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Business Process

Fundamentals

&Business Process

Reengineering (BPR)

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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

Process

CustomersSuppliers

Resources

Inputs Outputs

SIPOC (Process Flow) & COPIS (Process Thinking)

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Process Types and Hierarchies

1. Individual processes

Carried out by a single individual

2. Vertical or Functional processes Contained within one functional unit or department

3. Horizontal or Cross Functional processes Spans several functional units, departments or

companies

Make up

Make up

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Marketing Operations Accounting

CEO

Order Request

Order Fulfilled

Production planning

Vertical pr ocess Hori zontal processI ndividual process

Buying a TV

commercial

Illustration: Process Types and Hierarchies

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Process Types and Hierarchies

Core cross-functional processes often have highestimprovement potential

Core processesessential for meeting market place demand

through a specific strategy

Especially high improvement potential if a significant amountof 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

Flow units

Information structure

Resources

The network of

activities and buffers

ProcessArchitecture

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Components of the Process Architecture

Inputs and Outputs

Establish interaction between the process and its environment

Identify the process boundaries easy to identify the Inputconsumed

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 rateThe 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 beforemoving to the next activity (queues, waiting rooms, etc.)

Different types of jobs different paths through the network

Defining activities is crucial in process analysis

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Components of the Process Architecture

Resources Tangible assets utilizedto perform activities in a process

Can be divided into:

Capital assetsreal estate, machinery, equipment, IT systems

Laborpeople and their knowledge and skills

Resources are utilizedwhile 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 ofInformation Systems is often referred to as workflow

management

Workflow management systems

Control actions taken on documents moving through a businessprocess

Workflow management software/systems are used to control

who does what to a specific document

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Continuous Improvement vs. BPR

Subtle differenceboth 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:

Activity

Value-Adding

Non-Value Adding

Delay

Rework

Business Value Adding

Control

Policy compliance

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Improvement

Time

Incremental

Improvement

Radical

Improvement

thro BPR

Theoretical

Capability

Statistical

Process

Control

Incremental vs. Radical Design Improvement

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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

Maximize revenues and

minimize costsMust use resources efficiently while

understanding customer needs

Satisfying customer needs in an efficient way

Profit maximizing firms Non-profit organizations

Overarching objective is usually tomaximize long term shareholder value

A common objective is survival andgrowth while satisfying customer needs

Well designed business processes

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Operational Excellence is a philosophy of

leadership, teamwork and problem solving

resulting in continuous improvementthroughout the organization by focusing

on the needs of the customer,

empowering employees, and optimizing

existing activities in the process.

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The Eight Key Supply Chain Processes

1. CRM

2. CSM (Customer Service Management)

3. Demand Management

4. Order Fulfillment5. Manufacturing Flow Management

6. Supplier Relationship Management

7. Product Development &

Commercialization8. Product returns Management

Source: The Global Supply Chain Forum, The Ohio State University

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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

or

Process Mapping Symbols