Using MIS 2e Chapter 7: Business Process Management David Kroenke This presentation has been modified from the original and should be downloaded from the Course Documents area in Blackboard

Q2 – How do information systems solve process problems? Study Questions Q1 – Why is business process management (BPM) important to organizations? Q2 – How do information systems solve process problems? Q3 – What role do information systems play in business processes? Q4 – What are the most common functional systems? Q5 – What are the problems of functional systems? Q6 – What are the functions and characteristics of customer relationship management (CRM) systems Q7 – What are the functions and characteristics of enterprise resource (ERP) planning systems? Q8 – How do I choose the best system? Chapter 7: Business Process Management

Q1 – Why is BPM important to organizations? Business Process Management (BPM) is the systematic process of creating, assessing, and altering business processes Four stages of BPM: 1. Create model of business process components; the “as-is” model documents the current process and users review and adjust the model 2. Create system components; uses five elements of IS (hardware, software, data, procedures, and people) 3. Implement business process 4. Create policy for ongoing assessment and effectiveness Chapter 7: Business Process Management

Q1 – Why is BPM important to organizations? Functional processes involve activities within a single department; e.g., accounting or human resources. Cross-functional processes involve activities among several business departments; e.g., Customer Relationship Management (CRM) integrates the activities of several departments including sales, marketing, and customer support. The idea is not to improve existing functional systems, but to create more efficient business processes that integrate activities of all departments in a value chain Inter-organizational processes cross into multiple companies; e.g., SCM (Supply Chain Management) Chapter 7: Business Process Management

Q2 – How do organizations solve process problems? Object Management Group created a standard set of terms and graphical notations for documenting business processes That standard, called Business Process Modeling Notation (BPMN) is documented at www.bpmn.org BPMN Process Diagram of Top Level Business Process Chapter 7: Business Process Management

Q2 – How do organizations solve process problems? Expand the original process diagram to show task assignments for each of three individuals Now expand the Assemble and Ship Equipment activity Chapter 7: Business Process Management

Q2 – How do organizations solve process problems? This is the “as is” process for the Assemble and Ship Equipment activity The process consists of two parallel flows; for regular and special equipment, respectively Chapter 7: Business Process Management

Q2 – How do organizations solve process problems? Business Process Management helps a business streamline its activities in order to increase its margins by creating more efficient processes. The process has been redesigned to create a single integrated picking list, which presumably will eliminate one trip to the warehouse, reducing the time it takes to select the equipment, thereby reducing cost and adding value Chapter 7: Business Process Management

Q3 – What role do information systems play in business processes? Even with the redesign there is a problem as the trip leader is not notified if special equipment is not available; e.g. A client requested and paid for a private tent. His request and payment were processed by the Register Clients activity. However, no such tent was available in inventory, and equipment and logistics manager was supposed to notify trip scheduler, who was supposed to notify client. Tent did exist, but it had been damaged and out for repair. Trip scheduler did not know it was under repair and allocated it to the client Chapter 7: Business Process Management

Q3 – What role do information systems play in business processes? Information systems, and database systems in particular, can play an important role in implementing activities that link other activities Thus create a database application to track equipment, location, and status Add new activity “Process Equipment Database” that updates database from Register Clients, Assemble & Ship, Restore Equipment activities Linkages are the interactions across the value activities. Understanding a company’s linkages helps it succeed in designing or redesigning its business processes. Chapter 7: Business Process Management

Q4 – What are the most common functional systems? Functional systems facilitate the work of a single department. These systems evolved as extensions of the first system within an area; e.g. payroll evolved into human resources. Chapter 7: Business Process Management

Q4 – What are the most common functional systems? Sales and Marketing Systems Primary purpose: find prospects and transform them into customers by selling them something. Sales processes also manage customers by selling existing customers more products. Other functional sales processes forecast future sales. Processes exist to manage products and brands. Assess effectiveness of marketing messages, advertising, and promotions and to determine product demand among various market segments. Operations Systems Management of finished-goods inventory and movement of goods from that inventory to the customer Order-entry applications record customer purchases, obtain customer data, verify customer credit, track orders and inform customers of order status Operations applications are especially prominent for non-manufacturers, such as distributors, wholesalers, and retailers Chapter 7: Business Process Management

