MTAT.03.231 Business Process Management (BPM) (MBA version) Lecture 1: Introduction Marlon Dumas marlon.dumas ät ut. ee

MTAT.03.231Business Process Management (BPM)

(MBA version)

Lecture 1: Introduction

Marlon Dumas

marlon.dumas ät ut . ee

2

Structure of the Course

• Contact sessions1. 07.02 – Introduction to BPM and BPMN

2. 10.03 – Process Analysis & Improvement

3. 11.04 – Process Monitoring & Mining

4. 17.05 – Project Presentations

5. 17.06 – Exam

• Assessment– Two homeworks worth 10 points each– Project – 30 points– Exam – 50 points

3

Readings and Resources

• Textbook– Dumas & La Rosa. Fundamentals of Business Process

Management, Springer 2013

• Other readings & resources listed in the course pages:– http://courses.cs.ut.ee/2013/bpm

• For communication, we will use this message board:– http://www.quicktopic.com/50/H/RACpfMwnxRR

4

Agenda for Today

Time Contents

9.00-10.30 Introduction to BPM

10.30-10.45 Break

10.45-12.15 The BPM Lifecycle

12.15-13.15 Lunch Break

13.15-14.45 Introduction to BPMN

Part I

Introduction to Business Process Management

6

What is a Business Process?

7

fault-report-to-resolution process

“My washing machine won’t work!”

VA

LU

E

Customer

Warranty?

PartsStoreService

Dispatch

Technician

Customer

Call Centre

Customer

© Michael Rosemann

8

Processes and Outcomes

• Every process leads to one or several outcomes, positive or negative

• 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– …

9

What is BPM?

Body of methods to design, analyze, execute and monitor business operations involving humans, software, information and physical artifacts using process models.

10

Exercise

• Textbook, Chapter 1, exercise 1.1

11

Why BPM?

“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.”

12

Why BPM?

InformationTechnology

ProcessChange

Yields

Yields

BusinessValue

Index Group (1982)

Enables

13

How to Engage in BPM?

Two complementary BPM approaches:1. Continuous Process Improvement (CPI)

– Does not put into question the current process design, but rather seeks to identify issues and resolve them incrementally, one step at a time and one fix at a time

2. Business Process Re-Engineering (BPR)– Puts into question fundamental assumptions and principles of

the existing process design– Aims at achieving highly noticeable improvement, for example

by removing costly tasks that do not directly add value

14

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

15

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

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The correct answer is … Mazda’s Accounts Payable Department

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How the process worked? (“as is”)

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19


20


21


22


23

Reengineering Process (“to be”)

24


25


26


27


28


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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?

30

Principles of BPR

1. Have those who use the output of the process drive the process

2. Capture information once and at the source

3. Subsume information-processing work into the real work that produces the information

4. Treat geographically dispersed resources as if they were centralized

31

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 improvement of the process to shorten the client waiting time

© Laguna & Marklund

32

Overview of the existing claims process

ClientLocal

independentagent

Approvedglass

vendor

Claimsprocessing

center

Request additional information

Pay

Notify agent

File claim

Give instructionsForwardclaim

Request quote

Provide quote

Pay


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Existing claims process1. 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.


Part II

The BPM Lifecycle

35

How to engage in BPM?

1. Process Identification &

opportunity assessment 1. Process modelling (as-is)

2. Process analysis

3. Process re-design (to-be)

4. Process implementation

5. Process monitoring/controlling

Process Modeling Tools

Process Management Systems

Phase 1

Process Identification, Prioritization and Opportunity Assessment

37

Question

• Think about the company you are currently working for or a company you have worked for.

What processes does this company have?

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Process Architecture at a Harbor Authority

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Process Architecture

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Question

• Think about the company you are currently working for or a company you have worked for.– What processes would be a good starting point for a

Process Improvement project?– What criteria would you apply to select the ``starting

process’’?

41

Process Prioritization: Three Criteria(Hammer & Champy 1994)

• Dysfunction – Which processes are in the deepest trouble?

• Importance– Which processes have the greatest impact on the

company's customer?

