Professor June Sung Park KAIST

Copyright 2011. Dr. June Sung Park. All rights reserved.

Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Understand what a business process is Understand important properties of the business process Understand the lifecycle of business processes Understand the benefits created from managing business processes

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Definition of Business Process Value Chain Process Categories and Hierarchy Process Properties Purpose of Process Management Case Study Ford Procurement Process Redesign

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

A business process is a set of interacting activities that are undertaken in an enterprise in response to some event to achieve a goal. An activity is performed by on one or more actors, who transform an input to an output utilizing a certain set of resources.

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

A company has one or more value chainsa collection of activities performed to design, produce, sell, deliver and support a product or service line.
Michael Porters Generic Value Chain Primary Activities
Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Procurement Technology Development HR Management Firm Infrastructure

Support Activities
M. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, 1985.

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

A value chain cuts across functional departments to combine activities into a single flow that creates values to customers.

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

A value chain is the highest-level (level 0) business process. Value chain is decomposed into a process hierarchy through process decomposition.

Manufacturing Value Chain

Supply-Chain Council, Supply-Chain Operations Reference-Model Version 9.0, 2008.

Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

An activity can be decomposed into a process; vice versa, a low-level process can be viewed as a higher-level activity; viz., the latter is an abstraction of the process and called a compound activity (as distinguished from an atomic activity). If an activity in process A is decomposed into process B, B is called a subprocess of A. A subprocess is a compound activity and of type process. An atomic activity (also called task) has no sub-activities defined by the model, and can be described by a procedure containing multiple steps.

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Processes can be grouped into three categories:

Corporate (management) processes Core (or operational, or primary) processes Support (or enabling) processes

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Structured processes Semi-structured processes Ill-structured (or Ad hoc) processes Task Structure
Performer Process Topology Decision Knowledge Discipline IT Support

Structured
Operational worker Almost linear Few simple, predetermined, repetitive decisions Well defined and static Automation of process flow and steps Manufacturing line, retail sales, bookkeeping

Semi-structured
Knowledge worker Sparse with many decision and exception branches More complex decisions requiring a mix of rules and intuition Less well defined and evolving Workflow engine, business rule engine, knowledge base Equipment repair, field sales, product development

Ill-structured
Subject matter expert (SME) Mesh Many creative, ad hoc decisions Fast evolving requiring research, heuristics and educated guesses Social networking, collaboration infrastructure Market prediction, product idea generation, strategy consulting,

Example

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

A process (or an activity) must have a goal. A process should have performance metrics to measure the extent of goal achievement.

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

A process may be controlled by policies. A process may involve decisions of which the rules can be specified. Decision rules should conform to process policies.

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

A process utilizes resources which may include people, tools, materials and information systems. A process is performed by specific jobs. A process requires each participating job to play specific roles and possess certain competency acquired through certain training. A process should have a process owner.

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

A process A and its immediate sub-process B must have all their properties aligned; e.g., the goals and metrics of A must align with those of B. At top level of the process hierarchy, business strategy must be established to define goals of each value chain, which in turn are passed down vertically along the process hierarchy.

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Processes along the value chain should be tightly integrated with efficient handoffs; e.g., process As output should be optimal as input to its immediate successor B. Downstream concerns should be concurrently addressed in upstream processes. Common processes should be factored out, standardized and shared. As a result, insufficient or over-produced output, non-value-adding activities (such as rework and redundant effort) should be minimized.

A Life Insurance Companys Value Chain and Level 1 Processes

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Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Business process lifecycle first goes through process engineering (i.e., process analysis, design and implementation), and then goes into process operation and management (i.e., daily operation, management and continuous improvement). Business processes has 3 levels of concernenterprise-, process- and performer-level concerns. The business process lifecycle iterates (i.e., re-strategize, re-design, and so on) in response to business environment changes and strategic re-positioning.

BPM Framework

Strategize Enterprise Process Performer

Establish corporate strategy Set process goals and requirements Set personal goals

Design
Develop process architecture Model and simulate processes

Implement
Align enterprise capabilities (i.e. business assets) Implement processes and allocate resources

Operate
Govern processes Monitor and optimize processes Execute processes
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Plan activities

Align competency

Copyright 2011. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Document and understand how a process really works (especially when exceptions occur). Understand what resources and competencies are required for it to work effectively and efficiently. Elaborate and standardize how it should work and train the performers. Ensure employees daily work is aligned with the overall process goals and the enterprise strategies. Monitor the progress and performance of the process.

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Copyright 2010. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Analyze the process to find opportunities to improve its performance. Integrate the process with up or downstream processes to construct an end-to-end streamlined value chain. Determine how to adapt the process to changes in business environments and business strategies. Find common processes that can be standardized and shared across different departments.

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Copyright 2010. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Redesign a process, and then simulate and implement the new process. Provide a detailed specification of the process for an IT project to implement it (whether by custom development or package implementation). Automate at least a part of the process using software. Find ways to exploit emerging IT to innovate the business process (e.g. use of mobile devices, social networks, M2M computing, etc.) Outsource some portion of the process to external specialized vendors (e.g. BPO, SaaS vendors). Develop a process reference model to be shared among potential trading partners.
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Copyright 2010. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Company: Ford (1980s) Business Context: In early 1980s, Fords North American account payable department employed more than 500, while Mazda took care of its a/p chore with 5 people. Business Process to Redesign: Instead of looking into the a/p process to find causes of inefficiency, Ford looked at the whole process of procuring parts upon request from a factory planta super-process containing the a/p process as a sub-process. Ford focused on the output of the a/p processa correct and timely payment to the vendor for its shipment. It ignored the detail of the current process. This way, Ford set out to radically and holistically redesign the entire purchasing process rather than marginally improving the current a/p process through corrective actions.
order request purchase order

plant

order filling

shipment payment

Vendor

M. Hammer and J. Champy, Reengineering the CorporationA Manifesto for Business Revolution, HarperBusiness, 1993.

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Copyright 2010. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

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Copyright 2010. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

By adding a purchase order database and an associated PO application, Ford eliminated invoice. Payment authorization, used to be performed by accounting, is now done by the receiving clerk using the PO application system Empowerment!
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Copyright 2010. Dr. June Sung Park. All rights reserved.

Overview

Contents

Lecture

Case Study

Quiz

Exercise

Head count was reduced from 500 to 125 in the a/p dept right after this process reengineering. The a/p dept, after a few years, had only 5-10 needed for handling exceptional situations. Ford designed the process around outcomes, not tasks. It let doers be self-managing, flattening the organization hierarchy and reducing back office staffs. The new system captured information once and at its source, and had it shared across departments. The company changed the business rules: We pay when we receive the invoice to We pay when we receive goods.

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Copyright 2010. Dr. June Sung Park. All rights reserved.