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Ch0 1

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Ahmed Shoaib
Ahmed Shoaib

This document defines key concepts related to business processes. It begins by defining a business process as a network of connected activities that transform inputs into outputs. It then discusses the types of business processes including individual, vertical/functional, and horizontal/cross-functional processes. The document also outlines the key components of a process architecture including inputs/outputs, flow units, activities/buffers, resources, and information structure. Finally, it discusses the essence of business process design and how well-designed processes can efficiently satisfy customer needs.

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Chapter 1 Business Process Modeling, 1
What is a Business Process? 1. A pragmatic definition A Business Process describes how something is done in an organization In general terms… Business - Organizational entity that deploys resources to provide customers with desired products and services Process (Merriam-Webster’s Dictionary) (i) A natural phenomenon marked by gradual changes that lead to a particular result (ii) A natural continuing activity or function. (iii) A series of actions and operations conducing to an 2 end.
What is a Business Process? A process specifies the transformation of inputs to outputs Inputs Process Outputs The transformation model of a process Different types of transformations • Physical (Ex. raw material ⇒ finished product) • Locational (Ex. flying from Denver to L.A.) • Transactional (Ex. depositing money in a bank) • Informational (Ex. accounting data ⇒ financial statement) 3
What is a Business Process? 3. A more comprehensive process definition 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 Resources Process Suppliers Inputs Outputs Customers 4
Process Types and Hierarchies 1. Individual processes – Carried out by a single individual Make up 2. Vertical or Functional processes – Contained within one functional unit or department Make up 3. Horizontal or Cross Functional processes – Spans several functional units, departments or companies 5
Process Types and Hierarchies Core cross-functional processes often have highest improvement potential • Core processes – essential for meeting market place demand through a specific strategy • Especially high improvement potential if a significant amount of non-manufacturing/service related activities • Reasons – Difficult to coordinate – Have not kept up with improvements in manufacturing – Difficult to detect waste and inefficiencies – Often as little as 5% of the time considered adding customer value – Customers more likely to abandon business because of “poor” service than “poor” products 6
Components of the Process Architecture Inputs and Outputs Information structure Process Flow units Resources Architecture The network of activities and buffers 7
Components of the Process Architecture Inputs and Outputs • Establish interaction between the process and its environment • Identify the process boundaries ⇒ easy to identify the Input consumed from the environment in order to produce the desired Output • Process inputs and outputs can be – Tangible (Ex. raw material, cash, products, customers) – Intangible (Ex. Information, time, energy, services) Flow units • A flow unit is a transient entity or a job that proceeds through the network of activities and buffers and exits the process as a finished output • Typically, the identity of a flow unit changes across the process • Examples of common flow units: materials, orders, files, documents, customers, products, cash, transactions… • Flow rate – The number of jobs flowing through the process per time unit 8
Components of the Process Architecture The network of activities and buffers • The work performed on a job moving through a process can be divided into an ordered sequence of activities • The buffers represent storage or waiting points where the job waits before moving to the next activity (queues, waiting rooms, etc.) • Different types of jobs ⇒ different paths through the network • Defining activities is crucial in process analysis – Tradeoff between process and activity complexity Process Complexity Individual Activity Complexity 9
Components of the Process Architecture Resources • Tangible assets utilized to perform activities in a process • Can be divided into:  Capital assets – real estate, machinery, equipment, IT systems…  Labor – people and their knowledge and skills • Resources are utilized while inputs are consumed Information structure • Specifies the information required for making decisions and performing activities in a process • Limited information availability is a common cause for process inefficiencies – Information enables coordination! 10
Workflow Management Systems • Management of administrative processes in the field of Information Systems is often referred to as workflow management • Workflow management systems – Control actions taken on documents moving through a business process – Workflow management software/systems are used to control who does what to a specific document • Using our comprehensive process definition ⇒ Process = Workflow 11
The Essence of Business Process Design “How to do things in an efficient and effective way” • An efficient process which does not deliver customer value is useless A well designed process does the right things, right! More formally… • BPD is concerned with configuring the process architecture to satisfy customer desires in an efficient way – Customers can be both internal and external • Internal customer requirements must be aligned with the desires of the external customers in the business strategy We make a clear distinction between process design and implementation 12
The Essence of Business Process Design • BPD often most valuable when considering complex cross functional processes – Challenging coordination issues – Process inefficiencies often related to handing off work from one station or person to the next – introduces delays and errors • The functional organization and division of labor paradigm dates back to Adam Smith and the late 1700’s • Division of labor rationale: by focusing on fewer tasks ⇒ – Workers’ skill level goes up ⇒ work faster – No time lost when workers switch between tasks – Workers well positioned to help develop better techniques and tools • Drawback: more complex coordination issues when – More complex products and services – Customers demand more variety 13
Example 1 Explanation of existing claims process 1. Client notifies a local agent that she wishes to file a claim. She is given a claims form and is 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. 14
Example 1 New Design Recommended by the Team Call in claim Claims Client processing center Notify Pay Schedule repair Approved glass vendor 15
Linking BPD to overall Business Performance • Overall business performance? – Detailed definition is company specific – Generally, performance must be measured against the stated objectives Profit maximizing firms Non-profit organizations Overarching objective is usually to A common objective is survival and maximize long term shareholder value growth while satisfying customer needs Maximize revenues and Must use resources efficiently while minimize costs understanding customer needs Satisfying customer needs in an efficient way Well designed business processes 16

