MTAT.03.231
Business Process Management (BPM)
(MBA version)
Lecture 1: Introduction
Marlon Dumas
marlon.dumas ät ut . ee
Structure of the Course
• Contact sessions
1.
2.
3.
4.
5.
07.02 – Introduction to BPM and BPMN
10.03 – Process Analysis & Improvement
11.04 – Process Monitoring & Mining
17.05 – Project Presentations
17.06 – Exam
• Assessment
–
–
–
Two homeworks worth 10 points each
Project – 30 points
Exam – 50 points
2
Readings and Resources
• Textbook
– Dumas & La Rosa. Fundamentals of Business Process
Management, Springer 2013
• Other readings & resources listed in the course pages:
– http://courses.cs.ut.ee/2013/bpm
• For communication, we will use this message board:
– http://www.quicktopic.com/50/H/RACpfMwnxRR
3
Agenda for Today
Time
Contents
9.00-10.30
Introduction to BPM
10.30-10.45
Break
10.45-12.15
The BPM Lifecycle
12.15-13.15
Lunch Break
13.15-14.45
Introduction to BPMN
4
Part I
Introduction to Business Process
Management
What is a Business Process?
Collection of logically-related events, activities and
decisions, that involve a number of actors and
resources, and that collectively lead to an outcome
that is of value to an organization or its customers.
Examples:
•
•
•
•
•
Order-to-Cash
Procure-to-Pay
Fault-to-Resolution (Issue-to-Resolution)
Claim-to-Settlement
Application-to-Approval
6
“My washing machine won’t work!”
Warranty?
Call Centre
Technician
Customer
Customer
VALUE
Service
Dispatch
Parts
Store
fault-report-to-resolution process
© Michael Rosemann
7
Processes and Outcomes
• Every process leads to one or several outcomes,
positive or negative
• Fault-to-resolution process
–
–
–
–
–
–
Fault repaired without technician intervention
Fault repaired with minor technician intervention
Fault repaired and fully covered by warranty
Fault repaired and partly covered by warranty
Fault repaired but not covered by warranty
…
8
What is BPM?
Body of methods to design, analyze, execute
and monitor business operations involving
humans, software, information and physical
artifacts using process models.
9
Exercise
• Textbook, Chapter 1, exercise 1.1
10
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.”
11
Why BPM?
Information
Technology
Yields
Business
Value
Enables
Yields
Process
Change
Index Group (1982)
12
How to Engage in BPM?
Two complementary BPM approaches:
1. Continuous Process Improvement (CPI)
– Does not put into question the current process design, but rather
seeks to identify issues and resolve them incrementally, one
step at a time and one fix at a time
2. Business Process Re-Engineering (BPR)
– Puts into question fundamental assumptions and principles of
the existing process design
– Aims at achieving highly noticeable improvement, for example
by removing costly tasks that do not directly add value
13
Ford Case Study (Hammer 1990)
Ford needed to review its procurement process to:
• Do it cheaper (cut costs)
• Do it faster (reduce turnaround times)
• Do it better (reduce error rates)
Accounts payable in North America alone employed
> 500 people and turnaround times for processing
POs and invoices was in the order of weeks
14
Ford Case Study
• Automation would bring some improvement
(20% improvement)
• But Ford decided not to do it… Why?
a) Because at the time, the technology needed to
automate the process was not yet available.
b) Because nobody at Ford knew how to develop the
technology needed to automate the process.
c) Because there were not enough computers and
computer-literate employees at Ford.
d) None of the above
15
The correct answer is …
Mazda’s Accounts Payable Department
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How the process worked? (“as is”)
17
How the process worked? (“as is”)
18
How the process worked? (“as is”)
19
How the process worked? (“as is”)
20
How the process worked? (“as is”)
21
How the process worked? (“as is”)
22
Reengineering Process (“to be”)
23
Reengineering Process (“to be”)
24
Reengineering Process (“to be”)
25
Reengineering Process (“to be”)
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Reengineering Process (“to be”)
27
Reengineering Process (“to be”)
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The result…
• 75% reduction in head count
• Material control is simpler and financial
information is more accurate
• Purchase requisition is faster
• Less overdue payments
 Why automate something we don’t need to do?
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Principles of BPR
1. Have those who use the output of the process
drive the process
2. Capture information once and at the source
3. Subsume information-processing work into the
real work that produces the information
4. Treat geographically dispersed resources as if
they were centralized
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Exercise – Claims Handling in a
Large Insurance Company
• Claims handling for replacement of
automobile glass
• Under the existing process the client may
have to wait 1-2 weeks before being able
to replace the damaged auto glass
 Goal – A radical overhaul and
improvement of the process to shorten the
client waiting time
© Laguna & Marklund
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Overview of the existing claims
process
Request additional information
Pay
Notify agent
Client
Give instructions
File claim
Local
independent
agent
Forward
claim
Claims
processing
center
Request quote
Provide quote
Pay
© Laguna & Marklund
Approved
glass
vendor
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Existing claims process
1.
