Holistic Business Process Management: Theory And Pratice

Theory and Practice

Gunyung Lee, Masanobu Kosuga;Yoshiyuki Nagasaka;;

• Publisher: WSPC
• Year: 2017
• eBook ISBN: 9789813209855
• Topic: Business
• Subtopic: Business General
• Index: Business

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Holistic Business Process Management focuses on building business process management (BPM) as a model to address the importance of BPM views, analyze the effectiveness of the approach, and study the research trends in BPM. The book includes case studies of Japanese and Korean companies and BPM models suitable for small and medium-sized enterprises (SMEs) anywhere in the world.

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Contents:

• Japan Society of Organization and Accounting (JSOA)
• Editorial Board
• Preface
• About the Editors
• List of Contributors
• Theory and Methodology of BPM:
  • The Conceptual Framework of Business Process Management (Gunyung Lee)
  • Process Oriented Activity-based Costing for Business Process Management (Yoshiyuki Nagasaka and Gunyung Lee)
  • An application of the Most Effective KPI in Business Management — Development and Application of KPI Pool (Kenji Hirayama and Yoshiyuki Nagasaka)
  • Toyota Production System for Business Process Management (Noriyuki Imai)
• Case Studies of BPM in Japanese and Korean Companies:
  • Quality-Focused Cost Management by Projects: A Lesson from a Japanese Design and Construction Firm (Masanobu Kosuga)
  • Corporate Strategy and Business Process Innovation in a Japanese Company: A Case of Panasonic Corporation (Aiko Kageyama and Masanobu Kosuga)
  • BPM Practices in a Japanese Company: A Case Study of Canon Co. Ltd. (Yoko Asakura)
  • BPM Practices in a Korean IT Service Company (Kyounghwan Cha, Seungchan Lee, Suyong Kim and Hyunjong Yoo)
• Action Research of BPM in Japanese Small and Medium-sized Enterprises:
  • Methodology of Business Process Management for SMEs (Gunyung Lee)
  • Development of Event Driven Business Process Management (ED-BPM) Tool "SCRUM" (Hiroshi Matsumoto)

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--> Readership: Professionals, students and researchers in the field of business and management. -->
Business Process Management;Business Process Innovation;BPM Practices;BPM for SMEs Key Features:

• Discusses a conceptual framework which manages BPM using time drivers such as lead-time and velocity for measuring the performance of BPM
• Introduces the application examples of Japanese and Korean companies
• Proposes a BPM model suitable for SMEs

PART I

Theory and Methodology of BPM

The Conceptual Framework of Business Process Management

Gunyung Lee

Professor, Faculty of Economics, Niigata University

1.Introduction

It is generally known that today’s era — the IT era — is characterized by the global spread of information networks using Information Technology and the Internet in the IT era, corporate activities both inside and outside the corporation, are conducted in multiple areas simultaneously and surpass the hitherto existing limits of time and space. Because of this historical background and the complete environmental change to cutthroat competition, the leadership in commercial deals has shifted from suppliers to buyers. Consequently, the suppliers’ appropriate response to buyers’ and customers’ demands becomes one of the primary means to achieve a competitive advantage. Hence, in order to respond to the power wielded by customers (buyers and end-users), the suppliers need to customize their products and services according to the customers’ tastes and desires to cater to the likes of each customer.

It is necessary to (1) move the managerial point from the conventional vertical communication system usually found in organizations to a horizontal communication system and (2) establish a Business Process Management (BPM) system that can speedily and flexibly manage its responses to such environmental changes. This paper will discuss a framework that incorporates the understanding, construction, management, and evaluation of the business process both inside and outside the corporation such that the customers are satisfied in the competitive environment in the IT era.

2.Necessity and Possibility of Process Management in the IT Era

We live in a fast-paced world where things are constantly changing; therefore, it is increasingly difficult to predict what will happen in the near future. Moreover, the development of information that allows one to circumnavigate the limits of time and space on global business transactions has been altering the corporate environment in various ways. This environmental change necessitates that companies swiftly match the input of environmental changes with corporate output. In particular, because of the traditional response which focuses on functions often results in an accumulation of information and materials due to the imbalance among functions and the barriers among the many functions, there is a need for a swift response to the environmental changes from the process management perspective. In the IT era, the necessity of and possibilities for process management are being propounded simultaneously by the following two demands (Monden et al., 2007, pp. 235–248).

