BusinessBusiness ProcessProcess ManagementManagement inin LogisticsLogistics andand SupplySupply ChainsChains
DrDr BillBill KarakostasKarakostas CityCity University,University, LondonLondon
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 1 ContentsContents ofof thisthis PresentationPresentation
ConceptsConcepts ofof SupplySupply chainchain SupplySupply ChainChain ManagementManagement TheThe SCORSCOR ModelModel ofof SCMSCM ITIT RequirementsRequirements forfor SCMSCM WhatWhat isis BPMBPM BPMBPM ConceptsConcepts BPMBPM ToolsTools andand ArchitecturesArchitectures HowHow BPMBPM leveragesleverages SCMSCM ConclusionsConclusions
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 2 PartPart II
SupplySupply ChainChain ManagementManagement
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 3 WhatWhat isis SupplySupply Chain?Chain?
TheThe interconnectedinterconnected setset ofof businessbusiness proceduresprocedures andand businessbusiness partnerspartners thatthat managemanage thethe flowflow ofof goodsgoods andand informationinformation fromfrom thethe pointpoint ofof designdesign toto thethe deliverydelivery ofof thethe productproduct oror serviceservice toto thethe endend consumerconsumer
AA supplysupply chainchain isis likelike aa wellwell balancedbalanced andand practisedpractised relayrelay teamteam inin whichwhich thethe entireentire teamteam isis coordinatedcoordinated toto runrun thethe racerace
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 4 AA PicturePicture ofof aa simplesimple SupplySupply ChainChain
$ $ $
Purchasing Manufacturing Packaging Shipping
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 5 AA moremore rigorousrigorous definitiondefinition ofof ‘Supply‘Supply Chain’Chain’ Supply Chain (SC) is a system that provides a channel through which companies and organizations deliver their products and services to their final customers. The structure of the SC is linear and consists of the following entities: suppliers, manufacturer, distributors, retail outlets and consumers. The suppliers provide the sources for raw materials and services that the manufacturer will use in order to produce the final product or service. The distributor transports the product from the manufacturer to the retailer quite often through a wholesaler. Stock warehouses are used depending on the location, the type of product, distribution centres and so on. Finally the consumers purchase the product or service from the retailers.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 6 SupplySupply chainschains andand ValueValue ChainsChains EveryEvery firmfirm cancan bebe understoodunderstood asas aa collectioncollection ofof activitiesactivities thatthat rangerange fromfrom thethe design,design, marketing,marketing, deliverydelivery andand supportsupport ofof aa productproduct ValueValue chainchain activitiesactivities fallfall underunder twotwo genericgeneric categories:categories: primaryprimary andand supportsupport activitiesactivities PrimaryPrimary activitiesactivities constituteconstitute thethe physicalphysical productionproduction ofof thethe product,product, thethe salesale andand transfertransfer toto thethe buyerbuyer andand postpost salessales helphelp assistanceassistance andand soso on.on. SupportSupport activitiesactivities areare allall otherother activitiesactivities involvedinvolved inin supportingsupporting thethe primaryprimary onesones suchsuch asas marketing,marketing, informationinformation systemssystems etcetc
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 7 PrinciplesPrinciples ofof SupplySupply ChainChain IntegrationIntegration
ExtendingExtending thethe enterpriseenterprise toto embraceembrace allall aspectsaspects ofof aa productproduct oror serviceservice IntegrateIntegrate businessbusiness systemssystems ofof customerscustomers supplierssuppliers andand partnerspartners toto createcreate aa commoncommon informationinformation basisbasis ProvideProvide realreal timetime supportsupport toto increaseincrease responsivenessresponsiveness StriveStrive forfor executionexecution excellenceexcellence byby fullyfully automatingautomating andand optimisingoptimising businessbusiness practicespractices
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 8 TheThe ‘old‘old style’style’ SupplySupply ChainChain AtAt thethe beginningbeginning ofof thethe Century,Century, supplysupply chainschains werewere paperpaper chains,chains, linearlylinearly connectingconnecting manufacturers,manufacturers, warehouses,warehouses, wholesalers,wholesalers, retailersretailers andand consumers.consumers. TheThe chainchain rangedranged fromfrom oneone oror twotwo toto dozensdozens ofof tierstiers andand logisticslogistics werewere aa nightmare.nightmare. PeoplePeople andand paperpaper physicallyphysically connectedconnected allall ofof thethe tierstiers [of[of thethe chain]chain] together.together. Furthermore,Furthermore, thethe linearlinear naturenature ofof thethe chainchain mademade communicationcommunication betweenbetween thethe front-endfront-end andand back-endback-end ofof thethe chainchain messymessy andand timetime consuming.consuming.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 9 ModernModern SupplySupply chainschains areare inin factfact networksnetworks
TheThe termterm ‘Chain’‘Chain’ suggestssuggests thatthat onlyonly oneone playerplayer isis involvedinvolved atat eacheach stagestage ofof thethe flowflow ofof materials/productsmaterials/products InIn realityreality aa manufacturermanufacturer maymay receivereceive materialsmaterials fromfrom severalseveral supplierssuppliers andand thenthen serveserve manymany customerscustomers throughthrough aa complexcomplex distributiondistribution systemssystems MostMost supplysupply chainschains areare inin factfact ‘networks’‘networks’
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 10 SupplySupply ChainChain flowsflows
Supplier
manufacturer
Distributor
Retailer
Consumer
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 11 SupplySupply chainchain conceptsconcepts