2.
3.
4.
5.
Client notifies local agent that she wishes to file a claim. She is
given a claims form and told to obtain a cost estimate from a local
glass vendor.
When the claims form is completed the local agent verifies the
information and forwards the claim to a regional processing center.
The processing center logs the date and time of the claim’s arrival.
The data is entered into a computer-based system (for record
keeping only) by a clerk. The claim is then placed in a hard copy file
and passed on to a claims representative.
a) If the claims representative is satisfied with the claim it is passed
along to several others in the processing chain and eventually a
check is issued and sent to the client.
b) If there are problems with the claim the representative mails it
back to the client for necessary corrections.
When the client receives the check she can go to the local glass
vendor and replace the glass.
© Laguna & Marklund
33
Part II
The BPM Lifecycle
How to engage in BPM?
1. Process Identification &
opportunity assessment
1. Process modelling (as-is)
2. Process analysis
3. Process re-design (to-be)
4. Process implementation
5. Process monitoring/controlling
Process
Modeling
Tools
Process
Management
Systems
35
Phase 1
Process Identification, Prioritization
and Opportunity Assessment
Question
• Think about the company you are currently
working for or a company you have worked for.
What processes does this company have?
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Process Architecture at a Harbor
Authority
38
Process Architecture
39
Question
• Think about the company you are currently
working for or a company you have worked for.
– What processes would be a good starting point for a
Process Improvement project?
– What criteria would you apply to select the ``starting
process’’?
40
Process Prioritization: Three Criteria
(Hammer & Champy 1994)
• Dysfunction
– Which processes are in the deepest trouble?
• Importance
– Which processes have the greatest impact on the
company's customer?
• Feasibility
– Which process is the most susceptible to successful
redesign
 In any case, we have to measure…
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Process Measures
• Link the identified processes to measurable objectives
• Quantify the benefits of improvement
Profit maximizing firms
Overarching goal is usually to
maximize long term shareholder value
Maximize revenues and
minimize costs
Non-profit organizations
A common goal is survival and
growth while satisfying customer needs
Must use resources efficiently while
understanding customer needs
Satisfying customer needs in an efficient way
© Laguna & Marklund
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Classification of process metrics
Cost
Time
Quality
Cost per
execution
Cycle time
Error rates
(negative
outcomes,
wrong info)
Resource
utilization
Waiting time /
time spent in
non-valueadded tasks
Missed
promise
Waste
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Case Study at
Anonymous Utilities Provider
Manage
Unplanned
Outages
Manage
Emergencies &
Disasters
Manage Work
Programming &
Resourcing
Manage
Procurement
Customer
Satisfaction
0.5
0.55
-
0.2
Customer
Complaint
0.6
-
-
0.5
Customer
Feedback
0.4
-
-
0.8
Connection Less
Than Agreed Time
0.3
0.6
0.7
-
Process
Key Performance
44
Process: Manage Procurement
0.67
Process: Manage Emergencies & Disasters 0.58
Process: Manage Unplanned Outages
Overall Process Performance
0.54
1st Layer
Key Result
Area
Financial
People
0.5
0.4
2nd Layer
Key Performance
3rd & 4th Layer
Process Performance
Measures
Customer
Excellence
0.65
Customer
Complaint
0.6
Customer
Rating (%)
0.7
Operational
Excellence
0.5
Risk
Management
0.8
Health
& Safety
0.4
Customer
Satisfaction
0.7
Customer
Loyalty Index
0.6
Satisfied
Customer Index
0.4
Average Time
Spent on Plan
0.8
Market
Share (%)
0.8
45
Exercise
• Textbook, chapter 1, exercise 1.3
46
Phase 2: Process Identification and
“As Is” Modeling
Receive info
Request info
No
Deliver card
accept
Notify acceptance
Check for
completeness
Yes
Perform checks
Make decision
Start
End
complete?
