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Fundamentals of
Business Process Management
A Quick Introduction to Value-Driven
Process Thinking
Marlon Dumas
University ...
2
Objectives
1. To inspire you to think about your processes as
a way of improving your work and that of your
colleagues
1...
3
Structure of the course
• Part 1 – A quick tour of the BPM Lifecycle
– Why BPM?
– Overview of the BPM lifecycle
– Introd...
4
Companion Material
• Fundamentals of Business Process Management
(chapters 1, 2, 6, 8)
– Introduction to BPM (freely ava...
5
Business Process Management (BPM)
What is it?
Body of principles, methods and tools to design,
analyze, execute and moni...
6
What is a Business Process?
7
fault-report-to-resolution process
“My washing machine won’t work!”
VALUE
Customer
Warranty?
Parts
StoreService
Dispatch...
8
Processes and Outcomes
• Every process leads to one or several outcomes,
positive or negative
– Positive outcomes delive...
9
Rule of thumb
“If it does not make at least three
people mad, it’s not a process.”
Hammer and Stanton (1995)
10
Your turn
• Think of a process in your organization:
– Is it order-to-cash, procure-to-pay, fault-to-resolution…
– Who ...
11
Why BPM?
The Technology Perspective
Information
Technology
Process
Change
Yields
Yields
Business
Value
Index Group (198...
12
Why BPM?
The Technology Perspective
“The first rule of any technology used in a business
is that automation applied to ...
13
Why BPM? The Management Perspective
Roger Tregear: Practice Processes, BPTrends, July 2012
14
Why BPM?
Roger Tregear: Practice Processes, BPTrends, July 2012
15
Why BPM?
16
BPM and Related Disciplines
BPM is about managing and improving processes.
Whatever tools it takes to do so are most we...
17
How to engage in BPM?
After Tregear (2012)
18
Business Process
Lifecycle
19
Process Identification – Steps
• Enumerate major processes
• Determine process boundaries (scoping)
• Assess strategic ...
20
Process Enumeration
“Most businesses have just three core processes:
1. Sell stuff
2. Deliver stuff
3. Making sure you ...
21
Core vs Support Processes (Porter)
22
Process enumeration
• Typical number of processes is unclear
• Trade-off:
– ensuring process scope is manageable
– proc...
23
Exercise
• Let us enumerate processes at your company
24
Process scoping
• Processes are interdependent
1. Hierarchical relations: Main processes – subprocesses
2. Upstream–dow...
25
Process Scoping
Rules of Thumb
• A well-scoped process:
– Has a clear start, clear end (input, output)
– Has a clear, c...
26
Process Architecture
Core processes
Support processes
Management processes
Quote handling
Product delivery
Invoice hand...
27
Exercise
• Let us scope 1-2 processes up to level 2
28
Process selection
Three criteria:
1. Assess strategic relevance of each process
 Strategic importance
1. Render high-l...
29
Business Process PICK Chart
30
Back Health Judgments with
Performance Measures
31
Business Process
Lifecycle
32
Purposes of Process Modeling
Communication,
simulation, activity-
based costing…
Detailed Models
including
Data types, ...
33
Business Process Modeling Notation
(BPMN)
• OMG Standard, supported by many tools:
– Bizagi Process Modeller (free)
– S...
34
BPMN from 10 000 miles…
• A BPMN process model is a graph consisting of
four types of elements (among others):
35
Revised Order Management Process
36
When a claim is received, we first check if the claimant has a valid
insurance policy. If not, the claimant the claim i...
37
Guideline: Naming Conventions
• Give a name to every event and task
• For tasks: verb followed by business object
name ...
38
When?
Process
Which?
Data / Service / Product
What?
Function
Who?
Organization
Process Modelling Viewpoints
39
Resource Modelling in BPMN
• In BPMN, resource classes are captured using:
– Pools – independent organizational entitie...
40
Example with Pools and Lanes
41
BPMN Exercise: Lanes, Pools
• Claims Handling process at a car insurer
A customer submits a claim by sending in relevan...
42
BPMN Information Artifacts
• Data Objects are a mechanism to show how
data is required or produced by activities.
– Are...
43
Example: Data Object
44
When a claim related to a major car accident is evaluated, a clerk
first retrieves the corresponding car accident repor...
