Graduate Program in Business Information Systems BIS 581 Business Process Management Lecture-2 Aslı Sencer Department of Management Information Systems 1

Business Process Management- 2 Key Performance Indicators Process Identification 2

Key Performance Indicators - KPI Performance measures called key performance indicators (KPI) are developed to evaluate the processes from different aspects. BPM requires that the performance of the processes should be continually observed with respect to these KPI’s and documented periodically. In the next step, current performances are compared with the target values that have been generated for these KPI’s. Modifications are made in the process flow to improve the performance. You can not control without measuring! 3

Classification of KPI’s: Effectiveness, Efficiency, Flexibility Effectiveness:  Measures the degree to which an output fulfills the customer needs and requirements.  Measures if the right output is provided at the right time, place and price.  Can the process provide what is intended initially?  Can we produce more with the same input by decreasing defectives? Topics for EffectivenessMeasuring Criteria Order fulfillmentAmount delivered/amount ordered Being on timeOn time delivery rate Customer complaintsNumber of customer complaints Defect rateRatio of defectives Acting as plannedActual/planned Response timeResponse duration Service LevelRatio of satisfied customer 4

Classification of KPI’s: Effectiveness, Efficiency, Flexibility Efficiency:  Measures how much resource are used to obtain a given output? Resources are manpower, energy, machinery, raw material, capital and knowhow.  Measuring efficiency is more difficult than measuring effectiveness.  Aim is to decrease the amount of resource used to produce the same output.  Can we decrease the used resources by eliminating the non value adding activities? Topics for EfficiencyMeasuring Criteria DurationProcess time for a unit production CostUnit production cost Waiting timeWaiting time between processes Production rateProduction rate per unit time 5

Classification of KPI’s: Effectiveness, Efficiency, Flexibility Flexibility:  Measures the adaptability of the processes to the changing environmental conditions like special customer needs, new rules, regulations, emergency cases, etc.  A flexible process can be performed in a different way in special cases.  Flexibility is the most difficult performance to measure. Topics for FlexibilityMeasurement Criteria Special Customer RequirementsNumber of special custmer requirements Duration of special customer requestProcess duration for special customer/standard customer Rejections of special requestNumber of rejected special requests/all requests Extra resource requirementExtra resources required for a special request Extra processes requiredNumber of activities required for a special request 6

Process Identification Form Code: A standard code Name: Standard name of the process in the organization Aim: The aim of the process, indicating the type of output to be generated Classification: Process for Internal/external Customers; Basic/managerial/support process Owner: The person who is responsible for the process with sufficient authority Sup processes: Processes that include the current process Sub processes and activities: Limits of the process InputsSupplierOutputsCustomer Resources: Types of inputs that already exist in the system Process Interactions Processes that are affected by the current process Sup processes and the processes that come next Processes that affect the current process Previous processes, sub processes Support and Managerial Processes KPI Aim Increase/Decrease UnitTargetCurrent Gap = Current-Target Current Problems: Problems that have been encountered so far.

Ex: Cross Functional Process Map 8 Handoff A Product Quality Test Process in a Fast Food Restaurant

Example: Process Identification Form Code: Name: Aim: Classification: Owner: Sup Processes: Sub Processes and Activities: 9 M101 Product Quality Test Process in a Fast Food Restaurant Periodically checking if the quality of the food prepared in the fast food restaurants conforms the quality standards. Managerial process for internal customers General Product Quality Test Process in a Fast Food Restaurant This process includes: 1)Checking the hygiene of the kitchen and service area 2)Product quality test process 3)Implementation of the test results Take samples: Choose a sample  Put into an hygienic bag  Put into a cooler Take to laboratory: Put into the car  Take to the lab Analyze: Obtain the chemicals  Apply test Prepare a fine document Prepare an appropriate condition document Istanbul Municipality Department of Public Health

Example: Process Identification Form (cont’d.) Limits InputSupplier OutputCustomer Resources: Processes that are affected by the current process Processes that affect the current process Support Processes: Maintenance and cleaning of the laboratory, replenishment of stocks like lab chermicals Managerial processes: Defining target number of visits to be made per day KPIAimUnitTargetCurrentGap Current Problems: 10 Sample foodTest team member Pass/fail document approved by the test team Istanbul Municipality Test team member, Lab. Analyst, Lab. chemicals, Hygienic bag, Cooler, Lab materials Implementation of the test results General product quality testing process Checking the hygiene of the kitchen and service area Take samples Take to laboratory Analyze Prepare a fine document Prepare an appropriate condition document #Visits / day Cost/visit # visits in an epidemic Increase Decrease Increase Visits/day TL/visit Visits/day = 2 (to be improved) 25-20=5 (to be improved) 20-30= -10 (to be improved) It takes long time to go the lab. (traffic problem exists, might think of portable analysis tools) Long waiting time for the analyst (might think of increasing the staff size, check the support process for maintaining the chemicals)

Gap Analysis Gap=Current-Target Measure to be decreased Gap > 0 Measure to be increased Measure to be decreased Gap < 0 Measure to be increased Improvement needed 11 Improvement needed

Group Exercise 2: Process Identification 1) Complete the process identification form for the registration process. 12