MSIS-604 _Project Report _Spring 2010

Business Process Management

Contents
What is it?...................................................................................................................................................2

Overview.....................................................................................................................................................2

BPM Life Cycle.............................................................................................................................................3

Design......................................................................................................................................................3

Modeling.................................................................................................................................................3

Execution.................................................................................................................................................3

Monitoring...............................................................................................................................................3

Optimization............................................................................................................................................4

Industry Challenges in Operations and Supply Chain Management............................................................5

Success Stories............................................................................................................................................5

BPM’s Strategic Benefits:.............................................................................................................................6

IBPM – Integrated BPM...............................................................................................................................6

Cost.............................................................................................................................................................7

Efficiency.....................................................................................................................................................7

Customer Experience and Satisfaction........................................................................................................8

Switch from Reactive to Predictive..............................................................................................................9

Apply a second layer of BPM.......................................................................................................................9

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What is it?
Business process management (BPM) is a management approach focused on aligning all
aspects of an organization with the wants and needs of clients. From this general definition, just
about any process improvement discipline or activity, including reengineering, TQM or Six
Sigma quality methods, outsourcing and lean manufacturing, can be considered as BPM.

Thus, from an extremely general perspective, BPM has no distinguishing definition at all;
it’s just about anything that contributes to process improvement—it can mean whatever you
want it to mean. It is a holistic management approach that promotes business effectiveness
and efficiency while striving for innovation, flexibility, and integration with technology. Business
process management attempts to improve processes continuously.

It could therefore be described as a "process optimization process." It is argued that BPM

enables organizations to be more efficient, more effective and more capable of change than a
functionally focused, traditional hierarchical management approach.

Overview
As a managerial approach, BPM considers business processes to be strategic assets of an
organization that must be understood, managed, and improved to deliver value added products
and services to clients. BPM is an approach to integrate a "change capability" to an
organization - both human and technological. As such, many BPM articles and pundits often
discuss BPM from one of two viewpoints: people and/or technology.

Although the initial focus of BPM was on the automation of mechanistic business
processes, it has since been extended to integrate human-driven processes. More advanced
forms such as human interaction management are in the complex interaction between human
workers in performing a workgroup task. BPM can be used to understand organizations
through expanded views that would not otherwise be available to organize and present. BPM is
regarded by some as the backbone of enterprise content management.
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Most recently, technology has allowed the coupling of BPM to other methodologies,
such as Six Sigma. BPM tools now allow the user to Define, measure, analyze, improve and
control processes. This brings with it the benefit of being able to simulate changes to your
business process based on real life data and also the coupling of BPM to industry
methodologies allow the users to continually streamline and optimize the process to ensure it is
tuned to its market need.

BPM Life Cycle

Business process management activities can be grouped into five categories: design, modeling,
execution, monitoring, and optimization.

Design

Process Design encompasses both the identification of existing processes and the design
of "to-be" processes. Areas of focus include representation of the process flow, the actors
within it, alerts & notifications, escalations, Standard Operating Procedures, Service Level
Agreements, and task hand-over mechanisms.

Good design reduces the number of problems over the lifetime of the process. Whether
or not existing processes are considered, the aim of this step is to ensure that a correct and
efficient theoretical design is prepared.

Modeling

Modeling takes the theoretical design and introduces combinations of variables which
determine how the process might operate under different circumstances. It also involves
running "what-if analysis" on the processes: "What if I have 75% of resources to do the same
task?" "What if I want to do the same job for 80% of the current cost?"

Execution

One of the ways to automate processes is to develop or purchase an application that

executes the required steps of the process; however, in practice, these applications rarely
execute all the steps of the process accurately or completely. Another approach is to use a
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combination of software and human intervention; however this approach is more complex,
making the documentation process difficult.

As a response to these problems, software has been developed which does the
automation and takes in the human input when required, only drawback for this is that it needs
comprehensive IT structures. Business rules have been used by systems to provide definitions
for governing behavior, and a business rule engine can be used to drive process execution and
resolution.

Monitoring

Monitoring encompasses the tracking of individual processes, so that information on

their state can be easily seen, and statistics on the performance of one or more processes can
be provided. An example of the tracking is being able to determine the state of a customer
order so that problems in its operation can be identified and corrected.

In addition, this information can be used to work with customers and suppliers to
improve their connected processes. Examples of the statistics are the generation of measures
on how quickly a customer order is processed or how many orders were processed in the last
month. These measures tend to fit into three categories: cycle time, defect rate and
productivity.

