mtat.03.231 business process management (bpm) lecture 1: introduction marlon dumas marlon.dumas ät...
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MTAT.03.231Business Process Management (BPM)
Lecture 1: Introduction
Marlon Dumas
marlon.dumas ät ut . ee
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About This Course
Objective:– To introduce the concept of “business process” and
the discipline of modeling, analyzing, automating and monitoring business processes.
The course relates to:– Enterprise System Integration
• Integrating applications to automate or support business processes
– Data mining• Mining business process execution logs
– Software Economics• Business case analysis: Benefit assessment of IT projects
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Structure of the course
• 14 lectures covering:– Principles of BPM– Process Modeling Using BPMN– Process Analysis (Qualitative and Quantitative)– Process Automation– Process Monitoring and Mining
• 14 practice sessions – Intro to Process Modeling– Process Analysis & Re-design– Process Automation using Business Process Management Systems– Process Monitoring and Mining (ProM)
• Team Project
Practice coordinator: Fabrizio Maggi
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Grading
• Six assignments (25 points in total)– See course web page – 8-12 hours per homework, ≈ 60 hours in total
• Project (25 points) – to be released on 15 April– ≈ 40 hours
• Exam (50 points)
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Readings and Resources
• Course material posted on course Web page– http://courses.cs.ut.ee/2014/bpm
• Textbook– Dumas, La Rosa, Mendling & Reijers: Fundamentals of Business
Process Management, Springer 2013– You can download chapters or whole book if inside the university
network (see link in “Readings” section of web site)
• Message board (for questions) – http://www.quicktopic.com/50/H/zd6WnDQtT9f – Please subscribe using the “Get email” button!
Introduction to Business Process Management
Marlon Dumas
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What is a (Business) Process?
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fault-report-to-resolution process
“My washing machine won’t work!”
VA
LU
E
Customer
Warranty?
PartsStoreService
Dispatch
Technician
Customer
Call Centre
Customer
© Michael Rosemann
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Processes and Outcomes
• Every process leads to one or several outcomes, positive or negative– Positive outcomes deliver value
– Negative outcomes reduce value
• Fault-to-resolution process– Fault repaired without technician intervention
– Fault repaired with minor technician intervention
– Fault repaired and fully covered by warranty
– Fault repaired and partly covered by warranty
– Fault repaired but not covered by warranty
– Fault not repaired (customer withdrew request)
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What is a Business Process: Recap
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“If it does not make at least three people mad, it’s not a process.”
Hammer and Stanton (1995)
http://www.kimtracey.co.za/
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Your turn
• Think of an organization and a process in this organization:– Is it order-to-cash, procure-to-pay, fault-to-resolution…– Who is/are the customer(s)?– What value does this process deliver to its customer?– Who are the key actors of the process?– List at least 3 outcomes of the process.
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BPM: What is it?
Body of principles, methods and tools to design, analyze, execute and monitor business processes
In this course, we will focus on BPM based on process models.
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“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency.
The second is that automation applied to an inefficient operation will magnify the inefficiency.”
Bill Gates
Why BPM?
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In other words…
InformationTechnology
ProcessChange
Yields
Yields
BusinessValue
Index Group (1982)
Enables
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The Ford Case Study (Hammer 1990)
Ford needed to review its procurement process to:• Do it cheaper (cut costs)• Do it faster (reduce turnaround times)• Do it better (reduce error rates)
Accounts payable in North America alone employed > 500 people and turnaround times for processing POs and invoices was in the order of weeks
Michael Hammer. “Reengineering Work: Don’t Automate, Obliterate” Harvard Business Review, July 1990
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The Ford Case Study
• Automation would bring some improvement (20% improvement)
• But Ford decided not to do it… Why?a) Because at the time, the technology needed to
automate the process was not yet available.
b) Because nobody at Ford knew how to develop the technology needed to automate the process.
c) Because there were not enough computers and computer-literate employees at Ford.
d) None of the above
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The correct answer is … Mazda’s Accounts Payable Department
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How the process worked? (“as is”)
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How the process worked? (“as is”)
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How the process worked? (“as is”)
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How the process worked? (“as is”)
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How the process worked? (“as is”)
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How the process worked? (“as is”)
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Reengineering Process (“to be”)
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Reengineering Process (“to be”)
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Reengineering Process (“to be”)
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Reengineering Process (“to be”)
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Reengineering Process (“to be”)
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Reengineering Process (“to be”)
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The result…
• 75% reduction in head count• Material control is simpler and financial
information is more accurate• Purchase requisition is faster• Less overdue payments
Why automate something we don’t need to do? Automate things that need to be done.
