slides

Business Process Management:Closing The Gap Between Rigor And Relevance

By Steve TiemanEstee Lauder Companies

2

Overview

BackgroundEstée Lauder Companies (ELC)

Early BPM Implementation Of Product Lifecycle ManagementSOA Before The Term Was Known At ELC

Enterprise Wide BPM And SOAStrategic Modernization Initiative (SMI)

Leveraging BPM Throughout ELC

Selling BPM And SOA To Senior Management

Conclusion

3

Background On Estee Lauder Companies (ELC)

One of the world’s leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products

Formed in 1946 by Mrs. Estee Lauder in Queens, NY

Annual sales of over $7.04 billion (FY 2007)

Products sold in over 130 countries and territories

Over 25,000 products in the brand portfolio

4

Background On Estee Lauder Companies (ELC): Brands

5

Part 1

Early BPM Implementation OfProduct Lifecycle Management

At Estee Lauder Companies

6

Part 1─Early BPM Implementation Of Product Lifecycle Management: Scope

Development

First Production Run

Post Launch

Maintain Master Data

Upfront PlanningPreliminary

Investigation

First Batch Production

Detailed Investigation

Product Development

Logistics Parameter

Development

Product Extension

Value AnalysisProduct

Maintenance

Line Trials

Sourcing DataCompliance

DataItem Data Manufacturing

Data

Idea CreationMarketing Calendar

Sourcing Decisions

CreativeDevelopment

Logistics Data

Compliance Reporting

Logistics Packaging

Development

Business Planning

Post Launch Analysis

Timeline Management

Quality Assurance

7

Part 1: Organization Scope

50 Organizations

25 Brands

36 Affiliates

Over 5600 Concurrent Projects

20 SKUs Launched Each Day

Brand

Creative

Advertising

Product

Operations

Formula

Package

Sourcing

Production

Forecasting

Logistics

Merchandising

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Part 1: High Level Event Network

Program Approval/Cost Objective Issued

Marketing

Outline Issued

Packaging

Purchase Orders Placed

Brand Operations

Production Tooling Completed

Packaging

Artwork Completed

Marketing

Package Testing Completed

Packaging

Batch Card/Formula Released

R&D

Final Specifications Issued

Packaging

Shipping Started

Brand OperationsPreliminary Formula/

Package Design Approved

Marketing

Shopping List Issued

R&D

Forecast Issued

Marketing

Process Flow

9

Part 1: Benefits & Enablers

Service-Oriented Architecture: Major Cost Of Goods Improvement Item Master Bills Of Materials Recipes Component Specifications Artwork Mechanicals Direct Material Sourcing/Contracts

Business Process Management: Major Speed To Market Improvement 38 Workflow Driven Major Sub-Processes Common KPIs Common Back-Office Organizations Common Measurement And Reporting Platform

Automation: Major Productivity And Accuracy Improvement

10

Part 1: Challenges To Further Leverage BPM And SOA

Key Improvement Opportunity Is In The Upfront Planning Process Current process is documented and understood to be sub-optimal ARIS/SOA platform can be leveraged as enablers

Challenge Is To Implement BPM Within The Creative Organizations Significant cultural challenge Concern that creativity may be compromised Difficult to fault current practice based on 50 years of continuous

success

Collaborative approach is promising, but . . . Too slow based on the current organization structure: ”hand offs” Very difficult to execute as the brand grows larger

Can BPM Be Used To Drive Changes To Organization Structures? How? Suggestions? Success Stories?

11

Part 2

Strategic Modernization Initiative (SMI):

Enterprise Wide BPM & SOA At Estee Lauder Companies

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What Is SMI?

The Strategic Modernization Initiative (SMI) is Estee Lauder’s first implementation of SAP

Key enabler to support sales growth to $10 billion and beyond

Five major business processes are being standardized under SMI: Master Data Management Budget To Report Procure To Pay Demand To Build Order To Cash

Pilot (Aveda) Went Live In May 2007

13

Business Objectives For SMI

Improve Efficiency (SOA And BPM) Reduce the number of hand-offs Minimize the time spent on compliance activities Shorten time and effort by reusing “libraries” and standardized templates Implement automated work flow processes Reduce waste and rework by implementing clear roles, responsibilities, and

processes Minimize tactical tasks and focus on higher value strategic activities

Improve Effectiveness (SOA) Real time availability of accurate information through one global source Leverage benchmark analyses

Improve Operations (SAP Platform) Better customer service Better forecasting Better collaboration with Suppliers and Customers

