BUSINESS PROCESS MANAGEMENT

EM2800E
CHAPTER 1 INTRODUCTION TO BUSINESS PROCESS MANAGEMENT

1.1 Definition of Business Process

1.2 Components of Business Process
1.3 Concepts and Importance of Business Process Management
1.4 The Origin and Development of Business Process Management
1.5 Business Process Management Cycle
1.6 Systems related to Business Process Management
1.1 DEFINITION OF BUSINESS PROCESS

• A process is the set of value-added activities that transform inputs into

outputs

• Different types of transformations

• Physical (raw material => finished product)
• Locational (flying from Hanoi to Hue)
• Transactional (depositing money in a bank)
• Informational (accounting data => financial statement)
1.1 DEFINITION OF BUSINESS PROCESS

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
1.1 DEFINITION OF BUSINESS PROCESS

• Business processes are what companies do whenever they deliver a service

or a product to customers
• The way processes are designed and performed affects both:
• The quality of service that customers perceive
• The efficiency with which services are delivered
• An organization can outperform another organization offering similar kinds
of service if it has better processes and executes them better
• Not only for customer-facing processes, but also for internal processes
• Typical processes:
• Order-to-Cash
• Quote-to-Order: customers request for quote
• Procure-to-Pay: buying from suppliers
• Issue/ Fault-to-Resolution: customer feedback, complaints
• Application-to-Approval: apply for permit, lisence
YOUR TURN

• Think of an organization and a process in this 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.

PROCESS MAP FOR THE BLUEBIRD CAFE
1.2 COMPONENTS OF BUSINESS PROCESS

• A business process encompasses a number of events and activities

• A typical process includes decision points
• A process also involves:
• Actors: human actors, organizations, or software systems acting on behalf of
human actors or organizations. Actors can be internal (participants) or external
• Physical objects: such as equipment, materials, products, paper documents.
• Informational objects: such as electronic documents and electronic records
• The execution of a process leads to one or several outcomes
(negative/positive)
1.2 COMPONENTS OF BUSINESS PROCESS
EXAMPLE: EQUIPMENT RENTAL AT BUILDIT

• BuildIT is a construction company specialized in public works, such as roads, bridges, pipelines, tunnels
and railroads. Within BuildIT, it often happens that engineers working at a construction site (called site
engineers) need a piece of equipment, such as a truck, an excavator, a bulldozer, a water pump, etc.
BuildIT owns very little equipment and instead it rents most of its equipment from specialized suppliers.
• The existing business process for renting equipment goes as follows. When site engineers need to rent a
piece of equipment, they fill in a form called "Equipment Rental Request" and send this request by email
to one of the clerks at the company's depot. The clerk at the depot receives the request and, after
consulting the catalogs of the equipment suppliers, selects the most cost-effective equipment that
complies with the request. Next, the clerk checks the availability of the selected equipment with the
supplier via phone or email. Sometimes the selected option is not available. In these cases, the clerk has
to select an alternative piece of equipment and check its availability with the corresponding supplier.
• After finding a suitable and available piece of equipment, the clerk adds the details of the selected
equipment to the rental request. Each rental request has to be approved by a works engineer, who also
works at the depot. In some cases, the works engineer rejects the equipment rental request. Some
rejections lead to the cancelation of the request, i.e., no equipment is rented at all. Other rejections are
resolved by replacing the selected equipment with another equipment-such as a cheaper piece of
equipment or a more appropriate piece of equipment for the job. In this latter case, the clerk needs to
lodge another availability request.
EXAMPLE: EQUIPMENT RENTAL AT BUILDIT

• When a works engineer approves a rental request, the clerk sends a confirmation to the supplier. This
confirmation includes a Purchase Order (PO) for renting the equipment. The PO is produced by BuildIT's
financial information system using information entered by the clerk. The clerk also records the
equipment rental in a spreadsheet that is used to monitor all ongoing equipment rentals.
• In the meantime, the site engineer may decide that the equipment is no longer needed. In this case, the
engineer asks the clerk to cancel the request for renting the equipment. In due time, the supplier delivers
the rented equipment to the construction site. The site engineer then inspects the equipment. If
everything is in order, the site engineer accepts the engagement and the equipment is put into use. In
some cases, the equipment is sent back because it does not comply with the requirements of the site
engineer. In this case, the site engineer has to start the rental process all over again.
• When the rental period expires, the supplier comes to pick up the equipment. Sometimes, the site
engineer asks for an extension of the rental period by contacting the supplier via email or phone I to 2
days before pick-up. The supplier may accept or reject this request. A few days after the equipment is
picked up, the equipment's supplier sends an invoice to the clerk by email. At this point, the clerk asks
the site engineer to confirm that the equipment was indeed rented for the period indicated in the
invoice. The clerk also checks if the rental prices indicated in the invoice are in accordance with those in
the PO. After these checks, the clerk forwards the invoice to the financial department. The financial
department eventually pays the invoice.
SUMMARY INFOS OF THE PROCESS
EXERCISE

