BPM - Process for the Alert Enterprise

By Richard Douglass March 21, 2006

In the first article in this series, “SOA – The Backbone of the Alert Enterprise,” I made the case that service-oriented architecture (SOA) is part of the arsenal that IT needs to create an Alert Enterprise. An Alert Enterprise has a well-developed capacity to respond to change, react to opportunity and pre-empt risks, and ultimately, helps to drive alignment between IT and lines of business.
It is the orchestration, or business process management (BPM), layer on the SOA software stack where the rubber meets the road: where the business side meets IT. It’s important to note that BPM is not just about piecing together components to create a business process – although that is clearly important – but also about process improvement. The true value of BPM, in fact, is in defining a process-oriented architecture (POA) that links business strategy to execution.
Why is this true? The following statement by Charles H. Fine, professor of operations strategy and supply chain management at MIT’s Sloan School of Management, sums it up well: “Value chain design is the ultimate core competency . . . all competitive advantages are temporary” (Clockspeed – Winning Control in the Age of Temporary Advantage). While competitors can usually get a good idea about other businesses’ products and services, processes are much less visible to competitors and therefore less subject to being easily copied. However, with all the emphasis on “best practices” and benchmarking, even process design can be shared or co-opted in relatively short order. The key then is to be extremely nimble in adapting and improving the way business is conducted. As such, a POA must do for the business what SOA does for IT: create a framework for intelligent reuse of business processes and practices and rapid development of adaptations to those processes. BPM is the tool that plays a major role in providing this capability.

The term POA is not new. However, it has usually been used as a substitute for SOA or as a way to describe technology platforms that support business processes. To be truly process oriented, more attention has to be given to what the non-techies – the line of business folk – need to understand about a process, such as order-to-cash or procurement. As such, a POA is defined by its ability to:- establish process standards- monitor process performance- discern baseline vs. exceptional process behavior
Process Standards: The Building Blocks of Process-Oriented Architecture
There are a number of key elements in establishing a process standard. The first is in describing the basic inputs, outputs and process steps needed to transform the inputs into the desired output. The SCOR (Supply-Chain Operations Reference) model is a good example of this for the supply chain. As a process reference model for supply chain management, it serves as a management tool that enhances communication between parties. It describes supply chains, regardless of their complexity, as process building blocks using a common set of definitions.
Additionally, major business application software such as ERP (Enterprise resource planning) or CRM (customer relationship management) systems have set what amount to de facto standards for various business activities such as order taking, inventory management, shipping and invoicing. There is a push toward common standards as a common way of doing things. With common standards, it becomes easier for everyone to compare processes. The downside of this is that processes can become commoditized. An advantage to the commoditization of processes is that they can be more easily outsourced. In terms of business processes, the main issue with outsourcing is not in striking the initial deal, but in creating a solid foundation that will ensure successful execution of the process, day in and day out. BPM provides this essential framework, and allows organizations to tie together the building blocks of an end-to-end business process.
Monitoring Process Performance
After a process has been defined, it is important to understand how the process will be measured, i.e., what the key performance indicators (KPIs) will be. This is not as easy as it sounds. There is a tendency to either over-measure or measure the wrong things. To make genuine process improvements, it is critical to measure the correct things.
Let’s take a look at an oil refinery as a best practice of monitoring process performance. Oil refineries measure not only the quality and quantity of what comes out of the refinery – gas, diesel, jet fuel, etc. – but they monitor in real time what conditions exist during refining such as temperatures and feed rates.
As demonstrated in the oil refinery example, to learn why good or bad product may be produced, it is of chief importance to understand the conditions that applied during the creation of the output or product.
Much attention has been given to BPM simulation of business processes as a way to examine the impact of a proposed change. While there is a time and place for this, it is often more important to understand how the current process behaves. While this seems intuitive, it is the rare company that truly has this level of insight. Simulation asks, “What will happen if …” whereas current process analysis asks, “What really happens today?” There is little value to be had in addressing the former question if one cannot answer the latter.
Today's world of latent reporting and information, such as batch reports once per week, has created a comfort zone of lax responsiveness by the accountable and responsible personnel in large corporations. Having access to real-time information and corresponding metrics would beg the questions, "Do I want more real-time, up-to-date information to make decisions? What would I do with this real-time information if I had it readily available?”