SupplySupply chainschains areare concernedconcerned withwith thethe flowflow ofof information,information, materialsmaterials andand moneymoney downstreamdownstream (from(from thethe suppliersupplier toto thethe customer)customer) andand upstreamupstream (from(from thethe customercustomer toto thethe suppliersupplier InformationInformation flows:flows: demanddemand forecasts,forecasts, specifications,specifications, purchasepurchase orders,orders, performanceperformance reportsreports MaterialMaterial flows:flows: productsproducts sendsend toto customerscustomers andand returnedreturned byby customerscustomers forfor servicing,servicing, recycling,recycling, disposaldisposal etcetc Money/financialMoney/financial flows:flows: creditcredit cardcard informationinformation paymentpayment scheduleschedule CustomersCustomers cancan bebe bothboth internalinternal andand externalexternal
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 12 SupplySupply chainchain isis aboutabout processesprocesses
SupplySupply chainschains areare concernedconcerned withwith thethe flowflow ofof information,information, materialsmaterials andand moneymoney throughthrough tradingtrading partnerspartners SupplySupply chainschains emphasiseemphasise thethe processprocess approachapproach concernedconcerned withwith howhow aa productproduct oror serviceservice isis delivereddelivered toto thethe customercustomer
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 13 MainMain PremisePremise ofof ITIT enablingenabling thethe SupplySupply ChainChain TrueTrue breakthroughbreakthrough inin SCSC performanceperformance areare achievedachieved whenwhen newnew waysways areare identifiedidentified toto substitutesubstitute informationinformation forfor inventoryinventory andand workwork contentcontent.. SuchSuch informationinformation relatesrelates toto demanddemand,, supplysupply,, inventoryinventory andand shipmentshipment andand needsneeds toto bebe availableavailable atat realreal timetime
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 14 SupplySupply ChainChain ManagementManagement (SCM)(SCM)
SupplySupply ChainChain ManagementManagement isis concernedconcerned withwith thethe coordinationcoordination ofof information,information, materialmaterial andand financialfinancial flowsflows throughthrough improvedimproved relationshipsrelationships atat allall stagesstages ofof thethe supplysupply chainchain toto obtainobtain aa sustainablesustainable competitivecompetitive advantage.advantage. TheThe aimaim ofof SCMSCM isis toto useuse thethe informationinformation providedprovided byby ITIT toto integrateintegrate aa numbernumber ofof discretediscrete andand fragmentedfragmented processesprocesses intointo aa cohesivecohesive systemsystem capablecapable ofof deliveringdelivering valuevalue toto thethe customercustomer SCMSCM thesethese daysdays isis focusingfocusing onon inter-enterpriseinter-enterprise integrationintegration involvinginvolving collaborativecollaborative partnershippartnership orientedoriented modelsmodels withwith externalexternal supplierssuppliers andand customers.customers.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 15 TheThe objectivesobjectives ofof supplysupply chainchain managementmanagement
ReducedReduced SupplySupply CostsCosts ImprovedImproved ProductProduct MarginsMargins (Profit(Profit perper additionaladditional unitunit produced)produced) IncreasedIncreased ManufacturingManufacturing ThroughputThroughput (production(production atat allall levels)levels) BetterBetter ReturnReturn onon AssetsAssets (net(net incomeincome afterafter expenses/interest)expenses/interest)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 16 WhyWhy SCMSCM isis ImportantImportant
Competition has shifted from the company level to the supply chain level. To facilitate being competitive and profitable a company has to rely on its supply chain partners: this requires enhanced trust and real time communication between companies. In order to obtain competitive advantage a company has to achieve effective collaboration with its supply chain partners: This requires all members of the supply chain to be convinced to change their processes and adopt new compatible technologies. With the advent of Internet technologies the traditional supply chain has adopted the electronic implications and moves towards the e-supply chain. E-business and e-commerce have created the need for substituting product flow with information flow and integrating processes inside the company and within the supply chain.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 17 AA HolisticHolistic viewview ofof SCMSCM
SCM should be examined from three different perspectives: tactical, strategic and Web enabled. Tactical SCM draws on value-enhancing activities such as supplier/customer, management, product/service processing and support activities aiming to integrate and synchronise these operations at the most cost efficient way. Strategic SCM is reflected on the connectivity level of the value-enhancing activities aiming to develop a network between the SC partners that will operate smoothly illustratingillustrating innovationinnovation capabilities,capabilities, increasedincreased reliabilityreliability andand reduced cycle time IT addresses operational inefficiencies in order to gain a competitive edge. The Web enabled SCM expands the IT levellevel toto WebWeb basedbased applications.applications. WebWeb enabledenabled SCMSCM refersrefers toto the use of the Web to connect partners, increase efficiency and reduce cost.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 18 GlobalisationGlobalisation effecteffect onon SCMSCM
ModernModern businessesbusinesses attemptattempt toto deploydeploy globalglobal resourcesresources toto maximisemaximise thethe potentialpotential opportunitiesopportunities ofof thethe globalglobal economy.economy. GlobalisationGlobalisation strategiesstrategies includeinclude GlobalGlobal sourcingsourcing ofof supplierssuppliers Problems:Problems: currency,currency, tariff,tariff, legal,legal, changechange inin overseasoverseas governmentgovernment regulationsregulations GlobalGlobal tradingtrading Problems:Problems: RelativeRelative longlong leadlead times,times, highhigh bufferbuffer stocks,stocks, complexcomplex logisticslogistics