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Principles of Business Process Reengineering (BPR)
1. Capture information once and at the source
2. Subsume information-processing work into the real work that produces the information
3. Have those who use the output of the process drive the process
4. Treat geographically dispersed resources as if they were centralized
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Exercise: Claims Handling at an Insurance Company
• Claims handling for replacement of automobile glass
• 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 of the process to shorten the client waiting time
© Laguna & Marklund
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Existing claims process
Client
Approvedglass
vendor
Claimshandlingcenter
Request additional information
Pay
Notify incident
File claim
Give instructions
Request quote
Provide quote
Pay
© Laguna & MarklundAutomate vs Redesign
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Existing claims process1. Client notifies insurance company of an incident. She is given a
claims form and told to obtain a cost estimate (quote) from a local glass vendor. Client submits form and quote.
2. When the claims form is completed the local agent verifies the information and forwards the claim to a regional processing center.
3. The insurance claims handling center receives the claim (on paper) and enters the data into a claims handling system. The claim is checked by a claims handler.
4. a) If the claims handler is satisfied with the claim it is passed along to several others in the processing chain and eventually a bank transfer is made to the customer.
b) If there are problems with the claim the handler mails it back to the client for necessary corrections.
5. When the client receives the payment she can go to the local glass vendor and replace the glass (or they can do it before at their risk).
© Laguna & Marklund Automate vs Redesign
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How to engage in BPM?The BPM Lifecycle
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Phase 1: Process Identification
“Most businesses have just three core processes:
1. Sell stuff
2. Deliver stuff
3. Making sure you have stuff to sell and deliver”
Geary Rummler
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Core vs Support Processes (Porter)
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Process Architecture
Core processesSupport processesManagement processes
Quote handlingProduct deliveryInvoice handling
Detailed quote handling process
Not covered in this course
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Phase 2: Process Discovery
More in Lectures 2-3
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Phase 3: Analysis
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Qualitative Analysis
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Eliminating Waste
"All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect the cash.
And we are reducing the time line by reducing the non-value-adding wastes ”
Taiichi Ohno
More in Lecture 4
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Quantitative Analysis:Performance Measures
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Simulation / What-If Analysis
Start End
Check for completeness Perform checks Make decision
Deliver card
Receive review request
Request infoReceive info
Notify acceptance
Notify rejection Time out
complete? Decide
review request
Yes
No
reject
reviiew
accept
10 applications per hourPoisson arrival process (negative exponential)
0.5
0.7
0.3
0.5
0.2
0.8
Task Role Execution Time (mean, dev.)
Receive application system 0 0
Check completeness Clerk 30 mins 10 mins
Perform checks Clerk 2 hours 1 hour
Request info system 1 min 0
… … … …
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Simulation output: KPIs
Resource Utilization
18.82%
50.34%
5.04%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Clerk Manager System
Resource Cost
$ 898.45
$ 4,260.95
$ 285.00
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
Clerk Manager System
Cycle Time - Histogram
0
2
4
6
8
10
12
0 10 20 30 40 50 60
Days
# P
I's
More in Lectures 5-6
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Phase 4: Process Redesign
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Costs
Quality
Time
Flexibility
The Devil’s Quadrangle
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Redesign Heuristics
1. Task elimination
2. Task composition
3. Triage
4. Resequencing
5. Parallelism
6. Process specialization and standardization
7. Resource optimization
8. Communication optimization
9. Automation
Each heuristics improves one side of the devil’s quadrangle, generally to the detriment of others
More in Lecture 7
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Phase 5. When technology Kicks in..
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Business Process Management Systems
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More in Lectures 8-10
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Phase 6 – Process Monitoring
1) basic performance metrics
2) process modelStart
Register order
Prepareshipment
Ship goods
(Re)send bill
Receive paymentContact
customer
Archive order
End
3) organizational model 4) social network
5) performance characteristics
If …then …
6) auditing/security
More in Lectures 11-13© www.processmining.org
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Next Week
Introduction to Process Modeling