A CROSS-DISCIPLINARY VIEW FOR TEACHING BUSINESS PROCESS MANAGEMENT IN EXISTING SIMULATION COURSES OVERVIEW OF BUSINESS PROCESS MANAGEMENT

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1 A CROSS-DISCIPLINARY VIEW FOR TEACHING BUSINESS PROCESS MANAGEMENT IN EXISTING SIMULATION COURSES Susan W. Palocsay, Computer Information Systems & Management Science Department, James Madison University, Harrisonburg, VA 22807, (540) , OVERVIEW OF BUSINESS PROCESS MANAGEMENT A business process is generally defined as a network of activities that uses resources to transform inputs into outputs with an overall goal of satisfying customer requirements. Companies are being driven to design new business processes and to improve existing ones by increasing competition in a global environment. And the importance of a process focus creates a need for structured approaches to manage business processes. Business process management (BPM) can be viewed as a collection of concepts, techniques, and technologies to analyze, define, model, implement, and control processes. The interest in analyzing and improving processes has a long history that can be traced back to the early efforts in the 1900s of industrial engineers such as Frederick Taylor and Walter Shewhart. More recently, a series of methodological developments in total quality management, business process reengineering (BPR), lean management, Six Sigma, and workflow management has contributed significantly to the evolution of BPM. While initial applications were concentrated in the manufacturing sector, BPM has since spread to distribution, retail, and service industries, facilitated by technological advances in web services. Today the basic idea of redesigning both internal and external business processes to enhance company performance and provide more value to customers is well-accepted among business executives. Not surprisingly, the roots of BPM from a qualitative point of view are in strategic management. Major improvements in cost, quality, response time, and service levels are possible with BPM, but it is very difficult to manage the redesign of end-to-end, cross-functional processes [5]. From a broad technical standpoint, BPM is cross-disciplinary in nature with major contributions coming from the fields of operations management (OM), management science (MS), and computer information systems (CIS). As a result, those of us in these disciplines are uniquely positioned to provide students with a comprehensive understanding of the analytical tools and technology that can be used to design, model, and implement BPM solutions for real-world processes. The remainder of this paper briefly describes BPM from the perspective of each of these disciplines and then outlines an approach for shifting the focus of traditional MS courses in simulation modeling and analysis to BPM. Operations Management Perspective on BPM In the OM arena, operations is viewed as a transformation process that converts a set of inputs into one or more outputs. Manufacturing processes, where typical inputs consist of raw materials, labor, and equipment, have been studied extensively. Growth and competition in the industrial sector provided motivation for the initial development of tools and techniques to improve quality and support process management. More recently, the principles underlying

2 these methods are being adapted to processes in service operations. Hayler and Nichols [6] describe practical applications of lean, Six Sigma, and BPM methods in financial services organizations, including American Express, Bank of America, and Merrill Lynch. Process management is often considered to have its foundation in modern quality management, as it developed within the OM field. Two of the most influential process improvement programs in recent years are Six Sigma and BPR [9]. Six Sigma uses a rigorous, quantitative methodology aimed at reducing process variation to enable delivery of consistent, high-quality products and services. The quality of a process is measured by the ratio of the number of defects to the number of opportunities for error, with six sigma corresponding statistically to at most 3.4 defects per 1 million opportunities. All Six Sigma projects use the same five-phase problem solving approach, known by its acronym DMAIC define, measure, analyze, improve, and control with statistical tools applied in each phase as appropriate. BPR emerged in parallel with Six Sigma during the 1990s but its goal was to achieve vast improvement in performance measures by fundamentally redesigning core business processes. The emphasis in BPR was on speedy implementation of these new designs, often in response to a crisis in the organization. When BPR was first introduced, it received a great deal of attention in the press with reports of success in several notable companies, including Cigna, Xerox, and IBM, and it was promoted by books and articles in the academic literature. Yet a large number of BPR projects subsequently failed to deliver significant positive results within an acceptable timeframe. Research identified lack of strong executive leadership and misunderstanding of current operations as major issues, with complications due to the pressures associated with rapid change. The negative publicity dampened enthusiasm for re-engineering but its underlying principles as well as its tools continue to be applicable to the design of business processes. Management Science Perspective on BPM The most basic technical tool used in process analysis is a process flow diagram, also referred to as a process map. In its simplest form, it uses common flowchart symbols to graphically depict the movement of inputs such as materials and information through the activities of a process. Flow diagramming requires a clear definition of the process and forces development of a structured representation. When the diagram is augmented with time estimates and other performance data, it can aid management in identifying inefficiencies in the process. Graphical software tools such as Microsoft Visio 2007, Smartdraw, and igrafx s FlowCharter allow the user to draw a process map with common flowcharting symbols. Depending on the particular stage of a BPM project, process maps are constructed at different levels of detail. At the start of a project, a macro-level flowchart will provide an overview of the primary steps in a process. This chart is then expanded into a cross-functional process map with vertical bands to show which functional group performs each activity [10]. Additional information can be added by inserting horizontal bands to group activities into sub-processes. To incorporate more detail, the individual tasks or procedures in selected process activities may also be documented separately, forming a hierarchy of charts and tables. Process mapping supplies a visual mechanism to capture the elements of a business process and propose process improvements. In the form described above, however, it only supports a limited, static analysis of the process. MS offers a host of advanced optimization and simulation

3 modeling techniques that enable dynamic, quantitative process analysis. For BPM applications, queuing models provide mathematical formulas to estimate system performance characteristics and discrete-event simulation uses a statistical-based experimental approach to predict performance in more complex processes with variability in demand and processing times. Data envelopment analysis, a linear-programming methodology, can be applied to benchmark a company s performance against that of others in the same industry and generate ideas for process improvements or redesigns. The availability of spreadsheet add-ins and other automated software tools with graphical interfaces has made it feasible, with appropriate training, for organizations to adopt these techniques. Computer Information Systems Perspective on BPM An early approach to automating manual processes in the office environment was embodied in a set of concepts and technologies known as workflow management [8]. It presented an opportunity for streamlining the exchange of information, complementary to document imaging, , and other groupware technology. In a workflow system, the roles of participants in a process are defined by attributes such as job function and security level and rules are established to route the work to the appropriate participant, where manual processing and human judgment may be required. Classic systems were limited in scope to internally generated data on local servers. But workflow has been redefined to extend beyond a single enterprise via messagingbased architectures, thus becoming applicable to all the information involved in a particular task or process. Another important component of modern workflow software is a user interface that allows end-users to create and manipulate a graphical map depicting the process activities and provides real-time displays of the status of a process. Workflow technology addresses some of the issues related to managing interactions between humans and computer systems. Consequently, this technology is increasingly being built into newly emerging BPM systems, which represent a segment of the information technology (IT) market supporting the design, execution, and control of process-oriented applications [11]. Gartner [4] describes a BPM system as one that integrates the following technologies: Graphical process modeling Process registry/repository Orchestration engine Simulation and optimization 1 Process analysis tools Integration Rule engines Document/content repository The best BPM systems combine modules for these technologies in such a way that they appear to the users, both business (non-technical) managers and IT professionals, as a single product. Numerous vendors are currently competing in the BPM market, and the rapid proliferation of BPM products led to a need for the development of standards. There are two major graphical languages for designing business processes, Business Process Modeling Notation (BPMN) and Unified Modeling Language (UML) s activity diagrams. These languages provide a set of flowchart-like elements to model process patterns and business rules from the systems 1 Refers to the execution of scenarios with alternative resource constraints and business goals, not traditional MS methodology.

4 perspective, but cannot represent all of the technical implementation details. Thus, BPM systems also use a standardized language to coordinate the sequencing and execution of steps in the process based on the graphical model, i.e., an orchestration engine [7]. The most popular pair of notation and execution languages is BPMN and the Business Process Execution Language (BPEL), based on the extensible markup language (XML) message format for enterprise computing. A market analysis by Gartner [4] of more than 150 BPM system vendors classified those that meet a minimum set of requirements for business and technical functionality into four quadrants: challengers, leaders, niche players, and visionaries. It also identified additional features, including real-time agility infrastructure support and collaboration technology, that are beginning to be embedded into BPM systems. The overview of BPM products and vendors in this report highlights the immaturity and volatility of the BPM market. In an in-depth evaluation of BPM technology, the Butler Group [2] found that potential benefits in operational efficiency could be obtained through appropriate use of BPM systems but disputed the extent to which it can do so, contrary to vendor claims. TEACHING APPROACH FOR BPM Most schools of business have one or more departments comprised of faculty with academic qualifications in OM, MS, and CIS. This set of resources offers a strong environment for teaching the relevant technical skills for BPM to undergraduate business students. An approach that we are exploring this semester is a broadening of the focus of our traditional MS simulation course to give students an overview of BPM, with an emphasis on business processing modeling and analysis from all three perspectives. The course is currently offered within the MS minor with pre-requisites of introductory business statistics and MS, but may become suitable as an elective in some business majors such as CIS or management. New topics include discussing the importance of BPM for service organizations competing in a global economy, reviewing fundamental principles for successful BPM, examining the structured methodology and statistical basis for Six Sigma, applying descriptive and inferential statistics to evaluate processes, and using DEA to benchmark process performance. According to a recent Gartner report [3], business analysts must be fluent in modeling business processes. To improve proficiency in this area, students are creating basic process maps and evaluating the effectiveness of proposed process improvements in Microsoft Visio, accompanied by financial and queuing analysis of process designs using Excel spreadsheets. To further study how to manage and improve process flows, students will learn to develop models of complex business processes whose performance is affected by randomness and variation using a simulation approach. Discrete event simulation is one of the most flexible and powerful tools available for modeling, analyzing, and designing business processes. It has become more popular in industry through the availability of user-friendly simulation software with graphical interfaces and animation capabilities, no longer requiring computer programming skills in a specialized language. Recent advances in this software also support heuristic methods to optimize the design parameters within a simulation model, facilitating student experiments

5 with this approach for evaluating different configurations of an existing or proposed business process. A study on IT workforce trends by Abraham, et al. [1] identifies BPR as a business domain skill that is considered critical to retain in-house and thus can contribute to long-term career development in information systems. This suggests that business students might also benefit from exposure to BPM technology, especially the BPMN graphical notation language. A short module on BPM technology will be developed for the course using web-based, collaborative software to document processes and categorize problems based on severity and frequency. The goal of this type of software is to provide a link between management-oriented process maps and the IT architecture and application development required to support process implementation. MS courses are usually structured around a particular type of either optimization or stochastic modeling, such as linear programming, decision analysis, or forecasting. Unfortunately, this orientation often leads to a perception among students, faculty, and administrators that MS is not relevant in a business program. BPM offers an excellent opportunity for MS instructors to demonstrate the potential for their expertise to make a direct impact on the design and improvement of complex business processes. REFERENCES [1] Abraham, T., Beath, C., Bullen, C. Gallagher, K., Goles, T., Kaiser, K., & Simon, J. IT workforce trends: implications for IS programs. Communications of the Association for Information Systems, 2006(17), 2-43, [2] Butler Group. Business process management: a guide to navigating the process minefield [3] Gartner. The IT professional outlook: where will we go from here? Gartner Research Note G , [4] Gartner. Magic quadrant for business process management suites. Gartner Research Note G , [5] Hammer, M. The process audit. Harvard Business Review, April, , [6] Hayler, R. & Nichols, M. D. Six Sigma for Financial Services. New York: McGraw-Hill, [7] Havey, M. Essential Business Process Modeling. Beijing, China: O Reilly Media, Inc., [8] Koulopoulos, T. M. The Workflow Imperative. New York: John Wiley & Sons, [9] Laguna, M. & Marklund, J. Business Process Modeling, Simulation and Design. New Jersey: Pearson Prentice Hall, 2005.

6 [10] Madison, D. J. Process Mapping, Process Improvement, and Process Management. Chico, California: Paton Press, [11] Margulius, D. L. Workflow meets BPM. InfoWorld, April,

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