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 19 SupplySupply chainchain responsivenessresponsiveness andand efficiencyefficiency ResponsivenessResponsiveness meansmeans thethe abilityability to:to: RespondRespond toto widewide rangesranges ofof quantitiesquantities onon demanddemand MeetMeet shortshort leadlead timestimes HandleHandle aa largelarge varietyvariety ofof productsproducts BuildBuild highlyhighly innovativeinnovative productsproducts MeetMeet aa veryvery highhigh servicceservicce levellevel EfficiencyEfficiency isis aa measuremeasure ofof thethe costcost ofof makingmaking andand deliveringdelivering aa productproduct toto thethe customercustomer
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 20 ResponsivenessResponsiveness vs.vs. EfficiencyEfficiency
Responsiveness tends to increase costs which in turn lowerslowers efficiencyefficiency To respond to the demand for short lead times it may be necessary to keep relatively high inventory levels Efficient SCM includes determining the highest level of responsiveness that can be provided at a given cost Exchange of information between customer and supplier can enhance both responsiveness and efficiency Such information exchanges include sharing of inventory informationinformation ,, continuouscontinuous replenishmentreplenishment programmesprogrammes (CRP)(CRP) or vendor managed inventory (VMI) CRP/VMI are practiced by two neighbouring partners in a supply chain, e.g Proctor and Gamble (manufacturer) and Wal Mart(retailer )
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 21 WhereWhere costscosts occuroccur inin thethe supplysupply chainchain
Supply Chain Costs
Storage Handling Procurement Inventory Carrying Business Process Production COsts and Distribution Costs Costs Costs Costs
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 22 LimitationsLimitations andand concernsconcerns withwith currentcurrent SCMSCM systemssystems
cost competitive operations: inability to plan effectively the supply chain operations which results in increased cost during their function matching resources to requirements assigning human, financial and material resources to requirements affects both cost and efficiency of the supply chain. These requirements are a requisite for the operation of the supply chain and determine the cost and effectiveness of an organization. tied up capital in the inventory: The need to decrease the tied up capital in the inventory derives from the traditional Build to Forecast production planning where finished products are placed in the warehouse until they are dispatched. This results in the increased cost of stock maintenance and reduces the financial flexibility of an organization. increased lead time in procurement. The increased lead time in procurement is a result of the lack of real time communication between the supply chain partners and visibility through the supply chain results in delays in procurement. Critical decisions such as validating new customers are time consuming operations which increase the total time required for supply chain functions.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 23 WhatWhat isis SCOR?SCOR?
TheThe Supply-ChainSupply-Chain OperationsOperations Reference-modelReference-model (SCOR)(SCOR) isis aa processprocess referencereference modelmodel thatthat hashas beenbeen developeddeveloped andand endorsedendorsed byby thethe Supply-ChainSupply-Chain CouncilCouncil asas thethe cross-cross- industryindustry standardstandard diagnosticdiagnostic tooltool forfor supply-chainsupply-chain management.management. (www.supply-chain.org)(www.supply-chain.org)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 24 SCORSCOR ModelModel (www.supply-chain.org)(www.supply-chain.org)
SCOR describes five primary management processes of Plan, Source, Make, Deliver, and Return. By describing supply chains using these process building blocks, the Model can be used to describe supply chains that are very simple or very complex using a common set of definitions. Disparate industriesindustries cancan bebe linkedlinked toto describedescribe anyany supplysupply chain.chain.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 25 Plan the Supply Chain
Planning the Supply Chain involves: Balancing resources with requirements and establish/communicate plans for the whole supply chain, and the execution processes of Source, Make, and Deliver
Managing business rules for supply chain performance, data collection, inventory, capital assets, transportation planning configuration, and regulatory requirements and compliance
Aligning the supply chain unit plan with the financial plan
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 26 SCOR Process: Plan The Supply Chain
Involves the development and establishment of courses of action over specified time periods that represent a projected appropriation of supply chain resources to meet supply chain requirements
P1.1 Identify, Prioritise & Aggregate SC Requirements P1.3 P1.4 Balance SC Establish and Resources with Communicate P1.2 SC Requirements SC Plans Identify, Assess & Aggregate SC Resources
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 27 SCORSCOR Plan:Plan: IdentifyIdentify andand measuremeasure
Identify and measure the gaps and imbalances between demand and resources in order to determine how to best resolve the variances through marketing, pricing, packaging, warehousing, outsource plans or some other action that will optimize service, flexibility, costs, assets, (or other supply chain inconsistencies) in an iterative and collaborative environment
Planning Decision Policies Reliability Delivery Performance to SC Performance Improvement Plan customer request date Inventory Strategy Fill Rate Perfect Order Fulfilment Responsiveness Order Fulfilment Lead Time Flexibility SC Response Time P1.3 Production Flexibility Balance SC Cost Total SC Costs Resources with Value Added Productivity 04/11/09 SC Requirements BPM andAssets SCM Bill Karakostas, CITY University, London Inventory days of Supply 28 Asset Turns Cash-to-Cash Cycle Time SCORSCOR Plan:Plan: establishestablish andand communicatecommunicate Establish and communicate of courses of action over the appropriate time-defined (long-term, annual, monthly, weekly) planning horizon and interval, representing a projected appropriation of supply-chain resources to meet supply-chain requirements
