2. What is a Business Process?
1. A pragmatic definition
A Business Process describes how something is done in
an organization
In general terms…
Business - Organizational entity that deploys resources to provide
customers with desired products and services
Process (Merriam-Webster’s Dictionary)
(i) A natural phenomenon marked by gradual changes
that
lead to a particular result
(ii) A natural continuing activity or function.
(iii) A series of actions and operations conducing to an 2
end.
3. What is a Business Process?
A process specifies the transformation of inputs to outputs
Inputs Process Outputs
The transformation model of a process
Different types of transformations
• Physical (Ex. raw material ⇒ finished product)
• Locational (Ex. flying from Denver to L.A.)
• Transactional (Ex. depositing money in a bank)
• Informational (Ex. accounting data ⇒ financial statement)
3
4. What is a Business Process?
3. A more comprehensive process definition
A business process is a network of connected activities and buffers
with well defined boundaries and precedence relationships, which
utilize resources to transform inputs into outputs with the
purpose of satisfying customer requirements
Resources
Process
Suppliers Inputs Outputs Customers
4
5. Process Types and Hierarchies
1. Individual processes
– Carried out by a single individual
Make up
2. Vertical or Functional processes
– Contained within one functional unit or department
Make up
3. Horizontal or Cross Functional processes
– Spans several functional units, departments or
companies
5
6. Process Types and Hierarchies
Core cross-functional processes often have highest
improvement potential
• Core processes – essential for meeting market place demand
through a specific strategy
• Especially high improvement potential if a significant
amount of non-manufacturing/service related activities
• Reasons
– Difficult to coordinate
– Have not kept up with improvements in manufacturing
– Difficult to detect waste and inefficiencies
– Often as little as 5% of the time considered adding customer value
– Customers more likely to abandon business because of “poor”
service than “poor” products
6
7. Components of the Process Architecture
Inputs and Outputs Information structure
Process
Flow units Resources
Architecture
The network of
activities and buffers
7
8. Components of the Process Architecture
Inputs and Outputs
• Establish interaction between the process and its environment
• Identify the process boundaries ⇒ easy to identify the Input consumed
from the environment in order to produce the desired Output
• Process inputs and outputs can be
– Tangible (Ex. raw material, cash, products, customers)
– Intangible (Ex. Information, time, energy, services)
Flow units
• A flow unit is a transient entity or a job that proceeds through the network
of activities and buffers and exits the process as a finished output
• Typically, the identity of a flow unit changes across the process
• Examples of common flow units: materials, orders, files, documents,
customers, products, cash, transactions…
• Flow rate – The number of jobs flowing through the process per time unit
8
9. Components of the Process Architecture
The network of activities and buffers
• The work performed on a job moving through a process can be divided
into an ordered sequence of activities
• The buffers represent storage or waiting points where the job waits before
moving to the next activity (queues, waiting rooms, etc.)
• Different types of jobs ⇒ different paths through the network
• Defining activities is crucial in process analysis
– Tradeoff between process and activity complexity
Process Complexity
Individual Activity Complexity
9
10. Components of the Process Architecture
Resources
• Tangible assets utilized to perform activities in a process
• Can be divided into:
Capital assets – real estate, machinery, equipment, IT systems…
Labor – people and their knowledge and skills
• Resources are utilized while inputs are consumed
Information structure
• Specifies the information required for making decisions and
performing activities in a process
• Limited information availability is a common cause for process
inefficiencies
– Information enables coordination!
10
11. Workflow Management Systems
• Management of administrative processes in the field of
Information Systems is often referred to as workflow
management
• Workflow management systems
– Control actions taken on documents moving through a business
process
– Workflow management software/systems are used to control
who does what to a specific document
• Using our comprehensive process definition
⇒ Process = Workflow
11
12. The Essence of Business Process Design
“How to do things in an efficient and effective way”
• An efficient process which does not deliver customer value is useless
A well designed process does the right things, right!
More formally…
• BPD is concerned with configuring the process architecture to satisfy
customer desires in an efficient way
– Customers can be both internal and external
• Internal customer requirements must be aligned with the desires of the
external customers in the business strategy
We make a clear distinction between process design and implementation
12
13. The Essence of Business Process Design
• BPD often most valuable when considering complex cross
functional processes
– Challenging coordination issues
– Process inefficiencies often related to handing off work from one
station or person to the next – introduces delays and errors
• The functional organization and division of labor paradigm
dates back to Adam Smith and the late 1700’s
• Division of labor rationale: by focusing on fewer tasks ⇒
– Workers’ skill level goes up ⇒ work faster
– No time lost when workers switch between tasks
– Workers well positioned to help develop better techniques and tools
• Drawback: more complex coordination issues when
– More complex products and services
– Customers demand more variety 13
14. Example 1
Explanation of 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.
14
15. Example 1
New Design Recommended by the Team
Call in claim
Claims
Client processing
center
Notify Pay
Schedule repair
Approved
glass
vendor
15
16. Linking BPD to overall Business Performance
• Overall business performance?
– Detailed definition is company specific
– Generally, performance must be measured against the stated objectives
Profit maximizing firms Non-profit organizations
Overarching objective is usually to A common objective is survival and
maximize long term shareholder value growth while satisfying customer needs
Maximize revenues and Must use resources efficiently while
minimize costs understanding customer needs
Satisfying customer needs in an efficient way
Well designed business processes
16
