LOGO
EM2800E
CHAPTER 1:
INTRODUCTION TO BUSINESS PROCESS MANAGEMENT
Dr. Tran Thi Huong
Department of Business Administration
School of Economics and Management (SEM)
Hanoi University of Science and Technology (HUST)
huong.tranthi@hust.edu.vn
1
Main content
1.1 Definition of Business Process
1.2 Components of Business Process
1.3 Concepts and Importance of Business Process Management
1.4 The Origin and Development of Business Process Management
1.5 Business Process Management Cycle
1.6 Systems related to Business Process Management
2
1.1 Definition of Business Process
Traditional approach
A PROCESS?
v the set of value-added activities that transform inputs into
outputs
Inputs
Process
Outputs
Any organization can be characterized as a process or a network of processes
v Different types of transformations
¥
¥
¥
¥
Physical (Ex. raw material Þ finished product)
Locational (Ex. flying from Hanoi to Hue)
Transactional (Ex. depositing money in a bank)
Informational (Ex. accounting data Þ financial statement)
3
1.1 Definition of Business Process
v A business process is a network of connected activities and
buffers with well-defined boundaries and precedence
relationships, which utilize resources to transform inputs into
outputs with the purpose of satisfying customer requirements
Resources
Process
Suppliers
Inputs
Outputs
4
Customers
1.1 Definition of Business Process
Processes everywhere
A business process is a chain of events, activities and decisions
...involving a number of actors and objects,
É.triggered by a need
and leading to an outcome that is of value to a customer
v Typical processes
§ Order-to-Cash: customers
§ Quote-to-Order: customers request for quote
§ Procure-to-Pay: buying from suppliers
§ Issue/ Fault-to-Resolution: customer feedback, complaints
§ Application-to-Approval: apply for permit, lisence
5
ÒMy washing machine doesnÕt workÉÓ
Negative outcomes (value-reducing):
Positive outcomes (value-adding):
" Fault not repaired in
a timely
manner
" Fault
repaired
immediately with minor intervention
" Fault repaired but customer
pays more
thanby
expected
" Fault repaired,
covered
warranty
• Fault not repaired (customer withdrew request).
• Fault repaired but not covered by warranty;
Call Centre
Insurance
Company
Technician
Customer
Customer
Service
Dispatch
Centre
fault-to-resolution process
6
VALUE
Parts
Store
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Your turn
v Think of an organization and a process in this organization:
§ Is it order-to-cash, procure-to-pay, fault-to-resolutionÉ
§ Who is/are the customer(s)?
§ What value does this process deliver to its customer?
§ Who are the key actors of the process?
§ List at least 3 outcomes of the process.
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1.1 Kh‡i nißm vß quy tr“nh kinh doanh
Resources
According to APICS, ÒA set
of logically related tasks or
activities performed to
achieve
outcome.Ó
a defined business
Suppliers
Process
Inputs
Outputs
9
Customers
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Business processes
Assets &
Partners
Organisation
Function A
Function B
Function C
Financial
Business Process
Business Process
Technology
Business Process
Customers
Human
Resources
Materials
10
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deals with retailers in order to sell goods
Check &
PO
Package
confirm
received
products
PO
PO
issued
Load
truck
Obtain
Schedule Unload
PO
delivery
truck
confirm.
Notify
Issue
shipment invoice
Issue
delivery
receipt
Match Payment
payment made
Check Schedule Goods
invoice payment arrived
buy from the supplier
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11 trß quy
Customer Greet &
arrived
seat
Kitchen
is dirty
Load
dishwasher
Take
order
Bring
menu
Serve
meal
Present
bill
Issue Customer
invoice
paid
Clean
kitchen
surfaces
Brush
grills
Collect
laundry
Sweep
& mop
Unload
Kitchen
dishis clean
washer
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Ingredients of a Business Process
1.2 Components of Business Process
A business process encompasses a number of events and activities
A typical process includes decision points
A process also involves:
§ Actors, including human actors, organizations, or software systems
acting on behalf of human actors or organizations. Actors can be
internal (participants) or external
§ Physical objects, such as equipment, materials, products, paper
documents.