• In order to apply for admission, students first fill in an online form. Online applications are recorded in an
information system to which all staff members involved in the admissions process have access. After a
student has submitted the online form, a PDF document is generated and the student is requested to
download it, sign it, and send it by post together with the required documents, which include:
• certified copies of previous degree and academic transcripts,
• results of English language test,
• curriculum vitae,
• two reference letters.
• When these documents are received by the admissions office, an officer checks the completeness of the
documents. If any document is missing, an email is sent to the student. The student has to send the
missing documents by post. Assuming the application is complete, the admissions office sends the
certified copies of the degrees to an academic recognition agency, which checks the degrees and gives
an assessment of their validity and equivalence in terms of local education standards. This agency
requires that all documents be sent to it by post, and that all documents be certified copies of the
originals. The agency sends back its assessment to the university by post. Assuming the degree
verification is successful, the English language test results are then checked online by an officer at the
admissions office. If the validity of the English language test results cannot be verified, the application is
rejected (such notifications of rejection are sent by email).
EXERCISE

• Once all documents of a given student have been validated, the admissions office forwards these
documents by internal mail to the corresponding academic committee responsible for deciding
whether to offer admission or not. The committee makes its decision based on the academic
degrees and transcripts, the CV, and the reference letters. The committee meets once every three
months to examine all applications that are ready for academic assessment at the time of the
meeting.
• At the end of the committee meeting, the chair of the committee notifies the admissions office of
the selection outcomes. This notification includes a list of admitted and rejected candidates. A few
days later, the admissions office notifies the outcome to each candidate via email. Additionally,
successful candidates are sent a confirmation letter by post.
With respect to the above process, consider the following questions:
1. Who are the actors in this process?
2. Which actors can be considered as customers in this process?
3. What value does the process deliver to its customers?
4. What are the possible outcomes of this process?
EXERCISE

The process for the admission of international graduate students at a

university
1. Who are the actors in this process?
2. Which actors can be considered as customers in this process?
3. What value does the process deliver to its customers?
4. What are the possible outcomes of this process?
1.3 CONCEPTS AND IMPORTANCE OF BUSINESS PROCESS MANAGEMENT

• BPM
• introduces a process-oriented view of the flows of materials, information and
services through and across organizations
• as a body of methods, techniques and tools to identify, discover, analyze,
redesign, execute and monitor business processes in order to optimize their
performance
• Business process are the focal point of BPM
• BPM is not about improving the way individual activities are
performed, but rather, it is about managing entire chains of events,
activities and decisions that ultimately add value to the organization.
1.3 CONCEPTS AND IMPORTANCE OF BUSINESS PROCESS MANAGEMENT

BPM can help:

• Reduce operation cost
• Maintain stability of business
• Good system/ processes result in good products and services
• Information transparency
• Reduce defects/ failures
• Track and trace
1.4 THE ORIGIN AND DEVELOPMENT OF BPM

• The Functional Organization

• The Birth of Process Thinking
• The Rise and Fall of BPR
HOW PROCESS MOVED OUT OF FOCUS THROUGH AGES
ADAM SMITH: PROCESSES AND DIVISION OF LABOUR

• “To take an example, the trade of a pin-maker: But in the way in which this
business is now carried on, it is divided into a number of branches: One man
draws out the wire; another straights it; a third cuts it; a fourth points it; a
fifth grinds it at the top for receiving the head; to make the head requires
three operations; to put it on is a peculiar business; to whiten the pins is
another; to put them into the paper; and the important business of making a
pin is, in this manner, divided into about eighteen distinct operations.”
FREDERICK W. TAYLOR: SCIENTIFIC MANAGEMENT

