Chapter 1: Introduction to BPM PDF

Introduction to BPM Contents 1. Processes Everywhere 2. Ingredients of a Business Process 3. Origins and History of BPM 1. The Functional Organization 2. The Birth of Process Thinking 3. The Rise and Fall of BPR 4. The BPM Lifecycle 5. SEITE 1 Recap Overview  Business Process Management...

Introduction to BPM Contents 1. Processes Everywhere 2. Ingredients of a Business Process 3. Origins and History of BPM 1. The Functional Organization 2. The Birth of Process Thinking 3. The Rise and Fall of BPR 4. The BPM Lifecycle 5. SEITE 1 Recap Overview  Business Process Management (BPM) is the art and science of overseeing how work is performed in an organization to ensure consistent outcomes and to take advantage of improvement opportunities.  The term “improvement” may take different meanings depending on the objectives of the organization, e.g. reducing costs, reducing execution times, and reducing error rates, but also gaining competitive advantage through innovation.  Improvement initiatives are one-off or continuous; incremental or radical.  BPM is about managing processes, i.e. entire chains of events, activities, and decisions.  In this course, we describe typical processes that are found in contemporary organizations.  We provide a definition of business process and BPM.  We then provide a historical overview of the BPM discipline.  Finally, we discuss the BPM lifecycle, around which the course is structured. SLIDE 2 Introduction to BPM Contents 1. Processes Everywhere 2. Ingredients of a Business Process 3. Origins and History of BPM 1. The Functional Organization 2. The Birth of Process Thinking 3. The Rise and Fall of BPR 4. The BPM Lifecycle 5. SEITE 3 Recap What is a Business Process? 4 Issue delivery receipt Prepare shipment Load truck Schedule payment Package products Schedule delivery Issue invoice Check & confirm PO Unload truck Notify shipment Check Invoice 5 Request PO change Match incoming payment Obtain PO confirm. Serve meal Load dishwasher Bring menu Collect laundry Brush grills Collect payment Take order Unload dishwasher Collect laundry Present bill 6 Sweep & mop Clean kitchen surfaces Greet & seat 7 PO received Check & confirm PO Package products Load truck Notify shipment Issue invoice Match Payment payment made PO issued Obtain PO confirm. Schedule delivery Unload truck Issue delivery receipt Check invoice Schedule payment Goods arrived 8 Customer arrived Greet & seat Take order Bring menu Serve meal Present bill Issue invoice Customer paid Kitchen is dirty Load dishwasher Clean kitchen surfaces Brush grills Collect laundry Sweep & mop Unload dishwasher Kitchen is clean 9 A business process is… a chain of events, activities and decisions ...involving a number of actors and objects, ….triggered by a need and leading to an outcome that is of value to a customer. Examples: • Order-to-Cash • Procure-to-Pay (aka Purchase-to-Pay) • Application-to-Approval • Fault-to-Resolution 10 “My washing machine doesn’t work…” Negative outcomes (valuereducing): • Fault not repaired in a timely manner • Fault repaired but customer pays more than expected Positive outcomes (value-adding): • Fault repaired immediately with minor intervention • Fault repaired, covered by warranty Call Centre Technician Insurance Company Customer Parts Store fault-to-resolution process VALUE Service Dispatch Centre Customer Example: Construction Company BuildIT Construction Site of WU Vienna‘s New Campus opened in 2013. Source: Wikimedia Commons Equipment Rental Process at BuildIT    BuildIT is a construction company specialized in public works, such as roads, bridges, pipelines, tunnels and railroads. Within BuildIT, it often happens that engineers working at a construction site (called site engineers) need a piece of equipment, such as a truck, an excavator, a bulldozer, a water pump, etc. BuildIT owns very little equipment and instead it rents most of its equipment from specialized suppliers. The existing business process for renting equipment goes as follows. When site engineers need to rent a piece of equipment, they fill in a form called “Equipment Rental Request” and send this request by email to one of the clerks at the company’s depot. The clerk at the depot receives the request and, after consulting the catalogs of the equipment suppliers, selects the most cost-effective equipment that complies with the request. Next, the clerk checks the availability of the selected equipment with the supplier via phone or email. Sometimes the selected option is not available. In these cases, the clerk has to select an alternative piece of equipment and check its availability with the corresponding supplier. After finding a suitable and available piece of equipment, the clerk adds the details of the selected equipment to the rental request. Each rental request has to be approved by a