• Feasibility– Which process is the most susceptible to successful

redesign

In any case, we have to measure…

42

Process Measures

• Link the identified processes to measurable objectives• Quantify the benefits of improvement

Maximize revenues andminimize costs

Must use resources efficiently whileunderstanding customer needs

Satisfying customer needs in an efficient way

Profit maximizing firms Non-profit organizations

Overarching goal is usually tomaximize long term shareholder value

A common goal is survival and growth while satisfying customer needs


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Classification of process metrics

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Manage Unplanned

Outages

Manage Emergencies &

Disasters

Manage Work Programming &

Resourcing

Manage Procurement

Customer Satisfaction

0.5 0.55 - 0.2

Customer Complaint

0.6 - - 0.5

Customer Feedback

0.4 - - 0.8

Connection Less Than Agreed Time

0.3 0.6 0.7 -

Case Study at Anonymous Utilities Provider

Key Performance

Process

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Process: Manage Emergencies & Disasters

Process: Manage Procurement

Process: Manage Unplanned Outages

Overall Process Performance

Financial PeopleCustomerExcellence

OperationalExcellence

RiskManagement

Health& Safety

CustomerSatisfaction

CustomerComplaint

CustomerRating (%)

CustomerLoyalty Index

Average Time Spent on Plan

1st Layer Key ResultArea

2nd Layer Key Performance

SatisfiedCustomer Index

MarketShare (%)

3rd & 4th Layer Process PerformanceMeasures

0.65

0.6 0.7

0.7 0.6 0.8

0.4 0.8

0.5 0.4 0.5 0.8 0.4

0.54

0.58

0.67

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Exercise

• Textbook, chapter 1, exercise 1.3

47

Phase 2: Process Identification and “As Is” Modeling

Start End

Check for completeness Perform checks Make decision

Deliver card

Receive review request

Request infoReceive info

Notify acceptance

Notify rejection Time out

complete? Decide

review request

Yes

No

reject

reviiew

accept

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Phase 3: Analysis

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Phase 4: Re-design

To-Be

Strategy / Goals

Cap

abil

itie

s

• IT• Knowledge• People• Ability to change• Culture

Best Practice

ReferenceModels

Benchmarking

Idealmodels

Studytours

As Is

• Issues • Barriers

Guidelines

50

Costs

Quality

Time

Flexibility

The Devil’s Rectangle

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Phases 5-6. Automation & Monitoring –When Technology Kicks in..

Part II

Introduction to Business Process Modeling

53

Purposes of Process Modeling

Communication

Documentation

Analysis

ProcessImplementation

ProcessAnalysis & Design

Process Enactment & Monitoring

Process Evaluation

“TO BE”Process Models

Exe

cuta

ble

P

roce

ss M

od

els

Mea

sure

s fo

r Im

pro

vem

ent

Process Metrics

OrganizationalAnalysis

Tar

get V

alue

s

“AS IS”Process Models

Automation

Monitoring

Compliance Checking

54

Business Process Modeling Notation(BPMN)

• OMG Standard, supported by many tools:– Signavio (http://academic.signavio.com/)– Bizagi Process Modeller (free download for Windows)– ARIS– IBM BPM– Oracle BPA– Business Process Visual Architect (Visual Paradigm)– Savvion Business Modeller (Progress Software).

• For simple drawing, you can use:– Visio + BPMN stencils

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BPMN from 10 000 miles…

• A process model in BPMN is called a Business Process Diagram (BPD)

• A BPD is essentially a graph consisting of four types of elements (among others):

56

Example

An Order Management process is triggered by the reception of a purchase order from a customer. The purchase order has to be checked against the stock re the availability of the product(s) requested. Depending on stock availability the purchase order may be confirmed or rejected. If the purchase order is confirmed, the goods requested are shipped and an invoice is sent to the customer.

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Order Management Process in BPMN

Check stock availability

Reject order

Confirm order

Send invoice

Ship goods

58

A little bit more on gateways …

• Exclusive Decision / Merge– Indicates locations within a business process where the

sequence flow can take two or more alternative paths.– Only one of the paths can be taken.– Depicted by a diamond shape that may contain a marker

that is shaped like an “X”.

• Parallel Fork / Join– Provide a mechanism to synchronize parallel flow and to

create parallel flow.– Depicted by a diamond shape that must contain a

marker that is shaped like a plus sign.

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Revised Order Management Process


Reject order

Confirm order

Send invoice

Ship goods

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When a claim is received, it is first checked whether the claimant is insured by the organization. If not, the claimant is informed that the claim must be rejected. 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, they are checked for completeness. If the forms provide all relevant details, the claim is registered in the Claims Management system, which ends the Claims Notification process. Otherwise, the claimant is informed to update the forms. Upon reception of the updated forms, they are checked again.