Decide
reject
Notify rejection
Time out
review request
reviiew
Receive review
request
47
Phase 3: Analysis
Qualitative analysis
• Added-Value Analysis
• Root-cause analysis
• Issue Register
Quantitative Analysis
•
•
•
•
Cycle Time Analysis
Capacity Analysis
Queuing analysis
Process Simulation
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Phase 4: Re-design
As Is
Guidelines
• Issues
• Barriers
Capabilities
Strategy / Goals
To-Be
• IT
• Knowledge
• People
• Ability to
change
• Culture
Best Practice
Reference
Models
Bench
marking
Ideal
models
Study
tours
49
The Devil’s Rectangle
Costs
Time
Flexibility
Quality
50
Phases 5-6. Automation & Monitoring –
When Technology Kicks in..
51
Part II
Introduction to Business Process
Modeling
Purposes of Process Modeling
Organizational
Analysis
“AS IS”
Process
Models
Communication
Documentation
Process
Metrics
Process
Enactment &
Monitoring
Process
Implementation
Executable
Process Models
Process
Evaluation
Target Values
Measures for
Improvement
“TO BE”
Process
Process
Models
Analysis & Design
Analysis
Automation
Monitoring
Compliance Checking
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Business Process Modeling Notation
(BPMN)
• OMG Standard, supported by many tools:
–
–
–
–
–
–
–
Signavio (http://academic.signavio.com/)
Bizagi Process Modeller (free download for Windows)
ARIS
IBM BPM
Oracle BPA
Business Process Visual Architect (Visual Paradigm)
Savvion Business Modeller (Progress Software).
• For simple drawing, you can use:
– Visio + BPMN stencils
54
BPMN from 10 000 miles…
• A process model in BPMN is called a Business
Process Diagram (BPD)
• A BPD is essentially a graph consisting of four
types of elements (among others):
55
Example
An Order Management process is triggered by the
reception of a purchase order from a customer. The
purchase order has to be checked against the stock re
the availability of the product(s) requested. Depending
on stock availability the purchase order may be
confirmed or rejected. If the purchase order is
confirmed, the goods requested are shipped and an
invoice is sent to the customer.
56
Order Management Process in BPMN
Reject order
Check stock
availability
Send invoice
Confirm order
Ship goods
57
A little bit more on gateways …
• Exclusive Decision / Merge
– Indicates locations within a business process where the
sequence flow can take two or more alternative paths.
– Only one of the paths can be taken.
– Depicted by a diamond shape that may contain a marker
that is shaped like an “X”.
• Parallel Fork / Join
– Provide a mechanism to synchronize parallel flow and to
create parallel flow.
– Depicted by a diamond shape that must contain a marker
that is shaped like a plus sign.
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Revised Order Management Process
Reject order
Check stock
availability
Send invoice
Confirm order
Ship goods
59
BPMN Exercise 1:
Claims Notification process at a car insurer
When a claim is received, it is first checked whether the claimant is
insured by the organization. If not, the claimant is informed that the
claim must be rejected. Otherwise, the severity of the claim is
evaluated. Based on the outcome (simple or complex claims),
relevant forms are sent to the claimant. Once the forms are
returned, they are checked for completeness. If the forms provide all
relevant details, the claim is registered in the Claims Management
system, which ends the Claims Notification process. Otherwise, the
claimant is informed to update the forms. Upon reception of the
updated forms, they are checked again.
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Naming conventions for
processes and tasks
• Names should be 1-3 words long
• Begin with a verb followed by business object
name and possibly an adjective (e.g. Issue
Driver Licence, Renew Driver Licence via Offline
Agencies)
• Avoid generic verbs such as Handle, Record…
• Avoid prepositions (to, from, for)
• Avoid naming business areas which are already
named in a lane/pool
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Verbs to avoid
• Update, Create, Read, Delete, Record, Download,
Transmit: Too technical. Try Amend, change,
generate, retrieve, remove, capture, register, forward
• Send: Could merely be a message flow from one
business process to another.
• Process, Handle, Manage: Too generic, would not
reflect the specific objective of the process. Try
disseminate, distribute, etc.
• Input: Why do we have to input data? Maybe there is
an opportunity for process optimisation here…
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Process Modelling Viewpoints
Organization
Who?
What?
Function
When?
Process
Which?
Data / Service / Product
63
Organisational Elements in Process
Models
Two basic abstractions:
• Resource: Human actor or equipment (e.g. printer) that is
required to perform an activity
• Resource class: Set of resources with similar
characteristics, e.g. Clerk, Manager, Insurance Officer or
belonging to the same team (e.g. accounts payable)
64
Resource Modelling in BPMN
• In BPMN, resource classes are captured using:
– Pools – independent organizational entities, e.g.
• Customer, Supplier
• East-Tallinn Hospital, Tartu Clinic
– Lanes – resource classes that operate in the same
organizational space and share common systems
• Sales Department, Marketing Department
• Clerk, Manager, Engineer
65
Pools
Pool
 Pools represent business process
participants. They are used to
partition a set of activities.