• Meticulously studying labor activities

• Develop very specific work instructions for workers
• Workers would only be involved with carrying out one of the many steps
in the production process
• In administrative settings, the emergence of managers, to oversee the
productivity of groups of workers
• How to differentiate between the responsibilities of all these managers?
=> create functional units
• Functional units and their managers were structured hierarchically
• Functional organization remains dominant until the end of 1980s.
BIRTH OF PROCESS THINKING: BUSINESS PROCESS REENGINEERING (BPR)
PURCHASING PROCESS AT FORD AT THE INITIAL STAGE
PURCHASING PROCESS AT FORD AFTER REDESIGN
EXERCISE

Consider the purchasing process at Ford

1. Who are the actors in this process?
2. Which actors can be considered as customers in this process?
3. What value does the process deliver to its customers?
4. What are the possible outcomes of this process?
THE RISE AND FALL OF BPR

• From 1980s to 1990s: emergence of books, white papers, and BPR teams in
companies around the world.
• By the late of 1990s: many companies stopped BPR project. The reasons can be as
follows:
1. Concept misuse:
• Projects were labeled BPR, even when business processes were not the core.
• Many corporations initiated reductions of workforce, often packaged as process redesign
projects, which triggered resentment.
2. Over-radicalism:
• Hammer’s early papers states: “Don’t Automate, Obliterate”.
• Many situations require a much more gradual (incremental) approach.
3. Support immaturity:
• Necessary tools and technologies were not yet available or insufficient.
• Much process logic had to be hard-coded in IT applications of the time.
• People grew frustrated when they noted that their efforts on redesigning a process were
thwarted by a rigid infrastructure.
THE EMERGENCE OF BPM

Two key events lay the foundation for the emergence of BPM
• Empirical studies showing that organizations that were process-
oriented did better than non-process-oriented organizations
• Different types of IT systems emerged, most notably Enterprise
Resource Planning (ERP) systems and Workflow Management Systems
(WfMSs)
• ERP systems store all data related to the business operations of a company in a
consistent manner, all stakeholders can gain access
• WfMSs distribute work to various actors in a company on the basis of process
models, makes it easier to implement changes to business processes
=> BPM is a revival of BPR, adopts the process-centered view on
organizations
JOB FUNCTIONS OF PROCESS OWNER
1.5 BUSINESS PROCESS MANAGEMENT CYCLE
PROCESS IDENTIFICATION

1. Designation step
• Enumerate main processes
• Determine process scope
=> Process Architecture: a collection of inter-linked processes covering
the bulk of the work that an organization performs to achieve its mission
2. Prioritization step (aka Process selection)
Prioritize processes based on:
• Importance
• Health Feasibility
=> Prioritized Process Portfolio
ARCHITECTURE: HIGH LEVEL PICTURE OF AN ORGANIZATION
PROCESS ARCHITECTURE
COMPONENTS OF A PROCESS ARCHITECTURE
EXAMPLE: PROCESS ARCHITECTURE
EXAMPLE: CORE, SUPPORT AND MANAGEMENT PROCESSES

Wholesaler
Core processes
- Sales (lead-to-quote, quote-to-order, order-to-cash)
- Purchase-to-Pay (direct procurement, e.g. supplies replenishment)
Support processes
- Purchase-to-pay (indirect procurement, e.g. parts replenishment,
operational resources replenishment…)
- HR (policies update, recruitment, induction, probation…)
Management processes
- Suppliers management (suppliers planning, suppliers acquisition…)
- Logistics management (logistics planning, logistics controlling…)
RELATIONS BETWEEN CORE, SUPPORT, MANAGEMENT PROCESSES
EXAMPLE: PROCESS ARCHITECTURE
EXAMPLE: PROCESS ARCHITECTURE
EXAMPLE: PROCESS ARCHITECTURE OF VIENNA PUBLIC TRANSPORT
EXAMPLE: PROCESS ARCHITECTURE OF BUILDIT
PRIORITIZATION (AKA PROCESS SELECTION)

1. Importance
Which processes have greatest impact on the organization‘s strategic
objectives?
2. Health (or Dysfunction)
Which processes are in deepest trouble?
3. Feasibility
Which processes are most susceptible to successful process management?
=> Prioritized process portfolio
SELECTION CRITERIA

Strategic Importance:
• Find out which processes have the greatest impact on the strategic goals
• Consider profitability, uniqueness, or contribution to competitive advantages
• Select those processes for process management that relate to strategy
Health:
• Determine which processes are in deepest trouble
• These processes may profit the most from BPM initiatives
Feasibility:
• Determine how susceptible process is to BPM initiatives, incidentally or
continuously
• Culture and politics may be obstacles
• BPM should focus on those processes where it is reasonable to achieve benefits
PROCESS PERFORMANCE MEASURES

Process performance measures (process performance metrics) that will

be used to determine whether a process is in good shape or in bad shape
• Cost
• Time
• Quality
• Flexibility
The identification of performance measures is generally seen as part of
the process identification phase, although in some cases it may be
postponed until later phases
EXERCISE

Consider the student admission process described in previous Exercise.