§ Informational objects, such as electronic documents and electronic
records
The execution of a process leads to one or several outcomes (negative/
positive)
§
§
§
§
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?
What are the possible13outcomes of this process?
1.2 Components of Business Process
Inputs and Outputs
Flow units
Information structure
Process
Architecture
Resources
The network of
activities and buffers
@ Mohamed Zairi
14
1.2 Components of Business Process
15
Example 1.1 (page 3)
1. 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.
2. 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 ÒEquipment Rental RequestÓ and send this
request by email to one of the clerks at the companyÕs depot. The clerk at the depot receives the
request and, after consulting the catalogs of the equipment suppliers, selects the most costeffective 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.
3. 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 equipmentÑsuch
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.
16
Example 1.1 (page) cont.
4. 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 BuildITÕs financial information system using information entered by the clerk. The clerk also
records the equipment rental in a spreadsheet that is used to monitor all ongoing equipment
rentals.
5. 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.
6. 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 1
to 2 days before pick-up. The supplier may accept or reject this request. A few days after the
equipment is picked up, the equipmentÕs 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.
17
Example 1.1
Summary infos of the process
18
Example 1.1
19
Exercise 1.1 (page 5)
1. 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.
2. 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.
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 (page 5) cont.
3. 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.
4. 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.
§
§
§
§
§
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?
What (activities/ tasks) does each actor have to carry out?
What are the possible outcomes of this process?
1.3 Concepts and Importance of Business Process Management
BPM
v introduces a process-oriented view of the flows of materials,
information and services through and across organizations.
v includes concepts, methods, and techniques to support the design,
administration, configuration, enactment, and analysis of business
processes.
v more than workflows and process modelling, it is the comprehensive
practice that aims to achieve an organization's goals by understanding,
improving and optimizing business processes
"
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.
22
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1.3 Concepts and Importance of BPM
v Six core elements of BPM
23
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ERP modules
24
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Supply Chain Management (SCM) solution map
25
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1.3 Concepts and Importance of BPM
BPM can help:
v Reduce operation cost
v Maintain stability of business
v Good system/ processes result in good products and services
v Information transparency
v Reduce defects/ failures
v Track and trace
26
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1.3 Concepts and Importance of BPM
If you had to choose between two services, you
would typically choose the one that is:
v FÉ
Faster
v CÉ
Cheaper
Better
v BÉ
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Why BPM?
<The first rule of any technology used in a business
is that automation applied to an efficient operation
will magnify the efficiency.
The second is that automation applied to an
inefficient operation will magnify the inefficiency.=
Bill Gates
28
In other words&
Information
Technology
Yields
Business
Value
Enables
Yields
Process
Change
Index Group (1982)
29
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Why BPM? The management Perspective
30
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Why BPM? The management Perspective
31
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1.4 The Origin and Development of BPM
§ The Functional Organization
§ The Birth of Process Thinking
§ The Rise and Fall of BPR
@Paul Harmon
32
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How process moved out of focus through ages
Adam Smith: Processes and Division of Labour
ÒTo take an example, the trade of a pin-maker: But in the way in which this
business is now carried on, it is divided into a number of branches:
One man draws out the wire; another straights it;
a third cuts it; a fourth points it; a fifth grinds it at the
top for receiving the head; to make the head requires
three operations; to put it on is a peculiar business;
to whiten the pins is another; to put them into the paper;
and the important business of making a pin is, in this
manner, divided into about eighteen distinct operations.Ó
Source: Smith 1776
Picture:
http://www.library.hbs.edu/hc/
collections/kress/kress_img/ada
m_smith2.htm
Frederick W. Taylor: Scientific Management
v Meticulously studying labor activities
v Work instructions for workers
v Managers oversee the productivity of groups of workers
v Units and their managers were structured hierarchically
v Functional organization remains dominant until the end of 1980s.
