Graduate Program in Business Information Systems BIS 581

Graduate Program in Business Information Systems BIS 581 Business Process Management Lecture-2 Aslı Sencer Department of Management Information Systems 1

Business Process Management- 2 Key Performance Indicators Process Identification 2

Key Performance Indicators - KPI • Performance measures called key performance indicators (KPI) are developed to evaluate the processes from different aspects. • BPM requires that the performance of the processes should be continually observed with respect to these KPI’s and documented periodically. • In the next step, current performances are compared with the target values that have been generated for these KPI’s. t o • Modifications are made in the process flow to improve the n n a l performance. c u ntro o Y co out ! th ring i w su a e m 3

Classification of KPI’s: Effectiveness, Efficiency, Flexibility Effectiveness: Ø Ø Measures the degree to which an output fulfills the customer needs and requirements. Measures if the right output is provided at the right time, place and price. Can the process provide what is intended initially? Can we produce more with the same input by decreasing defectives? Topics for Effectiveness Measuring Criteria Order fulfillment Amount delivered/amount ordered Being on time On time delivery rate Customer complaints Number of customer complaints Defect rate Ratio of defectives Acting as planned Actual/planned Response time Response duration Service Level Ratio of satisfied customer 4

Classification of KPI’s: Effectiveness, Efficiency, Flexibility Efficiency: Ø Measures how much resource are used to obtain a given output? Resources are manpower, energy, machinery, raw material, capital and knowhow. Ø Measuring efficiency is more difficult than measuring effectiveness. Ø Aim is to decrease the amount of resource used to produce the same output. Ø Can we decrease the used resources by eliminating the non value adding activities? Topics for Efficiency Measuring Criteria Duration Process time for a unit production Cost Unit production cost Waiting time between processes Production rate per unit time 5

Classification of KPI’s: Effectiveness, Efficiency, Flexibility: Ø Measures the adaptability of the processes to the changing environmental conditions like special customer needs, new rules, regulations, emergency cases, etc. Ø A flexible process can be performed in a different way in special cases. Ø Flexibility is the most difficult performance to measure. Topics for Flexibility Measurement Criteria Special Customer Requirements Number of special custmer requirements Duration of special customer request Process duration for special customer/standard customer Rejections of special request Number of rejected special requests/all requests Extra resource requirement Extra resources required for a special request Extra processes required Number of activities required for a special request 6

Process Identification Form Code: A standard code Name: Standard name of the process in the organization Aim: The aim of the process, indicating the type of output to be generated Classification: Process for Internal/external Customers; Basic/managerial/support process Owner: The person who is responsible for the process with sufficient authority Sup processes: Processes that include the current process Sub processes and activities: Limits of the process Inputs Supplier Outputs Customer Resources: Types of inputs that already exist in the system Process Interactions Processes that are affected by the current process Processes that affect the current process Sup processes and the processes that come next Previous processes, sub processes Performance Measures KPI Aim Unit Target Increase/Decrease Current Problems: Problems that have been encountered so far. Current Gap = Current-Target

Ex: Cross Functional Process Map A Product Quality Test Process in a Fast Food Restaurant Handoff 8

Example: Process Identification Form Code: M 101 Name: Product Quality Test Process in a Fast Food Restaurant Aim: Periodically checking if the quality of the food prepared in the fast food restaurants conforms the quality standards. Classification: Managerial process for internal customers Owner: Istanbul Municipality Department of Public Health Sup Processes: General Product Quality Test Process in a Fast Food Restaurant This process includes: 1) Checking the hygiene of the kitchen and service area 2) Product quality test process 3) Implementation of the test results Sub Processes and Activities: Take samples: Choose a sample Put into an hygienic bag Put into a cooler Take to laboratory: Put into the car Take to the lab Analyze: Obtain the chemicals Apply test Prepare a fine document Prepare an appropriate condition document 9

Example: Process Identification Form (cont’d. ) Limits Input Supplier Output Customer Pass/fail document Sample food Test team approved by the test team Istanbul Municipality member Resources: Test team member, Lab. Analyst, Lab. chemicals, Hygienic bag, Cooler, Lab materials Processes that are affected by the current process Implementation of the test results General product quality testing process Processes that affect the current process Checking the hygiene of the kitchen and service area Take samples Take to laboratory Analyze Prepare a fine document Prepare an appropriate condition document Performans Measures KPI Aim Unit Process duration Decrease Hr Cost Decrease TL Number of tests/day Increase items Target 1 20 30 Current 3 100 10 Gap 3 -1= 2 (to be improved) 100 -20=80 (to be improved) 10 -30= -20 (to be improved) Current Problems: It takes long time to go the lab. (traffic problem exists, might think of portable analysis tools) Long waiting time for the analyst (might think of increasing the staff size, check the support process for maintaining the chemicals) 10

Gap Analysis Gap=Current-Target Gap > 0 Gap < 0 sure a e M Meas Improvement needed ased e r c e de b o t ure t o be in c sure a e M Meas rease d sed a e r c e de to b ure t o be in c rease d Improvement needed 11

Group Exercise 2: Process Identification 1) Complete the process identification form for the registration process. 12