MTAT 03 231MTAT.03.231 Business Process Management …courses.cs.ut.ee/2009/bpm/uploads/Main/ETMsession3.pdf · (for Masters of ETM) Lecture 3: Process Lifecycle Management Marlon

MTAT 03 231MTAT.03.231Business Process Management (BPM)

(for Masters of ETM)

Lecture 3: Process Lifecycle Management

Marlon Dumas

marlon.dumas ät ut . ee

Agenda for TodayAgenda for Today

Ti C t tTime Contents

10.15-11.45 Review of homework

12.15-13.45 Process Lifecycle Management

13.45-14.30 Lunch break

14.30-16.00 Process Lifecycle Management (cont.)

16.15-17.45 Process Lifecycle Management (cont.)

2

Another View on ProcessAnother View on Process Improvement

Business Process Lifecycle ManagementBusiness Process Lifecycle Management

• Process identificationP d lli ( i )• Process modelling (as-is)

• Process analysisP i ( b )• Process improvement (to-be)

• Process implementation• Process execution• Process monitoring/controlling

44

Process Improvement

Eli i ti f bj t t

- Object-oriented Approaches (1/2) -

• Elimination of object types– secondary objects (copies, reports)– e.g. prebilling

• Elimination of objects– statistical checks in goods receipt or invoice verification

• Substitution of objects– credit vouchers instead of invoices (Hammer: Ford)credit vouchers instead of invoices (Hammer: Ford)

(Evaluated Receipt Settlement)

• Digitalisation of objects• Digitalisation of objects– document management, EDM-systems– Microsoft‘s invoicing process

5© Michael Rosemann

Process Improvement- Object-oriented Approaches (2/2) -

• Harmonisation of objects – Unitisation

Logistical units (e g pallets)– Logistical units (e.g. pallets)

• Separation of objectsDifferentiation of standard cases and exceptions– Differentiation of standard-cases and exceptions

– Increased time-/cost-homogenity

• Process oriented optimisation of objects• Process oriented optimisation of objects– Design for process– Design of products meets needs of production,g p p

assembly, logistics and recycling


Process Improvement - Function-oriented Approaches (1/2) -

• Elimination of functions– Lean Management-approach

Outsourcing– Outsourcing

• Integration of functions (unification)Job Enlargement (horizontal compression)– Job Enlargement (horizontal compression)

• Process Owner• Case manager / case worker g

– Job Enrichment (empowerment)• delegation of decisions


Process Improvement- Function-oriented Approaches (2/2) -

• Change process direction– pull instead of push

Kanban Just in time– Kanban, Just-in-time

• Automation of functions– Basic idea of IT-use– Especially: Automation of control flow (workflow mgmt)

• Parallel routing of functions– create ‚natural order‘create ‚natural order– delinearize processes e.g. simultaneous/concurrent

engineering


Process Improvement - Resource-oriented Approaches -

• In general: extend the control sphere of a (human, technical) resource to its limits

organisational:– organisational:- case worker/process owner- reduced interfaces

d l ti f ibilit- delegation of responsibility

– IT: - integration of different media- integration of different media- reduced media changes (e.g. Enterprise System)- standardisation (e.g. Web services)

• Optimal synchronisation of demand and offer


Process Improvement- Another Classification -

Resource Function/P

Process ObjectProcess

Abandon / eliminate

Downsizing Lean Management e.g. copies,reports

Outsource/off-shore/self-service

External service provider

Business process outsourcing

Modular sourcing

Pull principle Management by exception

Kanban reports

St li T i i R d i f R d i fStreamline Training Re-design of function

Re-design of document

Automate Increased use of Workflow DigitalizationIT management

Natural order Simultaneous engineering

Multi-user access

10

g g

© Michael Rosemann

Process Improvement- Another Classification -

Resource Function/P

Process ObjectProcess

Horizontal integration

Job enlargement Workflow management

Unitization

Standardise Standardised roles (Global) Integration

XML, ontologies

Eliminate OPT Smoothen Multi user accessEliminate bottleneck

OPT Smoothen demand

Multi-user access

Specialisation/d t li ti

Specialised roles Design alternative Design of variantsdecentralisation casesEmpowerment Job enrichment Integrated quality

assuranceIntegration of delivery note and invoice

Centralisation Shared service Process consolidation

Elimination of variants


Process Implementation





1313

Harmon’s Process-centric Enterprise ArchitectureArchitecture

14Harmon (2004)