45
Anything wrong with this model?
46
Is this better?
47
Modeling Guideline
Start with a value chain
• Good practice is that the top-level process should
be simple (no gateways...
48
Guidelines: Modeling Levels
• First level: start with value chain
• Next level add:
– Main decisions
– Handoffs (lanes,...
49
Showing the value chain with sub-
processes
50
Question?
• What is the biggest pitfall of process modeling?
1. Using the wrong type of gateways, e.g. decision
gateway...
51
Business Process
Lifecycle
52
Process Analysis Techniques
53
Purposes of Qualitative Analysis
54
Eliminating Waste
"All we are doing is looking at the time line, from
the moment the customer gives us an order to
the ...
55
7+1 Sources of Waste
1. Unnecessary Transportation (send, receive)
2. Inventory (large work-in-process)
3. Motion (drop...
56
Value-Added Analysis
1. Decorticate the process into steps
2. Classify each step into:
– Value-adding (VA): Produces va...
57
Example (Equipment Rental Process)
58
Example – Equipment Rental Process
59
Issue Register
• Purpose: to categorise identified issues as part of as-is
process modelling
• A table with the followi...
60
Issue Register (Equipment Rental)
Name Explanation Assumptions Qualitative
Impact
Quantitative
Impact
Equipment
kept lo...
61
Techniques for issue analysis
• Cause-effect diagrams
• Why-why diagrams
• Pareto charts
62
Cause-effect diagram (rejected equipment)
63
Why-why analysis (equipment rental)
Site engineers keep equipment longer, why?
• Site engineer fears that equipment wil...
64
Pareto chart
• Useful to prioritize a collection of issues or
factors behind an issue
• Bar chart where the height of t...
65
Pareto chart (excessive rental expenses)
http://pareto-chart.qtcharts.com/index.php?g=prtt
66
Business Process
Lifecycle
67
Process Redesign
• Purpose: Identify possibilities for improving the
design of a process: “as is”  “to be”
• No silver...
68
Process Redesign Approaches
69
The Ford Case Study (Hammer 1990)
Ford needed to review its procurement process to:
• Do it cheaper (cut costs)
• Do it...
70
The Ford Case Study
• Automation would bring some improvement
(20% improvement)
• But Ford decided not to do it… Why?
a...
71
The correct answer is …
Mazda’s Accounts Payable Department
72
How the process worked? (“as is”)
73
How the process worked? (“as is”)
74
How the process worked? (“as is”)
75
How the process worked? (“as is”)
76
How the process worked? (“as is”)
77
How the process worked? (“as is”)
78
Reengineering Process (“to be”)
79
Reengineering Process (“to be”)
80
Reengineering Process (“to be”)
81
Reengineering Process (“to be”)
82
Reengineering Process (“to be”)
83
Reengineering Process (“to be”)
84
The result…
• 75% reduction in head count
• Material control is simpler and financial
information is more accurate
• Pu...
85
Principles of BPR
1. Capture information once and at the source
2. Subsume information-processing work into the
real wo...
86
Exercise – Claims Handling in a
Large Insurance Company
• Claims handling for replacement of
automobile glass
• Under t...
87
Overview of the existing claims
process
Client
Local
independent
agent
Approved
glass
vendor
Claims
processing
center
R...
88
Existing claims process
1. Client notifies local agent that she wishes to file a claim. She is
given a claims form and ...
89
Process Redesign Approaches
90
Incremental Process Re-design
1. Select issues to address, improvement goals
2. Map goals to process performance measur...
91
Costs
Quality
Time
Flexibility
Process Redesign Tradeoffs
92
Redesign Heuristics
1. Task elimination
2. Task composition
3. Triage
4. Resequencing
5. Parallelism
6. Process special...
93
Sample Heuristics
(8) Communication optimization
• Reduce the number of messages to be exchanged with
customers and bus...
94
Specific Guidelines
The Complete Kit Concept
• Many processes follow the “complete kit” concept:
– Work should not begi...
95
Final Words
• Any process is better than no process
• A good process is better than a bad process
• Even a good process...
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Fundamentals of Business Process Management: A Quick Introduction to Value-Driven Process Thinking

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Marlon Dumas of University of Tartu gives an introduction and quick tour of the business process management lifecycle. Seminar given at the Estonian BPM Roundtable, 10 October 2013.