2.1.Demand from the management side

The leadership in commercial deals has shifted from vendors to customers due to the easy access to the Internet and cutthroat competition, and hence, a company needs to plan and offer its products or services in line with the customers’ views. In other words, there is a need for horizontal organization management that considers the customer as the starting point.

Meanwhile, triggered by the window dressing settlement of Enron and WorldCom, the Corporate Reform Act (Sarbanes–Oxley Act: the SOX act) was executed for its recurrence prevention in the US. This act imposes a duty of the construction and accountability of internal control to which a manager guarantees the reliability of financial statements. In this act, the same duty is also imposed on both the US and the non-US companies. This strengthening of the supervisor function of managers or inspectorial agencies to such internal control requires a business process to be managed and documented appropriately. The aim of this law was to improve the reliability of financial statements by clarifying a business process; however, it is understood that, at the same time, a business process must be built to guarantee competitive advantage. Therefore, following changes in a company’s environment, such as a surge of customer power, there is an increase in expectation from process management as well as in legal demands for the preparation and application of internal control.

These demands from the management side can be attained by a system that integrates material flow and information flow. Therefore, the construction of a BPM system that can manage the performance of the business process based on the customer’s view is deemed most valuable as an important means to cater to the demands from the management side.

2.2Support from innovation in IT

In the 1990s, Business Process Reengineering (BPR) approaches that tried to achieve a drastic restructuring of the business process using IT failed because they were unable to obtain the expected support from IT. In the latter half of the 1990s, information management using Enterprise Resource Planning (ERP) originated as a result of the failure of these BPR approaches. However, ERP confined the operations into a concrete box, which was unable to support the changing operation flow. Hence, in the 2000s, (1) Service Oriented Architecture (SOA) technology that has enabled the restructuring of the IT environment to allow it to respond more flexibly to the environmental changes and (2) various softwares (Harmon, 2010, pp. 75–77) that have enabled the support of the changing operation flow flexibly have been developed. These are effective tools for the construction of BPM system because these new abilities can be exercised to create the business process and assess real-time performance management virtually.

3.History of BPM

In today’s IT era, information is treated on a global scale, the power of information spreads around all areas, and information control has become a means of producing competitive advantage. Moreover, in the global competitive environment, past experiences of success lose their worthiness, and management must always monitor changes in the environment, respond speedily, and obtain the outcome with certainty. However, organizational goals and management resources are distributed using a top-down approach based on the vertical organization. As a result, a mismatch frequently arises in the supply and consumption of resources due to the partition between the function and the department. This becomes an obstacle to achieving the expected goal. Therefore, establishment of a new management technique from the resource-consumption point of view is required.

However, according to the results of the Internet questionnaire targeting the readers of a Web magazine (Business Process Trends) in 2006 for the purpose of investigating the company trend, BPM was not recognized as a broadly accepted fixed model, as shown in Fig. 1; in other words, BPM has not managed to become more than just a way to share information within the organization by IT and to support decision making. Nevertheless, some companies have been able to manage the process using BPM to a considerable extent. Moreover, through IT innovation, it is becoming possible to build and manage BPM at low cost.

As long as the term “BPM” refers to the management of the business process of horizontal organization, we can say that the origin of process management dates back to the Tailorist approaches. On the other hand, it is said that the trigger that led to the recognition of BPM in Europe and the US was the Total Quality Management (TQM) approach adopted in the 1980s (Jeston & Nelis, 2006, pp. xii–xvi). In the 1990s, European and American companies faced a stagnant market and cutthroat competition across the globe. This led to further development of the ideas of traditional process management, and new methods such as BPR and Six Sigma emerged. BPR was suggested by Hammar in 1990. His article “Don’t automate, obliterate” in the Harvard Business Review (1990) was the starting point from which BPR disseminated quickly. Although BPR aimed to drastically restructure the business process using IT, IT was unable to describe and support the complicated processes (Jeston & Nelis, 2006, pp. xii–xvi).