Source: Wikimedia Commons
Birth of Process Thinking: Business Process Reengineering (BPR)
Slide 37
Purchasing process at Ford at the initial stage
Slide 38
Purchasing process at Ford after redesign
Slide 39
Exercise: 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 40
The Rise and Fall of BPR
v From 1980s to 1990s: emergence of books, white papers, and BPR teams
in companies around the world.
v By the late of 1990s: many companies stopped BPR project. The reasons
can be as follows:
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:
¥ HammerÕs early papers states: ÒDonÕt Automate, ObliterateÓ.
¥ Many situations require a much more gradual (incremental) approach.
3. Support immaturity:
¥ 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.
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:
§ HammerÕs early papers states: ÒDonÕt Automate, ObliterateÓ.
§ Many situations require a much more gradual (incremental) approach.
3. Support immaturity:
§ 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.
Slide 42
Reshaping Process Thinking
Process Orientation is
productive
ERP Systems penetrate the
market
Slide 43
Job Functions of Process Owner
Slide 44
1.5 Business Process Management Cycle
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
45
Process
redesign
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1.5 Business Process Management Cycle
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
46
Prioritized
Process
Portfolio
Process Enumeration
v There is no Ònumber fits allÓ - it really depends on
organizationÕs domain and size
v Trade-off:
§ ensuring process scope is manageable, since
§ process scope determines potential impact
@Marcello La Rosa. QUT
Process Scoping
v Processes are interdependent à
Insights into interrelations required
§ Horizontal: upstream Ð downstream processes
§ Vertical: root (a.k.a. main) processes Ð sub-processes
v Processes change over time
§ identification should be exploratory and iterative
§ improvement opportunities are time-constrained
Process Architecture
@Marcello La Rosa. QUT
Process Architecture
@Marcello La Rosa. QUT
Architecture: high level picture of an organization
Suppliers & Partners
Labor
Markets
people
General Environmental Influences:
Local and global economies, government regulations,
and social trends
Customers & Owners
information &
dividends
Your Organization
Shareholders
requests for new products
Capital
Markets
capital
sales contacts
Research
Community
Markets
marketing
contacts
Customers
Customers
orders
technology
products & services
delivered
Vendors
materials
support requests
Competitors
competitive products
After Rummler and Brache (1990)
@Marcello La Rosa. QUT
ÒProcessÓ Architecture
Value chains
Suppliers & Partners
people
Labor
Markets
The US and world economies,
government regulations, and social trends
BPT Delivery
Deliver Packages via Air & Ground
capital
Capital
Markets
Research
Community
technology
Manage Outsourced Supply Chain
Operations
information
& dividends
Shareholders
Southern US and Central
America
Individuals &
Businesses that want
on site pickup &
delivery
Southern US and Central
America
Businesses that want
to Outsource Delivery
Operations
Finance Supply Chain Operations
Vendors
Customers & Owners
Businesses that
need transport
financing
materials
UPS, FedEx. US & Mexican Postal Services
@Marcello La Rosa. QUT
competitive products
Components of a Process Architecture
Core Processes
Customers / Owners
Suppliers / Partners
Management
Processes
Support Processes
After Porter
@Marcello La Rosa. QUT
Example: core, support and management processes
Wholesaler
Core processes
v Sales (lead-to-quote, quote-to-order, order-to-cash)
v Purchase-to-Pay (direct procurement, e.g. supplies replenishment)
vÉ
Support processes
v Purchase-to-pay (indirect procurement, e.g. parts replenishment,
operational resources replenishmentÉ)
v HR (policies update, recruitment, induction, probationÉ)
vÉ
Management processes
v Suppliers management (suppliers planning, suppliers acquisitionÉ)