works engineer, who also works at the depot. In some cases, the works engineer rejects the equipment rental request. Some rejections lead to the cancelation of the request, i.e., no equipment is rented at all. Other rejections are resolved by replacing the selected equipment with another equipment – such as a cheaper piece of equipment or a more appropriate piece of equipment for the job. In this latter case, the clerk needs to lodge another availability request. Equipment Rental Process at BuildIT  When a works engineer approves a rental request, the clerk sends a confirmation to the supplier. This confirmation includes a Purchase Order (PO) for renting the equipment. The PO is produced by BuildIT’s financial information system using information entered by the clerk. The clerk also records the equipment rental in a spreadsheet that is used to monitor rentals.  In the meantime, the site engineer may decide that the equipment is no longer needed. In this case, the engineer asks the clerk to cancel the request for renting the equipment.  In due time, the supplier delivers the rented equipment to the construction site. The site engineer then inspects the equipment. If everything is in order, the site engineer accepts the engagement and the equipment is put into use. In some cases, the equipment is sent back because it does not comply with the requirements of the site engineer. In this case, the site engineer has to start the rental process all over again.  When the rental period expires, the supplier comes to pick up the equipment. Sometimes, the site engineer asks for an extension of the rental period by contacting the supplier via email or phone one to two days before pick-up. The supplier may accept or reject this request.  A few days after the equipment is picked up, the supplier sends an invoice to the clerk by email. At this point, the clerk asks the site engineer to confirm that the equipment was indeed rented for the period indicated in the invoice. The clerk also checks if the rental prices indicated in the invoice are in accordance with those in the PO. After these checks, the clerk forwards the invoice to the financial department. The financial department eventually pays the invoice. Chapter 1: Introduction to BPM Contents 1. Processes Everywhere 2. Ingredients of a Business Process 3. Origins and History of BPM 1. The Functional Organization 2. The Birth of Process Thinking 3. The Rise and Fall of BPR 4. The BPM Lifecycle 5. Recap SEITE 14 Definition of Business Process A business process as a collection of inter-related events, activities, and decision points that involve a number of actors and objects, which collectively lead to an outcome that is of value to at least one customer. SLIDE 15 Ingredients of a Business Process SLIDE 16 Exercise 1.1: University Admission Process WU Vienna‘s New Campus opened in 2013. Source: Wikimedia Commons Exercise 1.1: University Admission Process  Consider the process for the admission of international graduate students at a university.  In order to apply for admission, students first fill in an online form. Online applications are recorded in an information system to which all staff members involved in the admissions process have access. After a student has submitted the online form, a PDF document is generated and the student is requested to download it, sign it, and send it by post together with the required documents, which include:   certified copies of previous degree and academic transcripts, results of English language test,   curriculum vitae, two reference letters. Exercise 1.1: University Admission Process  When these documents are received by the admissions office, an officer checks the completeness of the documents. If any document is missing, an email is sent to the student. The student has to send the missing documents by post. Assuming the application is complete, the admissions office sends the certified copies of the degrees to an academic recognition agency, which checks the degrees and gives an assessment of their validity and equivalence in terms of local education standards. This agency requires that all documents be sent to it by post, and that all documents be certified copies of the originals. The agency sends back its assessment to the university by post as well. Assuming the degree verification is successful, the English language test results are then checked online by an officer at the admissions office. If the validity of the English language test results cannot be verified, the application is rejected (such notifications of rejection are sent by email). Exercise 1.1: University Admission Process  Once all documents of a given student have been validated, the admissions office forwards these documents by internal mail to the corresponding academic committee responsible for deciding whether to offer admission or not. The committee makes its decision based on the academic degrees and transcripts, the CV, and the reference letters. The committee meets once every three months to examine all applications that are ready for academic assessment at the time of the meeting.  