Process Definition and Properties

7/30/2019 Process Definition and Properties

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Professor June Sung Park

KAIST

Copyright © 2011. Dr. June Sung Park. All rights reserved.




Overview Contents Lecture Case Study Quiz Exercise

Understand what a business

process is

Understand important properties

of the business process

Understand the lifecycle of

business processesUnderstand the benefits created

from managing business

processes


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Definition of Business Process

Value Chain

Process Categories and Hierarchy

Process Properties

Purpose of Process Management

Case Study – Ford Procurement Process Redesign




A business process is a set of interacting activities that are undertaken in an enterprise in

response to some event to achieve a goal.

An activity is performed by on one or more actors, who transform an input to an output

utilizing a certain set of resources.


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A company has one or more value chains—a collection of activities performed

to design, produce, sell, deliver and support a product or service line.


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Michael Porter’s Generic Value Chain

M. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, 1985.

Procurement Technology Development

HR Management

Firm Infrastructure

Inbound

LogisticsOperations

Outbound

Logistics

Marketing

and SalesService

Primary Activities

Support Activities




A value chain cuts across functional departments to combine activities into a

single flow that creates values to customers.


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A value chain is

the highest-level

(level 0) business

process.

Value chain is

decomposed intoa process

hierarchy through

process

decomposition.


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Manufacturing Value Chain

Supply-Chain Council, Supply-Chain Operations Reference-Model Version 9.0, 2008.




An activity can be decomposed into a process; vice versa, a low-level process can be

viewed as a higher-level activity; viz., the latter is an abstraction of the process and called

a compound activity (as distinguished from an atomic activity).

If an activity in process A is decomposed into process B, B is called a subprocess of A.

A subprocess is a compound activity and of type process.

An atomic activity (also called task) has no sub-activities defined by the model, and can bedescribed by a procedure containing multiple steps.


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Processes can be

grouped into three

categories:

Corporate

(management)

processesCore (or

operational, or

primary) processes

Support (or

enabling)

processes


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홍길동




Structured processes

Semi-structured processes

Ill-structured (or Ad hoc) processes

Task Structure Structured Semi-structured Ill-structured

Performer Operational worker Knowledge worker Subject matter expert (SME)

Process Topology Almost linear Sparse with many decision

and exception branchesMesh

Decision

Few simple,

predetermined, repetitive

decisions

More complex decisions

requiring a mix of rules and

intuition

Many creative, ad hoc

decisions

KnowledgeDiscipline

Well defined and static Less well defined andevolving

Fast evolving requiring

research, heuristics and

educated guesses

IT Support Automation of process

flow and steps

Workflow engine, business

rule engine, knowledge base

Social networking,

collaboration infrastructure

ExampleManufacturing line, retail

sales, bookkeeping

Equipment repair, field sales,

product development

Market prediction, product

idea generation, strategy

consulting, 10





A process (or an activity)

must have a goal.

A process should have

performance metrics to

measure the extent of goal

achievement.

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A process may be controlled

by policies.

A process may involve

decisions of which the rules

can be specified.

Decision rules should

conform to process policies.

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A process utilizes resources

which may include people,

tools, materials and

information systems.

A process is performed by

specific jobs.

A process requires each

participating job to play

specific roles and possess

certain competency

acquired through certain

training.

A process should have a

process owner.

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A process A and its immediate

sub-process B must have all their

properties aligned; e.g., the goals

and metrics of A must align with

those of B.

At top level of the processhierarchy, business strategy must

be established to define goals of

each value chain, which in turn

are passed down vertically along

the process hierarchy.


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Processes along the value chain should be tightly integrated with efficient handoffs; e.g.,process A’s output should be optimal as input to its immediate successor B.

Downstream concerns should be concurrently addressed in upstream processes.

Common processes should be factored out, standardized and shared.

As a result, insufficient or over-produced output, non-value-adding activities (such asrework and redundant effort) should be minimized.


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A Life Insurance Company’s Value Chain and Level 1 Processes




Business process lifecycle first goes through process engineering (i.e., process analysis,

design and implementation), and then goes into process operation and management (i.e.,

daily operation, management and continuous improvement).

Business processes has 3 levels of concern—enterprise-, process- and performer-level

concerns.

The business process lifecycle iterates (i.e., re-strategize, re-design, and so on) inresponse to business environment changes and strategic re-positioning.


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Strategize Design Implement Operate

Process

Enterprise

Performer

Establishcorporate strategy

Develop processarchitecture

Align enterprise

capabilities (i.e.business assets)

Govern processes

Set process goalsand requirements

Model andsimulate

processes

Implement processes and

allocate resources

Monitor andoptimize

processes

Set personalgoals

Plan activities Align competency Execute processes

BPM Framework




Document and understand how a

process really works (especially

when exceptions occur).

Understand what resources and

competencies are required for it to

work effectively and efficiently.

Elaborate and standardize how it

should work and train the

performers.

Ensure employees’ daily work is

aligned with the overall process

goals and the enterprise strategies.

Monitor the progress and

performance of the process.


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Analyze the process to find opportunities

to improve its performance.

Integrate the process with up or

downstream processes to construct an

end-to-end streamlined value chain.

Determine how to adapt the process tochanges in business environments and

business strategies.

Find common processes that can be

standardized and shared across different

departments.


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Redesign a process, and then simulate

and implement the new process.

Provide a detailed specification of the

process for an IT project to implement it

(whether by custom development or

package implementation).

Automate at least a part of the process

using software.

Find ways to exploit emerging IT to

innovate the business process (e.g. use of

mobile devices, social networks, M2M

computing, etc.)

Outsource some portion of the process

to external specialized vendors (e.g. BPO,

SaaS vendors).

Develop a process reference model to be

shared among potential trading partners.


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Company: Ford (1980s)

Business Context: In early 1980s, Ford’s North American account payable department

employed more than 500, while Mazda took care of it’s a/p chore with 5 people.

Business Process to Redesign: Instead of looking into the a/p process to find causes of

inefficiency, Ford looked at the whole process of procuring parts upon request from a

factory plant—a super-process containing the a/p process as a sub-process.Ford focused on the output of the a/p process—a correct and timely payment to the

vendor for its shipment. It ignored the detail of the current process.

This way, Ford set out to radically and holistically redesign the entire purchasing process

rather than marginally improving the current a/p process through corrective actions.


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?lant

order request

order filling

purchase

order

shipment

payment Vendor

M. Hammer and J. Champy, Reengineering the Corporation—A Manifesto for Business Revolution, HarperBusiness, 1993.





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By adding a

purchase order

database and

an associated

PO application,

Ford eliminated

invoice.

Payment

authorization,

used to be

performed by

accounting, is

now done bythe receiving

clerk using the

PO application

system—

Empowerment!


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Head count was reduced from 500 to 125 in the a/p dept right after this process

reengineering.

The a/p dept, after a few years, had only 5-10 needed for handling exceptional situations.

Ford designed the process around outcomes, not tasks.

It let “doers” be self -managing, flattening the organization hierarchy and reducing back

office staffs.The new system captured information once and at its source, and had it shared across

departments.

The company changed the business rules: “We pay when we receive the invoice” to “We

pay when we receive goods”.

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Process Definition and Properties