v Logistics management (logistics planning, logistics controllingÉ)
vÉ
1.5 Business Process Management Cycle
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
@Marcello La Rosa. QUT
54
HR
Relations between core, support, mgt processes
Management processes
provide direction, rules and
practices
Establish
Sourcing
Procedure
Core processes
generate value as they
are directly linked to
external customers
Sign
Contracts
Plan
Vendors
Process
Fill Order Process
Receive
Order
Support processes provide
resources to be used by other
processes
Approve
Order
Stock
Supplies
Fill Order
Reorder
Supplies
Process
Receive
Supplies
@Marcello La Rosa. QUT
Evaluate
Vendors
Deliver
Order
Order
Supplies
Process Architecture Example
Television New Zealand
@Marcello La Rosa. QUT
Process Architecture Example
WA Water Corporation
@Marcello La Rosa. QUT
Process Architecture Example
An insurance company
Strategic
Management
Corporate
Development
Investor
Relations
Management Processes
Risk Assessment
and Management
Market
Development
Sales and Marketing
Underwriting
Management
Policy
Servicing
Claims
Management
Collections and Disbursement
Asset Management
Core Processes
Finance/
Treasury
Legal/
Audit
Enabling Processes
@Marcello La Rosa. QUT
Reinsurance
IT
HR
Hierarchy Example: British Telecom
Model structure, methodology and
modelling standards
Level A
Business Activities
Level B
Process Groupings
Level C
Core Processes
Level D
Business Process Flows
Level E
Operational Process Flows
Level F
Detailed Process Flows
Operations Levels Process Levels Business Levels
Meta
Level
Defines business activities
Distinguishes operational customer
oriented processes from management
and strategic process
Logical
Levels
Shows groups of related business
functions and standard end-to-end
processes (e.g. Service Streams)
Core processes that combine together to
deliver Service Streams and other endto-end processes
Decomposition of core processes into
detailed 8success model9 business
process flows
Physical
Levels
Detailed operational process flows
with error conditions and product and
geographical variants (where
required).
Further decomposition of detailed
operational where required
© British Telecommunications (2006)
@Marcello La Rosa. QUT
Level A
Business
Objectives
Business Activities
Business
Business
KPIs Balanced Scorecard
Level B
Business Unit
Objectives
Process Groupings
Unit KPIs
Business Unit
Scorecard
Level C
Core Processes
Operational Unit
Objectives
Level D
Business Process Flows
Level E
Operational Process Flows
Level F
Detailed Process Flows
Business Process
Value Streams
Business
Value Streams
Implementation Process Layer Business Layer
Strategic View
Davis (2005)
@Marcello La Rosa. QUT
Level A
Business
Activities
Level B
Process Groupings
Value Domains
Business Functions
End-to-End
Processes
Service Streams
Process Service Lines
Enabling Streams
Level C
Core Processes
Level D
Business Process Flows
Level E
Operational Process Flows
Level F
Detailed Process Flows
Core
processes
Tasks
Processes
Steps
Sub-processes
Resources
Operations
Detailed Processes
Detailed Resources
Implementation
Business Activities
Process Layer Business Layer
Process View
Davis (2005)
@Marcello La Rosa. QUT
Level A
Business Activities
Business
Level B
Process Groupings
Business Units
Level C
Core Processes
Operational Units
Level D
Business Process Flows
Operational Teams
Level E
Operational Process Flows
Level F
Detailed Process Flows
Operational Roles
Implementation Process Layer Business Layer
Organisation View
Davis (2005)
@Marcello La Rosa. QUT
Level A
Business Activities
Cust
contact
cn
n
Customer
Inquiry
1
Level B
1
Customer
budget
1
Cust
1
1
Customer
Account
n
1
1
Customer
Offer
1
1
Process Groupings
1
1
1
1
Customer
credit
limit
n
1
Corporate Data Model
Level C
Business
Information
Core Processes
Function
Data
Level D
Business Process Flows
Process
Information
Level E
Operational Process
Function
Entities
System
Entities
Phone #
