4 BPM Success Stories -- Budgeting, Supply Chain, Hotel...

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Companies are turning to business process management (BPM) to gain efficiencies in their processes and remove needless costs. In this article we share four mini-case studies of businesses with global operations that applied BPM to add value to customers, automate workflow and cut inefficiencies by eliminating non-value-adding processes and redundancies.

BPM in Budgeting

By using BPM to implement an integrated budgeting system companywide, for example, companies can standardize processes, improve process times and cut related costs. This is what a major retailing company with 1,100 chain stores and 120,000 employees did.

The global company's Excel-based budgeting spreadsheets were causing problems. Spreadsheets often went missing. Moreover, the process was time-consuming, taking five weeks to complete, with many managers turning in the numbers late. In addition, the process denied budgetmakers insight for the final decision-making process, creating employee dissatisfaction and frustration.

The BPM implementation had four major phases:

1. First, the company mapped existing "as-is" process flow charts.
2. Next, it captured key business logic and knowledge.
3. Then it identified strategic and operational objectives.
4. Finally, it prepared "to be" workflow process models to test the BPM systems and identify bottlenecks.

By using a phased implementation BPM approach as well as a company-wide business rules engine, which was introduced over the course of a year, the company streamlined processes and automated workflow. This meant that users at all levels of management could tap into the system and gain more accurate budget forecasts. The whole budgeting process became faster -- taking hours, rather than weeks to complete. Additionally, the process gave managers more time to focus on achieving their objectives while providing insight into the results. Plus, it has cut paper, printing and mailing costs by $1.1 million over 5 years.

BPM As-is Mapping

Using a similar approach, a global lender of unsecured loans chose BPM to become leaner, more efficient and cost effective. Seeking a BPM solution for automation of its loans disclosure system to meet tight reporting deadlines, it also wanted to increase transactional speed and lower transaction costs. With weekly reporting that involved handling 10,000 weekly loan disclosures and write-offs from 800 disparate source points by its employees, attorneys or state agencies, the company couldn't meet reporting deadlines. Additionally its manual processing and document storage costs were mounting.

During "as-is" mapping of processes, it was able to identify and eliminate 65% of non-value adding-process steps. The new process times improved 18-fold, shrinking from 54 hours to three hours as a direct result of this initiative. Direct costs went down 71%. Further savings came from the economies of using a Web-based storage system; the transportation, printing and stationery costs plummeted. It expected to recover ROI on the implementation within six months.

BPM in Inventory Management and Supply Chains

BPM streamlines inventory processes to help managers target higher sales volumes at lower cost. By using customer feedback, analyses and sales volumes to drive production and optimize inventory holding, companies can pass on cost savings to customers, expand sales and become more profitable and competitive. By using BPM technology across the supplier value chains, companies can:

• Use the business rules of an automated BPM-based inventory system to check supply re-order level quantities when inventories are running low.
• Generate an automated purchase order to suppliers (also on BPM technology).
• Route the purchase order automatically to the supplier.
• Negotiate better contract terms for the supply of materials or services.
• Predict problems with supply and demand chains using modeling, simulate alternatives and re-route shipments to account for problems.
• Drive collections to improve cash flows, improving working capital-to-sales ratios.
• Prepare sophisticated models relating operational costs to financial performance.

This is how Samsung lowered manufacturing costs of its electronic products, which contributed to overtaking Sony as the leading brand in TVs. Analyzing customer needs, it focused on production of plasma TVs and reduced manufacturing spend by going after better contract deals for the supply of its materials.

Samsung not only gained the competitive edge through leaner processes and lower costs, but also increased its marketshare in 2005 to 9.9%, declaring profits of over $10 billion. Conversely, Sony, which diversified into areas like media entertainment, didn't realize such economies of scale because it relied on third party suppliers for the manufacturing of its TVs. Sony lost its market edge, declaring a weak $1.53 billion in profits for the year to March 2005.

Total Hotel Optimization Using BPM

Marriott International, the global hotel chain, applies BPM processes and analytics by incorporating a "Total Hotel Optimization" program across its global operations to:

• Establish an optimum price for its rooms, conferences and catering after accounting for costs.
• Provide online BPM optimization tools to all its revenue managers and hotel owners around the globe.
• Allow changes in business rules to accommodate factors like natural disasters, terrorist activity or political unrest.
• Prepare a model of rates it actually charged as a ratio of optimal rates it could charge, increasing the ratio from 83% to 91% to get optimum returns from its inventory.

BPM software gave these companies the edge they needed to stay cost efficient -- and beat the competition. Nearly every company can implement BPM to gain process and operational efficiencies. What sets the leaders apart, however, is the way they employ modeling and simulation tools to define strategies for maximizing revenues, optimizing inventory and taking expense out of operational costs.