MTAT.03.

231
Business Process Management

Lecture 1 – Introduction

Marlon Dumas

marlon.dumas ät ut . ee

1
About this course

Objective
• To introduce the discipline of modeling, analyzing, automating
and monitoring business processes.

Related courses
• Enterprise System Integration
• Integrating applications to automate or support business
processes
• Business Analysis and Software Product Management
• Identifying and analyzing business problems that can be
addressed via IT solutions
• Data mining / Business data analytics
• Mining business process execution logs

2
Structure of the course

14 lecture+practice sessions covering:

• Process Identification & Modeling
• Process Analysis
• Process Redesign
• Process Automation
• Process Monitoring & Mining
Team Project

3
Grading

Six assignments (25 points in total)

• 8-12 hours per homework ≈ 60 hours in total

Project (25 points)

• ≈ 40 hours

Exam (50 points), free choice between:

• Technical exam: Modelling, Automation, Mining

• Business exam: Modelling, Analysis, Redesign, Mining
• Minimum exam score: 20 out of 50

4
 Readings and resources

• Course material posted on course Web page

• http://courses.cs.ut.ee/2018/bpm
• Textbook
• Dumas, La Rosa, Mendling & Reijers: Fundamentals of Business
Process Management (second edition), Springer 2018
• You can download chapters or whole book if inside the university
network (see “Readings” section of web site)
• Currently, only first edition is available (OK for the first 4 weeks)
• Second edition available from 12 March onward
• Use message board for questions
6
 Issue
delivery Package
receipt Load products Issue
truck invoice

Prepare
shipment Schedule Schedule
payment Check &
delivery
confirm
PO
Unload
truck
Notify
shipment
Obtain
PO
confirm.
Match
Check incoming
Request
Invoice payment
PO change

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 Serve
Load meal
dish-
washer

Bring
menu
Take
Collect order
Collect payment
laundry Unload
Brush
dish-
grills
washer
Collect
laundry
Clean
kitchen Greet &
Sweep surfaces
Present & mop seat
bill

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 Business processes

Assets & Organisation

Partners
Function A Function B Function C
Financial

Human
Business Process
Resources
Business Process Customers
Technology
Business Process
Materials

9
 Check &
PO Package Load Notify Issue Match Payment
confirm
received products truck shipment invoice payment made
PO

Obtain Issue
PO Schedule Unload Check Schedule Goods
PO delivery
issued delivery truck invoice payment arrived
confirm. receipt

10
Customer Greet & Take Bring Serve Present Issue Customer
arrived seat order menu meal bill invoice paid

Load Clean Unload

Kitchen Brush Collect Sweep Kitchen
dish- kitchen dish-
is dirty grills laundry & mop is clean
washer surfaces washer

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A business process is…
a chain of events, activities and decisions
...involving a number of actors and objects,
….triggered by a need
and leading to an outcome that is of value to a customer.

Examples:
• Order-to-Cash
• Procure-to-Pay (aka Purchase-to-Pay)
• Application-to-Approval
• Fault-to-Resolution

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 “My washing machine doesn’t work…”
Negative outcomes (value-reducing):
Positive outcomes (value-adding):
• Fault not repaired in a timely
• Fault manner
repaired immediately with minor intervention
• Fault repaired but customer pays more
• Fault repaired, than by
covered expected
warranty

Insurance
Call Centre Company
Technician

Customer Customer
Parts
Service Store
Dispatch
Centre

VALUE
fault-to-resolution process
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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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15
 Improving Performance (Rummler’s Framework)
Business Environment
Economy Regulatory Culture

Assets & Organisation

Resources
Performance Planning Performance Management Stakeholders
Financial

Value
Human Function A Function B Function C
Resources
Business Process
Technology
Business Process Customers
Materials
Business Process

Competitors
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Process performance

If you had to choose between two services, you would

typically choose the one that is:

• F…
• C…
• B…
Process performance

If you had to choose between two services, you would

typically choose the one that is:

• Faster
• Cheaper
• Better
Process performance

Three dimensions of process performance

• Time
• Cost
• Quality
 Improving process performance

Customer Greet & Take Bring Serve Present Issue Customer

arrived seat order menu meal bill invoice paid

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 How would you improve this process?
Outsource to Customer Standardize
Eliminate Cooking

Automate

Invest and Build

Re-sequence

Eliminate Waiters

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Business Process Management (BPM)
Body of principles, methods and tools to design, analyze,
execute and monitor business processes, with the aim of
improving their performance.