department
Procedural
Flows
Information
Level F
Detailed Process Flows
Title
Function
Attributes
Phone #
department
Title
System
Attributes
Implementation Process Layer Business Layer
Data View
Davis (2005)
@Marcello La Rosa. QUT
Level A
Business Activities
Level B
Process Groupings
System
Domains
Level C
Core Processes
System
Types
Level D
Business Process Flows
System Types and
Modules Types
Systems and
Modules
Level E
Operational Process Flows
System IT Functions
Level F
Detailed Process Flows
Screens
(System Specific)
Implementation Process Layer Business Layer
Systems View
Davis (2005)
@Marcello La Rosa. QUT
Hierarchy Example: QLD Shared Service Agency
Level A
@Marcello La Rosa. QUT
Example: process architecture
Management Processes
Define Vision
Develop Strategy
Implement
Strategy
Manage Risk
Core Processes
Procure
Materials
Procure
Products
Market
Products
Deliver
Products
Manage
Customer
Service
Support Processes
Manage Personnel
Manage
Information
Manage Assets
73
Example: process architecture
Sequence
Procure
Materials
Procure
Products
Decomposition
Market
Products
Specialization
Procure
Products
Process
Parts
Manage
Customer
Service
Deliver
Products
Assemble
Parts
Handle Job
Application
Handle Job
Application
(Austria)
74
Handle Job
Application
(Germany)
Example: process architecture of Vienna Public Transport
Management Processes
Manage
Enterprise
Communicate
in and out
Manage
Processes
Manage
Quality
Manage Risks and
Opportunities
Manage
Innovation
Core Processes
Manage
Customer
Relationship
Contact
Customer
Manage
Sales
Foster
Relationship
Operate
Vehicles
Plan and Buy
Vehicles
Maintain
Vehicles
Check
Vehicles
Transport
Customer
Plan Customer
Transport
Provide
Infrastructure
Plan
Infrastructure
Transport
Customer
Build
Infrastructure
Maintain
Infrastructure
Evaluate
Transport
Evaluate
Infrastructure
Support Processes
Manage
Personnel
Manage
Financials
Manage
Information
Manage
Materials
75
Manage
Disruptions
Provide Winter
Service
Example: process architecture of BuildIT
76
Exercise: classify by process type
These groups of processes are typically performed at a
university. Categorize each process group as core,
support or management
Sport
services
HR
Strategic
Management
IP
Management
Course
Management
Language
training
Market
management
Indirect
procurement
Teaching
award courses
Marketing
Additional
services mgt
Admission
IT
Teaching
professional courses
1.5 Business Process Management Cycle
Prioritization (aka Process Selection)
1. Importance
Which processes have greatest impact on the organizationÔs 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
79
Hammer, Champy (1993)
1.5 Business Process Management Cycle
Selection Criteria
v Strategic Importance:
§ Find out which processes have the greatest impact on the strategic
goals.
§ Consider profitability, uniqueness, or contribution to competitive
advantages.
§ Select those processes for process management that relate to strategy.
v Health:
§ Determine which processes are in deepest trouble.
§ These processes may profit the most from BPM initiatives.
v Feasibility:
§ Determine how susceptible process is to BPM initiatives, incidentally or
continuously.
§ Culture and politics may be obstacles.
§ BPM should focus on those processes where it is reasonable to achieve
benefits.
Slide 80
1.5 Business Process Management Cycle
Further Questions:
v Given all the discussed criteria, does an assessment of the
importance, health, and feasibility always point us to the same
processes to actively manage?
v Should all processes that are unhealthy, of strategic
importance, and feasible to manage be subjected to BPM?
Slide 81
1.5 Business Process Management Cycle
Exercise 2.8: Selection Criteria
v Exercise 2.8. Consider again the procure-to-pay process of
BuildIT (page 2) and the admission process of a university
(page 5) as described in Chapter 1.
v Discuss their strategic importance, their health, and the
feasibility of a potential improvement to these processes.