 Can be a business entity or a
business role.
 Sequence flows cannot cross the
boundaries of a Pool.
 Interaction between Pools are
captured through Message Flow
(dashed lines with an arrow)
66
Customer
Order Management Process with Pools
Place
purchase
order
Make
payment
Invoice
Order Rejection Notification
Purchase
order
Order confirmation
notification
Shipment notification
Send invoice
Supplier
Confirm order
Check stock
availability
Ship goods
Reject order
67
Lanes
Lane
 Lanes represent sub-partitions within a
pool. They are used to organize and
categorize activities.
 Horizontal vs. vertical
 Lanes are typically used for internal roles
(e.g., Manager, Associate) or an internal
department (e.g., shipping, finance).
 Lanes can also be used to represent
automated information systems (e.g. an
Enterprise System), although sometimes
Pools are used for this purpose or
sometimes such systems are only
implicitly captured in the model.
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Order Management Process with Lanes
69
BPMN Exercise: Lanes, Pools
• Claims Handling process at a car insurer
A customer submits a claim by sending in relevant
documentation. The Customer Service department
checks the documents for completeness and registers
the claim. The Claims Handling department picks up
the claim and first checks the insurance policy. Then,
an assessment is performed. If the assessment is
positive, a garage is phoned to authorise the repairs
and the payment is scheduled (in this order). In any
case (whether the outcome is positive or negative),
an e-mail is sent to the customer to notify the
outcome.
70
Adding Data – BPMN Artifacts
Data
Object
Data
Store
• Data Objects are a mechanism to show how
data is required or produced by activities.
– Are depicted by a rectangle that has its upper-right
corner folded over.
– Represent input and output of a process activity.
• Data stores are containers of data
objects that need be persisted beyond
the duration of a process instance
• Associations are used to link artifacts
such as data objects and data stores
Undirected association
with flow objects (e.g. activities).
Directed association
71
Interlude: Annotations
• A picture is worth a thousand words
• But some words in a picture can be worth a thousand
pictures
• Annotations are a mechanism for the modeller to provide
additional text information to the diagram reader.
Text Annotation
72
Order Processing Model with Artifacts
Send invoice
Purchase
Order
Confirm order
Check stock
availability
Set PO to approved
Ship goods
Set PO to rejected
Reject order
73
BPMN Exercise 3: Artifacts
When a claim related to a major car accident is evaluated, a clerk
first retrieves the corresponding car accident report in the Police
Reports database. If the report is retrieved, it is attached to the claim
file. The claim file and the police report serve as input to a claims
handler who calculates an initial claim estimate. Then, an “action
plan” is created based on a “checklist”. Based on the action plan and
the initial claims estimate, a claims manager negotiates a settlement
with the customer. After this negotiation, the claims manager makes
a final decision, updates the claim file to record this decision, and
sends a letter to the claimant to inform him/her of the decision.
Please depict all relevant documents in the model.
74
Sub-processes
• A task in a process can be decomposed into a
“sub-process”.
• Use this feature to break down large models
into smaller ones, making them easier to
understand
75
Sub-processes: example
Order Handling Process
Payment
OK
...
Check Purchase
Order
...
...
Payment Process
Issue Invoice
to Customer
Receive Payment
Notice from Bank
Confirm
Payment to
Customer
76
Value chain
• Good practice is that the top-level process
should be simple (no gateways) and should
show the main phases of the process
– Each phase then becomes a sub-process
– This is sometimes called a “value chain”
77
Showing the value chain with subprocesses
Purchase
Request
Purchase
Order
Approval
Goods
Receipt
Invoice
Verification
Consider resubmission
Purchase Request process
rejected
Check purchase
request for 1st
approval
Purchase Request
approved
rejected
Check purchase
request for 2nd
approval
approved
Send approved
request to requestor
Purchase Order process
Make copy of
purchase request
Forward to purchase
department
Approved Purchase Request
78
Recap: BPMN Main Elements
Swimlanes
Pool
Connections
Message
Lane
Association
Flow
Flow Objects
Artifacts
Text Annotation
Activity
Gateway
Event
Data
Object
Group
Check the BPMN Poster: http://www.bpmb.de/index.php/BPMNPoster
79
Homework 1 (10 points)
• Chapter 1, exercise 1.6
– Answer the questions in this exercise
– Plus write a BPMN model for this process (e.g. Signavio or
Bizagi)
• To be completed individually or in groups of 2
• Submit using the following form:
– https://courses.cs.ut.ee/2013/bpm/Main/MBAHomework1
• Deadline: 4 March 2013
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