The degree of monitoring depends on what information the business wants to evaluate
and analyze and how business wants it to be monitored, in real-time, near real-time or ad-hoc.
Here, business activity monitoring (BAM) extends and expands the monitoring tools in generally
provided by BPMS.

Process mining is a collection of methods and tools related to process monitoring. The
aim of process mining is to analyze event logs extracted through process monitoring and to
compare them with an a priori process model. Process mining allows process analysts to detect
discrepancies between the actual process execution and the a priori model as well as to analyze
bottlenecks.
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Optimization

Process optimization includes retrieving process performance information from

modeling or monitoring phase; identifying the potential or actual bottlenecks and the potential
opportunities for cost savings or other improvements; and then, applying those enhancements
in the design of the process. Overall, this creates greater business value.

Thus we see that using BPM allows us to monitor and control the business processes
and allows us to modify the business processes according to the changing environment by
providing a greater in depth knowledge of the processes and also helping innovation in this
dynamic markets.

Application to Supply Chain

In Present days, Business is in a constant state of change. Today, many organizations fight a
constant battle to adjust to both big and small changes – often without an ability to effectively support
these changes within their existing IT environment. This leads to a constant conflict between cost
increment and quality degradation. Present survival strategy is creating an ability to both continuously
improve the operation and to respond quickly to opportunity and market pressure. Problem is “how to
deliver this flexibility”?
The solution to this problem is Business Process Management’s approaches, methods, techniques
and tool suites. BPM is an operating philosophy that is supported by a strong set of tools that can
change the way IT and business operations evolves in any company. The advantages of this approach are
that it provides immediate improvement to operations with minimal changes to existing core systems.
Few Facts to establish importance of BPM:
 More than two-thirds of organizations use BPM because they expect to need to change business
processes at least twice per year.
 16% of companies using BPM expected to need to alter processes to a specific purpose not due
to cumulative reasons.
 During the economic crisis also, BPMS projects were some of the few projects receiving
continuous funding.
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BPM’s benefits can be grouped into following categories:

1. Improved understanding of the business operation and the rules that govern activity

2. Improved operating efficiency and cost reduction

3. Improved operating consistency and quality

4. Operating flexibility for rapid and continuous change to deliver optimization

5. Improved performance measurement and reporting

Industry Challenges in Operations and Supply Chain Management

Today’s market challenges are causing many global manufacturers to follow strategies to better
manage purchase orders and inventory across business units, customers, partners, and suppliers. Supply
chain complexities are coming out from multiple supply chain partners and a lack of collaboration with
these partners. In addition, a decentralized organizational structure, where multiple sites/locations are
used, adds a further level of complexity to supply chains.

Supply Chain Solution allows organizations to optimize the procurement process by:
- Eliminating issues caused by unlike manual processes in the organization
- Centralizing and aggregating buying activities. BPM is utilized to aggregate purchase orders
placed within the system, eliminating common part orders or orders from a common supplier.

Success Stories
- After deployment of BPM Operations suite in 2007, Coca-Cola Enterprises (1) accelerate the
transformation and help achieve high-class performance through standardizing and streamlining
operations (2) deploy a global unified solution across all business units to support the business that
includes standardization and process improvement while maintaining high standards (3) achieve a
minimum savings target of 25%
- Using full suite of BPM, together with outsourcing services, DHL was able to complete a rollover of
the high-tech company’s spare parts operation to its own operation with no trouble in services to the
market. The company is already seeing significant YOY cost reductions.
- Jessops is the largest photographic retailer in the United Kingdom with a nationwide network of more
than 200 stores, an industry-leading website and a dedicated mail order division. By outsourcing its
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supply chain forecasting activities using BPM, Jessops has reduced its inventory holdings, reduced its
need for working capital and delivers significantly better customer service—all milestones on the way to
high performance.
- In October 2006, BB&T Banking Services went live with a BPM-powered online account opening
process. Before the implementation, it took as long as two weeks to open a customer account online.
The process now can be completed in a few minutes. Before, the bank had 20 full-time employees in
place to support the online account opening process, now it needs just three. Meanwhile, the number of
accounts opened online has risen steadily, to more than 100,000 in 2007.
- Atlanta-based SunTrust Bank is using BPM solution to help prevent money laundering, support fraud
investigations, and manage compliance with the Bank Secrecy Act, USA Patriot Act and other
regulations. The goal is to simplify compliance by consolidating its multiple systems for suspicious
activity reports.

