Case of Rice Export prior to the launch of the Rice Export National Policy in August 2010 (cont.) Moreover, to transport rice from PS to Sihanouk Ville Port costs 40$ per ton which include 5$ charged by the trucking company. The exporter needs to top 50$ on the price of rice (for example buying the farmer 375$/ton and selling to buyer 425$) to be able to cover the export and transport charges and keep 10$/ton of gross margin. The PS also raises that the PS can not load the rice into container directly from the millers in various places. They have to bring the rice to PP and load into the container. This cost double price. This is a barrier that we cannot export rice in large amount. Page 38

Cambodia BPA recommendations for improvement One-Stop Shop: a special service for processing the export and import of agricultural products. This office will be in charge of issuing all the necessary permits and ensure: (i) transparent fee, and (2) time limit in 5 working days. Reduce informal fees: To be competitive with neighboring markets which are market leaders, we need to reduce the sales prices of rice meaning we need to limit unofficial fees for both export and import procedure. Export of rice: ensure free and fair competition by removing monopolies such as Greentrade. Thus enabling companies to export freely. Intervention in transport and transfer of merchandises: The MoC can influence other relevant entities such as dry ports to lower the cost for entering container from 20 USD to 3-5 USD. Or else the Royal Government of Cambodia (RGC) can provide a location for transferring merchandises without charging any fee. The RGC should establish or provide land for establishing of transferring center for huge amount of merchandises so that Cambodia can be a big rice supplier in Asia. There should be a website to promote rice in Cambodia or have an association of exporters of rice like in Thailand. Page 39

Cambodia BPA: as-is rice export process (documents & agencies to be visited) Page 40

Actors & main procedures for Cambodia rice export Page 41

Cost involved in Cambodia rice export Page 42

Time involved for Cambodia rice export Page 43

Trade facilitation measures in Cambodia Cambodia BPAs have identified bottlenecks, and proposed several specific improvement measures. Action 1: Tackling Capacity building issues, e.g. capacity building for exporting firms on export procedures, and capacity building on market access conditions. Action 2: Mobilizing of private sector rice actors Action 3: Enhancing trade facilitation, reducing informal fees and eliminating illegal check points Action 4: Identifying key legal and institutional gaps Page 44

Trade facilitation measures in Cambodia Cambodia BPAs provide strategic input and become the National Rice Export Policy endorsed by the Cambodia Government Measure 1: MEF/General Department of Customs and Excise (GDCE), MAFF and MoC/General Department of CAMCONTROL and relevant agencies shall: develop a specific strategy to identify and streamline export processing procedures including inspection, documentation requirements, fees and time required to process export applications; define clear and publicly transparent division of responsibilities among export regulating ministries/agencies; consider milled rice export as a top priority in order to reduce to a minimum informal payments and time required to export by extending special treatment similar to the garment sector. Measure 2: Implement a single-stop service for export processing: MEF/GDCE, MAFF and MoC/CAMCONTROL and relevant agencies shall set up a Single Stop Service for export processing and issuing certificates for SPS, fumigation, grading and quality, quantity and weight, and customs declaration. Page 45

Conclusions of Cambodia rice BPA The rice sector holds a huge potential economic growth for Cambodia. If rice export could reach 3 million tons, the total export value would amount to USD 2.1 billion (approximately 20% of GDP). According to rice BPA study, high trade facilitation and internal transportation costs, in particular, are cited as having a significant impact on smaller rice traders ability to effectively export. The BPA on rice export was instrumental in highlighting actual uncompetitive trade facilitation practices as well as identifying helpful suggestions in improving trade facilitation procedures and processes at the national level. Overall positive effects of the Rice Export Policy: There has been some improvement in the export process after the launching of the new policy of paddy production and rice export. Many government agencies along the institutional value chain to support the implementation of the rice export policy. There are visible impr ovements in reduction of government-related transaction costs related to Customs, Camcontrol, and Commerce. Page 46

A BPA Case Study III Thailand BPA

Inter-agency As-Is Process ส าแดงเอกสารใบอน ญาต (กรณ หน วยงานย งไม เช อมต อ ก บระบบ NSW) Traders 3 กยท. Customs Decalration/ ข อม ลผ านพ ธ การ ศ ลกากร 2 ข อม ลใบขนส นค า/พ ธ การศ ลกากร ข อม ล ใบอน ญาต 1 e-permit & e- Cert Paper-based Flow Electronic Information Flow Permit/ Cert Issuing Agency 1 Permit/ Cert Issuing Agency 2 Application forms (electronically on Web, or manual) to Agency 1 Application forms (electronically on Web, or manual) to Agency 2 Problems: Traders submit multiple/duplicated electronic data several times, or with physical papers. Page 48

Inter-agency To-Be Process (After inter-agency BPA) Traders ค าส งซ อ (Invoice) กยท. Customs Declaration ข อม ลผ านพ ธ การ ศ ลกากร Information for Permit/Cert Applications ข อม ลใบขนส นค า/พ ธ การศ ลกากร ข อม ล ใบอน ญาต E-Permit/e- Cert E-Application Paper-based Flow Electronic Information Flow Permit/ Cert Issuing Agency 1 Permit/ Cert Issuing Agency 2 Traders could submit each data element once at a Single Entry Service and the appropriate e-form will be sent to each Agency accordingly. Page 49

Inter-agency BPA : Sugar Export Export (13 Laws and Regulatio ns) 5 Government Agencies 4 Business Entities Process Reduction 37% As-Is To- Be Proce ss Steps 154-17 17 156 92 For m Doc s Paper Reduction 100% As-Is To- Be 21 0 52 0 Time Reduction 55% As-Is To- Be Days 67 30 Cost Reduction 96% As- Is To- คร Be Transp 5,26 200 ort Cost 0 Paper cost 58 0 MOC : Dept of Foreign Trade MOAC: Dept of Agriculture MOI: Sugar and Sugar Cane Commission MOF: Customs Dept MOST: Institute of National Nuclear Technology Business: Thai Chamber of Commerce, Thai Chamber of Industry, Sugar Factory, Surveyor. (บาท/ ง) Page 50

Lessons learned from Implementing BPA Get Buy-in from the high-level policy decision makers Secure adequate resources Clear roles and responsibilities of the project stakeholders Choose a Champion Start small, and then evolve Profit from experience Invest in training Performance measurement Page 51

Conclusions It is strongly recommended for the country (and also for each government department) to conduct detailed BPA study for the national strategic products (or for its internal process within the department) since it is a significant assessment tool for analysing the as-is and proposing specific trade facilitation measures for the country (or for the department). Graphical notations based on a modeling language, UML, is introduced. Step-by-step BPA project management is proposed. Page 52

Q & A Thank You. Somnuk Keretho, PhD Director, Institute for IT Innovation... Kasetsart University, Bangkok UNNExT Workshop on Promoting Cross-border Agricultural Trade for Sustainable Development Quality--Food Safety--Sustainability--Business Processes Markets 28-30 November 2016 United Nations Conference Centre, Bangkok