14

SMI Application Landscape

SAP

Non-SAP Application Portfolio

Application InterfaceMiddle Ware

netWeaver

ECC

SCM

BW

Portal SRM

Concept To Opportunity

Demand To Build

Procure To Pay

Budget To Report

Order To Cash

SolutionManager

CRM

ARISBusiness

Intelligence

Human Capital

Management

15

ELC Approach To BPM And ARIS As The Entrance Point To SOA

Identify All Processes Start with existing leading practice models, e.g., SCOR Adapt these models to your company using ARIS Integrate the adapted models to SAP using ARIS EPC (Event

Process Chain) methodology integrated with Solution Manager

Subdivide Processes Into Sub-Processes Identify process strings based on valid business practices

Normalize Sub-Processes To Become Services Identification of all the process steps is a product of the EPC

development process in ARIS Process steps are linked to transactions in Solution Manager Ensure that a transaction is limited to a single process step

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Scope Of The Business Processes Standardized Within SMI

6 process groupings: Master Data Governance Budget To Report Procure To Pay Demand To Build Demand Planning Order To Cash

114 major primary processes E.g. Manage Procurement Contracts And Requests For Quotations

680 fundamental integrated processes─Process Strings

17

Benchmarking Experiences During Past Two Years

Benchmarked BPM With 13 Major Corporations All have implemented SAP All have established BPM organizations All are anticipating SAP upgrades in next 1-2 years

Broad Conclusions Existing SAP implementations are poorly documented Increased BPM rigor is anticipated as a requirement for success Difficult to get senior management “buy-in” for longer than a “one time”

effort

Can rigorous BPM be implemented without another “Y2K or SOX”?

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Part 3: Vision For The Next Steps

Leveraging BPM Throughout ELC

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Vision For The ELC Business Process Management Landscape

BusinessUnits

End Users

Power Users

Business Process & IT Portfolio Governance

Global Process Owners

BusinessProcessSolutions Business Process Account

Management(Process Leads)

End UserServices

(Service Desk)

SolutionManagement

(Application Development)

CIO & SMI ProgramManagement Office

Technology Services(Basis & Infrastructure)

Global Process Template

ProjectManagement

Risk Management And Compliance

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Conventional Business View Of The Aveda Call Center Process

C-070-010Receive Customer

Inquiry

C-070-030Answer Order

Inquiries

C-070-170Create Sales

Order

C-070-100Document Customer

Interaction

Coordinator

CoordinatorCoordinator

Coordinator

V

21

Conventional Technical View Of The Aveda Call Center Application

CRM 1PCentral

Instance

CRM 10PApplication

Server

CRM 9PApplication

Server

Delago

ECC 1PCentral Instance

Vertex

SAPJCODuring Call

InternetPricing

Configurator

RFC2

RFC 1

MaterialMaster

RFC3

RFC6

To Bank

CRMCoordinator

SAPJCOCRM

BAPI· Procurement· A/R

SAPJCOECC

tRFCAfter Call

22

Conventional Management View Of The Aveda Call Center Key Performance Indicators

Key Performance Indicators·Sales Orders/Week/Representative·Maximum Hold Time·Average Call Length·Total Calls Taken/Week·Abandon Rate For Calls Taken·Calls Presented Weekly·Abandon Rate For Calls Presented

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Conventional View Of The Aveda Call Center Infrastructure Monitoring Metrics

CRP1P- CPU utilization

0

10

20

30

40

50

60

70

80

12:5

7:00

13:1

6:00

13:3

5:00

13:5

4:00

14:1

3:00

14:3

2:00

14:5

1:00

15:1

0:00

15:2

9:00

15:4

8:00

16:0

7:00

16:2

6:00

16:4

5:00

17:0

3:00

17:2

2:00

Time (system time)

% u

tiliz

atio

n

User CPU System CPU

CRP1P - Free Memory

7.04

7.06

7.08

7.1

7.12

7.14

7.16

7.18

7.2

7.22

7.24

12:5

7:00

13:1

6:00

13:3

5:00

13:5

4:00

14:1

3:00

14:3

2:00

14:5

1:00

15:1

0:00

15:2

9:00

15:4

8:00

16:0

7:00

16:2

6:00

16:4

5:00

17:0

3:00

17:2

2:00

GB

Time(system time) Free Memory

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Changing Conventional BPM Practice ForApplication Management

Challenge: No Effective Common Language Among Technical And Business Team Members

Business Process Procedures are in words. Words that are misinterpreted, not kept current with changes, and at too high a level to be actionable by technicians

Many specialists must be assembled and “socialized” in order to solve a performance or functional issue within a single process string. They have to have visibility of the entire process to be able to merge these technical “silos”

Result: Agility is limited, cross training is cumbersome so personal growth is compromised, and development costs are higher because there is very limited transparency between the process and infrastructure

25

Changing Conventional BPM Practice ForBusiness Team Members

Challenge: Measurements Of KPI Actual Performance Are Not Available On A Real Time Basis And Do Not Effectively Support Root Cause Analysis Consist of periodic reports that require significant manual work to generate Not linked to actual transactions and individual end users

Result: Cannot effectively determine why the KPIs are not met or analyze reasons for differences between end user performance because there is very limited transparency between the process and the KPIs.

