April 22, 2014 AT-A-GLANCE AUTOMATION VISIBILITY AGILITY

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1 PROLIFICS WHITE PAPER BPM IN RETAIL, HEALTHCARE AND BANKING Author: N.R. Vijay, Solution Architect, Prolifics April 22, 2014 AT-A-GLANCE AUTOMATION VISIBILITY AGILITY Automated processes deliver productivity gains and minimize manual error across each vertical. The nature of each vertical demands deep visibility to business processes for more informed decisions. Flexible business processes empower organizations to adapt quickly to changes and regulations across each vertical Executive Summary Business Process Management (BPM) has been making significant strides across industries in the last few years. This article explores the relevance of BPM across multiple domains and unique strategic advantages that are gained by the application of BPM principles. Although domains such as Healthcare, Retail, and Banking vary in the nature of their business as well as operational structure, the method of optimizing the business process in each of these domains remains similar. This article will elaborate the application of IBM BPM 8.0 with specific examples. About Prolifics Prolifics, an IBM Premier Business Partner and multiaward winner for technical excellence, creates competitive advantage by delivering customized, end-to-end Business Process Management, Integration, Mobile, Big Data and Cloud solutions that achieve business success. For over 35 years, our technology expertise, industryspecific insight and certified technology accelerators have transformed organizations around the world by solving complex IT challenges. Our expert services include architectural advisement, design, development, and deployment of tailored solutions that empower businesses around the world to create flexible business services and build agility into their organizations. twitter.com/prolifics facebook.com/prolificstech Park Sorrento, Suite 405, Calabasas, CA Phone:

2 Contents Principles of BPM...3 The Need for BPM...3 Innovation and BPM...3 Flavors of BPM...3 BPM Strengths...3 Retail...4 The Need for BPM in the Retail Industry...4 Innovation in Retail...4 Sample Order Fulfillment Flow...5 Flavors of BPM in Retail...5 Unique advantages with IBM BPM 8.0 in Retail...5 Healthcare...7 The Need for BPM in the Healthcare Industry...7 Innovation in Healthcare...7 Flavors of BPM in Healthcare...8 Unique Advantages of IBM BPM 8.0 in Healthcare...8 Banking...10 Need for BPM in Banking...10 Innovation in Banking...10 Flavors of BPM in Banking...11 Unique Advantages of IBM BPM 8.0 in Banking...11 Conclusion

3 Principles of BPM BPM is defined as a holistic management approach to aligning an organization s business processes with the wants and needs of clients. The key goal of BPM is to create a framework for identifying, analyzing, optimizing, re-evaluating and re-optimizing the critical business process. The chart below depicts the key features of IBM BPM 8.0: Visibility Rules Centralization Business Process Management Control Governance & Regulations The Need for BPM We are living in an increasingly hyper connected world. Smartphones and tablets have made access to information a seamless process. Consumers are more informed than ever. The market dynamics are changing by the hour and the first player to respond to the changing market dynamics will eventually lead the market. Such an ecosystem demands a hyper connected visibility to the business processes of an organization for its stakeholders to help them make informed decisions. IBM BPM 8.0 provides a complete visibility to the business processes. Innovation and BPM Edmund S. Phelps, a Nobel laureate in economics and director of the Center on Capitalism and Society at Columbia University and author of the forthcoming book Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change. notes the following about Innovation and BPM: My view is that innovation has declined in the everyday processes that businesses tinker with incrementally as they try to become more productive over time. This decline of innovation across many fields with notable exceptions like Silicon Valley, biotechnology and clean energy has set back much of the earlier gains in productivity in American history. Flavors of BPM IBM BPM 8.0 can be applied in different flavors such as: Complete automated process with minimal human interaction Mostly manual process with minimal automation Part automated and part manual Process BPM Strengths 1. IBM BPM 8.0 has robust integration capabilities with enterprise architecture The IBM BPM 8.0 suite has the capability to integrate with web services with minimal impact to the existing architecture. This greatly reduces the cost of implementing BPM solutions and, at the same time, provides improved process management. 2. BPM has been and will continue to change the nature of work force It eliminates the non-value add work such as data entry and leaves value addition work such as decision making and evaluation with the workforce. This advantage results in huge productivity gains to the enterprise and reduces manual error in routine tasks to a great extent. The result more robust business processes with less rework due to manual error. 3