Process ImplementationProcess Implementation

• Organisational Change– User Participation– User Training– Change Management

• IT Implementation– Custom Software ApplicationCustom Software Application

• In-house development• Outsourced

– Packaged Enterprise System– Workflow Management System (WfMS / BPMS)

15

User Participation/InvolvementUser Participation/Involvement

1. Buy-in, not only commitment2. Select first processes carefully3 Involve users and sponsors3. Involve users and sponsors4. Highlight business impact5. Provide short-term benefits and long-term objectivesg j6. BPM must be in their self-interest7. Proof of concept8. Communicate (internal) success stories9. Identify and coach BPM champion10 Communication is different to consensus10. Communication is different to consensus

16

Management of User Participation in PProcesses

17Harmon 2004

IT Implementation – Packaged Enterprise Systems

T i ll l ifi d iTypically classified into:• ERP: Enterprise Resource Planning, including

– Manufacturing inventory control procurement financials humanManufacturing, inventory control, procurement, financials, human resources

• SCM: Supply Chain Management, including– Material acquisition (forecasting, planning), logistics/transportation– Supplier relationship management

• CRM: Customer Relationship Management• CRM: Customer Relationship Management– Marketing, lead management, sales

• These functions can come together, or acquired separately, e.g. g , q p y, g– E.g. Peoplesoft for HR (now Oracle), SAP for manufacturing and SCM,

Oracle Apps for financials, Salesforce for CRM

18

ERP System

Data WarehouseLegacySystems

ERP System

On-Line Analytical Processing(OLAP)

Bolt-On Applications(Industry Specific Functions)

S li

y

Sales Business Shop Floor

Customers Suppliers

Core Functions [On-Line Transaction Processing (OLTP)]

&Distribution

BusinessPlanning

Shop FloorControl Logistics

Operational DatabaseC i

19

Customers, Production,Vendor, Inventory, etc.

© Sumit Lodhia

What is an ERP System?What is an ERP System?

M lti d l li ti th t h l• Multi-module application that helps a company manage key parts of its business in an integrated fashion.

• Key features include:• Key features include:– standardized environment with shared database independent of

applications and integrated applications– enables information flow across organizational boundaries to

support common transactions and business processes– intended to be customized for specific companiesp p

• database configuration• bolt-on software

20

Ri k A i t d ith ERP I l t tiRisks Associated with ERP Implementation

• Pace of implementation– ‘Big Bang’--switch operations from legacy systems to ERP in

a single eventa single event– ‘Phased-In’--independent ERP units installed over time,

assimilated, and integrated

• Opposition to change – user reluctance and inertia

d f t t– need of upper management support

• Choosing the wrong ERPgoodness of fit: no one ERP product is best for all industries– goodness of fit: no one ERP product is best for all industries

– scalability: system’s ability to grow

21

Risks Associated with ERP ImplementationRisks Associated with ERP Implementation …

• High cost and cost overruns• training• testing and integration• testing and integration• database conversion

• Disruptions to operationsDisruptions to operations– ERP implementations usually involve major process changes– Need to align ERP-imposed processes with existing processes

22

Workflow Systems / BPM SystemsWorkflow Systems / BPM Systems

• BPMN-based: Savvion, Lombardi, BizAgi• BPEL-based (Service-Oriented Architecture)( )

– Oracle SOA Suite– ActiveBPEL– IBM Websphere Process Engine– ……

• Microsoft: BizTalk, Windows Workflow FoundationCommunity based open source: YAWL• Community-based open-source: YAWL

