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BUSINESS PROCESS MANAGEMENTSESSION 3 – PROCESS COSTING<V1.0>
1/21/2013                2Contents•   Recap of Session 2•   Process Modelling•   Process Costing•   Lets have some fun
1/21/2013                        3            Recap of Session 2
1/21/2013                                           4Process Decomp• Process Decomposition is the break up of a process to...
1/21/2013                                                5Flow Objects• Flow objects define the behavior of the           ...
1/21/2013                                                 6 Artifacts• Artifacts are  • Group – to put similar activities ...
1/21/2013                                             7What is an Event• An Event is something that happens during the cou...
1/21/2013                                         8Connection Objects• Connections are used to connect  two or more object...
1/21/2013                                                9What is an Function• Functions indicate the tasks or activities ...
1/21/2013                                                      10   OR OperatorOR Following a Function              OR Pre...
1/21/2013                                                             11   XOR OperatorXOR Following a Function           ...
1/21/2013                                                          12   AND OperatorAND Following a Function              ...
1/21/2013   13
1/21/2013                                              14                    Important thing to remember                  ...
1/21/2013                       15            Process Modelling
1/21/2013                          16Why Process Modeling• Communication between people• Training and Learning• Persuasion...
1/21/2013                                                17Process Activity Questions• How do we do it• Why do we do it• W...
1/21/2013                                            18Why Simulate Business Model• Advantages of simulation      Persuasi...
1/21/2013                                                  19Types of Simulations Visual Depiction            Using proces...
1/21/2013                                             20Process Modeling Techniques• Individual Interviews – gathering inf...
1/21/2013                                  21            Understand the BUSINESS NEED
1/21/2013                                                       22Process Metrics• What do we measure  • Time – value, cyc...
Value Stream Mapping
1/21/2013                                24            DON’T COMPLICATE PROCESSES
1/21/2013               25Order Fulfillment VSM
1/21/2013                     26            Process Costing
1/21/2013                                                            27Why Costs• Everything boils down to How Much Does I...
1/21/2013                                                       28Factors Affecting Process Costs• Process Time  • How lon...
1/21/2013                                      29Cost Determining Attributes• Processing Time –  • Minimum, Average and Ma...
1/21/2013                                                                 30  Costs Attributes• Min, Average and Max Total...
1/21/2013                                         31Steps To Calculate Process Cost• Create a Level 5 Activity List• Captu...
1/21/2013                                                                     32    Process Costing                Process...
1/21/2013                                33            Keep your processes SIMPLE
1/21/2013                        34            Lets have some fun
1/21/2013                                        35 Business Functions In ManufacturingLet’s list down the various departm...
1/21/2013                                          36  Calculate the OPTIMUM Production Schedule            Explain WHY yo...
1/21/2013                                                                    37 Lets See The Scheduleunit                 ...
1/21/2013                                                                                                         38   Let...
1/21/2013                                        39                                  Please contact:Session 4ARIS - Introd...
