MTAT Business 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 Software Economics and Business Analysis Identifying and analyzing business problems that can be addressed via IT solutions Data mining Mining business process execution logs About this course 2

14 lecture+practice sessions covering: Process 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 Six assignments (25 points in total) ≈ 40 hours Project (25 points) 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 Textbook Dumas, La Rosa, Mendling & Reijers: Fundamentals of Business Process Management, Springer 2013 You can download chapters or whole book if inside the university network (see “Readings” section of web site) Use message board for questions Readings and resources

6

Obtain PO confirm. Obtain PO confirm. Prepare shipment Prepare shipment Schedule delivery Schedule delivery Issue invoice Issue invoice Check Invoice Check Invoice Load truck Load truck Check & confirm PO Check & confirm PO Notify shipment Notify shipment Unload truck Unload truck Package products Package products Issue delivery receipt Issue delivery receipt Request PO change Request PO change Match incoming payment Match incoming payment Schedule payment Schedule payment 7

Greet & seat Greet & seat Bring menu Bring menu Take order Take order Serve meal Serve meal Present bill Present bill Collect payment Collect payment Load dish- washer Load dish- washer Unload dish- washer Unload dish- washer Clean kitchen surfaces Clean kitchen surfaces Collect laundry Collect laundry Sweep & mop Sweep & mop Collect laundry Collect laundry Brush grills Brush grills 8

Financial Human Resources Technology Organisation Function A Function B Function C Assets & Partners Customers Materials Business Process Business processes 9

Obtain PO confirm. Obtain PO confirm. Schedule delivery Schedule delivery Unload truck Unload truck Issue delivery receipt Issue delivery receipt Check invoice Check invoice Schedule payment Schedule payment Check & confirm PO Check & confirm PO Package products Package products Load truck Load truck Notify shipment Notify shipment Issue invoice Issue invoice Match payment Match payment Payment made Payment made PO received PO received PO issued PO issued Goods arrived Goods arrived 10

Load dish- washer Load dish- washer Clean kitchen surfaces Clean kitchen surfaces Brush grills Brush grills Collect laundry Collect laundry Sweep & mop Sweep & mop Unload dish- washer Unload dish- washer Greet & seat Greet & seat Take order Take order Bring menu Bring menu Serve meal Serve meal Present bill Present bill Issue invoice Issue invoice Customer paid Customer paid Customer arrived Customer arrived Kitchen is dirty Kitchen is dirty Kitchen is clean Kitchen is clean 11

a chain of events, activities and decisions...involving a number of actors and objects, ….triggered by a need and 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… 12

fault-to-resolution process VALUE Customer Insurance Company Parts Store Service Dispatch Centre Technician CustomerCall CentreCustomer “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-creating): Fault repaired 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. 14

15

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 Greet & seat Take order Take order Bring menu Bring menu Serve meal Serve meal Present bill Present bill Issue invoice Issue invoice Customer paid Customer paid Customer arrived Customer arrived Improving process performance 19

How would you improve this process? Eliminate Cooking Outsource to Customer Standardize Eliminate Waiters Invest and Build Automate Re-sequence 20

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) 21

“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? 22

In other words… Information Technology Process Change Yields Business Value Index Group (1982) Enables 23

Why BPM 24

25

The BPM lifecycle 26

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 Prioritized Process 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 Suppliers / Partners Customers / Stakeholders 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 processes Wholesaler

Strategic Management Logistics Management Warehouse Management Suppliers Management Management processes Finance Indirect procurement ITHR Core processes Support processes Wholesaler Example: process architecture Demand Management Sales Direct procurement Distribution ServiceMarketing Process group

Strategic Management Corporate Development Investor Relations Risk Assessment & Management Market Development Management processes Marketing & Sales Underwriting Management Policy Servicing Claims Management Payments Collection and Disbursement Assets Management Finance/ Treasury Legal/ Audit ReinsuranceITHR Core processes Support processes Insurance company Example: process architecture

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 Importance High Low GoodPoor Short-term action Rating Contract preparation Loan market evaluation Handling of payments Loan application Loan planning Loan controlling Loan decision Feasibility Low High Medium Possible Strategic fit?

The BPM lifecycle 35

Business process model Invoice handling example 36

The BPM lifecycle 37

Qualitative process analysis Root-cause analysis example 38

Quantitative process analysis Process simulation example 39

The BPM lifecycle 40

Process redesign AS-IS process model TO-BE process model Cost Quality Time Flexibility 41

The BPM lifecycle 42

Process automation Executable process design Configuration & coding Testing... Process change management Job redesignTraining Performance management plan …. Process implementation 43

The BPM lifecycle 44

Process monitoring Dashboards, alerts & reports Model-based analytics (p. mining) Event stream DB logs 45

Roles in the BPM lifecycle BPM group Developer Process owner Analyst Process participants System admin/operati ons team 46

Course structure Weeks 2-3 Weeks 4-6 Weeks 7-8 Weeks 9-11 Weeks Week 6: Lecture 12 47

Fundamentals of Business Process Management Chapter 1 – Introduction Short quiz Further Readings & Resources 48

Next Week Introduction to Process Modeling 49