23

Workflow Technology in a Nutshell

24Animation by Wil van der Aalst, Vincent Almering and Herman Wijbenga

WorklistWorklistWork Item

25http://www.ahrq.gov

Danske Bank: Customer Package Process

Juni 2003 August 2003 December 2003October 2003 Marts 2007

Introduction of Customer packages.Word template to collect info

26© Steen Brahe, Danske Bank


Customer Create CardCreate Card

Create AccountCreate Account

Advisor Create CreditCreate CreditBackoffice workers

Email


Backoffice group createdHandles the creation process

27© Steen Brahe, 2007



Case Transfer SystemAutomatic validation and transfering




Workflow enabled creation process v. 1Automatic process control, 0% automated activities



Customer

ServiceA

Service B

Service C

Customer

XML

Not valid

Advisor Case Transfer System

Backoffice workers

Create CreditCreate Credit

Juni 2003 August 2003 December 2003October 2003 Marts 2007Juni 2003 August 2003 December 2003October 2003 Marts 2007

Workflow v. 680% automated activities


Danske Bank – System Architecturey

Executable Business ProcessA2

A1

A3

A4

WSDL A1 WSDL A2 WSDL A3 WSDL A4

Service Bus / Container

App1: COBOL App2: PL1 App3: Java App4: C#


The YAWL Workflow SystemYAWL

Workflow Engine

Event Log

PROM

Case Data

Worklet Service

Resource Service

Web ServiceInvoker

YAWL Process Editor

Admin Worklist

Event LogProcess

Repository Org Model

Web users Web

32

ebServiceusers Service

YAWL Editor

33

Simple Process Model in BPMNSimple Process Model in BPMN

34

Equivalent YAWL NetEquivalent YAWL Net

35

Path of a Work Item in YAWLPath of a Work Item in YAWL

36

Default YAWL Worklist HandlerDefault YAWL Worklist Handler

37

Process Monitoring & Controlling





3939

Process Monitoring and ControllingProcess Monitoring and Controlling

ProcessProcessPP

Strengths/kdesigndesign

Processdesign

Processdesign

ProcessMonitoring &Controlling

ProcessMonitoring &Controlling

weaknesses

ProcessProcessImple-mentation

designdesign

(Re-) Analysisexecutionexecution

Processi

Processi

implemen-tiation

executionexecution

40© Michael zur Muehlen

Process Monitoring

• Technical Monitoring:

Process Monitoring

Technical Monitoring:- System performance measurement (response time, system-load, reliability, etc.)

• Organizational Monitoring:- Measurement of organizational efficiency

Objective:Objective:enhanced transparency about the currentprocess status (e. g. improvement of the responsep ( g p pon customer requests)

41

Process Monitoring: Dashboardsg

Process Cycle Time

of Order Processing

Process Frequencyof Order

Processing

Process Cycle TimeProcess Cycle Timeof Order Processingsplit up to different

PlantsIDS (2003)

42

Beyond Monitoring – Process MiningBeyond Monitoring Process Mining2) process model

Start

Register order

3) organizational model 4) social network

Prepareshipment

Ship goods

(Re)send bill

Receive paymentContactcustomer

1) basic performance

Archive order

End

5) performance h t i tiperformance

metrics characteristics

6) auditing/security

If …then …

6) auditing/security

43www.processmining.org

Process Mining – The ProM Frameworkg

44www.workflowcourse.com

Example: Event log (audit trail)Example: Event log (audit trail)• Case 21

D i ti E t U / /dd hh• Description Event User yyyy/mm/dd hh:mm• ----------------------------------------------------------------------------• Start swdemo@staffw_edl 2006/02/05 15:00• Register order Processed To swdemo@staffw edl 2006/02/05 15:00Register order Processed To swdemo@staffw_edl 2006/02/05 15:00• Register order Released By swdemo@staffw_edl 2006/02/05 15:00• Prepare shipment Processed To swdemo@staffw_edl 2006/02/05 15:00• (Re)send bill Processed To swdemo@staffw_edl 2006/02/05 15:00

(R ) d bill R l d B d @ t ff dl 2006/02/05 15 01• (Re)send bill Released By swdemo@staffw_edl 2006/02/05 15:01• Receive payment Processed To swdemo@staffw_edl 2006/02/05 15:01• Prepare shipment Released By swdemo@staffw_edl 2006/02/05 15:01• Ship goods Processed To swdemo@staffw edl 2006/02/05 15:01p g @ _• Ship goods Released By swdemo@staffw_edl 2006/02/05 15:02• Receive payment Released By swdemo@staffw_edl 2006/02/05 15:02• Archive order Processed To swdemo@staffw_edl 2006/02/05 15:02