The best-run companies not only have outcome-based performance measures, as is typical with most business intelligence (BI) tools, but process-based performance measures. They use BPM to identify what needs to be measured throughout the course of the process, whether it is cycle time, volume, variability and so on. And, just as important, they use this real-time process information to pick up the pace and effectiveness of decision making, essentially resetting the metronome of their organization to a faster tempo – not more work, but more productive work.
Process Improvement with BPM: Discerning Baseline and Exceptional Process Behavior
The vast majority of companies, to the extent that they document their business processes at all, use tools such as Visio or PowerPoint to create visual depictions of processes. Because they are merely pictures of the process, and lack any link to the actual systems that comprise the process, they tend to become obsolete and forgotten.

BPM changes this. BPM establishes this vital link between business and IT. BPM establishes process standards and defines key performance measures. But, regrettably, this is where most BPM deployments leave off. And while there are substantial benefits in doing this – faster deployment of new applications and more efficient reuse of existing capabilities – let’s take this to the next step.

What if companies could not only monitor business processes as they are happening, but also learn what is normal, learn what exceptions (or defects, if you will) re-occur? In short, what if businesses could develop a clear picture of baseline behavior and identify patterns of defects or unusual activity? In many – if not most cases – this is far more valuable information than simply simulating what may occur.

Companies are clamoring for improved visibility into their supply chains. This used to mean visibility into things like current inventory balances or having a consistent financial view of what is going on. ERP has largely solved that problem. What large-scale ERP implementations have not solved, but what BPM can solve, is precisely this view into how processes are executed and where exceptions exist. Companies today are drowning in exceptions, and lack the tools to extricate themselves from this sinkhole in a timely, cost-effective way.

Let’s consider two examples where such visibility from BPM can aid process improvement.
First, look at a typical order–to-cash process. To keep it simple, assume there are two basic tiers of customers: a select few strategic customers (perhaps five to 10 that account for 60 percent or more of sales) and then the rest. Does the company have one order-to-cash process or two? What is the business willing to do differently for the strategic customers that it wouldn’t do for the rest? Once the basic strategy in this regard is set, it is important to monitor how the company is actually doing in serving these different customers, and how they behave during the process. Do the non-strategic customers call as often as the strategic ones? What about changes to existing orders? It is important to ensure that non-strategic customers aren’t receiving services for which they have not paid, which requires a deep understanding of ordering and payment patterns. Thus, with BPM, businesses can define an order-to-cash process that is largely the same for all customers, but which has two unique paths for strategic vs. non-strategic customers that might involve more hand-holding for the former and more self-service options for the latter.

Next, let’s consider an OEM that uses contract manufacturers and wants to ensure that service levels are being met. BPM can be used to define a cross-organizational process that can be monitored from start to finish. One of the key concerns companies have with outsourcing is fear that the outsourcing partner is a “black hole” into which the company outsourcing has little visibility. With BPM, along with the proper B2B integration capabilities, the OEM can largely eliminate this fear, and monitor the contract manufacturer’s performance in real time.
Done correctly, BPM can become the rallying point for the alignment of IT and the business. This means thinking about BPM not just as a tool, but as an approach that helps to create a true process-oriented architecture. BPM serves as a disciplined way to rapidly design and deploy new processes, ultimately aiding in continuous process improvement.

About The Author(s)


Richard Douglass
With twenty years of experience in supply chain management and operations, Richard Douglass joined webMethods as director overseeing the high-tech and discrete manufacturing sectors for the company’s Global Strategic Business Solutions group. Previously, he was a principal consultant for Manufacturing Associates, and an associate partner at Accenture, a global consulting firm.