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  • Very informative post. Readers would be able to derive good insights.
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  • We are delivering a new version of our free online course (MOOC) on Fundamentals of Business Process Management between 10 October 2016 and 12 February 2016. The new course is delivered in 3 parts: (1) Process identification and discovery; (2) Process Analysis and redesign; and (3) Process implementation and monitoring. You can register freely here: https://moocs.qut.edu.au/
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  • @Larry Sumuri It makes a lot of sense to organize your positive outcomes into primary and secondary ones as you propose. More generally, there can be a hierarchy of outcomes - first-level, second-level, third-level, especially if we are talking about large end-to-end processes.
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  • Hi All, We are planning to start new Salesforce Online batch on this week... If any one interested to attend the demo please register in our website... For this batch we are also provide everyday recorded sessions with Materials. For more information feel free to contact us : siva@keylabstraining.com. For Course Content and Recorded Demo Click Here : http://www.keylabstraining.com/salesforce-online-training-hyderabad-bangalore
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  • I was going through the lecture presentation based on this slides and I need clarification on one thing. There are positive and negative outcomes but can we also have primary and secondary outcomes that add value either to the customer and/or to the organisation itself. Say for instance, we have a Procure-to-Pay process that has certain compliance and regulatory requirements tied to it, and the process is refined to include these regulatory/compliance requirements and in the event of the execution of this process the customer requesting the item got the item in time at a cheaper cost (I think this is a positive primary outcome) and in the process of acquiring the item all requlatory/compliance requirements were met (Can we say this is a positive secondary outcome?). Or do I have to look at the inputs and outputs of the requlatory/compliance requirements in another process (management process) that supports this core process?
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Fundamentals of Business Process Management: A Quick Introduction to Value-Driven Process Thinking

  1. 1. Fundamentals of Business Process Management A Quick Introduction to Value-Driven Process Thinking Marlon Dumas University of Tartu marlon.dumas@ut.ee Estonian BPM Roundtable – 10 Oct. 2013
  2. 2. 2 Objectives 1. To inspire you to think about your processes as a way of improving your work and that of your colleagues 1. To show you how you can improve your business one process at a time 1. To reflect on which processes you should improve first, why and how?
  3. 3. 3 Structure of the course • Part 1 – A quick tour of the BPM Lifecycle – Why BPM? – Overview of the BPM lifecycle – Introducing BPM in a company: What to do first? • Part 2 – Identifying, Prioritizing and Modeling Processes – Building a process architecture – Prioritization of business processes – Bare-bones introduction to process modeling • Part 3 – Analyzing and re-designing processes – Simple analysis techniques to look at first – Tips for process re-design
  4. 4. 4 Companion Material • Fundamentals of Business Process Management (chapters 1, 2, 6, 8) – Introduction to BPM (freely available) – Identification – Analysis – Design http://fundamentals-of-bpm.org http://slideshare.net/MarlonDumas Youtube – Marlon Dumas
  5. 5. 5 Business Process Management (BPM) What is it? Body of principles, methods and tools to design, analyze, execute and monitor and continuously manage business processes
  6. 6. 6 What is a Business Process?
  7. 7. 7 fault-report-to-resolution process “My washing machine won’t work!” VALUE Customer Warranty? Parts StoreService Dispatch Technician Customer Call Centre Customer © Michael Rosemann
  8. 8. 8 Processes and Outcomes • Every process leads to one or several outcomes, positive or negative – Positive outcomes deliver value – Negative outcomes reduce value • 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 – Fault not repaired (customer withdrew request)
  9. 9. 9 Rule of thumb “If it does not make at least three people mad, it’s not a process.” Hammer and Stanton (1995)
  10. 10. 10 Your turn • Think of a process in your organization: – Is it order-to-cash, procure-to-pay, fault-to-resolution… – 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.
  11. 11. 11 Why BPM? The Technology Perspective Information Technology Process Change Yields Yields Business Value Index Group (1982) Enables
  12. 12. 12 Why BPM? The Technology Perspective “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. 13. 13 Why BPM? The Management Perspective Roger Tregear: Practice Processes, BPTrends, July 2012
  14. 14. 14 Why BPM? Roger Tregear: Practice Processes, BPTrends, July 2012
  15. 15. 15 Why BPM?
