Chapter 7 Business Process Management. Q1:Why is business process management important to...

Chapter 7

Business Process Management

Q1: Why is business process management important to organizations?

Q2: How does business process management vary in scope?

Q3: How does Business Process Management Notation (BPMN) document business processes?

Q4: How does the interaction of business process elements affect cost and added value?

Q5: What role do information systems play in business processes?

Q6: What are the advantages of the service-oriented architecture (SOA)?

Study Questions

7-2Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Tasks for processing an order at REI1. Learn Customer Intent

– Buy What?

– Pay How?

– Ship How?

2. Verify Credit

3. Remove from Inventory– Verify Quantity

– Pick Items

4. Pack and ship

5. Record transaction for Accounting, marketing and service

6. Provide Customer Service

Q1: Why Is Business Process Management Important To Organizations?


• Business Process Management (BPM)– Systematic process of creating, assessing, altering business

processes

• Four stages of BPM1. Create model of business process components

• Users review and adjust model

• “as-is model” documents current process; it is changed to solve process problems

2. Create system components• Uses five elements of IS (hardware, software, data,

procedures, people)

3. Implement business process4. Create policy for ongoing assessment of process

effectiveness• Adjust and repeat cycles

BPM


• BPM Scope– Functional

• Single department• Problem: may lead to “islands of automation”

– Cross-functional• Goal: Eliminate/reduce isolated systems and

data– Interorganizational

• Ex: SCM, credit card transaction processing • Requires negotiation, contracts, litigation to

resolve conflicts between organizations

Q2: How Does Business Process Management Vary in Scope?


• Software industry standardized notation for BPM by Object Management Group (OMG)

Q3: How Does Business Process Modeling Notation (BPMN) Document Business Processes?


Figure 7.6

Figure 7.5

Top-Level Business Processes at MRV


Figure 7.7

Business Process with Three Swim Lanes


Figure 7.8

MRV Assemble & Ship Equipment Process


• Ways to increase process performance1. Brute force approach—add people,

equipment

2. Change process structure w/o changing resource allocations

3. Do both 1 and 2

Q4: How Does the Interaction of Business Process Elements Affect Cost and Added Value?


Figure 7-9

Add Resources in the Assemble & Ship Equipment Process


Figure 7.10

Changing a Process by Altering Process Structure (cont’d)


• Roles– Implement business process activities

• Entirely manual• Automated• Mixed information systems

Q5: What Role Do Information Systems Play in Business Processes?


Alternatives:1. Entirely manual—using word processor to record

data, prepare documents of client roster and special requests list

2. Use spreadsheet or database application to accomplish above activities, plus determine trip availability, collect deposits and trip payments

3. Entirely automated—create Register Client system– Clients use Internet to register and pay for trips – Equipment is automatically reserved in inventory

IS Alternatives for Implementing the Register Clients Activity


• Create database application to track equipment, location, status

• New activity “Process Equipment Database”– Updates database from Register Clients, Assemble

& Ship, Restore Equipment activities– The trip scheduler can reserve special equipment

and be notified if not available

Information Systems for Facilitating Linkages Among Activities


Figure 7-11

Equipment Database Resource Completely Automated


• Service—repeatable task a business performs– Check space available on a river trip– Enroll client on a river trip– Bill client’s credit card

• SOA—standard techniques to model every activity as a service and interactions among services

Q6: What Are the Advantages of the Service-Oriented Architecture (SOA)?


Non-SOA Business Model


• Encapsulation — places logic for a service in one place and all other services go to it for that service

Service Interactions Governed by Standards


Q1: Why is business process management important to organizations?

Q2: How does business process management vary in scope?

Q3: How does Business Process Modeling Notation (BPMN) document business processes?

Q4: How does the interaction of business process elements affect cost and added value?

Q5: What role do information systems play in business processes?

Q6: What are the advantages of the service-oriented architecture (SOA)?

Active Review


Chapter Extension 11

Functional Processes, Applications, and

Systems

Q1:How do functional processes relate to functional applications and systems?

Q2: What are the functions of sales and marketing applications?

Q3:What are the functions of operations applications?

Q4:What are the functions of manufacturing applications?

Q5:What are the functions of human resources applications?

Q6: What are the functions of accounting applications?

Q7: What are the problems of functional processes?

Study Questions

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE11-22

• Functional processes– Processes that support a single organizational

function• Accounts payable, sales lead-tracking, customer support

• Functional application– A computer program that supports or possibly

automates the major activities in a functional process.

Q1: How Do Functional Processes Relate to Functional Applications and Systems?

CE11-23Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Functional Applications and Business Process Management (BPM)


Functional process1. Model of “as-is” functional process

2. Create components – Evaluate functional applications and select one that

provides closest fit (Off-the-Shelf)

3. Implement processes/application– Build remaining components of information system

4. Review and Assess effectiveness

• Find and transform prospects into customers and sell more product to existing customers

• Sales systems– Obtain prospects– Turn prospects into customers– Used for managing customers

• Marketing systems– Used for product and brand management– Used for assessing effectiveness of marketing messages,

advertising, and promotions

Q2: What Are the Functions of Sales and Marketing Applications?


• Manage finished-goods inventory and movement of goods to customer

• Primarily by non-manufacturer– distributors, wholesalers, retailers

• Principle operations applications– Finished-goods inventory management– Order entry – Order management – Customer service

Q3: What Are the Functions of Operations Applications?


• Figure CE11-3

Functions of Operations Applications


• Facilitate production of goods • Manufacturing applications include:

Q4: What Are the Functions of Manufacturing Applications?


