BPM Analysis from Procurement to Sales PDF

1 Lesson 4 BPM Analysis from Procurement to Sales ing. Massimiliano Oleotto Learning Objectives 2 Q1. What is BPM Analysis? Q2. What is Process Modeling? Q3. How much detail? Q4. How can BPM analysis be applied to Procurement? Q5. And to Sales? Organization and Information Systems | a.y. 2023...

1 Lesson 4 BPM Analysis from Procurement to Sales ing. Massimiliano Oleotto Learning Objectives 2 Q1. What is BPM Analysis? Q2. What is Process Modeling? Q3. How much detail? Q4. How can BPM analysis be applied to Procurement? Q5. And to Sales? Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 3 BPM Analysis is the understanding of a given Business Process through: • • • the activities of the Business Process the objectives of each activity, which are aligned with the strategy and are formalized in the metrics → the activities of a Business Process are always Performances the correlations among Performances → a Workflow is the set of Performances and their correlations inside a Business Process Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 4 The Workflow is a set of activities that follow a pre-defined flow to achieve a business outcome It is… the “binary” of a Business Process Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 5 Why do you carry out a BPM Analysis? • Standardization ➢ uhm ... you can’t explain it in one line ... see next slide (!) • Strategic Planning ➢ new strategy generally leads to new objectives for some performances • Organizational Change ➢ new company structure, M&A, … • Management Issue ➢ unacceptable quality, deviations from regulatory requirements, … • IS implementation ➢ e.g. new ERP system Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 6 Standardization is the main reason for carrying out a BPM Analysis because: • it defines common rules for company’s Policies → behaviors can be aligned • it identifies Roles and not people → the same outcome is obtained with different people • it sets a “sample” that can be resumed → it can be replicated in different business units or companies, but also reused in … other Business Processes (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 7 The fact that a Business Process can be replicated or reused elsewhere is a Lesson Learned that leads to … Best Practice (!) A Lesson Learned is knowledge derived by experience, i.e. things done in the past, that should be taken into account in future Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 8 What are the first things to do when making a BPM Analysis? • • • Choose the Business Processes Define its scope (e.g. ERP System implementation) Define what you want to achieve with it: ➢a snapshot → as-is analysis ➢an assessment → gap analysis (a gap needs a suggested improvement, i.e. a “future state”) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 9 There is not a single way to analyze a Business Process There are several well-recognized methods both formal and pragmatic to do it In each method there are two activities: • information gathering • results documentation Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 10 Information gathering takes place: • in certain ways → interview, observation, research • asking everything, i.e. putting every aspect of the process under the magnifying glass → context, history, rules, controls, metrics, human involvement, bottlenecks, “handoffs” Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. What is BPM Analysis? 11 Results documentation takes place: • in certain ways → typically .doc or .ppt files • using Process Modeling to represent the Business Process Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Learning Objectives – Recap 1 12 Q1. What is BPM Analysis? • • • BPM Analysis is the understanding of a given Business Process through the analysis of its workflow it is carried out for more than one reason – the main reason is standardization: Roles can be aligned to company’s Policies, and reuse of BPs can lead to Lesson Learned and Best Practice in BPM Analysis we first choose BP, define its scope and decide if it’s an as-is/gap analysis; then, we gather information and document the results Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is Process Modeling? 13 Process Modeling is a set of activities in creating graphical representations of Business Processes These representations typically are notations with: • icons • relationships among icons • relationships of the icons to their environment • how icons and relationships represent a performance Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is Process Modeling? 14 A Process Model is the outcome of Process Modeling – it’s: • a detailed view of Process Map • with standardized notation Standardized means that it’s common to Business Process community: business professionals → yes … what you will be tomorrow (!) ➢ Business Process professionals → yes … the ABPMP guys ➢ IT professionals ➢ Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is Process Modeling? 15 The are several standardized notations for Process Modeling Event Process Chain (EPC) Unified Modeling Language (UML) Integrated Definition Language (IDEF) Value Stream Mapping Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is Process Modeling? 16 The most used standardized notations for Process Modeling are: • BPMN 2.0 • Flow Charting BPMN 2.0 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Flow Charting Q2. What is Process Modeling? 17 BPMN 2.0 and Flow Charting have its own set of: • symbols • rules that govern how the symbols represent something else BPMN 2.0 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Flow Charting Q2. What is Process Modeling? 18 BPMN 2.0 is a very precise notation, but it’s … difficult to use (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is Process Modeling? 