At the end of the committee meeting, the chair of the committee notifies the admissions office of the selection outcomes. This notification includes a list of admitted and rejected candidates. A few days later, the admissions office notifies the outcome to each candidate via email. Additionally, successful candidates are sent a confirmation letter by post.  With respect to the above process, consider the following questions: 1. 2. 3. Who are the actors in this process? Which actors can be considered as customers in this process? What value does the process deliver to its customers? 4. What are the possible outcomes of this process? Definition of Business Process Management BPM as a body of methods, techniques, and tools to identify, discover, analyze, redesign, execute, and monitor business processes in order to optimize their performance. SLIDE 21 Related Disciplines  Total Quality Management (TQM)  Focus on continuously improving and sustaining the quality of products and services.  TQM puts emphasis on products and services themselves, while BPM focuses on improvement of processes.  Applications of TQM are primarily in manufacturing while BPM more in service organizations.  Operations Management  Concerned with managing physical and technical functions of organization, particularly those relating to production and manufacturing.  Using probability theory, queuing theory, decision analysis, mathematical modeling, and simulation for optimizing efficiency of operations.  Such techniques are also useful in.  Often concerned with controlling an existing process, while BPM making changes to an existing process in order to improve it. SLIDE 22 Related Disciplines  Lean  Originates from manufacturing, in particular Toyota Production System.  Eliminates waste, i.e., activities that do not add value to the customer.  BPM puts more emphasis on use of information technology as a tool to improve business processes and to make them more consistent and repeatable.  Six Sigma     SLIDE 23 Originates from manufacturing, in particular from production practices at Motorola. Focuses on minimization of defects (errors). Strong emphasis on measuring output of processes, especially in terms of quality. Popular approach to blend Lean with Six Sigma, leading to Lean Six Sigma. Chapter 1: Introduction to BPM Contents 1. Processes Everywhere 2. Ingredients of a Business Process 3. Origins and History of BPM 1. The Functional Organization 2. The Birth of Process Thinking 3. The Rise and Fall of BPR 4. The BPM Lifecycle 5. SEITE 24 Recap How process moved out of focus through ages SLIDE 25 Birth of Process Thinking: Business Process Reengineering (BPR) SLIDE 26 Purchasing process at Ford at the initial stage SLIDE 27 Purchasing process at Ford after redesign SLIDE 28 Exercise 1.2: Purchasing process at Ford Consider the purchasing process at Ford. 1. Who are the actors in this process? 2. Which actors can be considered as customers in this process? 3. What value does the process deliver to its customers? 4. What are the possible outcomes of this process? SLIDE 29 The Rise and Fall of BPR 1. Concept misuse:   Projects were labeled BPR, even when business processes were not the core. Many corporations initiated reductions of workforce, often packaged as process redesign projects, which triggered resentment. 2. Over-radicalism:  Hammer’s early papers states: “Don’t Automate, Obliterate”.  Many situations require a much more gradual (incremental) approach. 3. Support immaturity:    SLIDE 30 Necessary tools and technologies were not yet available or insufficient. Much process logic had to be hard-coded in IT applications of the time. People grew frustrated when they noted that their efforts on redesigning a process were thwarted by a rigid infrastructure. Reshaping Process Thinking Process Orientation is productive SLIDE 31 ERP Systems penetrate the market Job Functions of Process Owner SLIDE 32 Chapter 1: Introduction to BPM Contents 1. Processes Everywhere 2. Ingredients of a Business Process 3. Origins and History of BPM 1. The Functional Organization 2. The Birth of Process Thinking 3. The Rise and Fall of BPR 4. The BPM Lifecycle 5. SEITE 33 Recap Establishing Process Thinking in Organizations  Establish BPM Team  Describe Process Architecture  Define Process Performance Measures  Discover and Model Processes  Analyze, Redesign, Implement and Monitor Processes  Make Use of Process-Aware Information Systems SLIDE 34 Example: Process model for the initial fragment of the equipment rental process SLIDE 35 Exercises 1.3-5: University Admission Process WU Vienna‘s New Campus opened in 2013. Source: Wikimedia Commons Exercises 1.3-5: University Admission Process Consider the student admission process described in Exercise 1.1 (page 5).  