Business Process Analysis and Modelling Integrerade affärssystem och affärsprocesser.

Business Process Analysis and Modelling

Integrerade affärssystem och Integrerade affärssystem och affärsprocesseraffärsprocesser

Contents

ARIS– eEPC method

Business process management– Process measures– Process cost analysis: ABC-costing

ARIS Background

ARIS: a recognized market leader in business modelling (Gartner Group, 1997)

Developed by Prof. August-Wilhelm Scheer at Department of Information Systems, University of Saarland, Germany, in collaboration with SAP AG.

ARIS: a product of IDS Prof. Scheer GmbH (set up in 1992; a public company IDS Scheer AG in 1999; merged with Changeware Group in 2006)

ARIS(Rob Davis, 2001)

ARIS: Architecture of Integrated Information Systems– a method rather than one technique– a framework for business modelling (not only

limited to process modelling, but focus on the support of business processes)

– support requirement definition, conceptual design to logical design and physical implementation descriptions

ARIS Toolset– software tool/environment for modelling following

the ARIS method

ARIS Business process models in accordance with

the ARIS concept and framework ARIS provides a modelling framework and

method– a semi-conceptual method for describing process-

organizational issues (organization charts, network diagrams moved one step further in ARIS)

– helps to captures a wide range of descriptive aspects of business process

– tools for generating, constructing and configuring models

ARIS Method

Aims at modelling all aspects of a complex business. It can model:– processes, data, organizations, systems, information,

products, knowledge, business objectives, information flows

ARIS:– supports software system modelling using UML– uses Event-driven Process Chain (EPC) methodology– has a strong focus on modelling complex business

relationships– is a multi-user process design tool– is capable of fully distributed model development

One main use is defining business implementations of the SAP R/3 ERP systems

Business process models in ARIS

Business process models should address multiple aspects of business processes: process structure, organization, document resources, etc. – numerous description methods are necessary

ARIS was developed independently of any particular method; ARIS concepts especially excel in creating enterprise-wide as well as inter-business business models and production models

ARIS Background Process models need to be linked to the achievement

target and objects, with metrics gathering built into them Regulations places additional requirements on a business More complex relationships between businesses: no longer

is there a simple business-to-business competitor or supplier-customer relationships. The interfaces between businesses are now many and complex.

The move to e-business operations will make these interfaces more common and will require them to be automated.

How the nature of business has changed over the last few decades and how business modelling has changed with it?

ARIS models

Acknowledge links between models It is becoming necessary to share parts of

your business model with other businesses, suppliers, quality assessment organizations, regulators, etc.

a global business modellling method will be ideal, but of course no such method exist– a number of well-known, slightly different

business modelling methods exist: ARIS, Catalyst, Zackman Framework

– language standards, BPML (www.bpmi.org), UML

ARIS A framework that provides a way of

expressing business concepts sufficiently precise to allow detailed analysis

An architecture for describing business A set of modelling methods with an

associated meta-model The core of ARIS concept is the representation

of business processes in diagramatic forms as chains of events and process tasks.

It can also model other business objects and relationships between any objects

ARIS Concepts Business modelling: a single large model from

one single viewpoint is not so useful It is more useful to build many small models

from specific viewpoints and relate them to one another

Each model may contain many objects and relationships. Objects used in one model may be used in another model.

For any specific purpose, only one or two models will be built, supplemented by a small number of special models focusing on certain small aspects

The ARIS Concept

Different models can be built from four different views:– Organizational view: What types of organizational devices

exist? (e. g. purchase, distribution, accountancy)– Data view: What types of information are relevant? (e. g.

customers, suppliers, article, list of materials)– Functional view: What types of functions are to be

executed? (e.g. create enquiries, verify accounts)– Control view: Coherency of data, functions and

organizational devices The ARIS House or ARIS House of Business

Engineering (HOBE)

ARIS House

ARIS Model types

Different description levels in ARIS

ARIS Concepts and principles

ARIS supports all phases of business design:– Phase I– Phase II conceptual development

(capture and model requirements; capture and model conceptual design)

