Chapter 8 Business Process (BP)

Objectives After studying the chapter, students should be able to.. Explain definition of Business Process Describe elements of business process Create process maps for a business process and use them to understand and diagnose a process Calculate and interpret some common measures of process performance Explain how understanding of ERP contribute the businesses create management innovation.

Contents Business Processes Mapping Business Processes Managing and Improving Business Processes Ten Best Practices of Business Processes Business Process Challenges Summary

Business Processes Mapping Business Processes Managing and Improving Business Processes Ten Best Practices of Business Processes Business Process Challenges Summary

Business Processes Business Process Definition A set of logically related tasks or activities performed to achieve a defined business outcome (Bozarth & Handfield: 92) Outcome can be… Physical nature Informational nature Monetary nature

Business Processes Business Process Elements

Business Processes Improving Business Processes

Business Processes Mapping Business Processes Managing and Improving Business Processes Ten Best Practices of Business Processes Business Process Challenges Summary

Mapping Business Processes Purposes of mapping Business Processes Create a common understanding of the content of the process: its activities, its results, and who performs the various steps Define the boundaries of the process Provide a baseline against which to measure the impact of improvement efforts

Mapping Business Processes Definition and Rules of Process map Process map: a detailed map that identifies the specific activities making up the informational, physical, and/ or monetary flow of a process Rules: Identify the entity that will serve as the focal point Identify clear boundaries and starting and ending points Keep it simple

Mapping Business Processes Common process mapping symbols

Mapping Business Processes Process map for the Bluebird Café

Mapping Business Processes Process mapping at Distribution Center: order-filling process for in-stock items

Mapping Business Processes Guideline for improving a process

Mapping Business Processes Swim lane process map A process map that graphically arranges the process steps so that the user can see who is responsible for each step. Mapping advantages: Indicate “hand-off” once changes of process flow Show who sees each part of the process

Mapping Business Processes Swim lane process map Swim lane process map for order-filling process

Business Processes Mapping Business Processes Managing and Improving Business Processes Ten Best Practices of Business Processes Business Process Challenges Summary

Managing and Improving Business Processes Asking before improvement How do we know if a business process is meeting customers’ needs? Even if their needs are being met, how do we know whether the business process is being run efficiently and effectively? How should we organize for business process improvement? What steps should we follow? What roles should people play? What types of tools and analytical techniques can we use to rigorously evaluate business processes? How can we make sure we manage based on fact and not opinion?

Approach Measure First – Then Improve 1. Identify business objectives and select Key Performance Indicators. 2. Measure where you are now. 3. Determine what’s working and what isn’t. 4. Fix and improve problem areas. 5. Calculate value creation Managing and Improving Business Processes

Measuring business process performance  productivity  Efficiency  Cycle time Improving business process performance  Benchmarking  The Six Sigma methodology Continuous improvement tools

Managing and Improving Business Processes Measuring business process performance  Productivity : a measure of process performance; the ratio of outputs to inputs productivity = output/ input Examples of productivity measures: Productivity= number of customer calls handled/ support staff hours Productivity= number of items produced/ machine hours productivity= sales dollars generated/ labor, material, machine cost

Managing and Improving Business Processes Measuring business process performance> productivity Measuring productivity at BMA software Step 1

Managing and Improving Business Processes Measuring business process performance> productivity Measuring productivity at BMA software Step 2

Managing and Improving Business Processes Measuring business process performance  Efficiency : a measure of process performance; the ratio of actual outputs to standard outputs. Usually expressed in percentage terms Efficiency = 100% ( actual outputs/ standard outputs) Examples of efficiency measures: Suppose each painters is expected to paint 30 units an hour. Bob actually paints 25 unit/hour while Casey paint 32 unit/hour. The efficiency of each painters is….. Efficiency Bob = 100% (25/30) = 83% Efficiency Casey = 100% (32/30) = 107%

Managing and Improving Business Processes Measuring business process performance> efficiency Examples of efficiency measures: In week 16, Sawanya hires a new sole sewer, Daeng Doungdee. After five weeks on the job Daeng has recorded the results in table below. FINISHED SOLES

Managing and Improving Business Processes Measuring business process performance> efficiency Examples of efficiency measures: Sawanya calculates Daeng’s efficiency by dividing the actual finished soles produced each week by the standard value of 1,800. therefore, Daeng’s efficiencies for week are calculated as: FINISHED SOLES

Managing and Improving Business Processes Measuring business process performance  Cycle time : The total elapsed time needed to complete a business process. Also called throughput time. In order to measure cycle time in absolute terms, often useful to look at the percent value-added time being simply the percentage of total cycle time spent on activities actually providing value percent value-added time = 100% ( value added time/ total cycle time)

Managing and Improving Business Processes Measuring business process performance> cycle time Examples of cycle time measures: What is the percent value-added time for the typical “quick change” oil center? Even though the customer may spend an hour in the process, it usually take only about 10 minutes to actually perform the work. According to such equation, then, Percent value-added time = 100% (10minutes/60minutes) =

Managing and Improving Business Processes Improving business process performance  Benchmarking : The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance 2008 competitive benchmarking results for North American Automakers

Managing and Improving Business Processes Improving business process performance  Six Sigma Methodology : The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance Six Sigma focuses an organization on: Understanding and managing customer requirement Aligning key business processes to achieve those requirement Utilizing rigorous data analysis to understand and ultimately minimize variation in those processes Driving rapid and sustainable improvement to business processes

Managing and Improving Business Processes Continuous improvement tools  The philosophy that small, incremental improvements can add up to significant performance improvements overtime. Cause-and-Effect diagram Five Why Scatter plot Check sheet Pareto chart Bar graph Histogram Runchart

Managing and Improving Business Processes Continuous improvement tools

Managing and Improving Business Processes Continuous improvement tools

Managing and Improving Business Processes Continuous improvement tools

Business Processes Mapping Business Processes Managing and Improving Business Processes Ten Best Practices of Business Processes Business Process Challenges Summary

Ten Best Practices of BPM 1. Think process; be process 2. Get smart! 3. Adopt an executive 4. Great expectations 5. Pick a methodology 6. The right technology 7. Hear the voice of the customer 8. Pick a project 9. Measure first 10. Plan to change

Business Processes Mapping Business Processes Managing and Improving Business Processes Ten Best Practices of Business Processes Business Process Challenges Summary

Business Process Challenges Some processes are artistic in nature. That is, they require flexibility in carrying out the various steps. Furthermore, customers actually value variability in the outcome Some processes may be so broken or mismatched to the organization’s strategy that only a total redesign of the process will do Some processes cross organizational boundaries introducing additional challenges

Business Processes Mapping Business Processes Managing and Improving Business Processes Ten Best Practices of Business Processes Business Process Challenges Summary