Reliability Perfect Order Fulfilment On-time Delivery P1.4 Responsiveness None identified Establish & Flexibility Cumulative Source/Make Communicate Cycle Time SC Plans Total SC Response Time Cost SC Finance Costs Inventory Carrying Costs Assets Inventory Days of Supply (Inventory Turns) Return on Assets Cash-to-Cash Cycle time 04/11/09Supply Chain Plans (Customer)BPM and SCM Bill Karakostas, CITY University, London 29 SCORSCOR Plan:Plan: Identify,Identify, assessassess andand aggregateaggregate SCSC resourcesresources The process of identifying, prioritizing, and aggregating, as a whole with constituent parts, all sources of supply that are required and add value in the supply chain of a product or service at the appropriate level, horizon and interval (Customer Inventory Sourcing Plans Product MAKE Plans Delivery Plans Planning Data Projected Internal and External Production Capacity Revised Capital Plan Outsource Plan Regulatory Requirements Reliability - Responsiveness None Identified Flexibility Cumulative Source/Make P1.2 Cycle Times Identify, Assess & Intra- Manufacturing Aggregate SC Replan Cycle Time Resources Cost Planning Costs, SC Finance Costs, Product Data (MIS) Mngm Costs Assets Inventory Days of Supply
04/11/09 BPM and SCM Bill Karakostas, CITY University, London Inventory Turns 30 Return On Assets Cash-to-Cash Cycle Time ITIT requirementsrequirements forfor SupplySupply ChainChain PlanningPlanning
Ability to obtain a centralized overview of the entire supply network to identify areas of potential improvement. Ability to Forecast and plan demand, taking historical buying and selling behavior and sales objectives into account. Ability to Match demand to supply to maximize return on assets (ROA), taking operational constraints into account. Ability to take actual and historical production data into account. Ability to test various scenarios to determine the optimal location inin thethe networknetwork toto produceproduce products,products, andand determinedetermine howhow changeschanges inin customercustomer demanddemand willwill affectaffect thethe network.network. Ability to se exploded bills of material (BOM) for critical items in demand planning.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 31 ITIT RequirementsRequirements forfor SupplySupply ChainChain ExecutionExecution Ability to create production schedules and share accurate inventory and procurement-order information to ensure that production materials are available in the right place at the right time. Collaborative fulfillment capabilities to enable a company and its partners to manage transportation, track individual shipments, and intelligentlyintelligently commitcommit toto deliverydelivery datesdates inin realreal time.time. Support process manufacturing with optimized production schedules that take material and capacity into account. Campaign-planning tools to reduce set-up costs in complex manufacturing environments. Ensuring that you use the materials that have the optimal ‘ best before’ date, to reduce scrap and storage needs and help you avoid product recalls. Ability to use Internet-based collaborative procurement to streamline vendor selection and manage sourcing agreements. Ability to Integrate batch management, campaign handling, and Co-product and by-product information.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 32 ITIT RequirementsRequirements forfor SupplySupply ChainChain CollaborationCollaboration Ability to replace the traditional linear supply chain with an adaptive supply chain network that gives all participants simultaneous access to information about demand and supply. Use an exchange platform to manage replenishment and let partners to work together. Use Enterprise portal technology that enables employees to collaborate with coworkers, business partners, and customers. And with the solution’s mobile SCM capabilities, decision makers can gather information and act wherever they are. These supply chain collaboration capabilities make possible to: • Let suppliers see the status of their parts at all their plants, receive automatic alerts when inventory levels get low, and respond quickly via the Web. • Collaborate with partners to plan strategy and determine where to produce what products so you can optimize the cost of production and transportation. • React quickly to changing market conditions and successfully launch new products to enter new segments of the market.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 33 ITIT RequirementsRequirements forfor SupplySupply ChainChain CoordinationCoordination Involves the ability to involve working with partners to manage activities across the supply chain to take advantage of collaborative planning, forecasting, and replenishment (CPFR) and vendor-managed inventoryinventory (VMI)(VMI) processes.processes. Provide an event-management capability that monitors the execution of supply chain events and flags any problems that come up. It also lets you track key performance indicators (KPIs) – such as costs and assets – across the supply chain, and program the automatic generation of alerts that signal deviations from plan. With such supply chain coordination capabilities it is possible to: • Monitor the complete range of supply chain activities, from price quotation and procurement to product delivery. • Use advanced tracking and tracing capabilities, including alert management. • React quickly to planned and unexpected events.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 34 EvolutionEvolution ofof supplysupply chainchain managementmanagement technologiestechnologies
E-supply chain collaboration The Internet
Early information systems for supply chain management
1960s-1970s 1980s-1990s 21st century
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 35 WebWeb && SupplySupply ChainChain
The web is having a significant impact on how firms interact with each other and their customers.