4 3. BPM empowers the business and classifies IT as a supplementary function Tools such as BlueworksLive enable business process owners and participants with no programming language to draw up critical processes for analysis and improvement. By placing the process flows in the hands of the business users, BPM helps the business users to look at their business critical processes end to end and think holistically. Most of the critical business processes involve business rules. Ever changing regulations and market conditions require updating business rules on a day to day basis. Rules Engine integrated with BPM systems such as in BPM 8.0 provides a user-friendly interface for the business users to implement and govern ever changing business rules in processes without bringing down the applications or involving the IT team. Business process improvement is a continuous process and can be driven by the business after gathering process metrics over a period of time. By continuously monitoring the process metrics after deploying a process, the business users can track the savings in effort and time with the new process and suggest improvements to the process accordingly. 4. BPM aligns the business processes with the strategy of the organization A detailed analysis of business processes and well defined process roles and purpose help to evaluate and re-align the processes with the strategy of the organization. Let us see how these steps are implemented in various industries: Retail The Need for BPM in the Retail Industry Show rooming is the latest market disrupting trend faced by the retailers. Smartphone enabled consumers are evaluating the features of products in stores, comparing the prices of those products at other retail stores or online and leaving the store to buy it elsewhere. Online retailers like Amazon and ebay have made it easier for the consumers to shop remotely at a click of a button. Retailers have to carefully strategize their Unique Selling Preposition (USP) within a short period of time and present the best product (in terms of price, quality, ROI) to the consumers at the right time in the right place. This means better inventory control and flexibility to cater to changing consumer preferences. Retailers are creating market places for other retailers to sell on the retailer s store/website. The approval processes for adding new vendors to the market place, approving the product catalog, inventory decisions, supplier onboarding, transportation routing all have to be optimized and should have a quick turnaround time. Innovation in Retail Retailers have to think of creative ways to reduce cost while at the same time retaining existing customers and attracting new customers. Some of them are: Innovative transportation routing for the trucks that move the inventory across the warehouses and stores Sourcing products from suppliers that are close to where the demand is to reduce transportation costs Offering value added services along with the core products Delivering products to the customer s doorstep the same day Creating brand awareness through Social Media marketing Sourcing products across multiple channels Store, online, market place Using mobile apps to drive location based product offerings Rewarding tailored products to loyal customers Controlling the supply chain to adapt to changing market needs IBM BPM 8.0 can help retailers innovate in each of the above ways by providing the following features: Provide end to-end visibility for truck route assignment processes Integrate inventory systems with truck routing systems and provide a convenient approval process Ability to define/modify business rules around truck routing and inventory management 4

5 Integrate store inventory order management systems with supplier systems, build business rules to dynamically map suppliers with stores based on proximity and create a governance process to manage the mapping Integrate and provide visibility and control across channels store, online, market place Build business rules capability for offering location based products Provide intelligent systems to analyze customer behavior and formulate business rules around tailored product offerings Sample Order Fulfillment Flow Vendor Direct Items to Customer Flavors of BPM in Retail A supplier/vendor onboarding process will primarily have manual tasks and less automation/system integration Transportation management and inventory control process will have manual tasks and automation in equal measure The Cross channel inventory integration process will be mostly automated with minimal manual interaction Unique Advantages of IBM BPM 8.0 in Retail Integration: BPM software such as IBM BPM 8.0 provides robust integration capabilities with web services. This coupled with IBM Sterling Commerce software, which provides B2B integration, secure file transfer and multi-channel selling and fulfillment, provides control and visibility across the length and breadth of a retail product lifecycle IBM BPM 8.0 software integrates easily with existing software infrastructure of retailers that are based on SOA IBM BPM 8.0 also provides easy integration with enterprise Active Directory to provide role based authorization and authentication The Rules component of IBM BPM 8.0 suite can implement the role based governance by integrating with the existing enterprise directory 5

6 Changing Nature of Workforce Human Tasks in Retail: Non-Value Data collection on Add suppliers waiting for approval Data collection on number of trucks scheduled Collecting metrics on orders waiting for fulfillment B2B data collection from multiple sources, combining and sorting Download reports on product offering Download reports on Inventory Value Add Approving suppliers Approving vendors Product mix review Viewing customized system generated reports Monitoring process metrics Monitor consumer demand and inventory Most of the non-value work such as downloading the inventory data or transportation routes and presenting them as reports can be eliminated with IBM BPM 8.0 software. The IBM Business Access Manager (BAM) component of BPM suite provides comprehensive and customized reporting capabilities. The manual work involved in B2B approval process such as retrieving data from multiple system sources, combining and sorting data is eliminated. By automating the data integration across system sources and sorting and presenting the data in a user friendly format, BPM leaves only value addition work such as reviewing supplier information and approval in the hands of the employees. Productivity gains are achieved by the enterprise since employees spend less time collecting data and instead work on evaluating the data and making best judgment. Process owners spend less time collecting process metrics such as the number of suppliers waiting to be approved, the number of trucks scheduled on transportation routes, the product mix on the market place waiting for approval, number of pending orders in the order pipeline waiting to be fulfilled, the status of product delivery, etc. Out of the box process reports and customized reports from IBM Business Access Manager provide great visibility to the senior management to make informed decisions in a short span of time. Built-in escalation in the process ensures that human tasks are completed within the SLA. Visibility into the order pipeline process helps senior management make the decision to invest in those parts of the process that add most value to the customer. E.g.: An order fulfillment process that depends on an approval or loading the order in a data warehouse for reporting purpose before an order can be routed to a vendor for fulfillment is unnecessarily causing delays in the delivery of product to the customer. Eliminating the approval and making the load to data warehouse as a parallel process will expedite the delivery of product to the customer. User Role in Retail 6

