Business Process - A process is a series of activities or tasks which transforms inputs into outputs

Transformations are classified as:

Physical - The transformation of raw materials to a finished product
Locational - The transportation service provided by an airline
Transactional - Banking and transformation of cash into stocks by a brokerage firm
informational - The tranformational of financial data into information in the form of
financial statements
A business process describes how something is done in an organization
A business process is an activity which is conducted in an organization in order to achieve a
specific outcome
A business process is a collection of related activities or tasks that produce a specific service or
product for a customer
A business process consists of a series of steps each of which must be completed in order to
achieve a specific outcome
Types of Business Processes
Management Processes - The processes that govern the operation of a company as a system
Examples of management processes:
Corporate governance
Strategic Management
Operational processes - The processes that comprise the business and create value.
Examples of operational processes are:
Purchasing, Manufacturing, Marketing , Sales
Core Processes - The operational processes that are directly related to the mission of
the company.
Examples of core processes are: Order fulfillment process, Manufacturing, Consulting,
Claims processing, Tax preparation
Support Processes - The processes that support the core processes
Examples of support processes are: Accounting, Recruitment, Technical support

Examples of Business Processes: Claims process, Course registration, Filing a job application, Applying
for a passport, Requesting a cash refund or product exchange, Order fulfillment, Credit approval, Billing,
Admissions, Budget planning, Order fulfillment, New employee training
Business Process Decomposition - When a business process is divided up into separate activities, each
activity is called a sub-process.
Each activity may has its own attribute: Processing time, Buffer, Unit flow

Process Types and Hierarchies

Process are categorized according to their scope within an organization into three types:
Individual Processes - This process is carried out by separate individuals
Vertical or functional processes - This process is contained within a specific functional unit or
department
Horizontal or cross functional processes - This process cuts across several functional units
Core processes are cross-functional processes
Process Architecture/Process Structure
Inputs and outputs
Inputs and outputs and entry and exit points of the process
Inputs are transformed into outputs
Establish the process boundaries
Flow units
A flow unit is a transient entity that proceeds through various activities and finally exits
the process as a finished product
Examples; files, documents, cash, forms, orders, requests
Network of activities and buffers
Series process activities
Buffers Wait times
Through which flow units pass in order to be transformed from inputs to outputs

 Resources - Resources are tangible assets that are necessary to perform activities within the
process.
Information structure - Information structure specifies which information is required and which
is available in order to make the decisions necessary for performing a process.

System Thinking:
Conceptualizing a set of entities, activities, or organizations as systems
Focusing on how elements relate to each other and depend on each other
The different components of a company work together to achieved the desired outcome based
on the mission.
Systems View of an Organization
Organizations have customers, products, and suppliers
Work occurs in organizations
Inputs are converted to outputs in organizations
Outputs flow to customers

Business Model The term business model is used for broad range of informal and formal
descriptions to represent
core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational
structures, trading practices, operational processes, and policies

A business model is a framework for creating value:

Economic value
Social value
Other forms of value

There are two views of organizations

a) Traditional View of an Organization

Focus: Boss

Primary Relationships: Chain of Command

Orientation: Hierarchical

Decision Maker: Management

Style: Authoritarian

b) Process View of an Organization

Focus: Customer

Primary Relationship: Customer-supplier

Orientation: Process

Decision Maker: Employees

Style: Participative

Process view follows work as it moves across the organization

Emphasis is placed on work output

Output must meet customer requirements

Process structure is clear to everyone increase transparency

Employees understand how their efforts fit into the big picture

Employee involvement and participation increases

Barriers among departments breakdown

Process Management - A collection of basic principles used to manage, control, and improve
processes
Managers are responsible for specific processes or activities.
Managers are responsible for organizing the process, securing the resources needed to
execute it, measuring the results, providing rewards or corrective feedback, changing
and improving it when possible
Key issues of Business Process Management:
Strategic Focus and Customer Focus
Continuous learning and improvement

