Production & Operations

Management (POM 2)

Unit 2: Understanding Business Processes

Praxis Business School

Prof Agnimitra Biswas

 POM2 Course Outline
Unit 1: Introduction to POM2

Unit 2: Understanding Business Processes

Unit 3: Forecasting

Unit 4: Designing Products and Services

Unit 5: Production Planning and Control

Unit 6: Maintenance Management

Unit 7: Quality Management

Unit 8: Project Management Fundamentals

Unit 9: Developing Project Plans

Unit 10: Managing Procurement and Outsourcing

Unit 11: Project Monitoring and Control

2.2
 What are Business Processes?
• Based on Porter’s value chain concept
• Typically formulated based on strategic intent of the business

2.3
 Business Process - Definitions
• A business process is defined as a set of activities and tasks that, once
completed, will accomplish an organizational goal
• The process must involve clearly defined inputs and a single output. These
inputs are made up of all of the factors which contribute (either directly or
indirectly) to the added value of a service or product.
• These factors can be categorized into core processes and supporting
(enabler) business processes.
• Processes can be simple or complex based
on number of steps, number of systems
involved etc. They can be short or long
running. Longer processes tend to have
multiple dependencies and a greater
documentation requirement.
• With Business Process analysis,
organizations can find weaknesses and
limitations in organizational processes, which
can be elminated to improve the efficiency
and effectiveness of the organization

2.4
 Examples of Core Business Processes
Idea to Offering The process of developing products from idea to launching an offer.
Market to Order The process of marketing from concept to closing sales. Includes product
development, promotion, pricing, distribution and sales.
Order to Cash The process from accepting a customer order to getting paid for that order.
Includes order management, credit management, order fulfillment,
shipping, invoicing, accounts receivable, collection and related financial
accounting.
Record to Report Gathering financial, strategic and operational information and delivering it
to internal and external stakeholders to monitor the performance of the
business.
Procure to Pay The process of buying things including requirements, requesting
quotations, purchase orders and payment.
Hire to Retire The complete set of human resource functions that apply over the course
of an employee's career with an organization. Includes activities such as
hiring, onboarding, performance management, compensation & benefits,
training & development and retirement.
Plan to Produce The process of sales forecasting and production planning.
Plan to Inventory The process of sales forecasting and inventory management. Potentially
includes production planning if you manufacture your inventory.
Acquire to Retire Administering assets including requisition, acquisition, deployment and
2.5 retirement.
 DEFINITION OF A PROCESS MODEL

A process model is the analytical representation or illustration of an

organization’s business processes.

BPR CoE Process – [Title of Process or Sub-Process)

Process models are used to

map out an organization’s
Role 1 (example : PR CoE

Number Number
current (or “as-is”) processes to Start
Activity 1 Activity 2
Lead )

create a baseline for process

improvements and to design
future (or “to-be”) processes.
Role 2 (example Project

Number Decision Number

Sponsor )

No End
Activity 3 Gate Activity 4

Document

Yes
Role 3 (Example
BPR Project

Number Number
Lead )

Activity 5 Activity 6

6
 Industry process model – example from Telecom
Level 2 Business Processes defined in eTOM (enhanced Telecom Operations Map)

2.7
 More defnitions
• Business Process Mapping: A diagrammatic (visual)
documentation of the business processes in order to assist
organizations to become more effective. Mapping can be
done for the “as-is” processes or the “to-be” processes
• Business Process Management: BPM is a discipline in
operations management in which people use various
methods to discover, model, analyze, measure, improve,
optimize, and automate business processes. Generally
BPM software tools (eg. Those sold by Tibco and Pega) are
used to model and deploy business process automation
• Business Process Reengineering: BPR is a logical
methodology for assessing process weaknesses, identifying
capability gaps, and implementing innovation and
optimization opportunities to achieve breakthrough
improvements in operational performance.
2.8
 Business Process Mapping

2.9
 Definition of Business Process Mapping
• Process mapping is a method to graphically describe the
steps that make up a process.
• It consists of a set of tools that enable us to systematically
document, analyze, improve, and redesign a process.
• It is the first step of process management.

