MTAT Business Process Management (BPM) (for Masters of IT) Lecture 1

Transcription

1 MTAT Business Process Management (BPM) (for Masters of IT) Lecture 1 Marlon Dumas marlon.dumas ät ut. ee

2 Course Objective The objective of this course is to introduce the principles and methods of business process management. The course emphasises the role of business process modelling as an instrument to understand and analyse business operations, and to drive the design of Information Technology solutions to support the automation of business processes. 2

3 12 lectures covering: Principles of BPM Structure of the course Process Modeling & BPMN Process Analysis & Simulation Process Automation Process Mining 12 practice sessions Intro to process modeling (on paper) Process modeling & simulation (TIBCO Business Studio) Process Automation (YAWL) Process Analysis (ProM) Team Project (4-6 weeks) Vambola Leping Practice coordinator 3

4 Grading Two small assignments worth 5 points each (to be given in the labs) Project (30 points) starting on To be done jointly with students from the Masters of ETM Bonus tasks (10 points) to be announced Exam (60 points) 4

5 Readings and Resources Readings & resources listed in the course pages: Additional readings will be distributed during the lectures Please register to the course mailing list 5

6 Introduction to Business Process Management

7 BPM: What is it? Body of methods to design, analyze, execute and monitor business operations involving humans, software, information and physical artifacts using process models. 7

8 So What is a (Business) Process A collection of inter-dependent activities whose collective performance is intended to achieve a goal such as delivering a product or a service. Examples: Order-to-Cash Procure-to-Pay Claim-to-Settlement (Insurance) Fault-to-Resolution 8

9 My washing machine won t work! Call Centre Technician Warranty? Customer Service Dispatch Parts Store Customer fault-report-to-resolution process VALUE Michael Rosemann 9

10 Background to BPM Organisational Management - Adam Smith (1776) Observation: a number of specialized workers, each performing a single step in the manufacture of a pin, could make far more pins in a day than the same number of generalists. Quoted from Hammer & Champy

11 Limitations of Functional Org. Focus on skills and resource utilization rather than work output Reward systems tailored for the functional unit not the overall firm Group behavior and cultures fostering an us versus them mentality Creates silos firms within the firm with their own agenda Laguna & Marklund 11

12 Complementarity of Functional and Process Views Resources Organisation System Other Stakeholders Financial Human Resources Function A Function B Function C Materials Technology Business Processes Customers [after Rummler 1984] 12

13 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. 13

14 Why BPM? Improving Business Processes = #1 business priority for CIOs internationally, 4 years in a row Gartner Group, 2009 CIO Survey 14

15 Why BPM? Information Technology Yields Business Value Enables Process Change Yields Index Group (1982) 15

16 How to do BPM? Two complementary BPM approaches: 1. Continuous Process Improvement (CPI) Change that brings a process closer to its normal operating standards Does not question the fundamental assumptions and rules that define the current process design 2. Business Process Re-Engineering (BPR) Questions existing assumptions and rules Requires new perspectives to generate innovative solutions with potential for breakthrough improvements Laguna & Marklund 16

17 Continuous vs. Radical Improvement Improvement Incremental Improvement Theoretical Capability Statistical Process Radical Control Improvement Time 17

18 The 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 The solution: Rationalization Automation 18

19 The 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 19

20 The correct answer is Mazda s Accounts Payable Department 20

21 How the process worked? ( as is ) 21

22 How the process worked? ( as is ) 22

23 How the process worked? ( as is ) 23

24 How the process worked? ( as is ) 24

25 How the process worked? ( as is ) 25

26 How the process worked? ( as is ) 26

27 Reengineering Process ( to be ) 27

28 Reengineering Process ( to be ) 28

29 Reengineering Process ( to be ) 29

30 Reengineering Process ( to be ) 30

31 Reengineering Process ( to be ) 31

32 Reengineering Process ( to be ) 32

33 The result 75% reduction in head count Material control is simpler and financial information is more accurate Purchase requisition is faster Less overdue payments 33

34 Principles of BPR Have those who use the output of the process perform the process Subsume information-processing work into the real work that produces the information Treat geographically dispersed resources as though they were centralized Capture information once and at the source 34