7 Empowered Business Users Business rules related to truck routing and supplier allocation can be updated by the rules owners without IT team involvement Business rules around product catalog can be updated by the rules owners without IT team involvement Regulatory changes around order fulfillment, payment processing etc. can be implemented with minimal impact to the business process Healthcare The Need for BPM in the Healthcare Industry The healthcare reform, also known as the Affordable Care Act, has presented a pressing need for the healthcare insurers to be more competitive and reduce their costs. The law makes it easier for the individuals and small groups to compare and purchase the health insurance plans that best fits their needs. At the same time the health insurance costs have continued to rise. In 2011, the health insurance premiums for businesses rose by 9 percent. Increasing competition and rising administrative costs are forcing insurers to control costs by making their critical business processes more efficient. A major not for profit state healthcare insurer Prolifics was consulting at was facing the same challenge. This insurer processes over 50 million claims per year for its members. In 2011, it s SG&A (selling, general and administrative) expenses was around $1.5 billion. A major component of the administrative costs is the cost for claim processing. Efficient claim processing enabled by IBM BPM 8.0 will result in effort, time and cost savings for the insurer. Federal and state regulations impose a greater emphasis on the way insurers process the claims, charge and spend the premium amount, especially if the insurers happen to process claims for federal and state benefit plans. Claim quality auditing is a preferred method the insurers follow to ensure compliance with the regulations. An integrated BPM solution that eliminates bottlenecks and reduces non-value work like collection of auditing data will improve the claim processing and auditing process. Innovation in Healthcare Regulations and heightened competition has forced insurers to innovate in the following ways: Quick turnaround in creation of group insurance accounts for small, medium and large businesses Inculcate flexibility into benefit structuring and product offering Reduce the lead time to process claims by automating the classification of claims, gather data (evidence) around the claims, validate and pay the claims Eliminate over or under payment in claims there by save money and prevent regulatory action Build artificial intelligence into claims payment and auditing by identifying a pattern over a period of time and formulating business rules around those patterns Consolidate the enterprise business rules, update business rules easily and quickly react to the ever changing regulatory conditions IBM BPM 8.0 can help insurers innovate in each of the above ways by providing the following features: Orchestrating the account set up for small, medium and large businesses by integrating with Group & Membership systems, contract & ID generation systems and other third party systems Providing visibility and control to the account set up process Integrating account set up process with Benefit and product catalog systems, applying the business rules and associate the benefits and products with the accounts Analyzing the claim processing and auditing process, eliminating tasks taking high amount of time Automating the gathering of data (evidence) for claim processing and auditing and presenting it in an user friendly format Automating assignment of claims to claim processors and auditor Consolidating enterprise business rules using Rules Engine and providing easy interface to maintain the rules Enabling convenient introduction of new business rules into the process 7

8 A Sample BPM Enabled Account Setup Process: A Sample BPM Enabled Claim Audit Process: Flavors of BPM in Healthcare An account set up/maintenance process can be a mostly automated process with orchestration and integration as the primary function of the process and with minimal human interaction A Claim audit process can have part automation and part human interaction Claim processing can be completely automated by building intelligent rules into the rules engine to evaluate the claim against benefits & eligibility and integrating with the claims payment system Unique Advantages of IBM BPM 8.0 in Healthcare Integration: BPM software such as IBM BPM 8.0 provides robust integration capabilities with web services. The existing enterprise systems at the insurers can be exposed as web services and integrated with the IBM BPM 8.0 application. IBM BPM 8.0 software integrates easily with existing software infrastructure of healthcare providers that are based on SOA. IBM BPM 8.0 also provides easy integration with enterprise Active Directory to provide role based authorization and authentication. The Rules component of IBM BPM 8.0 suite can implement the role based governance by integrating with the existing enterprise directory. 8