Exercise 1.3: Taking the perspective of the customer, identify at least two performance measures that can be attached to this process.  Exercise 1.4: Taking the perspective of the customer, think of at least two issues that this process might have.  Exercise 1.5: What possible changes do you think could be made to this process in order to address these issues? SLIDE 37 The BPM Lifecycle Management Processes Process identification les for BPM lifecycle and process mining Define Vision Procure Materials 35h B Develop Strategy Process architecture A Procure Products Market Products Manage Personnel Manage Information E D 3m 10m 5m 30m 2h A 1.5h 10min B 10m Conformance and performance insights C 15m C D Process discovery As-is process model E Process monitoring Process analysis Insights on weaknesses and their impact Executable process model Process implementation SEITE 38 Manage Risk Deliver Products Manage Customer Service Support Processes 30h 15h 5m Implement Strategy Core Processes To-be process model Process redesign Manage Assets How to go about BPM? 39 40 The BPM lifecycle Process identification Process Process architecture architecture Conformance Conformance and and performance performance insights insights Process discovery As-is As-is process process model model Process monitoring and controlling Process analysis Executable Executable process process model model Process implementation Insights Insights on on weaknesses weaknesses and and their their impact impact To-be To-be process process model model Process redesign Process identification steps 1. Designation step  Enumerate main processes  Determine process scope Process Architecture 2. Prioritization step (aka Process selection) Prioritize processes based on:  Importance  Health  Feasibility Prioritized Process Portfolio After Davenport (1993) Example: process architecture Wholesaler Strategic Management Logistics Management Suppliers Management Warehouse Management Demand Management Management processes Direct procurement Sales Distribution Marketing Service Indirect procurement IT Core processes Finance Support processes HR Prioritization (aka Process Selection) 1. Importance Which processes have greatest impact on the organization‘s strategic objectives? 2. Health (or Dysfunction) Which processes are in deepest trouble? 3. Feasibility Which processes are most susceptible to successful process management? Prioritized process portfolio Hammer, Champy (1993) Example: prioritized process portfolio Financial institution Short-term action High Loan decision Low Contract preparation Medium Loan market evaluation Handling of payments Low Poor Feasibility Rating Loan controlling High Loan planning Loan application Possible Health Strategic fit? Good 45 The BPM lifecycle Process identification Process Process architecture architecture Conformance Conformance and and performance performance insights insights Process discovery As-is As-is process process model model Process monitoring and controlling Process analysis Executable Executable process process model model Process implementation Insights Insights on on weaknesses weaknesses and and their their impact impact To-be To-be process process model model Process redesign 46 Business process model Invoice handling example Finance ERP Department Invoice Invoice received Enter Invoice Details Report Check Invoice Mismatches Invoice DB Invoice no Post Invoice mismatches Invoice posted Invoice Senior Finance Officer mismatch exists Block Invoice Invoice blocked 47 The BPM lifecycle Process identification Process Process architecture architecture Conformance Conformance and and performance performance insights insights Process discovery As-is As-is process process model model Process monitoring and controlling Process analysis Executable Executable process process model model Process implementation Insights Insights on on weaknesses weaknesses and and their their impact impact To-be To-be process process model model Process redesign 48 Qualitative process analysis Root-cause analysis example 49 Quantitative process analysis Process simulation example 50 The BPM lifecycle Process identification Process Process architecture architecture Conformance Conformance and and performance performance insights insights Process discovery As-is As-is process process model model Process monitoring and controlling Process analysis Executable Executable process process model model Process implementation Insights Insights on on weaknesses weaknesses and and their their impact impact To-be To-be process process model model Process redesign 51 Process redesign TO-BE process model AS-IS process model Cost Time Flexibility Quality The Process Redesign Orbit 53 The BPM lifecycle Process identification Process architecture Process architecture Conformance and Conformance and performance insights performance insights Process discovery As-is process As-is process model model Process monitoring and controlling Process analysis Executable Executable process process model model Process implementation Insights on Insights on weaknesses and weaknesses and their impact their impact To-be process To-be process model model Process redesign 54 Process implementation Process automation Process change management Executable process design Job redesign IT development & configuration Training Performance Testing management plan ... …. 