Professional Documents
Culture Documents
Process Design
Chapter 1
Business Process Modeling,
g, Simulation and
Design
1
Overview
2
What is a Business Process?
1. A pragmatic definition
A Business Process describes how something is done in
an organization
g
In general terms…
5
What is a Business Process?
3. A more comprehensive process definition
A business process is a network of connected activities and buffers
with well defined boundaries and precedence relationships, which
utilize
tili resources tto ttransform
f iinputs
t iinto
t outputs
t t with
ith th
the purpose
of satisfying customer requirements
Resources
Process
6
Process Types and Hierarchies
1 Individual processes
1.
– Carried out by a single individual
M k up
Make
Make up
7
Illustration: Process Types and Hierarchies
CEO
Buying a TV
commercial
8
Process Types and Hierarchies
Process
Flow units Resources
A hit t
Architecture
Thee network
etwo ofo
activities and buffers
10
Components of the Process Architecture
Inputs and Outputs
• E
Establish
t bli h interaction
i t ti between
b t the
th process andd its
it environment
i t
• Identify the process boundaries ⇒ easy to identify the Input consumed
from the environment in order to pproduce the desired Output
p
• Process inputs and outputs can be
– Tangible (Ex. raw material, cash, products, customers)
– Intangible (Ex. Information, time, energy, services)
Flow units
• A fl
flow unitit is
i a transient
t i t entity
tit or a job
j b that
th t proceeds
d through
th h the
th network
t k
of activities and buffers and exits the process as a finished output
• Typically,
yp y, the identity
y of a flow unit changes
g across the pprocess
• Examples of common flow units: materials, orders, files, documents,
customers, products, cash, transactions…
• Flow
Fl rate t – The
Th number b off jobs
j b flowing
fl i through
th h the
th process per time
ti unit
it
11
Components of the Process Architecture
The network of activities and buffers
• Th
The workk performed
f d on a job
j b moving
i through
th h a process can be
b divided
di id d into
i t
an ordered sequence of activities
• The buffers represent
p storage
g or waitingg points
p where the job
j waits before
moving to the next activity (queues, waiting rooms, etc.)
• Different types of jobs ⇒ different paths through the network
• Defining
D fi i activities
ti iti is
i crucial
i l in
i process analysis
l i
– Tradeoff between process and activity complexity
Process Complexity
Resources
esou ces
• Tangible assets utilized to perform activities in a process
• Can be divided into:
¾ Capital assets – real estate, machinery, equipment, IT systems…
¾ Labor – people and their knowledge and skills
• Resources
R are utilized
tili d while
hil inputs
i t are consumed d
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!
13
Workflow Management Systems
14
The Essence of Business Process Design
“How
ow too do things
gs in an eefficient
c e andd effective
e ec ve way”
w y
More formally…
• BPD is concerned with configuring the process architecture to satisfy
customer desires in an efficient way
– Customers can be both internal and external
• Internal customer requirements must be aligned with the desires of the
external customers in the business strategy
Theoretical
Capability
nt
Improvemen
Statistical
Process
Incremental Radical Control
Improvement Improvement
Time
18
Example 1 – Claims Handling in a
Large Insurance Company
• Pilot project – claims handling for replacement of
automobile glass
• Springboard for later, more ambitious redesign efforts
• Set up procedure
1. The CEO appoints an executive sponsor to lead the project
2. Team members are handpicked by the CEO and the sponsor
3
3. The team creates a flowchart of the existing process
• Under the existing process the client may have to wait 1-2
weeks before being able to replace the damaged auto glass
⇒ Goal – A radical overhaul and improvement of the process
to shorten the client waitingg time
19
Example 1
Flowchart of the existing claims process
Pay
Notify agent
Forward
Give instructions Local claim Claims
Cli t
Client i d
independent
d t processing
i
File claim agent center
Request quote
20
Example 1
Explanation of existing claims process
1. Client notifies a local agent that she wishes to file a claim. She is given a claims
form and is told to obtain a cost estimate from a local glass vendor.
2
2. When the claims form is completed the local agent verifies the information and
forwards the claim to a regional processing center.
3. The processing center logs the date and time of the claim’s arrival. The data is
entered into a computer-based
computer based system (for record keeping only) by a clerk.
clerk The
claim is then placed in a hard copy file and passed on to a claims representative.
4. a) If the claims representative is satisfied with the claim it is passed along to
several others in the processing chain and eventually a check is issued and sent
to the client.
b) If there are problems with the claim the representative mails it back to the
client
li t for
f necessary corrections.
ti
5. When the client receives the check she can go to the local glass vendor and
replace the glass.
21
Example 1
New Design Recommended by the Team
Call in claim
Claims
Cl i
Client processing
center
Notify Pay
Schedule repair
Approved
glass
vendor
22
Example 1
Procedural changes to the new process
23
Example 1
Structural changes to the new process
24
Example 1
Benefits with the new redesigned process
• The client can have the gglass replaced
p within 24 hours
– As opposed to 10 days
• The client has less work to do
– Only one phone call, no need for a cost estimate
• Problems are handled immediately when the claim is filed
• Problems with lost or mishandled claims virtually disappear
• Fewer people are involved in the process ⇒ lower op. costs
• L
Long term
t relationships
l ti hi with ith glass
l vendors
d
⇒ Savings of 30-40% on paid claims due to special discounts
⇒ Consolidated monthly payments ⇒ lower handling costs
⇒ More consistent and reliable service
• Claims representative feels ownership of the process
⇒ Does a better job
25
Linking BPD to overall Business Performance
S ti f i customer
Satisfying t needs
d iin an efficient
ffi i t way
Well designed
g business processes
p
26
Linking BPD to Strategy
Strategy
¾ A unifying
if i theme
th that
th t helps
h l align
li decisions
d ii made
d in
i an organization
i ti
¾ Guides a business towards its stated goals
27
Linking BPD to Strategy
• An eeffective
ec ve business
bus ess strategy
s egy iss based
b sed oon uunderstanding
de s d g thee
organization’s
9 Internal environment – its strengths and weaknesses
9 External environment – the opportunities and threats
28
Linking BPD to Strategy
• Strategic
S eg c fit
¾ Match between the strategic position the firm wants to occupy in
the external market and the internal capabilities to get there
¾ Effective BPD is needed to achieve this fit
30
Activity Classification and BPD
A key issue in process design and analysis is classification of
the process activities
– Crucial in identifying waste and inefficiencies in existing processes
Value-Adding
Value Adding
Value-Adding
31
Activity Classification and BPD
32
Activity Classification and BPD
33