Past stumbling blocks for supply chain integration such as high transaction costs between partners poor information availability , and the challenges of managing complex interfaces between functional silos (applications)
are eliminated thanks to open web standards (IP and XML based)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 36 WebWeb basedbased SupplySupply ChainsChains
B2B commerce makes easier for a buyer to access price informationinformation andand procurementprocurement auctionsauctions Wide availability of price information in vendor Web sites makes itit increasinglyincreasingly easiereasier toto ‘point‘point andand click’click’ toto thethe webweb sitesite ofof anan alternative supplier The margin for error in SCM in particular in inventory availability has decreased by an order of magnitude Online marketplaces make the shopping for materials from alternative sources easier than befre Online product catalogues make product selection less time consuming. Online RFPs and electronic bidding make the bid process many times faster and less costly. All the above have permitted a 300%-500% reduction is procurement costs.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 37 MarketMarket forfor WebWeb basedbased LogisticsLogistics InternetInternet allowsallows exponentiallyexponentially greatergreater accessaccess toto logisticslogistics informationinformation thanthan previousprevious informationinformation architecturesarchitectures InIn 20012001 150,000150,000 organisationsorganisations tradingtrading moremore thanthan $1.8$1.8 trilliontrillion perper yearyear participatedparticipated inin webweb basedbased supplysupply chainchain exchangesexchanges TransportationTransportation bookingsbookings overover thethe InternetInternet areare expectedexpected toto increaseincrease byby 80%80% perper yearyear forfor thethe nextnext fewfew years.years. WWWWWW connectsconnects stationarystationary andand mobilemobile computerscomputers inin aa 7x24x3657x24x365 networknetwork permittingpermitting globalglobal visibilityvisibility ofof realreal timetime logisticslogistics transactionstransactions 04/11/09 BPM and SCM Bill Karakostas, CITY University, London 38 IntegratingIntegrating Order,Order, Warehouse,Warehouse, Transportation,Transportation, andand InstallationInstallation ManagementManagement CoversCovers allall orderorder managementmanagement stepssteps fromfrom processingprocessing customercustomer inquiriesinquiries andand quotesquotes toto routingrouting shipmentsshipments andand selectingselecting carrierscarriers IncludesIncludes WarehouseWarehouse managementmanagement fromfrom receivingreceiving andand pickingpicking productproduct toto loadload andand shipship productproduct IncludesIncludes receivereceive andand verifyverify productproduct atat customercustomer sitesite andand installationinstallation IncludesIncludes InvoicingInvoicing thethe customercustomer ManagesManages businessbusiness rulesrules forfor delivery,delivery, performance,performance, information,information, finishedfinished productproduct inventories,inventories, capitalcapital assets,assets, transportation,transportation, productproduct lifelife cycle,cycle, andand import/exportimport/export requirementsrequirements
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 39 AnAn IntegratedIntegrated SCMSCM InformationInformation SystemsSystems ArchitectureArchitecture
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 40 AnAn IntegratedIntegrated SCMSCM ArchitectureArchitecture shouldshould integrateintegrate thethe followingfollowing SCMSCM executionexecution systems:systems:
CustomerCustomer ResponseResponse ManagementManagement SystemSystem (CRS)(CRS) InventoryInventory ManagementManagement SystemSystem (IMS)(IMS) SupplySupply ManagementManagement SystemSystem (SMS)(SMS) TransportationTransportation ManagementManagement SystemSystem (TMS)(TMS) WarehouseWarehouse ManagementManagement SystemSystem (WMS)(WMS)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 41 AnAn IntegratedIntegrated SCMSCM ArchitectureArchitecture shouldshould integrateintegrate thethe followingfollowing SCMSCM planningplanning systems:systems: CustomerCustomer ResponseResponse PlanningPlanning SystemsSystems InventoryInventory PlanningPlanning SystemSystem SupplySupply PlanningPlanning SystemSystem TransportationTransportation PlanningPlanning SystemSystem WarehouseWarehouse PlanningPlanning SystemSystem
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 42 AnAn IntegratedIntegrated SCMSCM ArchitectureArchitecture shouldshould integrateintegrate thethe followingfollowing SCMSCM collaborationcollaboration systems:systems: SupplySupply ChainChain SchedulingScheduling andand OptimisationOptimisation SupplySupply chainchain conflictconflict resolutionresolution OnlineOnline customercustomer serviceservice InventoryInventory AuctionsAuctions ForecastForecast SharingSharing ProcurementProcurement Marketplaces,Marketplaces, GlobalGlobal Sourcing,Sourcing, OnlineOnline CatalogueCatalogue ManagementManagement
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 43 TotalTotal LogisticsLogistics ExchangeExchange ConceptConcept
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 44 TotalTotal LogisticsLogistics ExchangeExchange
Manufacturers, wholesalers, retailers, consumers and third party logisticslogistics companiescompanies areare connectedconnected toto aa WebWeb exchangeexchange thatthat provides the following services on a per transaction basis: E-procurement Electronic RFPs and product bidding Electronic funds transfer Transportation services bidding Reverse logistics management Freight payment and audit Online carrier management Container and shipping tracking Capacity and inventory exchange Forecast sharing and CPFR Supply chain optimisation Online logistics decision support tools Online advisory services
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 45 WebWeb basedbased transportationtransportation managementmanagement Due to ecommerce expansion, shipping sizes are declining and shipping frequencies are increasing dramatically Web technologies permit a multiplicity of breakthroughs in transportation management Carriers, transportation service providers and portals make shipping rates and shipping tracking information widely available Online transportation service providers provide online bill payment auditing analysis and claims collection GPS and RFID systems permit transportation assets to be physically tracked with accuracy of a few feet and monitor their status ie loading, unloading, travelling empty, travelling full, idling etc.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 46 ID Activity How is RFID applied? RFIDRFID appliedapplied toto DELIVERDELIVER processesprocesses
D1.6 Route Shipments RFID assisted by GPS satellite signal for tracking location.