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Changing Conventional BPM Practice ForInfrastructure Operations

Challenge: Availability And Performance Metrics Do Not Relate To The Business KPIs Based on infrastructure, not business process Based on averages, not maximums Based on synthetic transactions, not end user reality Existing diagnostic tools do not support BPM

Result: Proactive monitoring of the environment is not optimal because there is very limited transparency between the infrastructure performance metrics and the KPIs.

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Conventional Business And Technical Views Of The Call Center Business Process: How Can This Be Mapped?

Key Performance Indicators·Sales Orders/Week/Representative·Maximum Hold Time·Average Call Length·Total Calls Taken/Week·Abandon Rate For Calls Taken·Calls Presented Weekly·Abandon Rate For Calls Presented

CRM 1PCentral

Instance

CRM 10PApplication

Server

CRM 9PApplication

Server

Delago

ECC 1PCentral Instance

Vertex

SAPJCODuring Call

InternetPricing

Configurator

RFC2

RFC 1

MaterialMaster

RFC3

RFC6

To Bank

CRMCoordinator

SAPJCOCRM

BAPI· Procurement· A/R

SAPJCOECC

tRFCAfter Call

?

C-070-010Receive Customer

Inquiry

C-070-030Answer Order

Inquiries

C-070-170Create Sales

Order

C-070-100Document Customer

Interaction

Coordinator

CoordinatorCoordinator

Coordinator

V

?

CRP1P- CPU utilization

0

10

20

30

40

50

60

70

80

12:5

7:00

13:1

6:00

13:3

5:00

13:5

4:00

14:1

3:00

14:3

2:00

14:5

1:00

15:1

0:00

15:2

9:00

15:4

8:00

16:0

7:00

16:2

6:00

16:4

5:00

17:0

3:00

17:2

2:00

Time (system time)

% u

tiliz

atio

n

User CPU System CPU

CRP1P - Free Memory

7.04

7.06

7.08

7.1

7.12

7.14

7.16

7.18

7.2

7.22

7.24

12:5

7:00

13:1

6:00

13:3

5:00

13:5

4:00

14:1

3:00

14:3

2:00

14:5

1:00

15:1

0:00

15:2

9:00

15:4

8:00

16:0

7:00

16:2

6:00

16:4

5:00

17:0

3:00

17:2

2:00

GB

Time(system time) Free Memory

?

?

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Answer: Enhance The EPC To Support All Stakeholders, i.e., Implement Business Process Monitoring

Business Process Performance Monitoring Platform

C-070-010Receive Customer Inquiry

Identify Account

CRM Dialog Server

Confirm Account

CRM Dialog Server

Interaction History

CRM Dialog Server

3 SecondsMaximum

3 SecondsMaximum

CRM 1P CRM 1P

C-070-030Answer Order Inquiries

Document Flow

CRM Dialog Server

Display Delivery(VL03N)

CRM Dialog Server

Outbound Delivery

3 SecondsMaximum

3 SecondsMaximumCRM 1P

ECC 1P

V V

Sales Documentation(VTRK)

Display3 SecondsMaximum

ECC 1P

3 SecondsMaximum

CRM 1P

Parcel Tracking

ECC Dialog Server ECC Dialog Server

ECC Dialog Server ECC Dialog Server

Indicators Trend analyses StatisticsDrill-down analyses

SpecificEnd User

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Part 4: Selling BPM & SOA To Senior Management

Driving A Stand Alone ROI

30

Driving A Stand Alone ROI

BPM And SOA Are Direct Enablers For 50% Of The SMI Business Case Current BPM/SOA is focused in Sourcing And Financial organizations

Incremental Benefits Within The IT Organization IT Employee efficiency Improved service to the user community

Incremental Benefits Within The ELC User Community Continuous process improvement can drive productivity increases of 200%-300% for

system intensive tasks based on PLM experiences SOA enables leveraging the work products from the ELC Suppliers

Current State Of Business Process Monitoring Technology May Now Support The Vision

Exploring ARIS PPM/E2E Bridge Platform Exploring HP/Mercury Platform Exploring Computer Associates Platform Others To Be Discovered

31

Conclusion

Thanks to:

Estee Lauder Companies

IDS Scheer

5th International Conference on Business Process Management Dr. Michael Rosemann Conference Attendees