A hi d R l d B d @ t ff dl 2006/02/05 15 02• Archive order Released By swdemo@staffw_edl 2006/02/05 15:02• Terminated 2006/02/05 15:02

45W.v.d.Aalst (2003

Process discoveryProcess discovery

Registerorder

Prepareshipment

Shipgoods

(Re)sendbill

Archiveorder

process

Receivepayment

Contactprocess discovery

Contactcustomer


Conformance testinggPrepareshipment

Shipgoods

Registerorder

Receivet

(Re)sendbill

Archiveorder

payment

Contactcustomer

PurchaseRequisition

Requirementfor materialhas arisen

Requisitionreleased

Purchaserequisitionreleased

for schedulingagreement

schedule/SA release

requisitionreleased

for purchaseorder

Purchasing

Inbounddeliveryentered

Goodsreceived

Goodsreceipt

d

GoodsReceipt

Purchaseorder

created

Materialis released

Warehouse/Stores

posted

Invoicereceived

47TO item

confirmedwithout

differences

Transferorderitem

is confirmed

Paymentmust

be effected

InvoiceVerification

www.workflowcourse.com

Log based verificationg

formula four_eyes_principle( 1 ti it 2 ti it )(a1:activity,a2:activity) :=forall[p:person | (!(execute(p,a1)) \/ !( t ( 2)))]!(execute(p,a2)))];


ProM DemoProM Demo

http://www.processmining.org/


Process ControllingProcess Controlling

• Collation and analysis of runtime data

• Comparison of actual- and target datap g

• Active impact on current process execution as well asfuture process modeling (target)future process modeling (target)

Goal:Improvement of an enterprise‘s adaptabilityto changes in the environment and in theto changes in the environment and in theenterprise itself

50

Process ControllingObjective:

Establish a system for controlling the process and providing f db k t th l i l dfeedback to the people involved

Establish Control Points• Control points are activities such as

– Inspection, verification, auditing, measuring, counting…Usually considered business value adding– Usually considered business value adding

• Without control points and a control system the only way of assessing process performance is customer feedbackg p p⇒ The process ends up in a reactive mode⇒ Poor quality is discovered too late

L ti f t l i t i d t i d b• Location of control points is determined by – Criticality – impact on customer satisfaction– Feasibility – physically and economically possible

51

Feasibility physically and economically possible

Laguna & Marklund

Process Controlling (cont.)

Develop and Implement MeasurementsI l i th ti• Involves answering the questions1.What is to be measured and controlled (Ex. FedEx)?2.What is currently measured (available data)?2.What is currently measured (available data)?3.Can a business case be made for a new measurement system?4.What is an adequate sampling method, sampling size & frequency?

f• Measurements should be meaningful, accurate and timely– Statistical and graphical tools needed to turn data into information.

• Five measurement categories: Measures of• Five measurement categories: Measures of… – Conformance (to given specifications)– Response time (lead-time, cycle time)– Service levels (degree of availability, service reliability)– Repetition (frequency of recurring events such as rework)– Cost (Quality PAF internal and external failure costs)

52

– Cost (Quality, PAF, internal and external failure costs)

Laguna & Marklund

Performance Measures in SCMPerformance Measures in SCM

Overall Inventory Turns Annual cost of goods sold (company info) ÷ average total inventory

Raw Materials Inventory Turns(manufacturing companies only)

Annual cost of raw materials purchased (3) ÷ average raw material inventory

Work-in-Process Inventory Turns (manufacturing companies only)

(Annual cost of raw materials purchased (3) + Annual cost of conversion (4)) ÷ average work in process inventory

Finished Goods Inventory Turns Annual cost of goods sold (company info) ÷ average finished goods y g ( p y ) g ginventory