D1.8 Receive Product at Warehouse
D1.9 Pick Product
D1.10 Load Vehicle, Generate Ship -Carrier/Route optimization Documents, Verify Credit and Ship -Product tracking Product -Installed sensors for determining shipping conditions (e.g. heat, humidity, etc).
D1.11 Receive and Verify Product at Customer Site
D1.12 Install Product
04/11/09 D1.13 Invoice (Payment)BPM and SCM Bill Karakostas, CITY University, London 47 PartPart IIII
BusinessBusiness ProcessProcess ManagementManagement
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 48 WhatWhat isis BPMBPM
BusinessBusiness ProcessProcess ManagementManagement—— TheThe practicepractice ofof developing,developing, running,running, performanceperformance measuring,measuring, andand simulatingsimulating BusinessBusiness ProcessesProcesses toto effecteffect thethe continuedcontinued improvementimprovement ofof thosethose processes.processes. BusinessBusiness ProcessProcess ManagementManagement isis concernedconcerned withwith thethe lifecyclelifecycle ofof thethe ProcessProcess Definition.Definition. ““ (from(from WfMCWfMC www.wfmc.org)www.wfmc.org)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 49 DrivingDriving ForceForce forfor BPMBPM ManagingManaging complexcomplex interactions,interactions, unstructuredunstructured activities,activities, andand coordinatingcoordinating thatthat inin thethe contextcontext ofof businessbusiness processes,processes, isis aa realreal shiftshift andand oneone thatthat isis becomingbecoming moremore andand moremore criticalcritical toto thethe wayway thatthat organizationsorganizations cancan furtherfurther impactimpact theirtheir performance.performance.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 50 IntraIntra andand inter-organisationalinter-organisational BPMBPM
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 51 WhatWhat isis aa BusinessBusiness ProcessProcess AA coordinatedcoordinated useuse ofof activitiesactivities andand resourcesresources inin aa singlesingle organisationorganisation oror acrossacross organisationsorganisations withwith thethe goalgoal ofof providingproviding somethingsomething ofof valuevalue toto aa customer.customer. ProcessesProcesses areare repetitiverepetitive andand thethe dependenciesdependencies betweenbetween activitiesactivities (e.g(e.g sequencing)sequencing) mustmust thereforetherefore bebe defineddefined AA ‘customer’‘customer’ cancan bebe internalinternal oror externalexternal toto thethe organisationsorganisations performingperforming thethe processesprocesses TheThe outcome(s)outcome(s) ofof aa processprocess cancan bebe tangibletangible (a(a product)product) oror intangibleintangible (e.g.(e.g. aa service)service)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 52 WhyWhy businessbusiness processesprocesses areare importantimportant In a recent survey of 1,400 CIOs by Gartner Executive Programs, the top business priority identified by CIOs was business process improvement
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 53 WhatWhat isis BPMNBPMN
BusinessBusiness ProcessProcess ModelingModeling NotationNotation (BPMN)(BPMN) isis aa graphicalgraphical representationrepresentation forfor specifyingspecifying businessbusiness processesprocesses inin aa workflow.workflow.
BPMNBPMN waswas developeddeveloped byby BusinessBusiness ProcessProcess ManagementManagement InitiativeInitiative (BPMI),(BPMI), andand isis currentlycurrently maintainedmaintained byby thethe ObjectObject ManagementManagement GroupGroup
(source: Wikipedia)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 54 AA ProcessProcess ModelModel inin BPMNBPMN
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 55 BPMBPM isis notnot justjust aboutabout drawingdrawing models…models… BPMBPM providesprovides thethe abilityability toto capturecapture usersusers andand systemsystem requirementsrequirements toto optimizeoptimize howhow peoplepeople shouldshould work.work. It’sIt’s moremore thanthan justjust workflowworkflow oror aa diagramdiagram inin VisioVisio oror Smartdraw.Smartdraw. InIn BPM,BPM, thethe samesame processprocess modelmodel that’sthat’s defined,defined, iterated,iterated, andand optimizedoptimized becomesbecomes thethe applicationapplication specificationspecification toto deploydeploy inin anan enterpriseenterprise environment.environment. TheThe modelmodel becomesbecomes thethe commoncommon languagelanguage toto meetmeet useruser requirementsrequirements forfor automatingautomating andand improvingimproving processesprocesses andand thethe ITIT specificationspecification forfor systemsystem connections,connections, businessbusiness rules,rules, andand datadata architecture.architecture. (www.thectoforum.com)(www.thectoforum.com)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 56 BusinessBusiness ProcessProcess Fundamentals:Fundamentals: InputsInputs && OutputsOutputs AA businessbusiness processprocess mustmust havehave specificspecific input(sinput(s)) (the(the requestrequest)) andand output(soutput(s)) TheThe requestrequest comescomes typicallytypically fromfrom aa customercustomer andand thethe outcomeoutcome isis typicallytypically aimedaimed forfor thethe customer.customer. TheThe requestrequest andand outcomeoutcome areare linked:linked: thethe requestrequest isis forfor thethe outcome;outcome; thethe outcomeoutcome isis typicallytypically thethe thingthing requested.requested.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 57 BusinessBusiness ProcessProcess fundamentals:fundamentals: RulesRules
AA processprocess isis aa sequencesequence ofof statusstatus changeschanges fromfrom requestrequest toto outcome,outcome, andand thethe statusstatus changeschanges areare governedgoverned byby rulesrules.. TheThe rulesrules applicableapplicable toto allall requestrequest entitiesentities ofof thethe relevantrelevant typetype (eg(eg allall orders,orders, forfor aa purchasepurchase orderorder process)process) splitsplit thethe processprocess intointo subprocessessubprocesses