 Performance Excellence and Benchmarking

Appropriate IT Support
Lean Process with Knowledge Visibility
Successful Process Management - 3 Phases:
1. Initialization process authority, scope, interfaces and handoffs are determined

assign process ownership

analyze boundaries and interfaces

2. Definition workflow documentation / baseline for process evaluation is defined

Define the process by documenting its workflow

Establish control points and measurement

Identify the process boundaries, input, and output

Document process, activities, workflow

3. Control means and procedures for processing monitoring, feedback and control are
established

establish control points (inspection, verification, auditing, measuring, counting)

Develop and implement measures

Take corrective action and providing feedback and control

Means and procedures for process monitoring, feedback, and control are established

Measurements
Measures of conformance: verification that work conforms to a given requirement

Measures of response time: time is takes to complete work (cycle time, lead time)

Measures of service levels: the degree to which a service or resource is available to a customer
Measures of repetition: frequency of recurring events
Measures of cost: cost of waste- prevention costs, appraisal costs, failure costs.
Types of Costs
Prevention costs are associated with preventing future nonconformance

 Appraisal cost are associated with detecting nonconformities

Failure costs deal with nonconformities, example scrap and rework warranties.
Rich Picture - A rich picture is a tool which is used to for recording and reasoning about aspects of the
work context.
A rich picture is a graphical representation that identifies
identifies all the stakeholders
depicts their concerns
Shows some of the structure underlying the work context.
Structure, process and concerns
Process Strategy - The pattern of decisions made in managing processes so that they will achieve their
competitive priorities is called a process strategy.
Process strategy guides a variety of process decisions, and in turn is guided by the operations
strategy and the organizations ability to obtain the resources necessary to support them.
A process involves the use of an organizations resources to provide something of value.
No service can be provided and no product can be made without a process.
No process can exist without at least one service or product.
Managing processes involves answering a key question such as: How to provide services or
make products?
And making a decision
Many different choices are made in selecting human resources, equipment, outsourced
services, materials, workflows, and methods that transform inputs into outputs
Another choice is which processes are to be done in-house, and which processes are to be
outsourced that is, done outside the firm and purchased as material and services.
This decision helps to define the value chain
Process improvement decisions are needed when:
A gap exists between competitive priorities and competitive capabilities
A new or modified service or product is being offered
Quality must be improved

 Demand for a service or product is changing

Current performance is inadequate
The cost or availability on inputs has changed
Competitors are gaining by using a new process
New technologies are available
Competitive priorities have changed
Someone has a better idea
Major Process Decisions Operations managers must consider four common process decisions to
ensure effective process design:

Process structure
how processes are designed relative to the kinds of resources needed,
how resources are partitioned between them,
how their key characteristics are classified

Customer involvement - The ways in which customers become part of the process and the
extent of their participation
Operations managers make more of the process visible to the customers (workers may
be observed working)
Resources flexibility - The ease with which employees and equipment can handle a wide variety
of products, output levels, duties, and functions
Operations Managers decide whether to have flexible workforce (workers who are
capable of doing many tasks)
Capital intensity - The mix of equipment and human skills in the process;
As the capabilities of technology increase and its costs decrease, managers face an everwidening range of choices, from operations utilizing very little automation to those
requiring task-specific equipment and little human intervention
The automation decision requires careful examination of the type of capital needed for
the process
Front Office - A front office process is a process with high customer contact where the service
interacts directly with the internal or external customer

 Example: the process of the sale of financial services to municipalities

The process is customized to meet specific customer needs.
Hybrid Office - A hybrid office process is a process with moderate levels of customer contact and
standards with some options available
The workflow progresses from one workstation to the next, with dominant paths
Example; the process of evaluating employee performance on a quarterly basis
Back Office - The back office process has a low customer contact and little service customization. The
work is standardized and routine, with flows from one service provider to the next until the service is
completed.
Example the monthly production of client fund balance reports

Two strategies for change are:

Process reengineering - Process reengineering also called business process reengineering (BPR)
is the fundamental rethinking and radical redesign of processes to improve performance
dramatically in terms of cost, quality, service, and speed
BPR is about reinvention, rather than incremental improvement
estimates suggest 50-70% of all BPR projects have failed due to:
lack of top mgmt support
poor understanding of org/infrastructure needed to support new design
inability to deliver on technology
lack of guidance and motivation
Fundamental Argument upon which BPR rests - Information technology can be used to enable
new ways of doing work which are more time and cost efficient and effective than old/existing
ways of working
Business Process Re-engineering uses concepts: Business strategy, Accounting, Organization
Design, Information Systems, Industrial Engineering
Approach of BPR
Core business processes
Elimination of unnecessary work and supervisory activities