Taking the perspective of the customer, identify at least two performance
measures that can be attached to this process.
PROCESS DISCOVERY (PROCESS MODELING)

• The the current state of each of the relevant processes is documented

PROCESS DISCOVERY (PROCESS MODELING)
EXERCISE

Consider again the student admission process. Taking the perspective of

the customer, think of at least two issues that this process might have.
PROCESS ANALYSIS

• Issues associated with the as-is process are identified, documented,

and whenever possible quantified using performance measures
• The output of this phase is a structured collection of issues
• These issues are prioritized based on their potential impact and the
estimated effort required to resolve them
QUALITATIVE PROCESS ANALYSIS
QUANTITATIVE PROCESS ANALYSIS
EXERCISE

Given the issues in the student admission process, what possible

changes do you think could be made to this process in order to address
these issues?
PROCESS REDESIGN (PROCESS IMPROVEMENT)

• The goal of this phase is to identify changes to the process that would
help to address the issues identified in the previous phase and allow
the organization to meet its performance objectives
• Multiple change options are analyzed and compared in terms of the
chosen performance measures
• Process redesign and process analysis go hand-in-hand: As new change
options are proposed, they are analyzed using process analysis
techniques
• Eventually, the most promising change options are retained and
combined into a redesigned process. The output of this phase is
typically a to-be process model
PROCESS REDESIGN (PROCESS IMPROVEMENT)
PROCESS IMPLEMENTATION

• The changes required to move from the as-is process to the to-be
process are prepared and performed
• Process implementation covers two aspects: organizational change
management and automation
• Organizational change management refers to the set of activities
required to change the way of working of all participants involved in
the process
• Process automation refers to the development and deployment of IT
systems (or enhanced versions of existing IT systems) that support the
to-be process
PROCESS IMPLEMENTATION
PROCESS MONITORING

• Once the redesigned process is running, relevant data are collected

and analyzed to determine how well the process is performing with
respect to its performance measures and performance objectives
• Bottlenecks, recurrent errors, or deviations with respect to the
intended behavior are identified and corrective actions are undertaken
• New issues may then arise, in the same or in other processes, which
requires the cycle to be repeated on a continuous basis
PROCESS MONITORING
1.6 SYSTEMS RELATED TO BUSINESS PROCESS MANAGEMENT

• Total Quality Management

• Operations Management
• Lean
• Six Sigma
TOTAL QUALITY MANAGEMENT

• Focus on continuously improving and sustaining the quality of products

and services
• TQM puts emphasis on products and services, while BPM focuses on
improvement of processes
• Applications of TQM are primarily in manufacturing while BPM more in
service organizations
OPERATIONS MANAGEMENT

• Concerned with managing physical and technical functions of

organization, particularly those relating to production and
manufacturing
• Using probability theory, queuing theory, decision analysis,
mathematical modeling, and simulation for optimizing efficiency of
operations.
• Often concerned with controlling an existing process without
necessarily changing it, while BPM making changes to an existing
process in order to improve it.
LEAN

• Originates from manufacturing industry, in particular Toyota

Production System
• One of the main principles is eliminates waste, i.e., activities that do
not add value to the customer
• BPM puts more emphasis on use of IT as a tool to improve business
processes and to make them more consistent and repeatable
SIX SIGMA

• Originates from manufacturing industry, in particular from production

practices at Motorola
• Focuses on minimization of defects (errors)
• Strong emphasis on measuring output of processes, especially in terms
of quality
• Popular approach to blend Lean with Six Sigma, leading to Lean Six
Sigma
1.6 SYSTEMS RELATED TO BUSINESS PROCESS MANAGEMENT

In summary, BPM:
• inherits from the continuous improvement philosophy of TQM
• embraces the principles and techniques of operations management, Lean
and Six Sigma
• combines them with the capabilities offered by modern information
technology
=> to optimally align business processes with the performance objectives
of an organization
THANK YOU !