Percentage of safety stock Average safety stock ÷ total inventory

Purchase order cycle time (in days for h i d t t d l d

Average amount of time (in days) elapsed from point of intention to l d t i t f d b dpurchasing department and excludes

supplier lead time)place order to receipt of order by vendor

Supplier lead time Average amount of time (in days) elapsed from point of order to deliverydelivery

Supplier on-time delivery Percentage of orders supplier delivers on scheduled due date

53Find more at: http://www.exinfm.com/workshop.html

What to Measure? The Balance Scorecard FrameworkThe Balance Scorecard Framework

54After Kaplan & Norton (1992)

Strategy Map: Capture a Cause Effect Relationship from the Bottom Up

olde

rRelationship from the Bottom Up

sSt

akeh

o

Improved Returns on Investments

More rapid and accessible services

erna

l Pro

cess

Reduce Re-Activities thru ABC

Establish Web-Based Self Services

Economic Model Process

Inte

ing

wth Knowledge LeadershipExpand Global

Lear

n&

Gro

w gManagement

Leadership Development

)

Expand Global Facility Reach

Human Capital

Fina

ncia

l

nves

tmen

ts)

IT InfrastructureFacilities and Fixed Assets

55

(I

http://www.exinfm.com/

Examples of Measurements by PerspectiveExamples of Measurements by Perspective

Stakeholder / CustomerStakeholder / Customer Internal ProcessesInternal Processes• Number of unscheduled maintenance calls• Current customer satisfaction level• Production time lost because of maintenance

problems• Percentage of equipment maintained on

schedule

• Improvement in customer satisfaction• Customer retention rate• Frequency of customer contact by

customer service schedule• Average number of monthly unscheduled

outages• Mean time between failures

customer service• Average time to resolve a customer

inquiry• Number of customer complaints

Learning and GrowthLearning and Growth Financial / InvestmentsFinancial / Investments• % of facility assets fully funded for• Percentage employee absenteeism • % of facility assets fully funded for

upgrading• % of IT infrastructure investments

approved

• Percentage employee absenteeism• Hours of absenteeism• Job posting response rate• Personnel turnover rate

• # of new hire positions authorized for filling

• % of required contracts awarded and in place

• Ratio of acceptances to offers• Time to fill vacancy

56http://www.exinfm.com/

Extend the Map into Measurements, Extend the Map into Measurements, Targets and InitiativesTargets and Initiatives

Strategy Mapder

Targets and InitiativesTargets and Initiatives

Detailed statement of

what is critical to successfully

hi i th

How success in achieving the

strategy will be measured and

t k d

Key action programs

required to achieve bj ti

The level of performance

or rate of improvement

d d

Stak

ehol

Faster Service Access

achieving the strategy

tracked objectivesneeded

Objective Target InitiativeMeasureProc

ess

Self ServiceApplications

Description Target

2 per setup per month each Outlet Office

InitiativeMeasure

Number of ReworksIn

tern

al

Process and ValueM A l i

Lean ProcessesLean / Six Sigma

Eliminate waste, reworks, and other errors in our processes

L&G Web Enable

Technologies

Map Analysis our processes

ec o og es

estm

ents

Invest in IT

57

Inve

http://www.exinfm.com/

Alignment of Scorecard ComponentsAlignment of Scorecard Components

Make sure the components of your scorecard fit together. We want to create a tight model for driving execution of your strategy

Alignment of Scorecard ComponentsAlignment of Scorecard Components

create a tight model for driving execution of your strategy.

Goal Objective Measurement Target Initiativej g

Achieve Agency operational

Reduce Operational Service Costs by

Cost per Outlet Office, Cost per Region, Cost

5% - Year 110% - Year 215% Y 3

Activity Based Costing /operational

efficiencies with best practices in th i t

Service Costs by 50% over the next 5 years

Region, Cost per FTE

15% - Year 3 Costing / Management

the private sector

Reduce identified re-activities within primary processes by

Waste Volume Charts, Rework Tracking, Cycle Time End to End

Waste stream reductions of 5% each year, Reworks cut in

Lean / Six Sigma

processes by 80% over the next 3 years

Time End to End in S-LX (5 of 7 Regions)

Reworks cut in half for next 3 years, cycle time cut by 75%


Guidelines for Performance Guidelines for Performance MeasuresMeasures

• At least one measurement per objective. • Measurements define or explain objectives in

ifi blquantifiable terms:Vague => We will improve customer serviceP i > W ill i t i bPrecise => We will improve customer service by

reducing response times by 30% by year end. y

• Measurements should drive change and encourage the right behavior.

