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Business process management (BPM) is not simply a suite of software systems but a way of managing your day-to-day operations in an efficient and standardized practice to achieve efficiency and higher quality. Business process management, or BPM, standardizes end-to-end business processes through modeling, analytics, and optimization tasks. An example of a business process is the customer sales order life cycle: executing the customer sales order, shipping the product to the customer, the customer receiving the product, and the company receiving the payment.  

Key components of BPM: 

The three components of BPM are: 

  1. Design and model: Process design and modeling involve mapping activities, tasks, decision points, and information flows to achieve specific objectives. In the order-to-cash business process, I would indicate all the actions needed to execute the sales order, such as entering the sales order in the company's order system and determining if this is an automated process or keyed in manually by a sales representative. Microsoft Visio and Lucidcharts are diagramming applications used for process design and modeling.

  1. Implement: Implementation involves deploying the new or redesigned processes within the organization. It may include training employees, updating systems and technologies, and establishing standard operating procedures for the new operations. For example, if an area of optimization were to automate the entry of sales orders into the company's ordering system, this would involve modifying the current order system and workflow.

  1. Monitor and control: The monitoring and control stage involves tracking key performance indicators (KPIs), collecting data, and analyzing process metrics. APQC is the authority on benchmarking and can provide KPIs by business process by industry. The total cost to perform the "managing sales orders" function per $1000 of revenue is a KPI for the order-to-cash cycle. A median performer spends, on average, $1.16 to manage the sales order process for every $1000 of income. A business would track its costs to see if it performs above or below the median average.

BPM Methodologies: 

Examples of BPM methodologies are: 

  1. Six Sigma: Six Sigma reduces process variations and defects to enhance efficiency and quality. Six Sigma is very popular in manufacturing facilities. On a car manufacturing line,  Six Sigma would ensure that all vehicles of the same model are produced to the same standards.
  2. Lean: The Lean methodology focuses on eliminating waste (unnecessary tasks or products) by examining business processes. If the customer service representative entered the order in two systems (ordering and accounting system), this dual entry would be considered a redundant effort (waste). This waste is eliminated by automating the data transfer from the order system to the accounting software. 
  3. Agile: Agile methodologies focus on iterative, collaborative, and flexible approaches to process improvement. In an agile environment, the project team would identify the tasks needed to automate the data transfer from the ordering system to the accounting software. The agile team would meet daily to complete the tasks and perform testing until the team finished the data automation.
  4. Continuous improvement (Kaizen): Kaizen emphasizes minor, incremental process improvements and involves a culture of continuous learning and employee engagement. Kaizen events are a series of workshops where employees work together to improve a business process. Kaizen events usually last less than a week and are focused on a single process, such as sales order entry. 

The significance of BPM in various industries:

BPM involves analyzing, designing, implementing, and improving business processes to enhance efficiency, effectiveness, and agility. Here are some roles of BPM in critical industries:

  1. Manufacturing: Continuous improvement is widely used by the manufacturing industry to identify redundancies, inefficiencies, and bottlenecks in their workflows. A global mining company identified a need for a centralized returns process after hosting a Kaizen workshop. Previously, customers would return parts to the individual dealer, and the dealer would have to call the headquarters to understand which manufacturing plant the goods should be sent to. The returns process was lengthy and required many correspondences, delaying customer refunds. The centralized returns process ensured that parts were returned promptly and expedited customer refunds. 
  2. Finance:  Although Six Sigma was initially developed for manufacturing industries, it has been used by financial institutions to reduce the time to process a loan and improve the customer experience. By mapping the customer experience step by step, it is easier to identify areas for improvement, such as being asked to provide redundant information or delays in correspondence. 
  3. Healthcare: The principles of Lean focused on reducing waste can be applied to many areas of healthcare. To reduce inventory waste, healthcare providers can minimize inventory, such as surplus medications, medical supplies, and pre-printed forms. Another opportunity is to reduce idle time for patients by establishing a late appointment policy and schedule management. 
  4. Consumer goods: The agile methodology effectively reacts to the changing shopping behaviors in the consumer goods industry. A clothing manufacturer will launch agile pilots to smaller groups to create and test new products. The shortened feedback cycle and ability to rapidly test ideas leads to product innovations and faster time-to-market development of goods. 