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Business Process Management session 3

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Business Process Costing

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Transcript of "Business Process Management session 3"

  1. 1. BUSINESS PROCESS MANAGEMENTSESSION 3 – PROCESS COSTING<V1.0>
  2. 2. 1/21/2013 2Contents• Recap of Session 2• Process Modelling• Process Costing• Lets have some fun
  3. 3. 1/21/2013 3 Recap of Session 2
  4. 4. 1/21/2013 4Process Decomp• Process Decomposition is the break up of a process to activity level• Every project should have a Process Decomp• Process Decomp helps at later stages when improvisation has to be implemented• Process Decomp keeps a running score of all the processes under a function
  5. 5. 1/21/2013 5Flow Objects• Flow objects define the behavior of the Name process• Flow Objects are • Activities – are the actions that are carried out Activity as part of business Name • Event – are the process triggering objects that affect the flow of the process and have a cause and a result Event • Gateways – are the controlling objects that diverge or converge the flow Name Gateway
  6. 6. 1/21/2013 6 Artifacts• Artifacts are • Group – to put similar activities under a Group group • Annotations – are used to proved additional text information Text Annotation • Data Objects – are used to show how data is required or produced at each step
  7. 7. 1/21/2013 7What is an Event• An Event is something that happens during the course of a business process and affects its execution Event• An Event has a CAUSE and an IMPACT• All activities are triggered by an Event. for example purchase order received. This is an Event
  8. 8. 1/21/2013 8Connection Objects• Connections are used to connect two or more objects in a process• Connection Objects are Sequence • Sequence Lines – to show in which Flow order the activities are performed • Associations – are used to associate a Association role, text, artifact to a flow object • Message Lines – represents how message flows between the objects Message Flow
  9. 9. 1/21/2013 9What is an Function• Functions indicate the tasks or activities that are carried out in the business process. Function• Functions have inputs (material or information) and outputs (different material or information) and usually utilize resources. Thus, they are carried out by either people or systems.• Functions should not convey unambiguous information to the reader; it should be specific and convey the right information. The usage of short forms such as ent. instead of enter should be avoided.
  10. 10. 1/21/2013 10 OR OperatorOR Following a Function OR Preceding a FunctionSingle Input – Multiple Output Multiple Input – Single OutputOR Decision OR TriggerOne or many possible paths will be Any one Event, or combination of Events,followed willas a result of the decision trigger the Function
  11. 11. 1/21/2013 11 XOR OperatorXOR Following a Function XOR Preceding a FunctionSingle Input – Multiple Output Multiple Input – Single OutputXOR Decision XOR TriggerOne, but only one, of the possible paths One, but only one, of the possible Eventswill willbe followed be the trigger
  12. 12. 1/21/2013 12 AND OperatorAND Following a Function AND Preceding a FunctionSingle Input – Multiple Output Multiple Input – Single OutputAND Branch AND Branch TriggerProcess flow splits into two or more All Events must occur in order to triggerParallel thepaths following Function
  13. 13. 1/21/2013 13
  14. 14. 1/21/2013 14 Important thing to remember Change is DIFFICULT to accept Account for CHANGE MANAGEMENT This helps to reduce resistance to any change
  15. 15. 1/21/2013 15 Process Modelling
  16. 16. 1/21/2013 16Why Process Modeling• Communication between people• Training and Learning• Persuasion and selling• Analysis of business situation• Compliance management• Knowledge management
  17. 17. 1/21/2013 17Process Activity Questions• How do we do it• Why do we do it• What is the output• How many outputs• How long does it take• Where does the output go• Who reviews it and when• Who performs each activity• What generates the process/tasks• What are the KPI’s• Who are the customers of the process• Who are the suppliers of the process• What decision are made in executing the process• How are exceptions handled• What is the nature or frequency of errors / problems
  18. 18. 1/21/2013 18Why Simulate Business Model• Advantages of simulation Persuasion and Selling over testing in the real Simulating results of world: proposed solution Cause and Effect • Speed Simulation • Low cost • No disturbance of current Verification and operations Validation Are we doing the right thing Are we doing it right
  19. 19. 1/21/2013 19Types of Simulations Visual Depiction Using process flows during simulation and validation of logic Numeric Simulation Process Management Cycle Time Capacity Analysis What If analysis
  20. 20. 1/21/2013 20Process Modeling Techniques• Individual Interviews – gathering information from the actors of process steps• Facilitated Sessions – gathering information from a group• Top Down – documenting processes from a Process level• Bottom Up – documenting processes from Activity level
  21. 21. 1/21/2013 21 Understand the BUSINESS NEED
  22. 22. 1/21/2013 22Process Metrics• What do we measure • Time – value, cycle, waiting, productive , non productive • Volume – transactions per day, per hour • Costs – fixed, variable • Equipment used – cost • Value add – • Real value • Business value • Non value like time wasted on cigarette / tea breaks
  23. 23. Value Stream Mapping
  24. 24. 1/21/2013 24 DON’T COMPLICATE PROCESSES
  25. 25. 1/21/2013 25Order Fulfillment VSM
  26. 26. 1/21/2013 26 Process Costing
  27. 27. 1/21/2013 27Why Costs• Everything boils down to How Much Does It Cost US An improved process should cost LESS and execution should be FASTER Calculate costs using the following information • Duration of a process step • Cost incurred at the step• Compared to AS-IS processes, TO-BE processes are expected to bring improvisation in • Time • Costs Improvements can be identified using analyzing TIME/COST .