35 Exercise Claims Handling in a Large Insurance Company Claims handling for replacement of automobile glass Set up procedure 1. The CEO appoints an executive sponsor to lead the project 2. Team members are handpicked by the CEO and the sponsor 3. The team creates a flowchart of the existing process 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 35

36 Overview of the existing claims process Request additional information Pay Client Notify agent Give instructions File claim Local independent agent Forward claim Claims processing center Request quote Provide quote Pay Approved glass vendor Laguna & Marklund 36

37 Existing claims process 1. Client notifies a local agent that she wishes to file a claim. She is given a claims form and is told to obtain a cost estimate from a local glass vendor. 2. When the claims form is completed the local agent verifies the information and forwards the claim to a regional processing center. 3. 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. 4. 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. 5. When the client receives the check she can go to the local glass vendor and replace the glass. Laguna & Marklund 37

38 New Recommended Design Client Call in claim Claims processing center Notify Pay Schedule repair Approved glass vendor Laguna & Marklund 38

39 Procedural changes to the new process The Claims representative is given final authority to approve the claim. Long term relationships with a limited number of glass vendors enables the insurance company to leverage its purchase power to pre-negotiate low prices. Clients no longer have to collect estimates. Vendors are certified for quality, price, reliability, etc. The Client now contacts the claims representative directly instead of going via a local agent. Laguna & Marklund 39

40 Structural changes to the new process A new 24 hour hotline enables the client to speak directly to a claims representative at the regional processing center. The claims representative gathers data over the phone, enters the data into the computer and resolves any issues on the spot. He tells the client to expect a phone call from a certain glass vendor to arrange the replacement. The claims information is immediately available for accounting via a LAN system and they can start processing the check and send it to the vendor. Laguna & Marklund 40

41 Benefits of redesigned process The client can have the glass replaced within 24 hours As opposed to 10 days The client has less work to do Only one phone call, no need for a cost estimate Problems handled immediately when the claim is filed Lost or mishandled claims virtually disappear Less people involved in the process lower op. costs Long term relationships with glass vendors Savings of 30-40% on paid claims due to special discounts Consolidated monthly payments lower handling costs More consistent and reliable service Claims representative feels ownership of the process Laguna & Marklund 41

42 How to do BPM? Step 1: Define the strategic goals and link them to measurable objectives Profit maximizing firms Overarching goal is usually to maximize long term shareholder value Non-profit organizations A common goal is survival and growth while satisfying customer needs Maximize revenues and minimize costs Must use resources efficiently while understanding customer needs Satisfying customer needs in an efficient way Laguna & Marklund 42

43 Step 2: Document the as is process 43

44 Step 3: Analyze the existing process Qualitative analysis Issue Register Scenario analysis Cause-Effect-Analysis Quantitative Analysis Cycle Time Analysis Capacity Analysis Queuing Theory Simulation 44

45 Step 4: Re-design Strategy / Goals As Is Issues Barriers Guidelines To-Be Capabilities IT Knowledge People Ability to change Culture Best Practice Reference Models Bench marking Ideal models Study tours 45

46 Basics of Process Re-Design: Activity Classification A key step in process re-design is classifying of the process activities into value-adding and non-value adding Crucial in identifying waste and inefficiencies in existing processes Value-Adding Activity Non-Value Adding Handoff Delay Rework Business Value Adding Control Policy compliance Laguna & Marklund 46

47 Activity Classification Customer value-adding activities Essential in order to meet customer expectations Activities the customer would be willing to pay for Involves doing the right things right Performing the right activities Doing them correctly, with high efficiency Business value adding activities Control activities Do not directly add customer value but are essential to conducting business Non-value adding activities Activities the customer is not willing to pay for Laguna & Marklund 47

48 Activity Classification Elimination of non-value adding activities is a key first step in redesigning business processes Often achieved through task or activity consolidation Task and activity consolidation reduces Hand-offs Need for control activities Process complexity Laguna & Marklund 48

49 Step 5: Automate 49

50 And finally: close the loop Goal definition Process modelling (as-is) Process analysis Process re-design (to-be) Process implementation Process execution Process monitoring/controlling Process Modeling Tools Process Management Systems 50

51 References and acknowledgments Some slides are companion slides of Laguna & Marklund s book (see ref. in the course pages) Other resources are listed on the course Web page Next week: Introduction to Process Modeling 51