Slide 82
1.5 Business Process Management Cycle
Process Performance Measures (Health)
Performance Measures
v Time
v Cost
v Quality
v Flexibility
Performance Objectives
v Formulate performance objectives of the process at a
high level, in the form of a desirable state that the
process should ideally reach, e.g., customers should
be served in less than 30 minutes.
v For each performance objective, identify the
relevant performance dimension(s) and aggregation
function(s), and from there, define one or more
performance measures for the objective in question,
e.g., the percentage of customers served in less than
30 minutes. Let us call this measure ST(30).
v Define a more refined objective based on this
performance measure, such as
ST(30) >99%.
Slide 83
1.5 Business Process Management Cycle
Example: Performance measures
Slide 84
1.5 Business Process Management Cycle
Example 2.3: Restaurant
v A restaurant has recently lost many
customers due to poor customer
service. The management team has
decided to address this issue first of all
by focusing on the delivery of meals.
v The team gathered data by asking
customers about how quickly they liked
to receive their meals and what they
considered as an acceptable wait.
v The data suggested that half of the
customers would prefer their meals to
be served in 15 min or less. All
customers agreed that a waiting time of
30 min or more is unacceptable
v In this scenario, most relevant
performance dimension is serving time.
v One objective is to completely avoid
waiting times above 30 min.
v Percentage of customers served in less
than 30 min should be close to 100%.
v Thus, the percentage of customers
served in less than 30 minutes is relevant
performance measure.
v Threshold mentioned in scenario is 15
min.
v Choice between two performance
measures: average meal delivery time or
percentage of customers served in 15
min.
Slide 85
1.5 Business Process Management Cycle
Exercise 2.9: Travel Agency
Consider the following summary of issues reported in a travel agency.
v A travel agency has recently lost several medium-sized and large corporate
customers due to complaints about poor customer service. The management team
of the travel agency decided to appoint a team of analysts to address this problem.
The team gathered data by conducting interviews and surveys with current and
past corporate customers and also by gathering customer feedback data that the
travel agency has recorded over time.
v About 2% of customers complained about errors that had been made in their
bookings. In one occasion, a customer had requested a change to a flight booking.
The travel agent wrote an email to the customer suggesting that the change had
been made and attached a modified travel itinerary. However, it later turned out
that the modified booking had not been confirmed in the flight reservation system.
As a result, the customer was not allowed to board the flight and this led to a
series of severe inconveniences for the customer.
Slide 86
1.5 Business Process Management Cycle
Exercise 2.9: Travel Agency
v Similar problems had occurred when booking a flight initially: the customer had
asked for certain dates, but the flight tickets had been issued for different dates.
Additionally, customers complained of the long times it took to get responses to
their requests for quotes and itineraries. In most cases, employees of the travel
agency replied to requests for quotes within 2-4 working hours, but in the case of
some complicated itinerary requests (about 10% of the requests), it took them up
to 2 days.
v Finally, about 5% of customers also complained that the travel agents did not find
the best flight connections and prices for them. These customers essentially stated
that they had found better itineraries and prices on the Web by searching by
themselves.
1. Which business processes should the travel agency select for improvement?
2. For each of the business processes you identified above, indicate which
performance measure the travel agency should improve.
Slide 87
Example: prioritized process portfolio
Process Portfolio of an Australian Retailer
Primary Focus
High
F
Importance (priority)
D
E
T
G
C
I
A
K
H
B
W
N
P
J
Y
Z
U
M
V
X
R
Q
L
O
Low
Poor
0
@Marcello La Rosa. QUT
Good
Process Health
4
Example: prioritized process portfolio
Process Portfolio of a bank
@Marcello La Rosa. QUT
1.5 Business Process Management Cycle
Example: prioritized process portfolio
Financial institution
Short-term action
High
Importance
Loan
controlling
Loan
decision
Feasibility
Rating
Low
Contract
preparation
Medium
Loan market
evaluation
High
Handling of
payments
Loan
planning
Loan
application
Low
Poor
Possible
Health
Strategic fit?