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 58 BusinessBusiness ProcessProcess Fundamentals:Fundamentals: SubprocessesSubprocesses SubprocessesSubprocesses areare typicallytypically sequential,sequential, butbut couldcould bebe inin parallelparallel ifif thatthat isis whatwhat thethe rulesrules specify.specify. ForFor exampleexample subprocesssubprocess CheckCheck creditcredit ratingrating couldcould runrun parallelparallel toto subprocesssubprocess MatchMatch againstagainst stockstock.. FirstFirst taketake thethe order.order. ThenThen checkcheck thethe order.order. ThenThen checkcheck thethe customer’scustomer’s creditcredit rating.rating. …etc.…etc.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 59 BusinessBusiness ProcessProcess Fundamentals:Fundamentals:TasksTasks
The third and final level in a process model is the task. A subprocess consists of one or more tasks plus the routing between them. Where subprocess-level routing applies to all request entities for the process, task-level routing differs for different request entities— because the attributes of the request instances will have different values. The task structure of the process must accommodate every possible request instance. A request instance will typically pass through every subprocess, but only through the tasks it needs to pass through. A task is either automatic (all data available; the next status change achieved by applying rules mechanistically); or manual (human interaction needed, for example because data is missing, authorization is required, or a decision must be made).
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 60 SubprocessesSubprocesses andand TasksTasks inin BPMNBPMN notationnotation
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 61 WhatWhat isis thethe newnew focusfocus forfor BPM?BPM?
The transactional process where workflow and BPM was first applied has largely been resolved.
The really opportunities for organizations to build value is not in the lower tier where those processes are found, but by exposing those system capabilities as services, and connecting these to human-facing processes.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 62 WhyWhy BPMBPM isis neededneeded inin SCMSCM processesprocesses OrganizationsOrganizations quicklyquickly realizedrealized thatthat eveneven withwith systemssystems thatthat movemove documentsdocuments oror datadata toto thethe rightright peoplepeople inin thethe chainchain thethe processprocess doesdoes notnot alwaysalways getsgets completedcompleted quicklyquickly oror withwith highhigh quality.quality. PeoplePeople willwill abandonabandon oror bypassbypass ITIT systemssystems thethe processprocess ifif theythey cannotcannot easilyeasily interactinteract withwith them,them, oror ifif theythey dodo notnot bringbring themthem allall thethe contextualcontextual informationinformation theythey needneed toto makemake aa decision.decision. TheThe keykey toto successsuccess isis howhow toto engageengage andand connectconnect allall participantsparticipants acrossacross companycompany andand systemsystem boundaries,boundaries, andand automateautomate thethe capturecapture andand processingprocessing ofof informationinformation acrossacross diversediverse groupsgroups andand disparatedisparate systems.systems.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 63 WhatWhat doesdoes BPMBPM cancan offeroffer toto SupplySupply ChainChain ManagementManagement :: AbilityAbility toto delegatedelegate rulesrules toto thethe businessbusiness RulesRules areare inin languages/formatslanguages/formats thatthat businessbusiness usersusers cancan workwork withwith AbilityAbility toto constantlyconstantly monitormonitor thethe statestate ofof thethe businessbusiness system,system, identifyidentify bottlenecksbottlenecks andand taketake remedialremedial actionaction inin real-timereal-time ComprehensiveComprehensive recordingrecording andand reportingreporting ofof ManagementManagement InformationInformation AbilityAbility forfor thethe endend usersusers (process(process owners)owners) toto changechange andand improveimprove thethe processprocess dynamically,dynamically, ‘on‘on thethe fly’fly’
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 64 BPMBPM ArchitectureArchitecture (source(source O’Reilly)O’Reilly)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 65 EventEvent DrivenDriven BusinessBusiness ProcessProcess ManagementManagement EitherEither throughthrough aa subscriptionsubscription processprocess oror automatedautomated integrationintegration points,points, eventsevents flowingflowing withinwithin thethe serviceservice fabricfabric areare typicallytypically processedprocessed individuallyindividually andand propagatedpropagated throughthrough robustrobust messagingmessaging infrastructures.infrastructures. TheThe recognitionrecognition ofof patternspatterns withinwithin independentindependent andand varyingvarying eventevent streamsstreams isis knownknown asas ComplexComplex EventEvent ProcessingProcessing (CEP).(CEP). BPMBPM cancan incorporateincorporate oror interactinteract withwith CEPCEP EnginesEngines
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 66 ModellingModelling andand ExecutionExecution LanguagesLanguages forfor BPMBPM XPDLXPDL isis notnot anan executableexecutable programmingprogramming languagelanguage likelike BPELBPEL below,below, butbut specificallyspecifically aa processprocess designdesign formatformat thatthat literallyliterally representsrepresents thethe "drawing""drawing" ofof thethe processprocess definition.definition. ThisThis allowsallows anan XPDLXPDL toto storestore aa one-to-oneone-to-one representationrepresentation ofof aa BPMNBPMN processprocess diagram.diagram. ForFor thisthis reason,reason, XPDLXPDL isis effectivelyeffectively thethe filefile formatformat oror "serialization""serialization" ofof BPMN.BPMN. BPELBPEL isis anan executableexecutable language,language, specificallyspecifically forfor thethe executionexecution ofof processesprocesses modelledmodelled asas orchestrationsorchestrations ofof WebWeb servicesservices