 Strong leadership
Cross-functional teams (high involvement workplace, self-managing teams, employee
empowerment)
Top-down performance targets, bottom-up deciding how to achieve them
IT is a primary enabler of BPR
BPR projects are initiated by the need for strategic change
BPR team must determine who needs the information, when they need it, and where
BPR requires a clean-slate philosophy (starting with the way the customer wants to
deal with the company)
Process improvement - BPR team must understand the current process (AS-IS process), what it
does, how well it performs, and what factors affect it
BPR team must examine every activity involved in the process throughout the
organization, recording each step, questioning why it is done, and then eliminating
unnecessary activities
Strategic Fit - The process strategist should understand how the four major process decisions tie
together, so as to identify ways of improving poorly designed processes
The choices should fit the situation and each other
When the fit is more strategic, the process will be more effective
Process Choice A way of structuring the process by organizing resources around the process of
organizing them around the products

Job process A process with the flexibility needed to produce a wide variety of products
in significant quantities, with considerable complexity and divergence in the steps
performed
Batch process A process that differs from the job process with respect to volume,
variety, and quantity
Line process A process that lies between the batch and continuum; volumes are high
and products are standardized, which allows resources to be organized around particular
products
Continuous Process The extreme end of high volume standardized production and rigid
line flows, with production not starting and stopping for long time intervals

Production and inventory strategies

Make to order strategy - A strategy used by manufacturers that make products to

customer specification in low volumes

Assemble to order strategy a strategy for producing a wide variety of products from
relatively few assemblies and components after the customer orders are received
Make to stock strategy a strategy that involves holding items in stock for immediate
delivery, thereby minimizing customer delivery times
Mass production a term sometimes used in the popular press for a line process that uses
the make to stock strategy
Strategy Maps show cause and effect

faster process cycle times will increase retention of customers

A common visual framework

Embeds the elements of the balanced score card into a cause and effect chain

Connects desired outcomes with the drivers of those results

Common language

Businesses must create and deploy intangible assets

Employee skills and knowledge

Information technology

Corporate culture that encourages innovation, problem solving, and organizational

improvement

Strategy maps are a tool to describe intangible assets

Cycle Time - Cycle time is the total amount of time which elapsed during the completion of a process
(Harrington, 1991, 114)
Example the bread-making process
Cycle time totals several hours even though the bakers are directly involved in only a fraction of
that time
Cycle time is composed of two components:
Processing time - Processing Time: includes activities that transforms inputs to outputs
Non-processing time - Non-processing Time: includes activities such as waiting and
storing

 The cycle time of a process may be prolonged by many different factors

Improvement efforts dedicated to reducing cycle time focus on the identification and analysis
of:
Value-adding activities - Activities that contribute to transforming the product or service to better
conform to the customers requirements have the potential to add value.
For example, installing the hard drive in a new computer brings the product closer to valueadding
Value-adding activities are use a minimum of resources and are carried out correctly
Business value-added activities - Business value-added (BVA) includes processes/activities that are:

installed by management and deemed necessary to support, control, and monitor internal
business functions but have little or no perceived value to the customer

Examples: Scheduling, invoicing, auditing, record keeping

Non- value-added activities - Non-value-added activities (NVA) includes non-essential
processes/activities that contribute to neither customer satisfaction nor improved business operations

Non-value-added processes/activities increase cycle time and add costs rather than value
Examples: redundant inspections, rework, waiting, storage

Efficiency Ratio - Overall efficiency can be calculated by determining the cycle-time efficiency ratio
T= BVA+NVA
Further Improvements in Cycle Time
Improvements in cycle time are gained through streamlining the stream lining essential activities
by:
Eliminate all non-value-added activities
Streamline the business value-added activities
Economies of scope economies that reflect the ability to produce multiple products more cheaply in
combination than separately
Plants with plants (PWPs) Different operations within a faculty with individualized competitive
priorities, processes, and workforces under the same roof
Focused factories The result of a firms splitting large plants that produces all the companys products
into several specialized smaller plants

