Economics for Engineering Prof. Andrea Sianesi academical year 2008/2009

1. Economics for Engineering Prof. Andrea Sianesiacademical year 2008/2009 Basics of Business Processes Management

2. Agenda • Business Process: definition and introductory concepts • Business processes and the organisational structure of the company • Organisational principles of business process management • Business Process Reengineering and Business Process Management EE - BPM

3. Business Process Management • Innovative approach to management and organization of company activities which seeks to achieve integration of activities, global vision, global (process) performance, instead of mere local optimizations • Basic hypothesis: Organizations do not create value and profit through organisational units but rather through processes • Principles and criteria • Organisation design • Management • Performance measurement • Technology (ITC) • Organisational Change approaches and methodologies • BPR • BPM EE - BPM

4. The relevance of Business Process Management • Challenges: • Customer orientation • Time-based competition • Trade offs between effectiveness and efficiency • Key role of competencies and knowledge • Answers: • Chains of suppliers and customers • Flows and activities integration • Elimination of non value-added activities • Exploitation of resources and competencies of departments to obtain customer satisfaction •  Global optimisation of performance EE - BPM

5. What is a Business Process? • A business process is an organized set of activities and decisions, directed towards creating an output effectively requested by a customer and to which the latter attributes a clearly defined “value”. • Business process is a coordinated thread of sequential and parallel activities that work together to deliver value (price, quality, service, customization) to customers; must be oriented to customers’ need; embody, through their execution, the business strategy, therefore creating chances to get competitive advantages EE - BPM

6. Key elements of a Business Process • customer Key elements 1. Output 2. Phases 3. Input 4. Resources 5. Interdepencies 6. Management methods • input • output • resources • management • sequential interdependencies • reciprocal interdependencies • generic interdependencies EE - BPM

7. Example – Returns management at Biolchi • Biolchi is a medium sized company that produces small household appliances. Customer satisfaction is one of the critical performances for the company. One of the processes that influences it is the management of returns of non-conformity products on the part of customers. The company has a Returns office that takes care of these activities, following a company procedure as described in the quality manual. • A customer can carry out the return by either dispatching the product or handing it back to the carrier who has delivered it, who then takes it back to the company, informing the commercial office of the need to the carry out the return. The returned product must be accompanied by a module containing the customer’s data, the order references for the delivered product and the reason for the return. EE - BPM

8. Example – Returns management at Biolchi Returns can therefore arrive either directly at the Returns office (when dispatched by the customer) or at the finished products Warehouse (when returned by the carrier). In the latter case, they are then transferred by the Warehouse staff to the Returns office. In the Returns office a member of staff checks that all the documentation is present with the returns and where necessary requests that it be completed, contacting the Commercial office. The same member of staff enters the information in the information system, classifying each return in one of three categories: - Formal non conformity (a code other than that requested by the customer was delivered); - Damage (the product has sustained external damage – dents, scratches etc.); - Malfunctioning (the product does not function in accordance with specifications). EE - BPM

9. Example – Returns management at Biolchi In the first two cases the information is registered in the company quality system and is then communicated to the entity responsible for the non conformity (packaging, Warehouse or carrier). In the third case the product is inspected by Quality Control, which verifies the cause of the malfunctioning, establishes whether the product can be repaired – in which case the product is repaired by the workshop – and enters all the information in the quality system. In each case the Returns office organises delivery to the customer of a product to replace the returned item, issuing a delivery order which is sent to the Warehouse. The process ends with the closure of the returned product file, following the registration of all the quality data and the delivery of the replacement product to the customer. EE - BPM

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11. Primary and support processes • Primary processes: • directly value acknowledged by the external customer: • their performance has an impact on customer satisfaction • Support processes: • necessary to the management of primary processes; • their customers are internal EE - BPM

12. Key processes Not all business processes contribute in the same way to the critical success factors of the company Key process = process which has a strong influence on critical success factors for the company, independently form current performance level Targeting key processes requires to identify business process performance EE - BPM

13. Business Process Performance Customer satisfaction BusinessProcess Effectiveness Operational performance cost, time, quality, flexibility Revenues Business Performance Efficiency EE - BPM

14. Alternative organisational structures • Departments • Activities are grouped according to similarities • Organisational units include people with similar competencies and practice • Department goals are to maximise efficiency and develop specialised competencies • Business Processes • Activities are grouped according to physical or information flows • Process cross department boundaries involving resources belonging to different departments • Process goals are to maximise output performance for a specified customer EE - BPM

15. Process-based (Horizontal) organisation Top managementteam Process owner Team 1 Team 2 Team 3 customer Marketanalysis Research Productdevelopment Testing New product development process Process owner Team 1 Team 2 Team 3 customer Marketanalysis Purchasing Materialsmanagement Phisicaldistribution Purchasing management process EE - BPM

16. Process-based Organisation or Process Management? • Process management requires the orientation of company resources to the central goals for the business and to customer satisfaction and value creation • Process Management does not imply necessarily the redesign of the organisational structure towards an horizontal or matrix organisation • Managing processes in a functional or divisional organisation requires to redefine and revise the management roles and tasks between processes and organisational units: • Managing and organising resources • Managing and organising work/activities EE - BPM

17. Processes and Departments Competencies reservoirs: company department Production Comp. Market Comp. Technical Comp. Technical Department Sales Department Production Department R&D Process Customer Value Value creation: business processes Production Process After Sales Process EE - BPM

18. Managing processes and managing company departments • Process management: • Deployment of effectiveness and efficiency goals for process activities; performance measurement • Flows and interdependencies optimisation and integration • Standardisation of procedures and management tools • Continuous improvement of process management and activities • Department (functional and business unitis) management: • Supply competencies and resources to processes • Evaluation of resources on the basis of their contribution to business processes • Careers management • Knowledge and competencies accumulation and development • Contiuous improvement of specialized methodologies and tools EE - BPM