90
Good
Exercise 2.10 (page 64)
A university defined four core processes in relation to teaching. An evaluation
of strategic importance, health, and feasibility using a survey among the
department chairs has resulted in the following assessment:
§ Develop and Manage Study Programs: Importance 90%, Health 90%,
Feasibility 40%.
§ Market Study Programs: Importance 75%, Health 80%, Feasibility 60%.
§ Schedule Courses: Importance 95%, Health 30%, Feasibility 50%.
§ Deliver Courses: Importance 95%, Health 70%, Feasibility 30%.
§ Manage Student Services: Importance 85%, Health 50%, Feasibility
40%.
§ Manage Facilities: Importance 40%, Health 35%, Feasibility 70%.
Draw a process portfolio and suggest one process to be selected for process
improvement. Justify your choice.
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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
93
Process
redesign
1.5 Business Process Management Cycle
Business process model
Invoice handling example
Finance ERP
Department
Invoice
Invoice
received
Enter
Invoice
Details
Report
Check
Invoice
Mismatches
Invoice
no
Post Invoice
mismatches
Invoice
posted
Invoice
Invoice DB
Senior Finance Officer
mismatch
exists
Block
Invoice
Invoice
blocked
"Don't forget simplicity. This is what will help humans to make sense
of what you are trying to say."
94
1.5 Business Process Management Cycle
Business process model
Crowdsourcing Processes (Tranquillini et al. (2015))
95
1.5 Business Process Management Cycle
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
96
Process
redesign
1.5 Business Process Management Cycle
Qualitative process analysis
Root-cause analysis example
Causal Factors
Measurement
Issue
Material
Machine
Clerk
selected equipment
with incorrect specs
The system does not keep
the site engineer informed
Inaccurate
equipment description in
provider's catalogue
Equipment
rejected at
delivery
Incomplete or inaccurate
requirements from site engineer
Clerk
misunderstood
site engineer's requirement
Milieu
Man
Clerk is entirely responsible
for equipment selection
Site engineer does not
validate the choice of equipment
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Method
Quantitative process analysis
Process simulation example
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1.5 Business Process Management Cycle
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
99
Process
redesign
1.5 Business Process Management Cycle
Process redesign
TO-BE process model
AS-IS process model
Cost
Time
Flexibility
Quality
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1.5 Business Process Management Cycle
The Process Redesign Orbit
Slide 101
1.5 Business Process Management Cycle
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
impact
their impact
To-be
To-be process
process
model
model
102
Process
redesign
1.5 Business Process Management Cycle
Process implementation
Process
change
management
Process
automation
Executable
process design
Job redesign
IT
development
&
configuration
Training
Testing
Performance
management
plan
...
É.
103
1.5 Business Process Management Cycle
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
104
Process
redesign
1.5 Business Process Management Cycle
Process monitoring
Dashboards, alerts & reports
Event
stream
DB logs
Model-based analytics
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1.5 Business Process Management Cycle
Roles in the BPM lifecycle
Process
identification
BPM group
Process
Process architecture
architecture
Process
discovery
Conformance
Conformance and
and
performance
performance insights
insights
System
Process
admin/operati
monitoring and
ons team
controlling
Executable
Executable
process
process
model
model
Developer
As-is
As-is process
process
model
model
Process
owner
Process
analysis
Process
participants
Process
implementation
Insights
Insights on
on
weaknesses
weaknesses and
and
their
their impact
impact
To-be
To-be process
process
model
model
106
Process
redesign
Analyst
1.6 Systems related to Business Process Management
v Total Quality Management
v Operations Management
v Lean
v Six Sigma
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1.6.1 Total Quality Management
§ 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.
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1.6.2 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.
109
1.6.3 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.
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1.6.4 Six Sigma
§ 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.
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Quiz
Question 1: Which of the following is NOT a task?
A. Check insurance policy details
B. Insurance policy does not cover the damage (Your Answer)
C. Calculate settlement amount
D. Determine if customer is liable for damage
§ Answer
§ "Insurance policy does not cover the damage" is not a task. It is a
condition that may hold true or false and is likely to be part of a
decision point in an insurance claims handling process.