Process complexity The number and intricacy of the steps required to perform the process
Process Divergence The extent to which the process is highly customized with considerable latitude as
how it is performed
Active contact The customer is very much part of the creation of the service and affects the service
process itself
Passive contact The customer is not involved in tailoring the process to meet special needs or in how
the process is performed
Flexible flow the customers, materials or information move in diverse ways with the path of one
customer or job often crisscrossing the path that the next one will take
Line flow The customers, materials, or information move linearly from one operation to the next,
according to a fixed sequence

Strategy
Map for RIM
Productivity Strategy

Financial
Perspective

Improve Cost
Structure

Long Term
Shareholder Value

Increase Asset
Utilization

Growth Strategy

Expand Revenue
Opportunities

Going Worldwide

Customer Value Proposition

Customer
Perspective

Internal
Perspective

Price

Quality

Availability

Selection

Functionality

Service

Partnership

Brand

Operations
Management
Process

Customer
Management
Process

Innovation
Process

Regulatory and
Social Process

- Supply
-Production
-Distribution
-Risk Management

-Selection
-Tech Support
-Retention
-Growth

-Design/Develop
-Launch

-Environment
-Safety and Health
-Employment

Diversity

Teamwork

Human
Capital
Information
Capital

Learning and
Growth Perspective

Organization
Capital

Culture

Leadership

Rules for Describing / Documenting Processes

No rules only guidelines

No absolute rights or wrongs context is everything

The appropriate tools and technique to describe, document and analyse a process depends on

Why the analysis is being performed

What problem is being solved

Gut Feel on the root cause of the problem

Many many techniques for describing and documenting process

Business process modelling is a means of representing the steps, participants and decision logic in
business processes.

There are three main types of process models:

Active models: a working model that represents the processes (eg. computer simulations)

Diagrammatical models: a diagram that shows the processes and the relationships between
them (eg. process maps and flowcharts.)

Descriptive models: written explanations of the processes

A process map is

A drawing that shows a sequence of steps or activities from beginning to the end of a
process

A Road map for how to get from here to there

A good tool for identifying improvement opportunities

Process mapping is a technique of diagrammatical modelling.

The diagram represents a series of processes and how they are related.

Process mapping provides a representation of who does what and in what order.

For existing processes a process map can

Help a team come to a common understanding of a process

Educate the team on the steps in the process

Find unnecessary or redundant steps in the current process

Find missing steps in the process

Find efficiencies in the process flow

Look in more detail at the current methods being used in each part of
the process

Identify the supplier and customers of the process (both internal and
external)

Be used as a powerful communication tool

Uses: For new processes

Aid in planning for successful implementation of any new approach

Used as a method to keep track of the proposed process

Process mapping helps to clarify the steps involved in a particular process.

It is used for: understanding the current processes, clarifying responsibilities, identifying

process inefficiencies, designing new procedures, training

Useful to identify the departments, functions, or disciplines involved with the process. This
process map format allows the workgroup to

Determine all critical interfaces

Overlay the time to complete various sub-processes on the map

Identify disconnects

Identify extraneous steps

Identify illogical handoffs

Departments or functions is on the left side of the page. Flows go right to left.

A formal method for identifying and integrating processes between departments and teams

can ensure the connections, communications and hand-offs are well-designed and well
managed.

"Swim Lane Diagrams," also known as "Rummler-Brache Diagrams.

(www.mindtools.com)

Swim Lane Diagrams

Swim Lane Diagrams were proposed by Geary Rummler and Alan Brache in their book Improving
Processes (1990).

Process diagrams help spot processing gaps and inefficiencies.

allows you to quickly and easily plot processes and the interconnections between
processes, departments and teams.

The added advantage of the Rummler-Brache or Swim Lane Diagram approach is that it
focuses on the high risk interconnections between departments and teams, and helps
you spot more clearly issues and risks associated with these.

Once the diagram is complete, it is easy to see who is responsible for what and it is also easy to
start identifying potential inefficiencies.

helps you break down your process so you can spot the bottlenecks, redundancies, and
other causes of inefficiency

The first step to spotting inefficiencies and making improvements

Break down your organizations processes into manageable pieces

Determine your scope

If you are trying to find strategic inefficiencies, then analyzing every process in detail is
unnecessary and cumbersome.

you might assign each main functional area to a swim lane and look at the interchanges in and
between them.

this would help you spot disconnects between functional areas of the business.