BPMN Exercise 1:Claims Notification process at a car insurer

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Naming conventions for processes and tasks

• Names should be 1-3 words long• Begin with a verb followed by business object

name and possibly an adjective (e.g. Issue Driver Licence, Renew Driver Licence via Offline Agencies)

• Avoid generic verbs such as Handle, Record…• Avoid prepositions (to, from, for)• Avoid naming business areas which are already

named in a lane/pool

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Verbs to avoid

• Update, Create, Read, Delete, Record, Download, Transmit: Too technical. Try Amend, change, generate, retrieve, remove, capture, register, forward

• Send: Could merely be a message flow from one business process to another.

• Process, Handle, Manage: Too generic, would not reflect the specific objective of the process. Try disseminate, distribute, etc.

• Input: Why do we have to input data? Maybe there is an opportunity for process optimisation here…

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When?

Process

Which?

Data / Service / Product

What?

Function

Who?Organization

Process Modelling Viewpoints

64

Organisational Elements in Process Models

Two basic abstractions:• Resource: Human actor or equipment (e.g. printer) that is

required to perform an activity• Resource class: Set of resources with similar

characteristics, e.g. Clerk, Manager, Insurance Officer or belonging to the same team (e.g. accounts payable)

65

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 that operate in the same organizational space and share common systems

• Sales Department, Marketing Department• Clerk, Manager, Engineer

66

Pools Pools represent business process

participants. They are used to partition a set of activities. Can be a business entity or a

business role.

Sequence flows cannot cross the boundaries of a Pool.

Interaction between Pools are captured through Message Flow (dashed lines with an arrow)

Pool

67

Order Management Process with PoolsC

ust

om

erS

up

plie

r


Confirm order

Reject order

Send invoice

Ship goods

Place purchase

order

Purchaseorder

Order Rejection Notification

Order confirmationnotification

Invoice

Make payment

Shipment notification

68

Lanes

Lanes represent sub-partitions within a pool. They are used to organize and categorize activities. Horizontal vs. vertical Lanes are typically used for internal roles

(e.g., Manager, Associate) or an internal department (e.g., shipping, finance).

Lanes can also be used to represent automated information systems (e.g. an Enterprise System), although sometimes Pools are used for this purpose or sometimes such systems are only implicitly captured in the model.

Lane

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Order Management Process with Lanes

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BPMN Exercise: Lanes, Pools

• Claims Handling process at a car insurerA 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.

71

Adding Data – BPMN 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 Object

Directed association

Undirected association

Data Store

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Interlude: Annotations

• A picture is worth a thousand words• But some words in a picture can be worth a thousand

pictures

• Annotations are a mechanism for the modeller to provide additional text information to the diagram reader.

Text Annotation

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Order Processing Model with Artifacts


Confirm order

Reject order

Send invoice

Ship goodsSet PO to approved

Set PO to rejected

PurchaseOrder

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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.

Please depict all relevant documents in the model.

BPMN Exercise 3: Artifacts

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Sub-processes

• A task in a process can be decomposed into a “sub-process”.

• Use this feature to break down large models into smaller ones, making them easier to understand

76

Sub-processes: example

Check Purchase Order

OK Payment

...

...

Order Handling Process

Payment Process

Issue Invoice to Customer

...

Receive Payment Notice from Bank

Confirm Payment to Customer

77

Value chain

• Good practice is that the top-level process should be simple (no gateways) and should show the main phases of the process– Each phase then becomes a sub-process– This is sometimes called a “value chain”

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Showing the value chain with sub-processes

Purchase Request

ApprovalPurchase

OrderGoods Receipt

Invoice Verification

Purchase Request process

Check purchase request for 1st

approval

Check purchase request for 2nd

approval

approved

Consider re-submission

rejected

rejected

approved

Send approved request to requestor

Purchase Request

Make copy of purchase request

Approved Purchase Request

Forward to purchase department

Purchase Order process

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Recap: BPMN Main Elements

Flow Objects

Gateway

Event

Activity

Connections

Message

Flow

Association

ArtifactsText Annotation

Data Object Group

Swimlanes

Poo

l

Lane

Check the BPMN Poster: http://www.bpmb.de/index.php/BPMNPoster

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Homework 1 (10 points)

• Chapter 1, exercise 1.6– Answer the questions in this exercise– Plus write a BPMN model for this process (e.g. Signavio or

Bizagi)

• To be completed individually or in groups of 2• Submit using the following form:

– https://courses.cs.ut.ee/2013/bpm/Main/MBAHomework1

• Deadline: 4 March 2013

Documents

MTAT.03.231 Business Process Management (BPM) (MBA version) Lecture 1: Introduction Marlon Dumas marlon.dumas ät ut. ee