• Should be able to influence the outcome.


Benchmarking: SCORcardsg

60T. Gulledge & T. Chavusholu: “Automating the construction of supply chain key performance indicators”, Industrial Management & Data Systems, 2008.

Process Controlling (cont.)Performing Feedback and Control• Important for stabilizing and improving the process• Important for stabilizing and improving the process• Objectives of control/corrective action are

Regulation to maintain a certain performance level– Regulation to maintain a certain performance level– Improvement aiming at reducing variability or raising the average

performance level (see for example Six Sigma)

• Feedback is an important enabler for corrective action– People in the process need to understand how their actions affect

th ll d it fthe overall process and its performance– Feedback should be constructive and non-punitive

• Constructive feedback• Constructive feedback – Makes people feel that they matter– Encourages involvement and commitment

61

g

Laguna & Marklund

Six Sigma Quality Programs• Six Sigma is originally a company wide initiative at Motorola

for breakthrough improvement in quality and productivityfor breakthrough improvement in quality and productivity– Launched in 1987

• The ongoing success of Six Sigma programs has attractedThe ongoing success of Six Sigma programs has attracted a number of prestigious firms to adopt the approach – Ex. Ford, GE, AMEX, Honeywell, Nokia, Phillips, Samsung, J.P.

Morgan, Maytag, Dupont…

Broad definition of Six Sigma programs“A company wide strategic initiative for process improvement in both manufacturing and service organizations with the clear objective of reducing costs and increasing revenues”j g g

– Fierce focus on bottom-line results

62Laguna & Marklund

Technical Definition of Six Sigma• Reduce the variation of every individual process to render no more

than 3.4 defects per million opportunitiesp pp• Assuming the process output is normally distributed with mean μ and

standard deviation σ the distance between the target value and the closest specification limit is at least 6 σ and the process mean is p pallowed to drift at most 1.5 σ from the target

σμ 1.5- σ+μ 1.5μ

Target Value (T)

4.5σ σ4.5σ1.5 σ1.5

Upper Specification Limit (USL)

Lower Specification Limit (LSL)

6 6

636σ 6σ

Laguna & Marklund

The Six Sigma Cost or Efficiency RationaleRationale

• Reducing costs by increasing process efficiency has an immediate effect on the bottom lineimmediate effect on the bottom line – To assure worker involvement Six Sigma strives to avoid layoffs

Improvement projects

VariationThe Six Sigma Efficiency loop


Commitment Reduced Costs

Increased ProfitsCycle Time Yield

64

Increased Profits

Laguna & Marklund

The Six Sigma Cost or Efficiency Rationale

• Based on the dimensions of variation, cycle time & yieldRationale

Variation• Can be divided into two main types

1. Common cause or random variation2. Special cause or non-random variation

• Non random variation• Non-random variation – Relatively few identifiable root causes– First step in reducing the overall variation is to eliminate non-

random variation by removing its root causes• Random variation

The result of many different causes– The result of many different causes– Inherent in the process and can only be affected by changing

the process design

65Laguna & Marklund


Variation (cont.)Rationale

• Important concepts to understand the impact of variation– Dispersion

P di t bilit– Predictability– Centering

• Dispersion• Dispersion – Magnitude of variation in the measured process characteristics.

• PredictabilityPredictability– Do the measured process characteristics belong to the same

probability distribution over time?– For a predictable process, dispersion refers to the width of the pdf.

• CenteringH ll th i li d ith th t t l

66– How well the process mean is aligned with the process target value

Laguna & Marklund


Variation (cont.)