If you were trying to diagnose inefficiencies in your hiring and recruitment process then you
would look at specific roles, departments and perhaps some key individuals and assign these to
the swim lanes.

Tips for process models

Define the current practices of the process- start by clearly specifying the beginning and end
points.

Understand and define the stakeholders in the process.

Understand where and how the process fits into the organization.

How will changes in the process impact either processes or stakeholders. (Relationship
Map)

Levels of Process Modelling

A decision that must be made What is the level of process modelling needed?.

Macro or First Level identifies the steps in a process such that a team
can watch a product or service flow through the business cycle

Mid or Second Level is a more detailed flowchart of a step identified in

the macro level. This drill down is only done when a better
understanding of the overall process will be gained by further analysis
of a particular step.

Micro or Third Level is a very detailed level of flowcharting which

maps out the task in an activity identified in the mid or second level.

Supply Chain The network of services, materials, and information flows that link a forms customer
relationship, order fulfillment, and supplier relationship process to those of its suppliers and customers
Supply chain management Developing a strategy to organize, control, and motivate the resources
involved in the flow of services and materials within the supply chain
Supply chain strategy Designing a firms supply chain to meet the competitive priorities of the firms
operations strategy
Weeks Of supply An inventory measure obtained by dividing the aggregate inventory value by sales
per week at cost
Inventory Turnover An inventory turnover measure obtained by dividing annual sales at cost by the
average aggregate inventory value maintained during the year
Average aggregate inventory value the total value of all items held in inventory for a firm
Bullwhip effect The phenomenon in supply chains whereby ordering patterns experience increasing
variance as you proceed upstream in the chain
E-commerce the application of information and communication technology anywhere along the value
chain process
Centralized placement keeping all the inventory of a product at a single location such as firms
manufacturing plant or a warehouse and shipping directly to each of its customers
Inventory pooling a reduction in inventory and safety stock because of the merging of variable
demands from customers
Forward placement locating stock to customers at a warehouse, DC, wholesaler, or retailers
Vendor managed inventories An extreme application of the forward placement tactic, which involves
locating the inventories at the customers faculties
Continuous replenishment program A VMI method which the supplier monitors the customers
inventory levels and replenishes the stock as needed
Radio frequency identification A method for identifying items through the use of radio signals from a
tag attached to an item
Cross-docking The packing of products on incoming shipments so that they can be easily sorted at
intermediate warehouses for outgoing shipments based on their final destinations; the items are carried
from the incoming vehicle docking point to the outgoing vehicle docking point without being stored in
inventory at the warehouse

Competitive orientation a supplier relation that views negotiations between buyer and seller as a zero
sum game: Whatever one side loses the other side gains and short term advantages are prized over long
term commitments
Cooperative orientation a supplier relation in which the buyer and seller are partner, each helping the
other as much as possible
Sole sourcing the awarding of a contract for a service or item to only one supplier
Electronic data interchange a technology that enabled transmission of routine business documents
having a standard format from computer over telephone or direct leased lines
Catalog hubs a system where By suppliers post their catalog of items on the internet and buyers elect
what they need and purchase them electronically
Exchange an electronic marketplace where buying firms and selling firms come together to do
business
Auction a marketplace where firms place competitive bids to buy something
Value analysis a systematic effort to reduce the cost or improve the performance of services or
products, either purchased or produced
Early supplier involvement a program that includes suppliers in the design phase of a service or product
Pre-sourcing a level of supplier involvement in which suppliers are selected early in a products
concept development stage and are given significant if not total, responsibility for the design of certain
components or systems of the product
Postponement an organizational concept whereby some of the final activities in the provision of a
service or product are delayed until the orders are received.
Channel assembly The process of using members of the distribution channel as if they were assembly
stations in the factory
Make or buy decision a managerial choice between whether to outsource a process or do it in house
Backward integration a firms movement upstream toward the sources of raw materials, parts and
services through acquisitions
Forward integration acquiring more channels of distribution, such as distribution centers
(warehouses_ and retail stores, or even business customers