55 The BPM lifecycle Process identification Process Process architecture architecture Conformance Conformance and and performance performance insights insights Process discovery As-is As-is process process model model Process monitoring and controlling Process analysis Executable Executable process process model model Process implementation Insights Insights on on weaknesses weaknesses and and their their impact impact To-be To-be process process model model Process redesign 56 Process monitoring Dashboards, alerts & reports Event stream DB logs Model-based analytics (p. mining) 58 Course structure Process identification Week 2 BPMN - Weeks 3-6 Process discovery Weeks 13 Guest speaker Process monitoring and controlling Strate gy Weeks 7 & 8 Gover nance Process analysis Weeks 9&10 Culture Week 12 Process implementation Process redesign Week 11 Stakeholders in the BPM Lifecycle  Management Team:  Process Owners:  Chief Executive Officer (CEO) responsible for overall business success.  Process owner is responsible for efficient and effective operation of a given process, including  Chief Operations Officer (COO) responsible for defining the way operations are set up, sometimes Chief Process Officer (CPO) or Chief Process and Innovation Officer (CPIO).  Planning and organizing, i.e. defining performance measures and objectives as well as initiating and leading improvement projects.  Monitoring, i.e. ensuring that performance objectives are met, and taking corrective actions.  Process owner is involved in process modeling, analysis, redesign, implementation, and monitoring.  Chief Information Officer (CIO) responsible for operation of information system infrastructure.  Chief Financial Officer (CFO) responsible for overall financial performance of the company.  Human Resources (HR) director plays key role in processes that involve many process participants. SLIDE 59 Stakeholders in the BPM Lifecycle   Process Participants:  Process Methodologist:  Perform activities of business process on day-today basis.  Provides advice on methods, techniques and software tools.  Conduct routine work according to the standards and guidelines of the company.  Coordinates technical training.  Coordinated by process owner, who is responsible for non-routine aspects of process.  Involved as domain experts during process discovery and process analysis.  Support redesign activities and implementation. Process Analysts:  Conduct process identification, discovery, analysis, and redesign.  Coordinate implementation and monitoring.  Report to management and process owners  Have business or IT background. SLIDE 60   System Engineers:  Translate requirements into system design  Responsible for implementation, testing and deployment. BPM Group (also BPM Center of Excellence):  Responsible for preserving project knowledge and documentation.  Maintain process architecture.  Prioritize process redesign projects.  Align the BPM efforts with strategic goals.  Most common in large organizations with several years of BPM experience. Chapter 1: Introduction to BPM Contents 1. Processes Everywhere 2. Ingredients of a Business Process 3. Origins and History of BPM 1. The Functional Organization 2. The Birth of Process Thinking 3. The Rise and Fall of BPR 4. The BPM Lifecycle 4. Recap SEITE 61 Recap  A process is a collection of events, activities, and decisions that collectively lead to an outcome that brings value to an organization’s customers.  Every organization has processes.  Managing processes ensures that they produce value.  BPM is a body of principles, methods, and tools to design, analyze, execute, and monitor business processes.  Process models and performance measures are pillars for managing processes.  Various related disciplines complement BPM, such as Lean, Six Sigma, and Total Quality Management. SLIDE 62 Short quiz  http://www.proprofs.com/quiz-school/story.php?title=introduction-to-bpm 64 Next Week - Process Identification Strategic Management Logistics Management Suppliers Management Warehouse Management Demand Management Management processes Direct procurement Sales Distribution Marketing Service Indirect procurement IT Core processes Finance Support processes HR