Business Process Fundamentals & Business Process Reengineering (BPR)

What is a Business Process?

A 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

SIPOC (Process Flow) & COPIS (Process Thinking)

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
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Illustration: Process Types and Hierarchies

CEO
Marketing Operations Accounting

Buying a TV commercial

Order Request Individual process

Production planning Vertical process

Order Fulfilled

Horizontal process

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
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Components of the Process Architecture

Inputs and Outputs Information structure

Flow units

Process Architecture

Resources

The network of activities and buffers

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) 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
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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

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!
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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

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Continuous Improvement vs. BPR

Subtle difference both approaches concerned with how to do things better
Complement each other

Incremental process improvement: (continuous improvement)

Change that brings a process closer to its normal operating standards Does not question the fundamental assumptions and rules that define the current process design Deductive approach

Business Process Reengineering

Creative in its nature Questions existing assumptions and rules Requires new perspectives to generate innovative solutions with potential for breakthrough improvements Inductive approach
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Activity Classification and BPR

A key issue in process design and analysis is classification of the process activities
Crucial in identifying waste and inefficiencies in existing processes

Three basic classification approaches:

Value-Adding

Activity

Non-Value Adding Delay Rework Business Value Adding Control Policy compliance
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Incremental vs. Radical Design Improvement

Improvement

Theoretical Capability

Statistical Process Control

Incremental Improvement

Radical Improvement thro BPR

Time

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Backup

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Linking BPR to overall Business Performance

Overall business performance?
Detailed definition is company specific Generally, performance must be measured against the stated objectives Profit maximizing firms
Overarching objective is usually to maximize long term shareholder value

Non-profit organizations
A common objective is survival and growth while satisfying customer needs Must use resources efficiently while understanding customer needs

Maximize revenues and minimize costs

Satisfying customer needs in an efficient way Well designed business processes

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Operational Excellence is a philosophy of leadership, teamwork and problem solving resulting in continuous improvement throughout the organization by focusing on the needs of the customer, empowering employees, and optimizing existing activities in the process.

The Eight Key Supply Chain Processes

1. 2. 3. 4. 5. 6. 7. CRM CSM (Customer Service Management) Demand Management Order Fulfillment Manufacturing Flow Management Supplier Relationship Management Product Development & Commercialization 8. Product returns Management
Source: The Global Supply Chain Forum, The Ohio State University

Process Mapping Symbols

or
Operation (task or work activity)
Inspection Decision point (typically requires a yes or no) Document or order created Delay Storage Move Materials or employees activity