The benefits and challenges of BPM 

The benefits include:

  1. Efficiency and productivity: Benefits include greater efficiency and productivity by automating tedious manual tasks such as data management, process flows, entry, and approval processes, saving time and resources.  
  2. Compliance: BPM can ensure compliance by standardizing processes and capturing data that fulfill regulatory requirements such as SOX, GAAP, or Tax Jurisdictions. 
  3. Enhance customer experience:  When a company optimizes and streamlines, it positively impacts the customer experience by enabling faster response times, greater consistency, and higher quality.  
  4. Cost reduction: BPM helps organizations reduce manual tasks, and eliminate redundant steps. BPM also enables organizations to optimize resource allocation, minimize waste, and achieve higher cost-effectiveness.

Successful implementation requires a careful balance between people, processes, technology, and organizational culture, which requires significant investment and resources. In my opinion, the biggest challenges are: 

  1. Resistance to change:   In a successful transformation of BPM, you ask your employees and customers to interact with your company differently. Employees may resist BPM initiatives if they believe it could cost them their jobs, employment status, or opportunities for advancement.
  2. Lack of executive support: Executive buy-in is crucial to secure resources, funding, and stakeholder engagement for successful BPM implementation. Educating executives about the benefits of BPM, aligning BPM goals with organizational objectives, and demonstrating the potential return on investment is essential.
  3. Unclear goals and KPIs: Another challenge is the absence of clear goals and Key Performance Indicators (KPIs) for BPM initiatives. Organizations should define specific, measurable, achievable, relevant, and time-bound (SMART) goals and establish relevant KPIs to monitor the progress and effectiveness of BPM efforts. Defined KPIs and goals can help align BPM initiatives with the organization's strategic objectives.

BPM case study:

Client issue: A Lifesciences company that manufactures medical devices realized that their finance organization had grown to 450+ people and was dependent on manual processes such as excel and sharepoint. The company’s costs to run the organization were significantly higher than other companies of similar size. 

Action: The company decided to start a multi-year finance transformation focused on process improvement across technology and people.   The finance transformation had multiple workstreams. To identify areas of improvement within each workstream, the company focused on process mapping sessions documenting current and future state. The ‘gaps’ between the current state and the desired future state were formalized into projects that would resolve these gaps. 

One of these projects was a cost accounting Kaizen event. The Kaizen event involved cost accountants from each of the manufacturing plants meeting for a week to focus on identifying areas of improvement.  Each cost accountant provided an overview of their current processes to identify labor, fixed overhead and variable overhead throughout the month and their month-end closing accounting activities.  As each plant representative walked through their process, the group noticed that there was lots of variation in how each plant was analyzing and reporting their costs.  The process was very manual, involving data extracts from their ERP system, excel spreadsheets, and pivot tables to calculate their operating costs on a monthly basis. 

As a group, we decided that we needed to automate the cost accountants processes by building a data warehouse (Snowflake) and data visualization platform (Tableau). The group prioritized two projects focused on building reporting dashboards to monitor costs.  The data visualization project used the agile methodology. With the iterative approach focused on incremental releases, the team produced eight dashboards to track operating costs and manufacturing productivity within six months. 

Results: The finance transformation just completed its second year of a five-year process. The usage of business process methodologies resulted in tangible cost savings.  

  • The eight manufacturing dashboards are estimated to save the company 2000 working hours per year due to automation of data analysis. 
  • The Kaizen event identified areas of waste due to duplication of tasks that can be eliminated across the 5+ manufacturing plants that are estimated to save 5 hours per month. 

Future of BPM 

Businesses should adopt BPM to gain a competitive edge in today's rapidly changing business landscape. BPM enables enterprises to streamline operations and increase productivity, enhancing customer experience. By leveraging BPM tools and methodologies, organizations can identify new opportunities, adapt to market changes, and stay ahead of the competition. 

In the future, BPM will focus on automation and digitization of process improvement. Businesses can achieve higher operational efficiency and agility by automating manual tasks, integrating systems, and leveraging emerging technologies such as AI and robotics. Companies are focused on utilizing automation to drive process improvement and integrating BPM with analytics tools such as Tableau (a business intelligence software used to create dashboards and reports). The key to success with BPM is a combination of people, processes, and technology.

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Managing Partner, Clever Fox Advisory LLC
Diane has a passion for large-scale transformations focused on finance processes. When not working on their business, Diane is sailing around Lake Michigan.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.

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