19 Of course … Flow Charting is simpler than BPMN 2.0 (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Learning Objectives – Recap 2 20 Q2. What is Process Modeling? • • • Process Modeling is a set activities in creating graphical representations of BP A Model is the outcome of Process Modeling, and it's a detailed Process map using standardized notation The most used standardized notations are BPMN 2.0 and Flow Charting Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q3. How much detail? 21 How much detail does a Process Model need? In a lot of books you can read … as much as needed But again … how much do you need? It is a compromise between: • simplicity → fewer objects possible • clarity → as many objects as you need to avoid more than one interpretation Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q3. How much detail? 22 Of course … There is difference between SMEs and Corporates (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q3. How much detail? 23 In a Corporate, a BPMS may be used to create Process Models but also monitor them → a BPMS uses BPMN 2.0 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q3. How much detail? 24 In a SME, a Process Card may be used to create Process Models → a Process Card uses Flow Charting Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q3. How much detail? 25 Analyzing a Business Process is a ... practical matter Also with BPM Analysis (!) We can give two examples, which refer to two representative Business Processes – and fundamental in every company: • Procurement • Sales Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q3. How much detail? 26 Task How to proceed? Here are 6 possible steps (!) Business Process Main activities Detailed Performances Roles KPI Process Model Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Description Choose process and logics (Scope, Asis/Gap) Identify them – generally inside functions Follow the flow of actions – and list the problems if needed Find people and IS involved Define measures for objectives Finally it’s time to take a marker and draw everything on a paper or a board (!) Q3. How much detail? 27 We chose the processes … ok But what is the scope? And the As-is/Gap choice? Well… • the scope is “didactic”, i.e. understand how a process can be analyzed • we will proceed with a simplified As-is Analysis of a common version for both processes (taken from Best Practice) – but we will highlight some problems that can be found in them Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Learning Objectives – Recap 3 28 Q3. How much detail? • • • A Process Model needs as much detail as needed – it must be simple and clear, i.e. just one interpretation There is a difference between Corporates and SMEs: the former uses complex BPMS, the latter uses simple Process Card BP Analysis is a practical subject, not a theoretical one and therefore examples are needed – we will see Procurement e Sales Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 29 What is Procurement? It is the Business Process of buying goods and services that are necessary to the production of the products and to the working of the company For this example we consider only the buying of raw materials in a manufacturing company from an existing supplier → on closer inspection … it’s Purchasing Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 30 What are Procurement main activities? It’s the same as asking for a coffee at the bar → order, receive and pay Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 31 A closer look to order phase – inside Purchasing function: • find the suppliers for the item you need • ask the suppliers for a quotation – you want a price for the item (in a certain quantity for a certain delivery date) • select the quotation and send the supplier a Purchase Order (PO) – it’s a written document specifying item, quantity, delivery date and price Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 32 A closer look to receive phase – inside Inbound Logistics function: • receive the raw materials from the supplier, and control that everything is correct before taking ownership of them – quantity of each item • stock the raw materials in the warehouse – the quantity received updates (increases) the item inventory on hand Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 33 A closer look to pay phase – inside Accounting function: • receive the invoice from the supplier, and control that everything is correct before recording it – quantity and price of each item • pay the invoice to the supplier – because company ownership of the raw materials results in an obligation to compensate the supplier with a payment Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 34 What are the problems that we can find in this process? Here are some of them: • information silos → multiple entries in different IS that take time, lead to errors, etc. • lack of connection with Sales → the needs of finished products must “drive” Purchasing • no budget controls → the receiving generates a cost, and the costs must always be controlled • difficult check of invoices → there is always a three-way match: PO, receiving and invoice Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 35 What are the Roles that we can find in this process? Here they are: • order phase → Purchasing Manager • receive phase → Warehouse Manager • pay phase → Accountant • every phase → ERP System or … some ISs (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 36 What does the ERP System do in this process? A lot of things: • it creates Purchasing Requisitions based on some processing • it allows you to insert the PO using Purchasing Requisitions • it updates the PO when the materials and the invoice are received • it updates the warehouse status after receiving the materials and the supplier status after the receipt and payment of the invoice Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 37 This is how PO can be inserted on SAP R/3 … Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 38 What are the objectives that we can find in this process? Here are some of them – and for each one an example of KPI: • effectiveness: ➢ better supplier relationships → Supplier Growth Rate ➢ supplier service level before PO → Quotation Time ➢ supplier service level after PO → Purchasing Lead Time • efficiency: ➢ purchasing efficiency → Actual vs. Budget Costs ➢ warehousing efficiency → Putaway Time Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 39 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. How can BPM analysis be applied to Procurement? 