  16. 16. 16 BPM and Related Disciplines BPM is about managing and improving processes. Whatever tools it takes to do so are most welcome.
  17. 17. 17 How to engage in BPM? After Tregear (2012)
  18. 18. 18 Business Process Lifecycle
  19. 19. 19 Process Identification – Steps • Enumerate major processes • Determine process boundaries (scoping) • Assess strategic relevance of each process • Assess of the “health” of each process • Qualify the culture and politics of each process • Back judgments with performance measures See Davenport (1993) Prioritized Processes & Performance Measures
  20. 20. 20 Process Enumeration “Most businesses have just three core processes: 1. Sell stuff 2. Deliver stuff 3. Making sure you have stuff to sell and deliver” Geary Rummler
  21. 21. 21 Core vs Support Processes (Porter)
  22. 22. 22 Process enumeration • Typical number of processes is unclear • Trade-off: – ensuring process scope is manageable – process scope determines potential impact • Rule of thumb: 10-20 main processes
  23. 23. 23 Exercise • Let us enumerate processes at your company
  24. 24. 24 Process scoping • Processes are interdependent 1. Hierarchical relations: Main processes – subprocesses 2. Upstream–downstream relations • Key scoping questions: 1. When starts a given process instance? 2. When do we consider a process completed/closed? 3. What key objects does the process manipulates? 4. Who participates in the process? 5. Who owns the process?
  25. 25. 25 Process Scoping Rules of Thumb • A well-scoped process: – Has a clear start, clear end (input, output) – Has a clear, coherent set of “main objects” and “participants” – Has a clear owner
  26. 26. 26 Process Architecture Core processes Support processes Management processes Quote handling Product delivery Invoice handling Detailed quote handling process
  27. 27. 27 Exercise • Let us scope 1-2 processes up to level 2
  28. 28. 28 Process selection Three criteria: 1. Assess strategic relevance of each process  Strategic importance 1. Render high-level judgments of the “health” of each process  Potential dysfunction 1. Qualify the culture and politics of each process  Feasibility
  29. 29. 29 Business Process PICK Chart
  30. 30. 30 Back Health Judgments with Performance Measures
  31. 31. 31 Business Process Lifecycle
  32. 32. 32 Purposes of Process Modeling Communication, simulation, activity- based costing… Detailed Models including Data types, conditions, data mappings, fault handling… Integration, testing, deployment…
  33. 33. 33 Business Process Modeling Notation (BPMN) • OMG Standard, supported by many tools: – Bizagi Process Modeller (free) – Signavio (http://www.signavio.com/) - subscription – Oracle BPA – “kind of free” – ARIS – very sophisticated but the opposite of free – IBM Websphere Business Modeler – Logizian – reasonable tradeoff – Visio – Your company might already have this – Paper and pen! - No excuse not to start
  34. 34. 34 BPMN from 10 000 miles… • A BPMN process model is a graph consisting of four types of elements (among others):
  35. 35. 35 Revised Order Management Process
  36. 36. 36 When a claim is received, we first check if the claimant has a valid insurance policy. If not, the claimant the claim is rejected and the claimant is informed. 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, we check them for completeness. If the forms are complete, we register the claim in the Claims Management system and the evaluation of the claim may start. Otherwise, the claimant is asked to update the forms. Upon reception of the updated forms, we check them again and continue. BPMN Exercise: Simplified Insurance Claim Registration
  37. 37. 37 Guideline: Naming Conventions • Give a name to every event and task • For tasks: verb followed by business object name and possibly complement – Issue Driver Licence, Renew Licence via Agency • Avoid generic verbs such as Handle, Record… • Every XOR-split should be labelled with conditions – Policy is invalid, Claim is inadmissible • For events: object + past participle – Invoice received, Claim settled
  38. 38. 38 When? Process Which? Data / Service / Product What? Function Who? Organization Process Modelling Viewpoints
  39. 39. 39 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 in the same organizational space and sharing common systems • Sales Department, Marketing Department • Clerk, Manager, Engineer
  40. 40. 40 Example with Pools and Lanes
  41. 41. 41 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.