IT systems
Customers Employees

Business
Processes
Data Trading
Partners

IT infrastructure Suppliers

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Why BPM?

“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
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In other words…

Information Yields
Technology Business
Value

Enables
Yields
Process
Change

Index Group (1982)

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Why BPM

25
26
The BPM lifecycle

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Process identification steps

1. Designation step
• Enumerate main processes Process
Architecture
• Determine process scope

2. Prioritization step (aka Process selection)

Prioritize processes based on: Prioritized
• Importance Process
• Health Portfolio
• Feasibility

After Davenport (1993)

Process Enumeration

“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
Porter: Components of a process architecture

Management
Processes

Customers / Stakeholders
Suppliers / Partners

Core Processes

Support Processes

After Michael Porter (1985)

Example: core, support and management processes
Wholesaler
Core processes
• Sales (lead-to-quote, quote-to-order, order-to-cash)
• Direct procurement (supplies replenishment)
•…

Support processes
• Indirect procurement (parts replenishment, operational resources
replenishment…)
• HR (policies update, recruitment, induction, probation, performance
appraisal and professional development…)
•…

Management processes
• Suppliers management (suppliers planning, suppliers acquisition…)
• Logistics management (logistics planning, logistics controlling…)
•…
Example: process architecture
Wholesaler

Strategic
Management

Logistics Suppliers
Management Management
Warehouse Demand
Management Management
Management processes

Direct
Sales Distribution
procurement

Marketing Service
Core processes
Indirect
Finance IT HR
procurement
Support processes
Prioritization (aka Process Selection)

1. Importance
Which processes have greatest impact on the organization‘s strategic
objectives?
2. Health (or Dysfunction)
Which processes are in deepest trouble?
3. Feasibility
Which processes are most susceptible to successful process
management?

Prioritized process portfolio

Hammer, Champy (1993)

Example: prioritized process portfolio
Financial institution

Short-term action
High Feasibility
Loan Rating
Low
controlling Contract
preparation Medium
Loan
decision Loan market High
evaluation
Handling of
payments Loan
planning
Loan
application
Low
Poor Health Good
Possible Strategic fit?
The BPM lifecycle

35
Business process model
Invoice handling example

36
The BPM lifecycle

37
Qualitative process analysis
Root-cause analysis example

38
Quantitative process analysis
Process simulation example

39
The BPM lifecycle

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Process redesign

AS-IS process model TO-BE process model

Cost

Time
Flexibility

Quality
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The Process Redesign Orbit
The BPM lifecycle

43
Process implementation

Process Process change

automation management

Executable
Job redesign
process design

IT development
Training
& configuration

Performance
Testing management
plan

... ….
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The BPM lifecycle

45
Process monitoring
Dashboards, alerts & reports

Event Model-based analytics (p. mining)

stream
DB logs

46
Roles in the BPM lifecycle

BPM group

System
admin/operati Process
ons team owner Analyst

Process
participants

Developer

47
Course structure

Week 3

Weeks 2 & 4

Weeks 12-14 Gover- Weeks 5-7

Strategy nance

Culture

Weeks 10-11 Weeks 8-9

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Further Readings & Resources

• Fundamentals of Business Process Management

• Chapter 1 – Introduction
• Short quiz
• http://www.proprofs.com/quiz-school/story.php?title=introduction-to-bpm

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Next Week
Process Identification

Strategic
Management

Logistics Suppliers
Management Management
Warehouse Demand
Management Management
Management processes

Direct
Sales Distribution
procurement

Marketing Service
Core processes
Indirect
Finance IT HR
procurement
Support processes 50