9 Changing Nature of Workforce: Human Tasks in Healthcare Non-Value Add Evidence collection from multiple sources, reviewing and auditing claims Manual processing of claims Evidence collection from multiple sources, reviewing and processing claims Manually gather reports on number of new accounts set up Manually gather auditing score reports Manually gather reports on number of claims paid Value Add Review system generated evidence for claim audit Review system processed claim reports Review system generated evidence for claim processing Monitoring process metrics for account set up Review system generated audit reports Review system generated claim reports Most of the non-value work such as downloading the claims audit report cards or the number of accounts set up or the numbers of claims paid and presenting them as reports can be eliminated with IBM BPM 8.0 software. The IBM Business Access Manager (BAM) component of BPM suite provides comprehensive and customized reporting capabilities. The manual work involved in Claim auditing or approval process such as retrieving data from multiple system sources, combining and sorting data is eliminated. By automating the data integration across system sources and sorting and presenting the data in a user friendly format, IBM BPM 8.0 leaves only value addition work such as reviewing claim evidence and creating the audit reports or approving the claims in the hands of the employees. Productivity gains are achieved by the enterprise since employees spend less time collecting data and instead work on evaluating the data and making best judgment. Out of the box process reports and customized reports from IBM Business Access Manager provide great visibility to senior management to make informed decisions in a short time span. Visibility into the account set up process helps senior management make the decision to invest in those parts of the process that add most value to the customer. E.g.: An account set up process that sequences the contract generation, ID generation, and broker payment and claims routing code set up is causing inconvenience to the end customer. All these activities can be done in parallel and contracts and ID cards sent out to the customer(s) as soon as they are set up without waiting for the broker payment or claim routing code setup. By building intelligent business rules to automate classification and payment of claims, only those claims that meet a threshold condition and require to be reviewed before payment will need to be reviewed by the claim processors. 9

10 User Role in Healthcare Empowered Business Users: Since data gathering process and orchestration is automated, the employees can spend more effort in value adding work such as: Formulating business rules keeping pace with changing healthcare regulations Gathering customer feedback on the account set up process Incorporating improvements into the future process Customer service representatives can resolve issues within a shorter period of time since IBM BPM 8.0 presents an integrated view on the customer portfolio Any lag in human activities in process flows can be escalated to senior management to resolve the lag Banking Need for BPM in Banking As the world economy is recovering from the financial crisis of 2008, more regulations than ever are being placed on the banking industry. Banks are in a pressing need to increase their risk appetite, maintain sufficient capital and are also required to separate out their investment arm (and the riskier arm) from the customer facing retail arm to reduce the contagion effect of bad investments. Complying with these regulations is placing a greater stress on the bottom line of the banks. The competitive environment forcing the banks to fight for the same customer is also adding to the importance of tightening the belts. In order to optimize the operating budgets, the banks should have greater control over critical processes such as new account set up, have a 360 degree view of the customer portfolio to help cross sell new products & services and resolve customer issues in a timely manner. IBM BPM 8.0 enables the bank with the visibility, agility and control over the critical processes. Innovation in Banking Regulations and heightened competition has forced banks to innovate in the following ways: Deliver online contracts to customers (small, medium and large businesses) Ability to cross sell financial products & services to existing customers Customize financial products & services based on the analysis of customer portfolio Ability to attract new customers with unique financial products & services Consolidate the enterprise business rules, update business rules easily and quickly react to the ever changing regulatory conditions 10

11 IBM BPM 8.0 can help retailers innovate in each of the above ways by providing the following features: Orchestrating the account set up for small, medium and large businesses by integrating with various product systems, contract & ID generation systems and other third party systems Providing visibility and control to the account set up process Integrating account set up process with business rules, applying the business rules during the account set up process Automating the gathering of contracts and documents from the customers during the account set up process Consolidating all the customer s existing accounts and subscribed services to present a 360 degree view of the customer portfolio Consolidating enterprise business rules using Rules Engine and providing easy interface to maintain the rules Enabling convenient introduction of new business rules into the process Flavors of BPM in Banking An account set up/maintenance process can be a mostly automated process with orchestration and integration as the primary function of the process and with minimal human interaction A Customer Issue Resolution process can have part automation and part human interaction Process metrics from customer interactions can be used to analyze the customer behavior and formulate business rules to automate product suggestions tailored to existing customers Unique Advantages of IBM BPM 8.0 in Banking Integration: BPM software such as IBM BPM 8.0 provides robust integration capabilities with web services. The existing enterprise systems in banks can be exposed as web services and integrated with the IBM BPM 8.0 application. IBM BPM 8.0 software integrates easily with existing software infrastructure of banks that are based on SOA. IBM BPM 8.0 also provides easy integration with enterprise Active Directory to provide role based authorization and authentication. The Rules component of IBM BPM 8.0 suite can implement the role based governance by integrating with the existing enterprise directory. IBM BPM 8.0 integrates seamlessly with imaging systems and other third party vendor systems. Changing Nature of Workforce: Human Tasks in Banking Non-Value Add Download opportunities from Salesforce Call customers to fill out the paper application Fill out customer contracts Mail customer contracts Verify customer filled out contracts Call customers to correct contracts and resend Enter customer info into multiple product systems Value Add Review system integrated opportunities Enter customer data into an integrated application Customer fills out contracts in the online system Review filled out online contracts Cross-sell new products and service Resolve customer issues quickly View product set up status 11 Most of the non-value work such as downloading the status reports on the number of accounts set up in multiple product systems or manually tracking contract mailing status or instruction kits can be eliminated with IBM BPM 8.0 software. The IBM Business Access Manager (BAM) component of BPM suite provides comprehensive and customized reporting capabilities.

12 Most banks offer a range of 10 to 15 financial products such as ACH, Lockbox, Escrow, Reports etc. Automated set up of account in these product systems results in customer relationship managers or the account implementation users spending less time manually entering customer data into these product systems. Automated set up of account in multiple product systems results in a single point of contact with the customer at the beginning of the account set up process, resulting in improved customer experience. An integrated account set up system provides a single view of the customer details, allowing the customer facing users to have quality interactions with customer. Product specialists can analyze customer portfolio to come up with customized products that can be offered to customers and build business rules to automate the customized product suggestions. Productivity gains are achieved by the enterprise since employees spend less time collecting data and instead work on evaluating the data and making best judgment. Out of the box process reports and customized reports from IBM Business Access Manager provide great visibility to the senior management to make informed decisions in a short span of time. Visibility into the account set up process helps senior management make the decision to invest in those parts of the process that add most value to the customer. E.g.: If the existing account set up process is waiting for the customer account to be set up in all the product systems before allowing the customer to use the services, the lead time for customers to start using the services will be high. If the process can be engineered in such a way that customers are given access to services as and when those services are set up, without waiting for all the products/services are setup, it will create a better customer experience. By building intelligent business rules, the required documents/information to be collected from the customer can be automated and enforced in an online system. User Role in Banking Empowered Business Users: Since data gathering activities and orchestration is automated, the employees can spend more effort in value adding work such as Formulating business rules keeping pace with changing banking regulations Gathering customer feedback on the account set up process Incorporating improvements into the future process Customer service representatives can resolve issues within a shorter period of time since IBM BPM 8.0 presents an integrated view on the customer portfolio Any lag in human activities in process flows can be escalated to senior management to resolve the lag 12

13 Conclusion IBM BPM 8.0 provides unique features and capabilities that can be customized and applied to a wide range of solutions across domains with minimal impact to the existing IT architecture. It results in satisfaction to everyone involved the executive team (because of the improved employee productivity), employees (as a result of better quality work), suppliers/vendors (because of close integration with the business) and the end customers (because of shorter and quality interactions with the business). 13

14 More Information About Prolifics Prolifics, an IBM Premier Business Partner and multi-award winner for technical excellence, creates competitive advantage by delivering customized, end-to-end Business Process Management, Integration, Mobile, Big Data and Cloud solutions that achieve business success. For over 35 years, our technology expertise, industry-specific insight and certified technology accelerators have transformed organizations around the world by solving complex IT challenges. Our expert services include architectural advisement, design, development, and deployment of tailored solutions that empower businesses around the world to create flexible business services and build agility into their organizations. For more information about Prolifics, visit Contact Information Phone: Phone: About the Author: N.R. Vijay is a Solution Architect in the Business Process Management division of Prolifics. He has over 10 years of consulting experience across domains such as Retail, Healthcare and Banking. Specializing in technology, management concepts and enterprise strategy, he is focused on change management and process improvement initiatives. He co-authored a whitepaper titled Improving Customer Loyalty through Business Process Optimization and Advanced Business Analytics Prolifics, Inc. All rights reserved. Prolifics is a registered servicemark of Prolifics, Inc. The IBM logo and the IBM Premier Business Partner mark are trademarks of International Business Machines Corporation, registered in many jurisdictions worldwide.