MTAT.03.231Business Process Management

Lecture 1 – Introduction

Marlon Dumas

marlon.dumas ät ut . ee

1

Objective

• To introduce the discipline of modeling, analyzing, automating and monitoring business processes.

Related courses

• Enterprise System Integration

• Integrating applications to automate or support business processes

• Business Analysis and Software Product Management

• Identifying and analyzing business problems that can be addressed via IT solutions

• Data mining / Business data analytics

• Mining business process execution logs

About this course

2

14 lecture+practice sessions covering:

• Process Identification & Modeling

• Process Analysis

• Process Redesign

• Process Automation

• Process Monitoring & Mining

Team Project

Structure of the course

3

• 8-12 hours per homework ≈ 60 hours in total• 8-12 hours per homework ≈ 60 hours in total

Six assignments (25 points in total)

• ≈ 40 hours• ≈ 40 hours

Project (25 points)

• Technical exam: Modelling, Automation, Mining

• Business exam: Modelling, Analysis, Redesign, Mining

• Minimum exam score: 20 out of 50

• Technical exam: Modelling, Automation, Mining

• Business exam: Modelling, Analysis, Redesign, Mining

• Minimum exam score: 20 out of 50

Exam (50 points), free choice between:

Grading

4

• Course material posted on course Web page• http://courses.cs.ut.ee/2018/bpm

• Textbook• Dumas, La Rosa, Mendling & Reijers: Fundamentals of Business

Process Management (second edition), Springer 2018

• You can download chapters or whole book if inside the university network (see “Readings” section of web site)

• Currently, only first edition is available (OK for the first 4 weeks)

• Second edition available from 12 March onward

• Use message board for questions

Readings and resources

6

ObtainPO

confirm.

Prepare shipment

Scheduledelivery

Issue invoice

Check Invoice

Loadtruck

Check &confirm

PO

Notify shipment

Unload truck

Package products

Issuedelivery receipt

PO changeRequest

PO change

Match incomingpayment

Schedulepayment

7

Greet & seat

Bringmenu

Takeorder

Servemeal

Presentbill

Collectpayment

Loaddish-

washer

Unloaddish-

washer

Cleankitchensurfaces

Collectlaundry

Sweep & mop

Collectlaundry

Brushgrills

8

Financial

HumanResources

Technology

Organisation

Function A Function B Function C

Assets &Partners

Customers

Materials

Business Process

Business Process

Business Process

Business processes

9

ObtainPO

confirm.

Scheduledelivery

Unloadtruck

Issuedeliveryreceipt

Checkinvoice

Schedulepayment

Check &confirm

PO

Packageproducts

Loadtruck

Notifyshipment

Issueinvoice

Matchpayment

PaymentPaymentmadereceived

POreceived

POissued

Goodsarrived

10

Loaddish-

washer

Cleankitchensurfaces

Brush grills

Collect laundry

Sweep & mop

Unload dish-

washer

Greet &seat

Take order

Bringmenu

Servemeal

Presentbill

Issueinvoice

CustomerCustomerpaid

CustomerCustomerarrived

Kitchenis dirty

Kitchenis clean

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a chain of events, activities and decisions...involving a number of actors and objects, ….triggered by a needand leading to an outcome that is of value to a customer.

Examples:• Order-to-Cash• Procure-to-Pay (aka Purchase-to-Pay) • Application-to-Approval• Fault-to-Resolution

A business process is…

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fault-to-resolution process

VA

LUE

Customer

InsuranceCompany

PartsStoreService

DispatchCentre

Technician

Customer

Call Centre

Customer

“My washing machine doesn’t work…”

Negative outcomes (value-reducing):• Fault not repaired in a timely manner• Fault repaired but customer pays more than expected

Positive outcomes (value-adding):• Fault repaired immediately with minor intervention• Fault repaired, covered by warranty

13

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.