  28. 28. 1/21/2013 28Factors Affecting Process Costs• Process Time • How long does a process take from a resource capacity point of view• Process Costs • What costs accrue during the execution of a process or of entire process chains aiming at the creation of products or services• Resource Requirements • How many resources are required for performing the relevant processes • What is the degree of utilization of available resources
  29. 29. 1/21/2013 29Cost Determining Attributes• Processing Time – • Minimum, Average and Max processing time Orientation Time – • Minimum and Average orientation Time Wait Time – • Minimum and Average wait Time Frequency – • Daily / Weekly / Monthly / Annual
  30. 30. 1/21/2013 30 Costs Attributes• Min, Average and Max Total Costs• Min, Average and Max Material Costs • Costs related directly associated with processing and use of material Min, Average and Max Personnel Costs Min, Average and Max Operational Costs Min, Average and Max Overheads These are costs not directly allocated to an account Min, Average and Max Depreciation / Maintenance Costs Min, Average and Max Interest Costs
  31. 31. 1/21/2013 31Steps To Calculate Process Cost• Create a Level 5 Activity List• Capture information – Manual / Automatic step• Capture the RASCI for the step• Capture information like • Effort • Rework • Wait time between two steps Calculate Effort + Cost for every step Create Cost – Effort Matrix Compare Costs per step with SLA
  32. 32. 1/21/2013 32 Process Costing Process Costs Raw Material Directly Direct Material traceable to the process Labor and Overheads Conversion Costs directly traceable to the process• Calculate DM per unit Steps• Calculate Conversion Costs per unit 1. Analyze flow of physical units• DM + CC = Total Cost Per Unit 2. Calculate unit costs• COGS = Total Cost Per Unit x Units 3. Determine Total Cost to Account Sold
  33. 33. 1/21/2013 33 Keep your processes SIMPLE
  34. 34. 1/21/2013 34 Lets have some fun
  35. 35. 1/21/2013 35 Business Functions In ManufacturingLet’s list down the various departments in a Factory Production Finance Purchase / HR Procurement Accounts – AP / AR Sales Marketing After Sales R&D Shipping Warehousing Distribution Operations
  36. 36. 1/21/2013 36 Calculate the OPTIMUM Production Schedule Explain WHY your approach is the right one
  37. 37. 1/21/2013 37 Lets See The Scheduleunit Cost per of RM = 65 Time Taken Stock Recd RM to produce from Prev Week 1 Needed EACH unit Function Day 1 SETUP TIME F Time A 00:00:0 15 0 15 12 20 0 C 0 0 T 120 O Cash R 0 7 0 14 10 10000 60 Y Fixed Costs 11000 30 F L WIP Stock 0 O 10 0 40 O R Sales Price Calculate the Optimum per unit ofproduction process to Produce Market FG = 180 20 Units with least wait times Demand 
  38. 38. 1/21/2013 38 Lets ScheduleLabor Set 9:00 9:30 - 10:00 10:30 11:00 - 11:30 12:00 12:30 13:30 14:00 14:30 15:00 15:30 16:0 16:30 – - 10:00 – – 11:30 - - - - - - – – 0– 17:00 up 9:30 10:30 11:00 12:00 12:30 13:30 14:00 14:30 15:00 15:30 16:00 16:3 Tim 0 e 15 120 60 30
  39. 39. 1/21/2013 39 Please contact:Session 4ARIS - Introduction Naval Vithalani tonaval@yahoo.com Thank You

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