Fig. 1. Survey results on the meaning of BPM submitted by the management over the world

Source: Celia & Harmon (2007).

Drawing upon the lessons learned from the failure of BPR, ERP was introduced in the latter half of the 1990s. It appeared as though ERP had already solved the process management problem related to IT; however, ERP was unable to support process improvement because it suffered from many shortcomings including non-flexibility, despite the fact that it was sold with the catchphrase “best practice”. In other words, after ERP was set up, the flexibility of the process was lost and could be likened to dry concrete, even though initially (before installation), ERP was as flexible as wet cement (Smith & Finger, 2007, p. 73).

There are two opinions regarding the origin of BPM. One is that it originated in the 1990s (Jeston & Nelis 2006, pp. xii–xvi) and the other is that it emerged after the year 2000 (Jeston & Nelis, 2006; Smith & Finger, 2007). However, it seems that the difference between these two opinions arises from (1) the time frame of the emergence of IT that supports process management and (2) the history of process management. The latter viewpoint emphasizes IT innovation that supplements the lack of flexibility in ERP. This viewpoint treats BPM according to the development of the Business Process Management System (BPMS), i.e., as a total management system of business process that supports a flexible unity between business process and IT. However, a consensus regarding the content of BPM is yet to be reached and BPM has been reduced to a three-letter acronym used to refer to process management.

Harmon (2010, pp. 37–38) showed that there are three streams in the methodology for the management of a business process. These are streams of management, Quality Control (QC) and IT. Each stream has mutually ignored the other streams or degraded their worthiness until now. However, Harmon stated that the three streams have now been included in comprehensive BPM.

4.The Concept of Process

A process is a series of interlinked activities that achieve a specific objective (Daly & Freeman, 1997, p. 16). Davenport (1993, p. 5), however, defines the process as follows: “A process is simply a structured, measurable set of activities designed to produce a specified output for a particular customer or market”. Therefore, we can say that the definition of process differs with each person. This is the reason why each writer defines the process differently on the basis of the measurement unit, categorization, and extent of the process.

This paper regards the process as “a flow composed of various mutually dependent groups of activities toward the creation of customer value, the input and the output of which are clearly distinguished, and which have a hierarchical structure depending on the levels of the subject matters of management”. In addition, it is desirable for the process to satisfy the following three key elements as explained in Statements on Management Accounting (SMA) No.4NN (2000, p. 8).

Transformation:	By means of one or more changes, it provides output from a group of interrelated work activities that is of greater value than the inputs.
Feedback control:	Involves some regulatory means by which the transformation activities are modified or collected to maintain certain attributes of the output.
Repeatability:	Implies that a process is executed many times in the same manner.

5.Process Classification Framework (PCF) of the American Productivity & Quality Center (APQC)

Supply-chain operations reference (SCOR) of the Supply Chain Council (SCC) is a well-known business process framework. SCOR is composed of three levels. sec formulates the process framework until level 3, and the individual firm builds level 4 based on the condition of its company. In addition to SCOR, other frameworks include the Value Reference Model (VRM) built by the Value Chain Group, eTOM developed for a telecom company, and the APQC framework that incorporates the base elements of SCOR (Harmon, 2010, pp. 61–63).

In particular, the free benchmarking service SCORmark, which is provided for SCC members and operated by SCC, APQC, and IBM together...

Table of contents

• Cover
• Halftitle
• Japanese Management and International Studies
• Title
• Copyright
• Japan Society of Organization and Accounting (JSOA)
• Editorial Board
• About the Editors
• List of Contributors
• Contents
• Preface
• PART I: Theory and Methodology of BPM
• PART II: Case Studies of BPM in Japanese and Korean Companies
• PART III: Action Research of BPM in Japanese Small and Medium-Sized Enterprises
• Index