  42. 42. 42 BPMN Information Artifacts • 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 with flow objects (e.g. activities). Data Store
  43. 43. 43 Example: Data Object
  44. 44. 44 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. Depict all relevant documents in the model. BPMN Exercise 3: Data Objects
  45. 45. 45 Anything wrong with this model?
  46. 46. 46 Is this better?
  47. 47. 47 Modeling Guideline Start with a value chain • Good practice is that the top-level process should be simple (no gateways, no lanes) and should show the main phases of the process – Each phase then becomes a sub-process – Top-level process is basically a value chain • Introduce gateways and lanes at the next levels…
  48. 48. 48 Guidelines: Modeling Levels • First level: start with value chain • Next level add: – Main decisions – Handoffs (lanes, see later) • Only at the more detailed level add procedural aspects: – Parallel gateways – Input and output data objects, data stores – Different types of events – And as much detail as you need
  49. 49. 49 Showing the value chain with sub- processes
  50. 50. 50 Question? • What is the biggest pitfall of process modeling? 1. Using the wrong type of gateways, e.g. decision gateway instead of parallel gateways 2. Writing process models from top-to-bottom instead of left-to-right 3. Not following strictly the rules of the BPMN notation 4. Spending lots of time to produce detailed models that nobody uses
  51. 51. 51 Business Process Lifecycle
  52. 52. 52 Process Analysis Techniques
  53. 53. 53 Purposes of Qualitative Analysis
  54. 54. 54 Eliminating Waste "All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing the time line by reducing the non-value-adding wastes ” Taiichi Ohno
  55. 55. 55 7+1 Sources of Waste 1. Unnecessary Transportation (send, receive) 2. Inventory (large work-in-process) 3. Motion (drop-off, pick-up, go to) 4. Waiting (waiting time between tasks) 5. Over-Processing (performing what is not yet needed or might not be needed) 6. Over-Production (unnecessary cases) 7. Defects (rework to fix defects) 8. Resource underutilization (idle resources) Source: Seven Wastes defined by Taiichi Ohno 8th waste coined by Ben Chavis, Jr.
  56. 56. 56 Value-Added Analysis 1. Decorticate the process into steps 2. Classify each step into: – Value-adding (VA): Produces value or satisfaction to the customer. • Is the customer willing to pay for this step? – Business value-adding (BVA): Necessary or useful for the business to run smoothly, or required due to the regulatory environment, e.g. checks, controls • Would the business potentially suffer in the long-term if this step was removed? – Non-value-adding (NVA) – everything else including handovers, delays and rework
  57. 57. 57 Example (Equipment Rental Process)
  58. 58. 58 Example – Equipment Rental Process
  59. 59. 59 Issue Register • Purpose: to categorise identified issues as part of as-is process modelling • A table with the following columns (possibly others): – issue number – name – Description/explanation – Impact: Qualitative vs. Quantitative – Possible resolution
  60. 60. 60 Issue Register (Equipment Rental) Name Explanation Assumptions Qualitative Impact Quantitative Impact Equipment kept longer than needed Site engineers keep the equipment longer than needed by means of deadline extensions BuildIT rents 3000 pieces of equipment p.a. In 10% of cases, site engineers keep the equipment two days longer than needed. On average, rented equipment costs 100 per day 0.1 × 3000 × 2 × 100 = 60,000 p.a. Rejected equipment Site engineers reject delivered equipment due to non-conformance to their specifications BuildIT rents 3000 pieces of equipment p.a. Each time an equipment is rejected due to an internal mistake, BuildIT is billed the cost of one day of rental, that is 100. 5% of them are rejected due to an internal mistake Disruption to schedules. Employee stress and frustration 3000 × 0.05 × 100 = 15,000 p.a. Late payment fees BuildIT pays late payment fees because invoices are not paid by the due date BuildIT rents 3000 pieces of equipment p.a. Each equipment is rented on average for 4 days at a rate of 100 per day. Each rental leads to one invoice. About 10% of invoices are paid late. Penalty for late payment is 2%. 0.1 × 3000 × 4 × 100 × 0.02 = 2400 p.a.
