the people involved in the process, the information systems they rely on, and the information they require to optimally perform their tasks.
Process modeling software can support this activity. IT’s About
Business 2.2 shows how Chevron has employed BPR, BPI, and BPM.
to identify specific areas to improve. Rather, the project identified the desired outputs and then worked backward by examining the supporting processes, using BPR. As an added benefit, this holistic approach led the company to examine the interdependencies
among processes used in different business units. This approach ultimately improved the company’s overall performance. In a 1996 report, Chevron claimed the BPR project saved the company $50 million.
This complex BPR effort was initially followed by several smaller, employee-driven BPI initiatives. For example, in 1998, six Chevron employees initiated a project to improve water treatment processes at a company plant in California. Operating costs fell by one-third.
Their success inspired other employees to initiate BPI projects in Indonesia, Angola, and other locations around the globe by using the Six Sigma improvement methodology. Although some
managers were able to demonstrate the benefits of BPI at the local level, it wasn’t until 2006 that these efforts achieved companywide recognition and corporate backing. In that year, Lean Six Sigma, which combines statistical process analysis with techniques to eliminate waste and improve process flow, became Chevron’s
preferred improvement methodology. Since Chevron implemented Lean Six Sigma, company employees have initiated hundreds of BPI projects worldwide, resulting in significant savings. From 2008 to 2010 alone, Chevron reported more than $1 billion in BPI benefits. To support these internal improvement efforts, Chevron got its suppliers on board in BPI initiatives as well.
To coordinate these various BPI efforts, Chevron has adopted a unified BPM approach that involves standardizing processes across the entire company and consolidating process information within a central repository. Chevron figures that only 20 percent of its
processes can be fully automated—the rest involve a combination of manual and automated steps. Thus, process standardization involves not only supporting activities that can be automated but also ensuring that relevant employees are familiar with the
standards for manual activities. To familiarize employees with all these processes, Chevron implemented Nimbus
(nimbus.tibco.com), a BPMS that acts as a repository of standard companywide rules and procedures. Nimbus can also provide employees with detailed work instructions.
Take Chevron’s shipping process as an example where the BPMS could shine. Shipping was executed in different ways in locations throughout Asia, Europe, and the United States. To establish uniform company standards, Chevron employed a BPI approach.
The company documented its processes as they existed across different geographical locations, identified best practices, and combined these practices into a common process to implement. It then detailed these new policies and procedures, which it
distributed to managers through the company’s Web-based BPMS.
Chevron has a companywide management system that focuses on operational excellence, and BPM is a key part of that system. All Chevron operating companies and business units must implement continuous improvement, using carefully defined guidelines,
metrics, and targets that are reviewed and adapted every year.
Chevron’s metrics focus on process efficiency, safety, risk, and the environment. The commitment to continuous improvement is part of Chevron’s corporate culture. All employees participate in
operational excellence activities, and managers receive specific operational excellence training.
Operational excellence is especially crucial when economic times are tough. For example, in the fourth quarter of 2014, Chevron’s net income was $3.5 billion, down nearly 30 percent from $4.9 billion for the same period in 2013. This decline resulted primarily from the steep drop in crude oil prices. However, it’s likely that net income would have been less without the operational excellence initiatives. Chevron’s CEO noted that the lower crude oil prices were partially offset by increased operational efficiency in the company’s downstream operations—that is, refining oil products and delivering them to customers. This increased efficiency was a product of the company’s ongoing BPR, BPI, and BPM efforts.
These efforts appear to be paying off, as Chevron’s net income for 2017 was $9.2 billion.
Sources: Compiled from P. Harmon, Business Process Management,
Elsevier, Burlington, MA, 2007; “Operational Excellence,” chevron.com, March 2012; “Chevron—Using Nimbus Control Software to Manage Processes,” FindingPetroleum.com, September 23, 2010; “Chevron Wins Boston Strategies International’s 2010 Award for Lean Six Sigma
Implementation in Oil and Gas Operations,” www.bostonstrategies.com, September 22, 2010; E. Schmidt, “From the Bottom Up: Grassroots Effort Finds Footing at Chevron,” isixsigma.com, March 1, 2010; R. Parker,
“Business Process Improvement: A Talk with Chevron’s Jim Boots,”
Ebizq.net, August 26, 2009; and www.chevron.com, accessed October 31, 2018.
Questions
1. Describe the main advantages of BPR at Chevron.
2. Why did Chevron adopt BPI?
3. How does Chevron apply BPM in its operations today?
Business activity monitoring (BAM) is a real-time approach for
measuring and managing business processes. Companies use BAM to monitor their business processes, identify failures or exceptions, and address these failures in real time. Furthermore, because BAM tracks process operations and indicates whether they succeed or fail, it
creates valuable records of process behaviors that organizations can use to improve their processes.
BPM activities are often supported by business process management suites (BPMS). A BPMS is an integrated set of applications that
includes a repository of process information, such as process maps and business rules; tools for process modeling, simulation, execution, coordination across functions, and reconfiguration in response to changing business needs; and process-monitoring capabilities.
Gartner (www.gartner.com), a leading IT research and advisory firm, states that companies need to focus on developing and mastering BPM skills throughout the organization. Gartner notes that high-
performing companies use BPM technologies, such as real-time
process monitoring, visualization, analytics, and intelligent automated decision making, to support intelligent business operations.
Another promising emerging trend is social BPM. This technology
enables employees to collaborate, using social media tools on wired and mobile platforms, both internally across functions and externally with stakeholders (such as customers or subject-area experts), to exchange process knowledge and improve process execution.
BPM initially helps companies improve profitability by decreasing costs and increasing revenues. Over time, BPM can create a
competitive advantage by improving organizational flexibility—
making it easy to adapt to changing business conditions and to take advantage of new opportunities. BPM also increases customer
satisfaction and ensures compliance with rules and regulations. In all cases, the company’s strategy should drive the BPM effort.
Before you go on . . .
1. What is business process reengineering?
2. What is business process improvement?
3. What is business process management?