Q4 – What are the most common functional systems? Manufacturing Systems Inventory applications support inventory control and inventory management. In terms of inventory control, inventory applications track goods and materials into, out of, and between inventories. Inventory-management applications use past data to compute stocking levels, reorder levels, and reorder quantities in accordance with inventory policy. Just-in-time (JIT) inventory policy seeks to have production inputs (both raw materials and work-in-process) delivered to manufacturing site just as they are needed UPC bar codes scan products; RFID (Radio Frequency Identification) tags coming into wide use Bill of materials consists of a list of materials, materials within materials, materials within materials within materials, and so on Customer Service Systems Includes order tracking, account tracking, and customer support and training Most organizations place as much of the customer service application on the Web as possible Chapter 7: Business Process Management

Q4 – What are the most common functional systems? Human Resource Systems Supports recruitment, compensation (includes pensions and bonuses and is linked to payroll), assessment, and training Accounting Systems General ledgers show assets and liabilities. Financial reporting applications produce financial statements. Cost-accounting applications determine marginal cost and profitability. Accounts receivable includes receivables, payments, and collections. Accounts payable systems reconcile payments against purchasers. Cash management is the process of scheduling payments and planning use of cash. Budgeting applications allocate and schedule revenues and expenses. Treasury applications concern management and investment. Chapter 7: Business Process Management

Q5 – What are the problems of functional systems? Traditional functional systems provide benefits to individual departments, but operate in isolation leading to data duplication, inconsistency, and lack of integrated information. Isolated decisions also lead to inefficiencies and the individual applications are sometimes called islands of automation. Thus there is a movement toward cross-functional systems that integrate the activities of all departments in a value chain (network of activity that implements business strategy); e.g., CRM and ERP Chapter 7: Business Process Management

Q6 –What are the functions and characteristics of CRM systems? Customer relationship management (CRM) is the set of business processes for attracting, selling, managing, and supporting customers. These include: solicitation, lead tracking (presale), and relationship management (post sale). The difference between CRM systems and traditional functional applications is that CRM addresses all activities that touch the customer (before and after the sale) and provides a single repository for data about all customer interactions. Chapter 7: Business Process Management

Q6 –What are the functions and characteristics of CRM systems? A Customer Relationship Management (CRM) system has three major components: solicitation, lead tracking (presale), and relationship management (post sale). The CRM is centered on an integrated customer database Chapter 7: Business Process Management

Q7 – What are the functions and characteristics of ERP systems? An Enterprise Resource Planning (ERP) System provides more integration than a CRM by integrating primary value chain activities with human resources and accounting support activities across the enterprise. Chapter 7: Business Process Management

Q7 – What are the functions and characteristics of ERP systems? ERP provides a cross-functional view of the organization with more efficient business processes. The potential benefits of an ERP system include: lead time reduction, inventory reduction, improved customer service, and higher profitability. ERP implementation is very expensive and time consuming. Management support is crucial! The initial (and most successful) vendor of ERP software is the German company SAP Chapter 7: Business Process Management

Q7 – What are the functions and characteristics of ERP systems? The first task is to model the current business processes by comparing the processes to the ERP blueprint (see next slide). The company must then eliminate the differences. The organization converts its data and procedures to the new ERP system. Implementation requires that users be trained on the new processes, procedures, and use of the ERP system features and functions. The process of moving from separated, functional applications to an ERP system is difficult, time consuming, and expensive. Employees resist the changes in work responsibilities and normal habits Because so much organizational change is required, all ERP projects must have full support of the CEO and executive staff. Frequent two-way communication is essential. Chapter 7: Business Process Management

Q7 – What are the functions and characteristics of ERP systems? Business process management requires an organization to develop a vision for the organization that specifies business objectives and to identify critical processes that are to be redesigned. ERP vendors provides hundreds of inherent processes such as placing an order These processes have been tested and the organization modifies its activities to conform to these processes The disadvantage is that the processes may be different from what is already in place and require dramatic change. Chapter 7: Business Process Management