• Generate master production schedule (MPS)– Analyzes past sales to estimate future sales

Three philosophies of manufacturing1.Pull manufacturing process

• Products are pulled through manufacturing by demand. Produced in response to signals from customers or other production processes. (Demand-side method, JIT)

2.Push manufacturing process• Analyze past sales levels, make estimates of future sales,

create master production schedule. Produce and push into sales (Supply-side method)

3.Combined push and pull systems

Manufacturing-Scheduling Applications


• Materials requirement planning (MRP)– Application that plans need for materials and

inventories used in manufacturing process

• Manufacturing resource planning (MRP II)– Includes planning of materials, personnel,

machinery

– Capability to perform "what-if“ analyses on variances in schedules, raw materials availabilities, personnel, and other resources

Manufacturing-Scheduling Applications (cont’d)


• HR Functions Support:– Recruitment– Compensation, pensions, bonuses, and so on in

liaison with Payroll – Training and Development – Assessment

Q5: What Are the Functions of Human Resources Applications?


• Cost-accounting applications determine marginal cost and profitability

• Accounts receivable includes receivables, payments, and collections

• Cash management is the process of scheduling payments and planning use of cash

• Financial reporting applications produce financial statements• General ledgers show assets and liabilities• Accounts payable systems reconcile payments against

purchasers• Budgeting applications allocate and schedule revenues and

expenses• Treasury applications concern management and investment

Q6: What Are the Functions of Accounting Applications?


1. Data is duplicated because each functional application has its own database

2. Business processes disjointed because supporting applications separated– Difficult for activities to reconcile data and

increases chances of errors

3. Lack of integrated enterprise information

4. Inefficiency

5. Increased costs due to duplicated data, disjointed systems, limited information, and inefficiencies

Q7: What Are the Problems of Functional Processes?


Q1:How do functional processes relate to functional applications and systems?

Q2: What are the functions of sales and marketing applications?

Q3:What are the functions of operations applications?

Q4:What are the functions of manufacturing applications?

Q5:What are the functions of human resources applications?

Q6: What are the functions of accounting applications?

Q7: What are the problems of functional processes?

Active Review


Chapter Extension 12Cross-Functional

Processes, Applications, and Systems

Q1: Why is cross-functional BPM not quite so easy?

Q2: What are the benefits of inherent processes?

Q3: What are the functions and characteristics of customer relationship management (CRM) applications?

Q4: What are the functions and characteristics of enterprise resource planning (ERP) applications?

Q5: What are the functions and characteristics of enterprise application integration (EAI) applications?

Q6: What is a realistic role for BPM in cross-functional processes?

Study Questions


• Learning notation• Picking modeling tool• Documenting as-is processes• Examining bottlenecks and inefficiencies and

designing new processes to fix them• Employees resisting change • Scope may be expanded

Q1: Why Is Cross-Functional BPM Not Quite So Easy?


• Purchased Package applications– Software contains inherent (built-in) processes that

integrate activities across functional systems

• Benefits– Saves time identifying needed processes– Saves money– Reduces agony of process design – Enables company to quickly benefit

• Disadvantages– May require drastic changes that disrupt

operations and upset employees

Q2: What Are the Benefits of Inherent Processes?


• Figure CE12-1

Example of an Inherent Process in SAP R/3


• CRM – Tracks all interactions with customer from prospect through

customer service– Integrates all primary activities of value chain

• Supports four phases of customer life cycle1. Marketing —Marketing sends messages to target market2. Customer Acquisition—Customer prospects order and need to

be supported3. Relationship Management—Support and resale processes

increase value to existing customers4. Loss/churn—Win-back processes categorize customers

according to value and attempt to win back high-value customers

Q3: What Are the Functions and Characteristics of Customer Relationship Management (CRM) Applications?


• Figure CE12-2

CRM and the Value Chain Model


1. Integrate primary value chain activities with human resources and accounting

2. Cross-functional, process view of entire organization– Track customers, process orders, manage inventory,

pay employees, and provide general ledger, payable, receivables, and necessary accounting functions

3. Outgrowth of MRP II

Q4: What Are the Functions and Characteristics of Enterprise Resource Planning (ERP) Applications?


• Figure CE12-6

ERP Applications and the Value Chain


• Figure CE12-7

Characteristics of ERP


Important characteristics of EAI: • Connects system “islands” via a new layer of applications • Leverages existing systems—leaving functional legacy

applications as is, but providing an integration layer over the top• Enables a gradual move to ERP (Application Suite)• Has no centralized database

Q5: What Are the Functions and Characteristics of Enterprise Application Integration (EAI) Applications?


• Most organizations will – adopt BPM in principle and concept of four stages of BPM

cycle– accept any inherent processes in CRM or ERP applications

and model new process activities around those– endorse service-oriented components from their CRM and

ERP application vendors

• EAI is ideally suited to SOA (Service-oriented Architecture)– ERP vendors are converting their application components to

SOA, because it makes it easier to integrate with other applications

Q6: What Is a Realistic Role for BPM in Cross-Functional Processes?


Q1: Why is cross-functional BPM not quite so easy?

Q2: What are the benefits of inherent processes?

Q3: What are the functions and characteristics of customer relationship management (CRM) applications?

Q4: What are the functions and characteristics of enterprise resource planning (ERP) applications?

Q5: What are the functions and characteristics of enterprise application integration (EAI) applications?

Q6: What is a realistic role for BPM in cross-functional processes?

Active Review


Chapter 7Ch. Ext. 11, 12

Business Process Management

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