IBPM – Integrated BPM

The basic BPM solutions create the processes and rules for managing the business processes
being driven by strategic requirements but have little integration to business solutions other than email
and task managers. The next level of BPM solution primarily comes from the old workflow solution
providers with some integration to ERP functions no strategic level change. The new ERM tool
(Integrated Business Process Management or IBPM) is going to be the one that creates the graphs that
shows change in business. Organizations and solution providers take the current BPM concepts and
completely enable the Supply Chain through the available technologies; Also Six Sigma methodology
deployment and ISO/QS standards embedded in the day-to-day, moment-to-moment activities of every
employee in the organization.

Vision of IBPM: The fundamental difference that this solution provides is the ability to have the user
follow the process but also open applications in multiple enterprise solutions as well as use the abilities
of MS-Office (Word, Excel) and MS-Outlook (Calendars, Task Lists, email) and, where necessary, create
and integrate its own database into the process solution. Additionally, this solution utilizes the Internet
and Intranet technologies to link the processes to other Supply Chain partners. This would allow a
person working for one company to begin a transaction that creates a task for a person in other
company to complete.
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With IBPM that timeline will be shortened to hours. The new solutions are going to have
execution capabilities that will allow the organization to implement the changes with the push of an
icon. Effectively, the change is executed in IBPM and the next person to execute the process will be
working in a new way.

Global Strategic Impact

Cost
In today’s weakened economy, cost is always one of the driving factors of change. More and
more choices are being made simply by choosing the lowest cost. From this viewpoint, implementing a
BPM strategy can be very effective. It may be the case that one segment of a company is having
problems processing payroll, but another segment has already identified and solved that problem. With
a BPM system in place, a manager may more easily allocate the solution of the second segment into the
first, and therefore save resources by preventing the first segment from needlessly resolving the same
problem. In the same way, two segments facing the same issue may be able to combined resources in
order to jointly create a solution, instead of working redundantly in independent environments.

Efficiency
One of the more interesting features of BPM is its ability to increase efficiency by using “what-if”
analyses. This can be used both to change current processes, and to produce predictive processes for
the future. This can provide a strategic advantage for current processes, by allowing managers to test
what advantages a change may offer, and ultimately find the most efficient methods. It can also help
management prepare in advance for future changes. For example, an executive may choose to ask what
would happen if funding for a certain department suddenly dropped 50%, and plan accordingly. When
some major change occurs out of the control of any one company, the ones that are prepared will be
able to responded most rapidly, and therefore gain or maintain a competitive advantage.
BPM also offers models and monitoring in real time according to user defined metrics which
allow managers to stay up to date on all of the most recent parameters of the corporation. This
provides an efficiency boots, and creates a competitive advantage, by allowing management to react
faster when needed. For example, a manager may directly see the sales of a branch are running short,
and reallocate resources to meet sales goals. Or, perhaps, a manager might notice tasks piling up on an
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employee who is out of town and immediately redistribute the workload. With a faster reaction time
ultimately customer needs are met faster, and a corporation’s advantage in the marketplace is
increased.
The ability to graphically see and track bottlenecks is also a major advantage of deploying a BPM
system. Many times, particularly in large corporations, communication can become problematic. It may
be difficult for management to find processing bottlenecks, particularly if for the employees involved it
would mean reporting to their superiors that they are causing inefficiency in the company. By making
involvement in a BPM process mandatory for all employees, the reporting is handled automatically, and
human breakdowns in communications are reduced or eliminated. Once the bottleneck has been
identified, the same lines of communications can be used to rapidly address the problem and increase
the company’s overall efficiency.
BPM is primarily useful for tracking and managing automated processes. For many
corporations, automating processes can be a major source of competitive advantage. In many
instances, a single computer can do in moments what would take a team of employees weeks of work.
HP is a good example of this, their recent layoff of thousands of employees is a direct result of
automating many of their internal IT processes. From the company’s viewpoint, they gain a lot of
efficiency and greatly reduce costs in salary and liabilities from using human workers. However, such
large upgrades on a massive scale can be difficult to manage and implement. BPM can enable a
company like HP to even consider making such a change by offering tools to manage creating and
implementing so many automated processes. By automating processes such as data entry, data
validation, record changes, and document versioning, a corporation may gain a significant competitive
advantage over any competitor which does not implement the same system and instead relies on the
more expensive and unreliable human workforce.
Because of the gains in efficiency, many companies are already implementing a host of
automated business process, and even tools which monitor and track business operations. As the
number of such tools increases with the natural growth of the company, it can be difficult to manage so
many separate tools. Most BPM systems are built specifically to be adaptable to a massive range of
different tools and processes. Using BPM, all of the tools and processes that developed as the
corporation grew can be integrated to work together and interact with each other. Many times
processes are developed in response to a specific problem, without a thought towards future adaptation
or integration. BPM can surmount this issue, by providing retroactive integration for disparate
processes in order to maximize efficiency. By providing a method of integrating legacy processes in
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response to growth, BPM can remove barriers to growth and allow a company to flourish, creating an
advantage over more retrained competitors.