Q8 – How do I Choose the Best System (Ask Independent Experts) Gartner Research (www.gartner.com) is the world’s leading information technology research and advisory company providing technology-related insight necessary for clients to make the right decisions, every day. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. Forrester Research, Inc. (www.forrester.com) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, consumer insight, consulting, events, and peer-to-peer executive programs. For more than 25 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. Chapter 7: Business Process Management

Q8 – How do I Choose the Best System (UM Access to Gartner) UM spends significant money for access to Gartner Research. It is available to students and alumni at no charge (i.e., those with a Cane ID) Chapter 7: Business Process Management

Q8 – How do I Choose the Best System (Gartner’s Magic Quadrant) The Magic Quadrant is based on two axes: Ability to Execute: Summarizes factors such as the vendor's financial viability, market responsiveness, product development, sales channels and customer base. Completeness of Vision: Reflects the vendor's innovation, whether the vendor drives or follows the market, and if the vendor's view of how the market will develop matches Gartner's perspective. UM spends $75,000 a year for access to Gartner Research. It is available to students and alumni at no charge Chapter 7: Business Process Management

Q8 – How do I Choose the Best System (Gartner’s Magic Quadrant) UM spends $75,000 a year for access to Gartner Research. It is available to students and alumni at no charge Chapter 7: Business Process Management

Q8 – How do I Choose the Best System (Gartner Hype Cycle) The Hype Cycle is a commentary on the pattern of human response to technology and provides a graphical way to track multiple technologies within an IT domain or technology portfolio. Hype Cycles enable technology planners to compare their understanding of a technology's evolution against Gartner's analysis of the technology's maturity, to decide when to invest in that technology. Each point on a hype cycle includes an estimate of the expected time to mainstream adoption. You want to be on the “leading edge”, not the “bleeding edge” UM spends $75,000 a year for access to Gartner Research. It is available to students and alumni at no charge Chapter 7: Business Process Management

Q8 – How do I Choose the Best System (Gartner Hype Cycle) You want to be on the “leading edge”, not the “bleeding edge” UM spends $75,000 a year for access to Gartner Research. It is available to students and alumni at no charge Chapter 7: Business Process Management

Inter-organizational processes cross into multiple companies Summary Business Process Management (BPM) is the systematic process of creating, assessing, and altering business processes Functional systems facilitate the work of a single department and evolved as extensions of the first system within an area; e.g., payroll evolved into human resources. The problem with functional applications is isolation. Cross functional systems span the activities of many departments and integrate the activities of an entire business process. Customer relationship management (CRM) supports solicitation, lead tracking, and relationship activities within the organization Enterprise Resource Planning (ERP) integrates all of the organization’s principal processes. It is a formal approach based on a set of inherent processes. Most organizations are a mixture of functional and integrated systems. Inter-organizational processes cross into multiple companies Chapter 7: Business Process Management

Access to Gartner research is free to UM students and alumni Summary (Continued) Gartner Research and Forrester Research provide are competing companies that provide independent analysis of technology and technology trends Access to Gartner research is free to UM students and alumni The Gartner Magic (upper right) Quadrant identifies visionary companies excelling in implementation The Gartner Hype Cycle displays the time frame required for technology implementation Chapter 7: Business Process Management

Review: Select the appropriate term for each item Michael Porter – Customer Relationship Management – Data Duplication – Islands of Automation – Enterprise Resource Planning – SAP – Business Process Modeling Notation – Business Process Management Problem with functional systems. Data Duplication Individual applications (as opposed to cross functional applications) are sometimes called. Islands of Automation He defined the value chain. Michael Porter Cross-functional system for attracting, managing, selling, and supporting customers. Customer Relationship Management German company known for ERP systems SAP Cross-functional system that integrates an organization’s principal processes Enterprise Resource Planning Systematic and structured approach whereby an organization rethinks its business processes. Business Process Management Standard set of terms and graphical notations for documenting business processes Business Process Modeling Notation Company providing independent evaluation Gartner Research Chapter 7: Business Process Management