– Phase II logical development

ARIS Analysis and simulation tools can be used to test the

models at each stage and validate it against the objectives and requirements

Conceptual design:– defines in very broad terms how the objective can be

reached Logical design

– decompose these ideas into a detailed design, but does not tell how the design will be implemented

Physical design:– shows in details how the design will be implemented

using specific equipment, software applications or communication devices

ARIS model - Function tree

ARIS model - Organigram

ARIS model – Technical term model

ARIS model – eEPC (enhanced Event-driven process chain)

eEPC combines the different views (data, organization, function, resources) in one single model

Business process management- process measures and cost

analysis

Business Process Management

5 steps:– Business process identification– Business process analysis– Business process modelling– Business process change/implementation– Business process monitoring, control and

evaluation

Business Process Performance Variables(Alter, 2002)

Activity rate Output rate consistency productivity cycle time downtime security cost What is important is to find the right value

for each process performance variable, and find balance between the measures.

How to evaluate business processes?

Measuring process performance – achieved business objective or not?– how well does it support business goals?– how to estimate process performance?

• simulation

– Performance measurement:• qualitative measures• quantitative measures

– DEA method: a technology for the empirical calculation of the most effective combination of resources that can be used to perform a process that is performed in many different places (of similar organization)

Cost Analysis One of the most common motivation of BPM is to reduce

costs. Cost is one dimension of measurement of inputs and outputs. It may prove to be difficult to decide how much a process

costs:– one problem is in deciding how to allocate costs that arise from

multiple processes.– infrastructure (overhead) is a major problem

Beyond the concept of cost, the main concern is about the bottom line (i.e. margin or profit). Reducing costs does not automatically lead to increased benefits.

Cost analysis Pay attention to different types of costs:

– variable and fixed costs– average costs, total costs, opportunity costs…

Charts of accounts can be a useful source of cost information

Cost classification:– employment expenses, employee travel,

property occupancy costs, utilities, buildings, raw materials, office supplies…

– Some costs are related to infrastructure where as other costs are related directly to production and delivery of goods and services.

Cost analysis Conventional approach to cost allocation:

– overhead per person– overhead per machine hour– overhead per square meter

Opportunity costs: consider alternatives to the decision to do the process– could resources be used for a different process?– could the process be done by someone else at a

lower cost?– would a different process lead to higher

revenues or higher added value?

Cost analysis – cost drivers

Cost drivers are a step towards Activity based costing

Cost drivers can be identified from activities performed – in other words identifying the components of business processes

Events and inputs are usually the cost drivers of processes.

Cost analysis – Activity Based Costing

Conventional approach to cost allocation poses problems because it allocates costs to functions rather than processes

Activity Based Costing is an alternative approach, which is concerned with identifying activities (processes) that contribute the most to the emergence of overhead costs.

Determines how a process and its sub-processes consume resources by identifying cost drivers to activities

Example: ABC-costing

A B

Units produced 10000 50000

Labor input (hrs) (cost: 10€/hrs) 1000 500

Machine hours input (cost: 5€/hrs) 2000 5000

Overhead: 25000 €Total costs= (1000 +500)*10 + (2000+5000)*5 + 25000= 75000

Direct production costs of A and B can be defined, but what about allocation of overhead? We can use ”units produced”: Overhead/unit= 25000/60000=0.4166Production costs A= (1000*10) + (2000*5) + (10000*0.4166)=24166,66Production costs B= (500*10)+ (5000*5) + (50000*0.4166)=50833,33

ABC-costing (2) We need to identify the cost drivers of the

production process:– Labor? Machine hours?– Labor as cost driver:

• Labor cost driver 25000/(1000+500)=16,666• Production costs A= (1000*10) + (2000*5) +

(1000*16,666)=36666,66• Production costs B= (500*10)+ (5000*5) +

(500*16,666)=38333,33– Machine hours as cost driver:

• Machine hours cost driver: 25000/(2000+5000)= 3,571• Production costs A= (1000*10) + (2000*5) +

(2000*3,571)=27144• Production costs B= (500*10)+ (5000*5) +

(5000*3,571)=47856

ABC-costing (3)

Depending on how overhead is alllocated, costs will be different

When performing process analysis, it is important to consider how the cost calculation method will be influenced by different cost drivers.

ABC helps understanding the cost structure.