40 In general things are more complicated… Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Learning Objectives – Recap 4 41 Q4. How can BPM analysis be applied to Procurement? • • • Procurement is the BP of buying what is necessary to the production of the products (Purchasing) and to the working of the company In a simple Purchasing process there are 3 phases (Order, Receive and Pay) and 4 Roles (Purchasing Manager, Warehouse Manager, Accountant and some ISs) The objectives of that process are about both effectiveness and efficiency Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 42 What is Sales? It is the Business Process of selling goods and services to customers, i.e. exchanging them for money For this example we consider only the selling of finished products in a B2B manufacturing company to an existing customer Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 43 What are Sales main activities? It’s the same as buying something on Amazon → sell (thanks to an order), ship and (get a) payment Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 44 A closer look to sell phase – inside Sales function: • receive the PO from the customer, and control that everything is correct before recording it as a Sales Order (SO) → there are three checks: ➢ item → technical check: is it feasible? ➢ quantity and delivery date → operational check: are we able to do it? ➢ price → financial check: is the customer’s credit limit overcome? Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 45 A closer look to ship phase – inside Outbound Logistics function: • pick the finished products from the warehouse – the quantity picked updates (decreases) the item inventory on hand • pack the finished products in packages • ship the packages to the customer – according to the transportation mode agreed with the customer Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 46 A closer look to payment phase – inside Accounting function: • create the invoice, and control that everything is correct before sending it to the customer – quantity and price of each item • receive the payment from the customer – because customer ownership of the finished products results in an obligation to compensate the company with a payment Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 47 What are the problems that we can find in this process? Here are some of them: • information silos → multiple entries in different IS that take time, lead to errors, etc. • unfulfilled promise to the customer → you must always check if there will be what the customer needs when he needs it • risky sales → you must always check if the customer will be able to pay the amount due • unauthorized price discounts → they should change in real time (customer revenues, item availability, etc.) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 48 What are the Roles that we can find in this process? Here they are: • sell phase → Sales Agent • ship phase → Warehouse Manager • payment phase → Accountant • every phase → ERP System or … some ISs (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 49 What does the ERP System do in this process? A lot of things: • it allows you to insert the SO • it updates the SO when the products and the invoice are sent • it updates the warehouse status after shipping the products and the customer status after sending and payment of the invoice Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 50 This is how SO can be inserted on SAP R/3 … Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 51 What are the objectives that we can find in this process? Here are some of them – and for each one an example of KPI: • effectiveness: ➢ better customer relationships → Customer Growth Rate ➢ service level → Sales Lead Time ➢ customer satisfaction → Order Fullfilment ➢ sales effectiveness → Actual vs. Budget Revenues • efficiency: ➢ warehousing efficiency → Shipping Time Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 52 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. And to Sales? 53 In general things are more complicated… Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Learning Objectives – Recap 5 54 Q5. And to Sales? • • • Sales is the BP of selling products to customers In a simple Sales process there are 3 phases (Sell, Ship and Payment) and 4 Roles (Sales Agent, Warehouse Manager, Accountant and some ISs) The objectives of that process are about both effectiveness and efficiency Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto References 55 Course book: Earl McKinney Jr. • David M. Kroenke – Processes, Systems, and Information, An Introduction to MIS – Chapters 2, 7-8, 12 ❑ Other books: Association of Business Process Management Professionals – BPM CBOK – Chapters 3-5 ❑ Massimiliano Oleotto – La mappa dei processi aziendali operativi nelle PMI, Come evitare di perdersi in azienda – Chapter 2 ❑ Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto