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Business process management (BPM) is garnering a lot of corporate attention these days, along with a new wave of interest in process-based business transformation. This may sound familiar to those who were around in the early 1990s when business process re-engineering was all the rage and initiatives like Collaborative Planning, Forecasting and Replenishment (CPFR), Efficient Consumer Response (ECR) and Quick Response (QR) were at the top of many supply chain agendas.
For the most part, these programs failed to live up to their promise, largely because of cultural barriers and integration difficulties. But underlying process improvements did help boost supply chain efficiency and began to slowly pry open the door to intra- and inter-enterprise collaboration.
Since then technology has made huge advances and added capabilities unimagined a decade ago. That progress, along with a need to respond to the increasingly fast pace of business, is driving renewed interest in process management. This interest was documented in a benchmark survey conducted early this year by the Aberdeen Group, Boston. (The Supply Chain Executive's Strategic Agenda 2008: Managing Global Supply Chain Transformation). The survey found BPM to be the number one concern among the 800 supply chain executives polled, with 48 percent of respondents listing it as a top priority. Due to this relatively high percentage of interest as compared with other focus areas, Aberdeen predicts that investments in BPM will grow significantly in coming months.
So just what is business process management? There are many definitions, but most characterize BPM as a technology-enabled management discipline that emphasizes three things: cross-functional business process modeling and simulation; process implementation using workflow automation and integration; and performance monitoring, measurement and feedback.
"What is most different today about BPM are the enabling technologies," says Michael Lees, director of BPM product marketing at Software AG, Darmstadt, Germany. Lees previously held a similar position at webMethods, which was acquired by Software AG last year. "In the past, when businesses re-engineered processes they had to hard-wire the results into their IT systems and into the culture and organizational structure of the enterprise," says Lees. "This was fine if all you wanted was the most efficient process for your business at a set point in time. But businesses have never been static. And companies today face much faster cycles and much greater change and have far more threats to defend against than they ever have before."
These changes create huge opportunities as well for companies that are flexible enough to take advantage of them, Lees says. "To get that kind of flexibility, you need to be able to change processes very efficiently and very flexibly when new opportunities or new threats present themselves."
The primary technology that makes this possible is Service Oriented Architecture, says Lees. SOA is a methodology for systems development and integration that separates functions into distinct units or services, which are made accessible over a network so that they can be loosely coupled and reused in different configurations to support various processes. "SOA is not the only technology that has come along to enable BPM, but it certainly makes BPM more feasible," says Lees. "You can do BPM without SOA and vice versa, but you will get the full benefits of both only when you put them together." Software AG's view is actually more aggressive than that, he adds. "We really see BPM and SOA as two sides of the same coin."
Laura Mooney, Vice President of Corporate Communications at BPM vendor Metastorm, Baltimore, agrees that BPM and SOA are tightly linked. "The reason is because if you try to do SOA in a vacuum, you are blindly spending resources to create services without really understanding how frequently they will be used," she says. "Similarly, if you start modeling processes without understanding what functions and systems those processes use and where services can be reused, you will be doing a lot of extra work."
"We see SOA as enabling the delivery of processes, and the important point here is that it can do it quickly," says Anand Iyer of i2 Technologies, Dallas. "What we often see today is that a company will decide to change its business model in some way and the delivery mechanism is to go upgrade its ERP system to add functional enhancements," he says. "By the time that gets done, three years have passed. The need is no longer the same and people have moved on to something else. So the key thing about SOA is that it can deliver processes with the speed at which businesses change." i2's Agile Business Process Platform is SOA-based.
Working with supply chain technology vendors that have incorporated SOA and process management as part of their offering is one avenue to BPM adoption. Another is through upgrades of enterprise resource planning systems like SAP and Oracle, says Nari Viswanathan, supply chain research director at Aberdeen. "The strategy that ERP providers are adopting is that when companies upgrade, they will automatically get an embedded BPM solution," he says. A third way is through stand-alone BPM suites.
Which of these a company chooses may depend on how committed the enterprise as a whole is to process management. "BPM suites can be very complicated to set up, but when a company gets to the point where it really wants to manage its business by processes, these tools can be very supportive," says Jeff Varney, BPM practice leader at APQC, Houston, a member-based nonprofit that provides benchmarking and best-practice research.
Metastorm BPMS has the capability to model and simulate a process, integrate systems involved in that process with a common user interface, automate the process and then report on the process," says Mooney. The flexibility of these tools allows users to define and automate a wide variety of processes across the business, she says. One customer, Blue Rhino, provides an example.
A division of Ferrellgas, Blue Rhino, Winston-Salem, N.C., is the leading national provider of branded propane cylinders that are made available for exchange at more than 42,000 retail locations in the continental U.S. and Puerto Rico.
"We have millions of cylinders that we need to track company-wide so that we can order and transfer inventory between our distributors," says Tamria Zertuche, senior director of IT at Blue Rhino. Visibility also is needed to the status of each tank, whether empty or full. Previously this had been accomplished fairly efficiently, but the process was "pretty much paper based," Zertuche says. "And, while we weren't losing tanks, we really didn't know at any given time how fluidly we could move tanks from one location to another."
With Metastorm, Blue Rhino automated more than 10 processes. One enables distributors to report on month-end inventory counts. These are totaled and compared with master inventory records. Another process enables distributors to order cylinders and cages using a simple graphical interface. Blue Rhino "used canned business flows that come with the Metastorm product and tweaked them a little so they would look like our processes," says Zertuche. "There was very little customization involved."
Blue Rhino has always been process-centric but Metastorm is the first suite of tools it has used "that does everything from A to B," she says. "We really look at the Metastorm tools as a glue that brings all of our other enterprise systems together."
Blue Rhino also has used Metastorm to model and execute processes for IT change control, customer care and human resources. It originally purchased the suite to help it comply with Sarbanes-Oxley requirements and this remains a key use. "The self-documentation that occurs while using the tool enabled us to decrease the number of days that our audit teams are on site, because we don't have to prepare or do any additional work to get internal documentation ready for our IT or financial audit teams," she says.
Ahold, a grocery company based in the Netherlands, uses a BPMS solution from webMethods, now Software AG , to create an unattended replenishment system for more than 700 Albert Heijn grocery stores. It's process-driven replenishment program feeds real-time, point-of-sale data to its suppliers, which are responsible for their stock positions in the store. "Our philosophy is that if you can be responsive enough and close enough to what your customer does, and if you reduce lead times from nine hours to 18 hours, as we have done, then you have a much better model," said Peter Van Kralingen, vice president of information management at Ahold, in a speech to the 2007 webMethods user conference. Ahold's improved processes lowered costs enough to enable Ahold to significantly reduce prices to customers, he said. As a result sales increased and the company outperformed its Dutch competition and gained market share.
WebMethods now comprises the core part of Software AG's BPM suite, which begins with process modeling and simulation. "Simulation allows you to build scenarios around the process model to see how it will operate in the real world before it goes live," says Lees. The suite's back-end infrastructure executes the work flow rules. "This environment includes communications with the different back end systems that might be involved in process steps, as well as sending out tasks to individuals and presenting them with user interfaces to collect or view information."
An important benefit of BPM is that the process that is executed is the exact same process that is built with the modeling tool, Lees notes. This enables alignment between the business operation and IT. "At present, there is little communication between these two areas," says Lees. "What typically happens is the business group will specify what it needs in some sort of requirements document that it throws over the wall to IT. IT will go and build an application and at some point, may 18 to 24 months down the line, the business will get a solution back that may or may not hit its requirements-and, actually, the requirements probably have changed in that time anyway." BPM gets around this by providing an environment where the business side defines the model in the same environment that IT uses to integrate to applications and build user interfaces, he says. "That is quite a key part of the BPM value proposition because it eliminates miscommunication. IT completely understands the context of what the business requires because they are working from the same model."
Intalio, an open-source BPMS vendor based in Palo Alto, Calif., has simplified this step "with something unique in the industry," says Jonathan Crow, director of marketing. He explains that Intalio automatically translates Business Process Modeling Notation (BPMN), the language used to graphically notate processes in a work flow, into Business Process Execution Language(BPEL), the language for specifying business process behavior. "We translate BPMN to BPEL in a couple of clicks so users can take a process diagram and deploy it automatically, without having to recode," he says.
The final element in a BPM suite is monitoring, measuring and feeding back performance information to enable continuous improvement. This subset of BPM typically is called Business Activity Monitoring (BAM). "As soon as a process starts executing, the BAM component begins collecting the metrics that the user has specified to measure against the process," says Lees. This can include things like process cycle time, step cycle time, whether a particular step is happening out of order, and the value of transactions flowing through the process. These are collected in real time and presented in graphical user interfaces. Work rules can be written to trigger alerts when any of these measurements indicate a problem.
"Real-time monitoring of processes is a key part of BPM," says Alexander Lotterer, senior manager of BPM consulting at IDS Scheer, Saarbrucken, German. He notes, for example, that a company implementing Six Sigma quality processes follows the DMAIC cycle: define, measure, analyze, improve and control. "It is the measurement and analysis phase that takes lot of time because they have to go and get all the data," Lotterer says. "BAM gives them a very efficient way to use IT to get the information they need in real time."
IDS Scheer offers Process Performance Manager (PPM) as part of its ARIS BPM suite of tools. PPM continuously monitors and optimizes internal and external workflows, Lotterer says. It also enables businesses to monitor service level agreements relating to core processes, such as order processing, procurement, and transportation and logistics.
