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/RACpf. Mwnx. RR 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!” Technician Customer Service Dispatch Parts Store Customer VALUE Call Centre Warranty? 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 16
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”) 26
Reengineering Process (“to be”) 27
Reengineering Process (“to be”) 28
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? 29
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 30
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 Þ Goal – A radical overhaul and improvement of the process to shorten the client waiting time © Laguna & Marklund 31
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 32
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. 2. 3. 4. 5. Process modelling (as-is) Process analysis Process re-design (to-be) Process implementation 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? 37
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… 41
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 42
Classification of process metrics Cost Time Quality Error rates Cost per execution Cycle time Resource utilization Waiting time / time spent in non-valueadded tasks (negative outcomes, wrong info) Missed promise Waste 43
Case Study at Anonymous Utilities Provider Manage Unplanned Outages Manage Emergencies & Disasters Manage Work Programming & Resourcing Manage Procurement Customer Satisfaction 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 1 st Layer Key Result Area Financial People 0. 5 0. 4 2 nd Layer Key Performance 3 rd & 4 th 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 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 48
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 Communication Documentation Analysis Automation Monitoring Compliance Checking 53
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 an invoice is sent to the customer. 56
Order Management Process in BPMN 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. 58
Revised Order Management Process 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. 60
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 61
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… 62
Process Modelling Viewpoints Organization What? Function Who? 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 § 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
Order Management Process with Pools 67
Lanes § 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. 68
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 Objects are a mechanism to show 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 Store • 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 with flow objects (e. g. activities). 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. 72
Order Processing Model with Artifacts 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 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 78
Recap: BPMN Main Elements Connections Swimlanes Flow Objects Artifacts 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/MBAHomework 1 • Deadline: 4 March 2013 80
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