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15

Improving Performance (Rummler’s Framework)

Financial

HumanResources

Technology

Economy CultureRegulatory

Organisation

Performance ManagementPerformance Planning

Function A Function B Function C

Assets &Resources

Business Environment

Stakeholders

Customers

Materials

Competitors

Business Process

Business Process

Business Process Val

ue

Val

ue

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Process performance

If you had to choose between two services, you would typically choose the one that is:

• F…

• C…

• B…

Process performance

If you had to choose between two services, you would typically choose the one that is:

• Faster

• Cheaper

• Better

Process performance

Three dimensions of process performance

• Time

• Cost

• Quality

Greet &seat

Take order

Bringmenu

Servemeal

Presentbill

Issueinvoice

CustomerCustomerpaid

CustomerCustomerarrived

Improving process performanceImproving process performance

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How would you improve this process?

Eliminate Cooking

Outsource to Customer Standardize

Eliminate Waiters

Invest and Build

Automate

Re-sequence

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Body of principles, methods and tools to design, analyze, execute and monitor business processes, with the aim of improving their performance.

Business Process Management (BPM)

BusinessProcesses

IT systems

Employees

Data TradingPartners

SuppliersIT infrastructure

Customers

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“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.”

Bill Gates

Why BPM?

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In other words…

InformationTechnology

ProcessChange

Yields

Yields

BusinessValue

Index Group (1982)

Enables

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Why BPM

25

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The BPM lifecycle

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1. Designation step

• Enumerate main processes

• Determine process scope

2. Prioritization step (aka Process selection)

Prioritize processes based on:

• Importance

• Health

• Feasibility

Process identification steps

After Davenport (1993)

Process Architecture

PrioritizedProcess

Portfolio

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

Porter: Components of a process architecture

Core Processes

Management Processes

Su

pplie

rs / P

art

ners

Custo

mers

/ Sta

kehold

ers

Support Processes

After Michael Porter (1985)

Core processes• Sales (lead-to-quote, quote-to-order, order-to-cash)• Direct procurement (supplies replenishment)• …

Support processes• Indirect procurement (parts replenishment, operational resources

replenishment…)• HR (policies update, recruitment, induction, probation, performance

appraisal and professional development…)• …

Management processes• Suppliers management (suppliers planning, suppliers acquisition…)• Logistics management (logistics planning, logistics controlling…)• …

Example: core, support and management processesWholesaler

StrategicManagement

LogisticsManagement

WarehouseManagement

SuppliersManagement

Management processes

FinanceIndirect

procurementIT HR

Core processes

Support processes

Wholesaler

Example: process architecture

DemandManagement

SalesDirect

procurementDistribution

ServiceMarketing

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

Hammer, Champy (1993)

Financial institution

Example: prioritized process portfolio

Health

High

Low

GoodPoor

Short-term action

Rating

Contractpreparation

Loan marketevaluation

Handling ofpayments

Loanapplication

Loanplanning

Loancontrolling

Loandecision

Feasibility

Low

High

Medium

Possible Strategic fit?

The BPM lifecycle

35

Business process modelInvoice handling example

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The BPM lifecycle

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Qualitative process analysis

Root-cause analysis example

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Quantitative process analysis

Process simulation example

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The BPM lifecycle

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Process redesign

AS-IS process model TO-BE process model

Cost

Quality

Time

Flexibility

41

The Process Redesign Orbit

The BPM lifecycle

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Process automation

Executable process design

Executable process design

IT development & configurationIT development & configuration

TestingTesting

......

Process change management

Job redesignJob redesign

TrainingTraining

Performance

management plan

Performance

management plan

….….

Process implementation

44

The BPM lifecycle

45

Process monitoringDashboards, alerts & reports

Model-based analytics (p. mining)Eventstream

DB logs

46

Roles in the BPM lifecycle

BPM group

Developer

Process owner Analyst

Process participants

Systemadmin/operations team

47

Course structure

Weeks 2 & 4

Weeks 5-7

Weeks 8-9Weeks 10-11

Weeks 12-14

48

Week 3

Gover-nance

Culture

Strategy

• Fundamentals of Business Process Management

• Chapter 1 – Introduction

• Short quiz• http://www.proprofs.com/quiz-school/story.php?title=introduction-to-bpm

Further Readings & Resources

49

Next Week

Process Identification

50

StrategicManagement

LogisticsManagement

WarehouseManagement

SuppliersManagement

Management processes

FinanceIndirect

procurementIT HR

Core processes

Support processes

DemandManagement

SalesDirect

procurementDistribution

ServiceMarketing