ARIS supports the entire BPM life cycle of design, implementation and control, says Allen Johnson, director-alliances at IDS Scheer. "Our core products help companies design, architect and publish business processes and continuously monitor the performance of the processes."
The Supply Chain Council has adopted the ARIS platform for the Supply Chain Operations Reference Model (SCOR) and associated reference models. Supply Chain Council members are able to access and use predefined supply chain processes, industry best practices and performance metrics in combination with the ARIS BPM tool.
"We have been working with the Supply Chain Council for 10 years now," says Johnson. "We think the SCOR model itself provides an excellent tool to help companies design their supply chain from the top down. It provides that independent notation that really helps companies during early design sessions when it is important to understand how the supply chain is configured and who all of the internal and external players are. They can start at a high level and drill down to whatever level of detail is necessary."
Process frameworks like SCOR can be useful as a starting point, "but then processes need to be tailored more specifically to an individual company's operations," says Iyer. "Dell and Hewlett-Packard, for example, are both computer companies, but for a long time they had very different business models. Processes around procurement, manufacturing, forecasting, and so on would have had to be structured completely differently."
i2 has a descriptive framework as part of its SCM 2.0 approach, he says. "We use this to see which of these many genetic strains a company belongs to, from the standpoint of process and organizational makeup. Then we bring in an analytics framework where we use the company's own data and conversations with its own workers to make the model more company-specific. No two companies are alike and we find that a company may match up to its genetic strain in several respects but not all, which is as it should be."
APQC offers its Process Classification Framework to help companies get started. "Processes around the supply chain have been mapped to the SCOR model, so it is compatible with that," says Varney. He notes that using the SCOR model helps from a benchmarking standpoint because it gives companies a common vernacular. "Even if they have customized the framework to suit their organization and are using different terms, they can still talk about what part of the framework a process maps to, which makes it easier to look across industries or even across business units within the same company," he says.
The important thing for a company to keep in mind when it approaches BPM is that "you don't start with the tool," says Varney. "You start by understanding your existing processes and how you function as a business. You need to get out there and talk to the people who are performing these tasks and find out if everyone does it the same way or if there are five different ways. Until you understand your processes and where you need to standardize and where variability is appropriate, trying to implement a tool is an exercise in futility, and a costly one at that."
Crow agrees. "The first things you have to look at are whether you have a clearly defined process and whether the requirements for that process are clearly articulated," he says. "Without that, all the technology in the world will be of no help."
Forte, a supply chain consulting and integration firm based in Mason, Ohio, has done a lot of work helping companies optimize processes in warehouses, says Ian Hobkirk, director of supply chain consulting. "Warehousing is very process-centric and no two warehouses are the same," he says. "They all have the same basic processes like receiving, putaway, picking and shipping, but there are little nuances to everybody's business that makes each warehouse almost like a fingerprint."
As a result, companies often struggle with implementations of off-the-shelf warehouse management software, he says. "What we have done very successfully at Forte is to help companies re-engineer their processes prior to a software implementation or, in some cases, after an implementation as a way to help companies understand how to use the software more effectively." Typically, in an engagement to optimize business processes, Forte observes and documents the processes that are used 90 percent of the time, Hobkirk says. "But more importantly, we spend a lot of time documenting all the exceptions," he says. "That's where a lot of companies fall down -they don't document what happens the 5 percent to 10 percent of the time when a customer needs special handling or a shipment can't be packed in the usual way or when anything falls outside usual parameters. It is critical to document all these exceptions as part of defining the current state." Only when that is done, he says, can you begin to map processes for the future state that you want to achieve.
When done well, BPM makes an organization more agile and responsive to change, says Iyer. "A lot of work gets done out of habit," he says. "The business environment changes, but companies oftentimes are slow to adapt. If you have a process management discipline and a process measurement discipline, you can often detect those market shifts and start preparing for them well before you are in the middle of a crisis situation. It is all about being adaptable and able to change."
By enabling processes that span different departments or even different enterprises, BPM enables an end-to-end approach to management and helps break down the silos that often serve as barriers to agility, Varney says. "If I were to define BPM in terms of its most significant impact on business, I would say it is in removing the barriers to interactions between people and systems. If you don't break down those silos, you are not doing BPM. Rather, you end up trying to fix little pieces of the business without seeing the impact of those changes somewhere else, so you are in danger of optimizing one element and sub-optimizing something else."
Iyer agrees that using BPM helps companies look at the big picture. "I'm reminded of the story about the stone masons who were each asked by the archbishop to describe their jobs," he says. "One said that he was removing a defect from a stone block and the other replied that he was building a cathedral."
Aberdeen Group, www.aberdeen.com
IDS Scheer, www.ids-scheer.com
i2 Technologies, www.i2.com
Software AG, www.softwareag.com
Blue Rhino, www.bluerhino.com
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