Rationale( )

• Ideally the process should be predictable, with low dispersion, and well centeredS d d h f d i i bili i Si Si• Standard approach for reducing variability in Six Sigma programs

1 Eliminate special cause variation to reduce overall1. Eliminate special cause variation to reduce overall dispersion and improve predictability

2. Reduce dispersion of the predictable process3 Center the process to the specified target3. Center the process to the specified target

• Six Sigma use traditional tools for quality and process control/analysisy

– Basic statistical tools for data analysis– The 7 QC tools

67Laguna & Marklund


Cycle time and Yield

Rationale

• Cycle time (lead-time, response time)– The time a job spends in the process

Yi ld ( d i i )• Yield (productivity)– Amount of output per unit of input or per unit time

I t i l ti d i ld f ll th• Improvement in cycle time and yield follow the same tactic as for variation

– Gain predictability reduce dispersion and center to targetGain predictability, reduce dispersion and center to target

• The target is usually broadly defined as– Minimize cycle time and Maximize yielde cyc e t e a d a e y e d

• Six Sigma principle– Improvement in average cycle time and yield should not be

68made at the expense of increased variation

Laguna & Marklund

The Six Sigma Revenue or Eff ti R ti l

• Determinants of the company’s revenues

Effectiveness RationaleDeterminants of the company s revenues– Sales volume closely related to market share– Sales prices

⇒ Revenues contingent on how well the firm can satisfy the external customers’ desires

An important Six Sigma Success factor isAn important Six Sigma Success factor is the focus on internal and external customer requirements in every single improvement project

69Laguna & Marklund

The Six Sigma Cost & Revenue RationaleRationale


Variation

Customer satisfaction

R d d C t

p p j Customer satisfaction

Increased Market Sh & i llCommitment Reduced Costs Share & potentially

higher prices

Increased Profits

Cycle Time Yield

Increased Revenues

Cycle Time

70Laguna & Marklund

The Six Sigma Framework

Centered around a disciplined and quantitatively i t d i t th d l (DMAIC)oriented improvement methodology (DMAIC)

– Define, Measure, Analyze, Improve, Control

Top Management Commitment

Training

Define Measure Analyze Improve C t l

Training

Improvement MethodologyDefine Measure Analyze Improve Control

Measurement SystemMeasurement System

Stakeholder Involvement

71Laguna & Marklund

Six Sigma Success Factors• The bottom line focus and big dollar impact

E d i t i t t it t– Encourages and maintains top management commitment

• The emphasis on - and consistent use of - a unified and quantitative approach to process improvementquantitative approach to process improvement– The DMAIC methodology provides a common language to share

experiences and successes across the organization– Creates awareness that decisions should be based on factual data

• Emphasis on understanding & satisfying customer needs– Creates focus on doing the right things right– Anecdotal information is replaced by factual data

Combination of right projects right people and right tools• Combination of right projects, right people and right tools– Careful selection of projects and people combined with hands on

training in using statistical tools in real projects

72

g g p j

Laguna & Marklund

Recap: The Layers of BPM Activitiesy

BPM SetupStrategic

AlignmentBPM

GovernanceBPM

MethodologyProcess-awareInfom. Systems

Culture &People

Process AnalysisProcess

IdentificationProcess

ModellingProcess

MeasurementProcessAnalysis

ProcessImprovement

Process ImplementationProcess Process Process Process ChangeLean/

Process Execution and Controlling

ProcessConfiguration

ProcessDevelopment

ProcessTraining

ProcessTesting

ChangeManagementSix

Sigma

ProcessExecution

Process Monitoring

Process Mining

ProcessPerform. Mgt.

ProcessControlling

Process Execution and Controlling

73

Project

(see project description on the course web page)web page)

ReadingsReadings

• P. Harmon. Business Process Architecture and the Process-Centric Company, BPTrends Newsletter, March 2003. http://tinyurl.com/c88rlp

• P. Harmon. Business Processes at a New Company: What Do You Do First?. BPTrends p yNewsleter, October 2004. http://tinyurl.com/cfckrfp y

75

Documents

MTAT 03 231MTAT.03.231 Business Process Management …courses.cs.ut.ee/2009/bpm/uploads/Main/ETMsession3.pdf · (for Masters of ETM) Lecture 3: Process Lifecycle Management Marlon