  61. 61. 61 Techniques for issue analysis • Cause-effect diagrams • Why-why diagrams • Pareto charts
  62. 62. 62 Cause-effect diagram (rejected equipment)
  63. 63. 63 Why-why analysis (equipment rental) Site engineers keep equipment longer, why? • Site engineer fears that equipment will not be available later when needed, why? – time between request and delivery too long, why? • excessive time spent in finding a suitable equipment and approving the request, why? – time spent by clerk contacting possibly multiple suppliers sequentially; – time spent waiting for works engineer to check the requests;
  64. 64. 64 Pareto chart • Useful to prioritize a collection of issues or factors behind an issue • Bar chart where the height of the bar denotes the impact of each issue
  65. 65. 65 Pareto chart (excessive rental expenses) http://pareto-chart.qtcharts.com/index.php?g=prtt
  66. 66. 66 Business Process Lifecycle
  67. 67. 67 Process Redesign • Purpose: Identify possibilities for improving the design of a process: “as is”  “to be” • No silver-bullet: requires creativity • Redesign heuristics can be used to generate ideas Descriprive modelling of the real world (as-is) Prescriptive modelling of the real world (to-be)
  68. 68. 68 Process Redesign Approaches
  69. 69. 69 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
  70. 70. 70 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
  71. 71. 71 The correct answer is … Mazda’s Accounts Payable Department
  72. 72. 72 How the process worked? (“as is”)
  73. 73. 73 How the process worked? (“as is”)
  74. 74. 74 How the process worked? (“as is”)
  75. 75. 75 How the process worked? (“as is”)
  76. 76. 76 How the process worked? (“as is”)
  77. 77. 77 How the process worked? (“as is”)
  78. 78. 78 Reengineering Process (“to be”)
  79. 79. 79 Reengineering Process (“to be”)
  80. 80. 80 Reengineering Process (“to be”)
  81. 81. 81 Reengineering Process (“to be”)
  82. 82. 82 Reengineering Process (“to be”)
  83. 83. 83 Reengineering Process (“to be”)
  84. 84. 84 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? Automate things that need to be done.
  85. 85. 85 Principles of BPR 1. Capture information once and at the source 2. Subsume information-processing work into the real work that produces the information 3. Have those who use the output of the process drive the process 4. Treat geographically dispersed resources as if they were centralized
  86. 86. 86 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 of the process to shorten the client waiting time © Laguna & Marklund
  87. 87. 87 Overview of the existing claims process Client Local independent agent Approved glass vendor Claims processing center Request additional information Pay Notify agent File claim Give instructions Forward claim Request quote Provide quote Pay © Laguna & Marklund
  88. 88. 88 Existing claims process 1. 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. 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
  89. 89. 89 Process Redesign Approaches
  90. 90. 90 Incremental Process Re-design 1. Select issues to address, improvement goals 2. Map goals to process performance measures and set objectives/targets 3. Apply re-design heuristics on the “as is” process model and analyze the tradeoffs 4. Select promising “change options”, justify and prioritize their implementation
  91. 91. 91 Costs Quality Time Flexibility Process Redesign Tradeoffs
  92. 92. 92 Redesign Heuristics 1. Task elimination 2. Task composition 3. Triage 4. Resequencing 5. Parallelism 6. Process specialization and standardization 7. Resource optimization 8. Communication optimization 9. Automation Each heuristics improves one side of the devil’s quadrangle, generally to the detriment of others
  93. 93. 93 Sample Heuristics (8) Communication optimization • Reduce the number of messages to be exchanged with customers and business partners – But avoid front-loading the process too much – Not necessarily suitable if customer contact is desirable • Monitor customer interactions, record exceptions, determine what to front-load/back-load • Try to automate handling, recording and organization of messages (send/receive). (T+,Q+,C+/-,F-)
  94. 94. 94 Specific Guidelines The Complete Kit Concept • Many processes follow the “complete kit” concept: – Work should not begin until all pieces necessary to complete the job are available • In such cases, consider three principles: – Provide complete and easy-to- follow instructions for those who will initiate the process. – If a process cannot start, the client should be notified of all defects that could be reasonably identified at the onset of the process. – Consider the tradeoff between “incomplete-kit” process initiation and roundtrip to revise and resubmit a request. Michael zur Muehlen: “Service Processes: The Customer at the Center?” http://tinyurl.com/5tunkxy
  95. 95. 95 Final Words • Any process is better than no process • A good process is better than a bad process • Even a good process can be improved Michael Hammer (1948 – 2008)

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