Customer Experience and Satisfaction

As corporations grow, it becomes harder and harder to meet customer expectations of
uniformity and interoperability across all of a corporation’s product offerings. The interior of a
corporation becomes more diverse, and may spread across very different geographical regions. By
repeating and reusing processes across segments, one of the benefits of BPM, a corporation can
increase the uniformity across sectors. Management can implement a solution on a broader scale, and
track how that solution is working in different segments. By centralizing the management of many
separate processes into one location, BPM can allow a company to provide a more uniform experience
to customers. A customer interacting with one segment can expect other segments to use similar
processes, and products from different segments will be more likely to be interoperable when they are
created using processes managed at a single source. Because BPM also increases the internal efficiency
of a corporation, the customer may also receive increased response time and flexibility from the
company. By increasing customer satisfaction, BPM offers yet another advantage to its users.

Our Suggestions

Switch from Reactive to Predictive

Perhaps the most common use of BPM, and IT strategies in general, is in response to problems
instead of predicting preventing future problems. In many cases, this maybe a funding issue. It may be
difficult to justify spending money on a problem that might happen, when there are so many issues
currently on hand vying for attention. It’s much easier to convince a manager that a concrete problem
needs solving or sales will decrease, compared to convincing the same manager that funding should be
diverted on the chance that sales might decrease at some point in the future.
Normally, it is far far cheaper and more efficient to plan for and prevent future problems, rather
than creating retroactive solutions. While in many places this is already in effect to some extent, this
group would urge that a far greater emphasis be placed on predictive BPM rather than reactive. By
using “what-if” modeling, BPM may provide slightly more definite predictions of future problems, and
therefore provide a better justification for spending resources on those future problems now. One well
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known example of such a situation is the famed “Y2K bug”. In that case, many computer failures would
have occurred, causing massive and cascading damages across many different systems in the year 2000.
Hundreds of thousands of dollars and man-hours were spent trying to correct this bug, when 5 minutes
of planning at the start could have stored the date’s year in 4 digits instead of 2. By managing and
consolidating all or most of a corporation’s business tracking tools, it becomes much easier to predict
problems, and design solutions before they even occur. While it may seem like a risky investment at
first, this group believes that a major shift from reactive to predictive BPM would ultimately impact
future expenses on a potentially massive scale, reducing costs and creating a competitive advantage
over any competitors who fail to plan ahead.

Apply a second layer of BPM

One a conceptual level, BPM is the process of managing processes. BPM tools can help capture
processes manually done by humans, analyze the intelligent choices made as a part of that process, and
convert those to digital logic that can be implemented by a computer. However, at some basic level,
BPM itself is a process that involves taking data input and making intelligent choices. Therefore, this
group believes that BPM could be applied to itself for further optimization and maximization of
efficiency. It would likely be very difficult, but the process of management looking at a collection of BPM
tools and making decisions for the corporation could possibly itself be captured and digitalized for a
computer to implement. This may allow for the process of using BPM tools to be maximized, making
deployment of BPM systems an even better investment. One of the benefits of BPM is real time
reactions to problems by management; a computer could react even faster, at all hours of the day.
There has already been some work in this direction by current BPM providers. It is very
challenging to integrate human judgment and processes into tracking tools primarily focused on
automated processes. However, this group believes this will ultimately be the future of BPM, and
therefore more resources should be spent on developing this area. A BPM process that can run itself
with minimal oversight would hypothetically provide the maximal benefit in efficiency and optimization
for a corporation.
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Conclusion
Business Process Management offers many benefits including cost reduction and increases in
efficiency which creates competitive advantages for corporations utilizing BPM. BPM can grow as the
company grows, so it is an investment that will continue to be useful and up to date. Ultimately BPM
may evolve to include human processing and judgment, and become an even more efficient tool,
making BPM a very attractive and even necessary option all corporations in today’s business
environment.