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 67 BPMBPM StepsSteps
1.1. AutomateAutomate ManualManual StepsSteps inin thethe ProcessProcess 2.2. IterateIterate throughthrough thethe AutomatedAutomated process,process, addingadding moremore processes,processes, enhancingenhancing thethe UI,UI, addingadding moremore reporting/reporting/ MIMI oror addingadding additionaladditional businessbusiness rulesrules withwith eacheach iteration.iteration. 3.3. IntegrateIntegrate—Build—Build inin thethe integrationintegration withwith externalexternal systems,systems, whichwhich isis theythey keykey toto achievingachieving StraightStraight ThroughThrough ProcessingProcessing (no(no huimanhuiman interventionintervention isis required.required. 4.4. DelegateDelegate—The—The finalfinal stepstep entailsentails passingpassing onon controlcontrol ofof thethe businessbusiness processprocess andand itsits executionexecution toto thethe business.business. IdentifyingIdentifying keykey businessbusiness rulesrules andand processprocess controlcontrol points,points, andand thenthen buildingbuilding themthem inin suchsuch aa wayway thatthat theythey cancan bebe easilyeasily maintainedmaintained byby thethe businessbusiness users.users. InIn thisthis wayway ContinuousContinuous ProcessProcess ImprovementImprovement isis achieved.achieved.
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 68 StepsSteps inin aa BPMBPM ProjectProject (source:O’Reilly)(source:O’Reilly)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 69 BPMBPM stepstep 1:1: ValidateValidate thethe startingstarting pointpoint ASSESS WHERE YOU ARE BEFORE DECIDING WHERE YOU ARE GOING The first step in building a business case for BPM is to establish a “current state” benchmark of the process or processes targeted for improvement.improvement. This is not intended to be a comprehensive re-engineering exercise, but rather an opportunity to better understand the process in question. Every process has its “cow paths” where practice has outlived the original design, and may or may not reflect how it should be performed in current context. Often this offers great opportunity for improvement. Yet overly scrutinizing this at the beginning can lead to a political battle or cause stakeholders to become defensive. So rather than getting entangled in politics, begin by simply documenting how things are done today, including specific steps and activities, the frequency with which they are performed, and the duration of individual activities—and be sure to note obvious bottlenecks, issues, or areas of improvement.
(Source: transformationandinnovation.com)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 70 BPMBPM StepStep 2:2: BenchmarkBenchmark thethe currentcurrent processprocess Next, start to identify the interdependencies and links between activities in terms of individual roles. Examine each individual’sindividual’s rolerole inin thethe process,process, askingasking “when“when dodo you...?”you...?” andand “why do you...?” questions about process “steps.” The goal is to build the context around process steps, so that a process can be defined and modeled as a set of interrelatedinterrelated butbut discretediscrete activities,activities, ratherrather thanthan simplysimply aa looselyloosely defineddefined sequencesequence ofof actions.actions. In addition, start to identify system dependencies in the process—what data is accessed when and by whom and in what system does it reside. Next focus on the “white space” between activities, specifically the precedents (what happens before) and dependents (what happens after) as well as the flow of informationinformation andand howhow itit changeschanges fromfrom oneone activityactivity toto another.another. This is also an opportunity to identify bottlenecks, without directly implicating any specific roles or individuals.
(Source: transformationandinnovation.com)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 71 BPMBPM StepStep 3:Define3:Define PerformancePerformance MetricsMetrics andand SuccessSuccess CriteriaCriteria The calculation and determination of a project’s success should be based on milestones and measurable goals, not an arbitrary notion of completion. While the business case requires structure, it should also be fluid and adaptable. Business performance is dynamic and so should be the ruler used to measure it, particularly during the formative stages of the business case. This means that metrics should be both quantitative, such as time and cost variables, as well as qualitative, such as being easier to do business with, increasingincreasing visibility,visibility, oror improvingimproving employeeemployee productivity.productivity. AA business case should contain measurements that are tactical and quantitative as well as factors that are strategic and qualitative such as enabling ‘round-trip BPM’ so that business processes can be adapted in realtime by process owners.
(Source: transformationandinnovation.com)
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 72 SoSo,, isis BPMBPM thethe newnew ITIT weaponweapon forfor logisticslogistics andand SupplySupply ChainChain Management?Management? Yes,Yes, however,however, BPMBPM isis notnot justjust anotheranother ITIT tool;tool; itit isis thethe bridgebridge betweenbetween businessbusiness processesprocesses andand ITIT systemsystem BPMBPM speaksspeaks thethe languagelanguage ofof thethe businessbusiness useruser ItIt integratesintegrates teamsteams andand peoplepeople notnot justjust systemssystems acrossacross thethe wholewhole logisticslogistics chainchain HelpsHelps withwith compliancecompliance toto regulatoryregulatory andand otherother requirementsrequirements AllowsAllows organisationsorganisations toto leverageleverage theirtheir investmentinvestment inin ITIT forfor SCMSCM
04/11/09 BPM and SCM Bill Karakostas, CITY University, London 73