2.10
 Processes Are....
• A set of Activities and Tasks, which are performed by
Participants in Roles, organized in a particular
Sequence, directed and measured by Time and Events /
Triggers

Activities / Tasks Participants Roles

A single unit of work, People or systems that A layer of abstraction
can be performed by a provide input to, or that creates the link
person or system perform work steps between participants
within a process and activities / tasks

Events / Triggers
Sequence Time Occurrences that
The logical order in Average or desired cause a process to
which work steps are durations for work start, direct a process
performed items sequence, or cause a
process to end

2.11
 Benefits of Process Mapping
• Ability to visually understand and document a process
• Ability to take a holistic view of process objectives
• Develop true “buy-in” from employees
• Develop a sense of pride among employees
• Create customer-focused processes
• In order to prevent the need for a VERY large sheet of paper, we
create a process hierarchy that allows us to compartmentalize and
focus on specific process segments
• Our process hierarchy will be the following:
• Cycle
• Process ← Generally we start here
• Subprocess
• Activity
• Task

2.12
Business Process Breakdown

These levels can be combined,

depending on the complexity of the
process.

Procedural documentation should

focus on describing the actions that
occur at these levels.

Adapted from the Business Process Management Institute, “Analyzing the ‘As-Is’ Process”.

13
Business Process Breakdown... Cont’d

14
Business Process Breakdown – Example of “As-Is” Process

• This is the “50,000-foot” view

• Each green box represents a process function, with sub-processes listed underneath

15
Business Process Breakdown – Example .... Cont’d

16
 SIPOC Charts
SIPOC stands for Suppliers – Inputs – Process – Outputs – Customers. A
SIPOC diagram is a map showing a full process at a high level in no more
than 6-8 steps.

2.17
 Waste Elimination Using Value Stream Mapping
“Wastes” are the non-value added activities in a Business
Process. Value Stream Mapping and Value Stream
Analysis are special type of flow charts that uses symbols
known as "the language of Lean" to depict and improve the
flow of inventory and information by eliminating “Wastes”
such as:
– Delays
– Duplication
– Approvals
– Hand-offs
– Errors
– Uncertainties

2.18
 Potential Pitfalls of Process Mapping
• Mapping without a clear purpose
• Lost in the details
• Failure to finalize mapping
• Not verifying the facts
• Hidden bias or agenda
• Not focusing on customers’ needs

2.19
 Business Process Mapping -
Practice

2.20
 Basic Flowchart Shapes and Definitions

Start / End Project / Task Input / Output

The start or end of a workflow. Process or action. Data: Inputs to, and outputs
from, a process.

Split Decision Document

or
Merge

Upright indicates a process split, Decision point in a Document or report.

inverted indicates a merge of processes. process or workflow.

Off Page
Manual Connector Connector
Input

Prompt for information, manually Connector used to connect one

entered into a system. Used to connect one part of
a flowchart to another. page of a flowchart to another.

2.21
 Create a Process Flow Chart for
“Brewing Coffee”

2.22
Flowchart Example: Brewing Coffee
Coffee Grinder

Start Grind Beans

Task

Add Filter
Read
Instructions Merge
Inputs
Coffee Pot

Document Brew
Add Coffee

Inputs

Add Water

Decision Decision

Yes
Coffee

Pour Sugar Cream

Coffee
Mug

No
Manual Input Yes
Mug

No
Task

Drink Finish

2.23
 Flowchart with Horizontal Swimlanes
Department

No Yes
Start Input Decision Finish
Department

Task Manual Input

Group Three
Department

Merge Document

2.24
 Flowchart with Vertical Swimlanes

System One System Two System Three System Four

Process
Start Improvement

Produce Review data

Documents

No

Input / Output Process

Improved?