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Ch0 1

  • 2. What is a Business Process? 1. A pragmatic definition A Business Process describes how something is done in an organization In general terms… Business - Organizational entity that deploys resources to provide customers with desired products and services Process (Merriam-Webster’s Dictionary) (i) A natural phenomenon marked by gradual changes that lead to a particular result (ii) A natural continuing activity or function. (iii) A series of actions and operations conducing to an 2 end.
  • 3. What is a Business Process? A process specifies the transformation of inputs to outputs Inputs Process Outputs The transformation model of a process Different types of transformations • Physical (Ex. raw material ⇒ finished product) • Locational (Ex. flying from Denver to L.A.) • Transactional (Ex. depositing money in a bank) • Informational (Ex. accounting data ⇒ financial statement) 3
  • 4. What is a Business Process? 3. A more comprehensive process definition 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 Resources Process Suppliers Inputs Outputs Customers 4
  • 5. Process Types and Hierarchies 1. Individual processes – Carried out by a single individual Make up 2. Vertical or Functional processes – Contained within one functional unit or department Make up 3. Horizontal or Cross Functional processes – Spans several functional units, departments or companies 5
  • 6. Process Types and Hierarchies Core cross-functional processes often have highest improvement potential • Core processes – essential for meeting market place demand through a specific strategy • Especially high improvement potential if a significant amount of non-manufacturing/service related activities • Reasons – Difficult to coordinate – Have not kept up with improvements in manufacturing – Difficult to detect waste and inefficiencies – Often as little as 5% of the time considered adding customer value – Customers more likely to abandon business because of “poor” service than “poor” products 6
  • 7. Components of the Process Architecture Inputs and Outputs Information structure Process Flow units Resources Architecture The network of activities and buffers 7
  • 8. Components of the Process Architecture Inputs and Outputs • Establish interaction between the process and its environment • Identify the process boundaries ⇒ easy to identify the Input consumed from the environment in order to produce the desired Output • Process inputs and outputs can be – Tangible (Ex. raw material, cash, products, customers) – Intangible (Ex. Information, time, energy, services) Flow units • A flow unit is a transient entity or a job that proceeds through the network of activities and buffers and exits the process as a finished output • Typically, the identity of a flow unit changes across the process • Examples of common flow units: materials, orders, files, documents, customers, products, cash, transactions… • Flow rate – The number of jobs flowing through the process per time unit 8
  • 9. Components of the Process Architecture The network of activities and buffers • The work performed on a job moving through a process can be divided into an ordered sequence of activities • The buffers represent storage or waiting points where the job waits before moving to the next activity (queues, waiting rooms, etc.) • Different types of jobs ⇒ different paths through the network • Defining activities is crucial in process analysis – Tradeoff between process and activity complexity Process Complexity Individual Activity Complexity 9
  • 10. Components of the Process Architecture Resources • Tangible assets utilized to perform activities in a process • Can be divided into:  Capital assets – real estate, machinery, equipment, IT systems…  Labor – people and their knowledge and skills • Resources are utilized while inputs are consumed Information structure • Specifies the information required for making decisions and performing activities in a process • Limited information availability is a common cause for process inefficiencies – Information enables coordination! 10
  • 11. Workflow Management Systems • Management of administrative processes in the field of Information Systems is often referred to as workflow management • Workflow management systems – Control actions taken on documents moving through a business process – Workflow management software/systems are used to control who does what to a specific document • Using our comprehensive process definition ⇒ Process = Workflow 11
  • 12. The Essence of Business Process Design “How to do things in an efficient and effective way” • An efficient process which does not deliver customer value is useless A well designed process does the right things, right! More formally… • BPD is concerned with configuring the process architecture to satisfy customer desires in an efficient way – Customers can be both internal and external • Internal customer requirements must be aligned with the desires of the external customers in the business strategy We make a clear distinction between process design and implementation 12
  • 13. The Essence of Business Process Design • BPD often most valuable when considering complex cross functional processes – Challenging coordination issues – Process inefficiencies often related to handing off work from one station or person to the next – introduces delays and errors • The functional organization and division of labor paradigm dates back to Adam Smith and the late 1700’s • Division of labor rationale: by focusing on fewer tasks ⇒ – Workers’ skill level goes up ⇒ work faster – No time lost when workers switch between tasks – Workers well positioned to help develop better techniques and tools • Drawback: more complex coordination issues when – More complex products and services – Customers demand more variety 13
  • 14. Example 1 Explanation of existing claims process 1. Client notifies a local agent that she wishes to file a claim. She is given a claims form and is 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. 14
  • 15. Example 1 New Design Recommended by the Team Call in claim Claims Client processing center Notify Pay Schedule repair Approved glass vendor 15
  • 16. Linking BPD to overall Business Performance • Overall business performance? – Detailed definition is company specific – Generally, performance must be measured against the stated objectives Profit maximizing firms Non-profit organizations Overarching objective is usually to A common objective is survival and maximize long term shareholder value growth while satisfying customer needs Maximize revenues and Must use resources efficiently while minimize costs understanding customer needs Satisfying customer needs in an efficient way Well designed business processes 16