112
Quiz
Question 2: Which of the following is NOT an event?
A.
Purchase order received
B. Claim withdrawn by customer
C. Notify settlement decision to customer
D. Payment delay expired
Answer
§ "Notify settlement decision to customer" is a task. One can see this because
the label starts with a verb in active form ("to notify"). Someone has to contact
the customer to notify the customer.
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Quiz
Question 3: Which of the following statements refer to a critical (core)
process of a company?
A. Human resource management
B. Accounts payable
C. Order-to-cash
D. Customer relationship management
Answer
§ Order-to-cash is a process that is found in virtually every private organization.
Human resource management and Customer relationship management are
"function" that an organization needs to have. In any reasonably large company,
there will be managers and workers specialized in these functions. These managers
are workers will be involved in several processes, like for example recruitment
processes, complaint-to-resolution processes, etc. Accounts payable is also a
function (typically performed by a dedicated team or a department) which consists
mainly in producing invoices and collecting payments. The accounts payable
department is typically for the final part of the order-to-cash process.
114
Quiz
Question 4: A water utility company provides drinking water to residents and
businesses in a city of one million inhabitants, as well wastewater treatment
services to the city council. Which processes are likely to be core processes of
this company?
A. Bill-to-cash
B. Procure-to-pay
C. Issue-to-resolution
D. Infrastructure inspection
E. Debt collection
Answer
A+C+D. The bill-to-cash process is likely to be a core process in a water utility company
because it is the process that ultimately assures the cash flow of the company. Issue-toresolution is also critical (core) since issues with water supply are very critical for the company's
customers - not handling them in a timely and effective manner is likely to generate bad
reputation for the company and possibly also formal complaints and court cases that may be
costly to the company. Infrastructure inspection is critical to a water company since
infrastructure is the core asset of the organization, and poorly maintained infrastructure results
in customer issues and complaints. Procure-to-pay is clearly not core. Debt collection is to some
extent important, especially if a large number of customers are defaulting with their payment.
But debt collection can in some cases be outsourced to a debt collection agency, or isolated
115
from the rest of the company in such a way that
it does not interfere with the core processes.
Quiz
Question 5: The measurement-to-cash process of an electricity company is the process
that starts when the electricity meter of a customer is read at the end of a month and
ends (successfully) when the customer pays the electricity bill for that month. In this
process, which of the following performance measures are directly related to costs?
A.
Average electricity consumption per customer
B.
Cycle time
C.
Percentage of under-billing errors
D.
Percentage of over-billing errors
E.
Price per kilowatt-hour (KWh)
Answer
B+C+D. Cycle time leads to costs since if cash is not collected promptly the company loses in
interest rates payment. Billing errors cause costs, obviously in the case of under-billing errors, but also
in the case of over-billing errors since these latter would typically entail customer complaints which
then entail costs to be resolved
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Quiz
Question 6: In a process-oriented organization, who is directly accountable for poor
performance of a process?
A.
The process participants
B.
The executive management team
C.
The process owner
D.
The process analyst
E.
The BPM group
Answer
C. First of all, that all of the above actors are concerned by poor performance of a process (in
the case of process participants at least for those processes they participate in).
However, the process participants are not directly accountable for poor process performance.
They share responsibility for the process, but are not ultimately answerable for poor
performance of the whole process.
The executive management team is responsible for overseeing the entire organization, including
all its processes, but not directly accountable for poor performance of a process.
This accountability is delegated to a manager as close as possible to the process, which is the
process owner.
Process analysts and the BPM group support the process owner(s) in their work, but are not
directly accountable for poor process performance.
117
Exercises of week 1+2
§ Exercise 1.6,1.7,
Dumas, Marlon, et al. (2018) Fundamentals of business process management.
Heidelberg: Springer.
§ Establish process architecture of
¥ Hanoi University of Science and Technology
¥ Highland Coffee
118