Yes

Change Process

Completed

2.25
 Individual Assignment on Process Mapping
• Select any one “Process” of your choice. Prepare the flow
chart on a A4 size paper with proper labelling. Can use
software (Powerpoint/Visio) or simply hand drawing. Do not go
more than 3 level deep. Use horizontal swim lanes. Identify the
process steps which can be improved. Due date: 8th Feb 2020
• Some examples are given below, but everybody is free to
choose any process:
– Praxis related processes (Admission, Placement, Class Scheduling,
Mess, Fee Payments, Examination, Security etc.)
– Manufacturing processes (Assembling, Bottling, Machining, etc.)
– Retail Management (Warehousing, Store Planning, Customer care,
Online shopping)
– Business processes (Purchase, Budgeting, Hiring, Staffing, Billing,
Treasury, Inventory, Payroll, Audit, Quality etc.)
– Government processes (Passport Application, Income Tax, Driver
License, Aadhar verification, eProcurement, etc.)
– Healthcare (Hospital Admission, Discharge, Patient Billing)
2.26
Process Measures

Capacity, Time, Throughput, Utilization,

Inventory
 Production Processes
• Similar to business processes, but the focus is
on how to produce a product.
• “Buffering” refers to storage areas between
two “stages” of a process, where output of a
stage is placed prior to being used by the
downstream stage. Buffering allows stages to
occur independently.
• Without Buffering, there might be “Blocking”
(upstream activities must stop because
downstream is not ready to process) or
“Starving” (downstream stage must stop as
there is no work.
• “Cycle Time” refers to the time a stage takes
to process one unit of product. If two stages
have different cycle times, it may lead to a
“Bottleneck”

2.28
 Problem 2.1: Calculating throughputs
• In a two stage process, the first stage has a cycle time of
30 secs and the second stage has a cycle time of 45
secs. If the process needs to produce 100 units find out if
there will be blocking or starving?
• If an inventory buffer is placed between the stages...
– What would be the optimal inventory build up?
– What would be the throughput rate (production per unit of time)
of the whole system?
– Which stage of this process is the bottleneck?
– What are the utilization of the two stages?
• Reverse the two stages and calculate all of above.
• How can you further improve the throughput rate?

2.29
 Problem 2.1: Solution
Stage A Buffer Stage B
30 secs / Unit 45 secs / Unit

• Without buffer
– Stage B starves for first 45 secs, Stage A is blocked for 15 secs after every 30 secs
– Total Time to Process 100 units is 4530 secs
• If an inventory buffer is placed between the stages...
– Stage B starves for first 30 secs, Stage A starves for last 45 secs
– Total Time to Process 100 units is 4530 secs
– Inventory built up can be calculated as follows:
• Stage A will produce 100 units in 3000 secs. In this 3000 secs, Stage B will produce (3000-30)/45
= 66 units
• Therefore the inventory will start building up and maximum inventory would be 100-66 = 34 units. It
will start going down after 34 to zero at the end of 4530 secs. Minimum buffer size = Maximum
inventory built-up = 34 units
– Throughput Rate = 79.5 units per hour
– Stage B is the bottleneck
– Utilization of Stage A is (3000/4530) = 66.23%, Utilization of Stage B is (4500/4530) =
99.34%
• How can you further improve the throughput rate?
2.30 – Add more resources to Stage B (May be create two parallel machines)
 Measures Recap
• Cycle Time – The time between the output of two successive flow
units (could be single or batch, eg. Time to serve one customer in
line, time to wrap 100 packets, etc.)
• Capacity - The planned number of units that can be processed in a
given time (eg. 20 cars in a day)
• Bottleneck – The process stage that takes the longest time to
complete. The capacity of a process is determined by the slowest
(bottleneck) resource
• Throughput Rate - Rate at which the number of units goes through
the process per unit time
• Throughput Time – The average time an unit stays in the system
• WIP (Inventory) – The average number of units in process at any
given time
• Utilization of a Resource – Proportion of time resource is actually
used
• Efficiency (Utilization Rate) – What percentage of the Capacity is
actually utilized. This is measured as: (Throughput Rate) / Capacity
2.31
 Little’s Law
• Shows relationship between Throughput Rate,
Throughput Time and WIP
• Expressed as:

Throughput Time = (Average) WIP / Throughput Rate

• Example: Bank Teller

– Average WIP: 6 customers
– Throughput rate: 12 customers per hour
– Throughput time: 6/12 = 0.5
– A customer spends (on average) 0.5 hours in the bank

• Implication of Little’s Law: Keeping WIP fixed, reducing

throughput time results in a higher throughput rate
2.32
 Problem 2.2: Loan Processing
Check Credit Rating
(15 mins)

Check Loan Docs Complete paperwork

Categorize Loans
And put them in order For new loan
(20 mins)
(15 mins) (10 mins)
Data Entry
of Loan Application
(12 mins)

• What step is the bottleneck?

• What is the throughput time?
• What is the maximum loans that can be processed in 5
hours (assuming loan applications are coming
continuously)?
• What is the throughput rate?
• What is the average number of loans that can be
processed?
2.33
 Problem 2.2: Solution
Check Credit Rating
(15 mins)

Check Loan Docs Complete paperwork

Categorize Loans
And put them in order For new loan
(20 mins)
(15 mins) (10 mins)
Data Entry
of Loan Application
(12 mins)

• “Categorize Loans” is the Bottleneck (slowest step)

• What is the throughput time?
– Each loan takes 15+20+15+10 mins (longest path) = 60 mins
– Throughput Time = 60 mins OR 1 hour
• What is the maximum loans that can be processed in 5
hours?
– Total Available Time / Bottleneck Step Time = 300 mins / 20 mins = 15
– Throughput Rate is 15 loan applications per 5 hours or 3 loans per
hour
– WIP is given by Little’s Law = 1 hour * 3 loans per hour = 3 loans
2.34
 Problem 2.3: Customer Service with Waiting Time
• At a bank counter, people arrive at the rate of 30/hour. On
an average there are 8 people waiting on line to be served.
Once a person gets to the counter, it takes an average 5
mins to serve

30 people
5 mins to serve
Per hour 8 people
waiting

• What is the flow unit?

• How long does the average person wait on line?
• On average, how many people are being served at once?
• On average, how many people are in the bank (being
served and waiting in line)?
• On average how long does it take for a person to get
through the line and service?
2.35
 Problem 2.3: Solution
Activity WIP (Inventory) Throughput Throughput Throughput
=I Rate (#/hour) Rate (#/min) = Time (By
R activity) = T
Wait in Line Given –> 8 Given –> 30 Calculated: .5 Calculated (I/R)
(Buffer) people people / hour people / min = 8/.5 = 16 mins
Being Served Calculated (R*T) Given –> 30 Calculated: .5 Given –> 5mins
(Process) = .5 * 5 = 2.5 people / hour people / min per person
person
Total Calculated Calculated: .5 Calculated – 16
8+2.5 = 10.5 people / min + 5 = 21 mins
persons

• Flow unit here is people or customer.

• How long does the average person wait on line? 16 mins
• On average, how many people are being served at once? 2.5 persons
• On average, how many people are in the bank (being served and
waiting in line)? 10.5 persons
• On average how long does it take for a person to get through the line
and service? 21 mins
2.36
 Summary of Unit 2
• In order to study a business operations, we can break down the business into
core processes and supporting (enabler) business processes
• Processes are a set of Activities and Tasks, which are performed by
Participants in Roles, organized in a particular Sequence, directed and
measured by Time and Events / Triggers
• All processes may not be adding “value”, especially if the customer is not
willing to pay for those
• Process Flow Charts, SIPOC Charts, Value Stream Mapping are various
ways to map the business processes visually in order to analyse and improve
the processes from “as-is” to “to-be”
• Instead of making small incremental improvements, Business Process
Reengineering aims at innovation and optimization opportunities to achieve
breakthrough improvements in operational performance of the entire
Business Unit / Organization
• Buffering, Blocking, Starving, Cycle Time and Bottlenecks are terms used in
context of a manufacturing process to find out how process throughput can
be improved.
• Little’s Law suggests that WIP (Average Inventory) = Throughput Time x
Throughput Rate
2.37