Week 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 The order to cash is the first example we saw ▪ [add quote-to-order and lead-to-quote] ▪ The procure to pay is an example of acquiring goods in stock for later reselling them to retailers ▪ A-to-A is found in gov orgs but also in private organizations. E.g. a passport or a vacation leave or recreation leave in a company ▪ F-to-R starts … ▪ --- ▪ Importantly, BPM is not about improving the way individual activities are performed, but rather, it is about managing entire chains of events, activities and decisions that ultimately add value to the organization. ▪ Within the broad context of the above definition, BPM regroups a body of methods for managing business operations on the basis of process models. Process models represent the understanding that people in the organization have about how work is done or should be done. They act as the bridge between business operations and IT systems. They allow us to understand how IT systems contribute to adding value to the organization by streamlining its work practices. ▪ Every process begins with an event. For example, the order-to-cash process begins when an order is received from the customer, and completes when payment is received from the customer. 10 Events correspond to things that happen ``atomically'', meaning that they have no duration. For example, the arrival of a plant to the depot is an event. This event may trigger the execution of series of activities. For example, when a plant arrives, the site engineer inspects the plant. This inspection is an activity, in the sense that it takes time. When an activity is rather simple and takes relatively little time, we call it a task. For example, if the inspection that the site engineer performs is quite simple -- e.g. just checking that the plant received corresponds to what was ordered -- we can say that the ``plant inspection'' is a task. If on the other hand the inspection of the plant requires many steps -- such as checking that the plant fulfills the specification included in the purchase order, checking that the plant is in working order, and checking the plant comes with all the required accessories and safety devices -- we will treat it as an ``activity''. The distinction between task and activity is not always clear-cut. This is why, very often people will use the term task and activity interchangeably. Order-to-cash: This is a process that starts when a customer places an order to purchase a product or a service, and ends when the product or service in question has been delivered and the corresponding payment has been received. An order-to-cash process encompasses activities such as purchase order verification, shipment (in the case of physical products), delivery, invoicing, payment receipt and acknowledgment. Quote-to-order: This process typically precedes the order-to-cash process. It starts from the point when a ``request for quote'' is received from a customer, to the point when the customer places a purchase order. The order-to-cash process takes the relay from that point on. The combination of a quote-to-order and the corresponding order-to-cash process is called a quote-to-cash process. Procure-to-pay: This is a process that starts when a stakeholder within an organization -- typically an employee -- determines that a given product or service needs to be purchased. It ends when the product or service has been delivered and paid for. A procure-to-pay process includes activities such as approving the purchase, obtaining quotes, selecting a supplier, issuing a purchase order, receiving the goods (or consuming the service), checking and paying the invoice. Procure-to-pay can be seen as the dual of quote-to-cash in the context of business-to-business interactions. [For every procure-to-pay process there is a corresponding quote-to-cash process on the supplier's side.] Issue-to-resolution. This is a process that starts when a customer raises a problem, such as a complaint related to a defect in a product or an issue encountered when consuming a service. The process continues until the customer, the supplier, or preferably both of them, agree that the issue has been resolved. A variant of this process can be found in insurance companies that have to deal with ``insurance claims''. This variant is often called claim-to-resolution or claim-to-settlement. 11 12 “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 16 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 17 Ingredients of a Business Process SLIDE 18