Business Process Management Chapter 7 Business Process Management

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Study Questions 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)? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q1: Why Is Business Process Management Important To Organizations? Tasks for processing an order at REI Learn Customer Intent Buy What? Pay How? Ship How? Verify Credit Remove from Inventory Verify Quantity Pick Items Pack and ship Record transaction for Accounting, marketing and service Provide Customer Service Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall BPM Business Process Management (BPM) Systematic process of creating, assessing, altering business processes Four stages of BPM Create model of business process components Users review and adjust model “as-is model” documents current process; it is changed to solve process problems Create system components Uses five elements of IS (hardware, software, data, procedures, people) Implement business process Create policy for ongoing assessment of process effectiveness Adjust and repeat cycles Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q2: How Does Business Process Management Vary in Scope? 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Q3: How Does Business Process Modeling Notation (BPMN) Document Business Processes? Software industry standardized notation for BPM by Object Management Group (OMG) Figure 7.6 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Top-Level Business Processes at MRV Figure 7.5 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Business Process with Three Swim Lanes Figure 7.7 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

MRV Assemble & Ship Equipment Process Figure 7.8 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Q4: How Does the Interaction of Business Process Elements Affect Cost and Added Value? Ways to increase process performance Brute force approach—add people, equipment Change process structure w/o changing resource allocations Do both 1 and 2 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Add Resources in the Assemble & Ship Equipment Process Figure 7-9 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Changing a Process by Altering Process Structure (cont’d) Figure 7.10 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q5: What Role Do Information Systems Play in Business Processes? Roles Implement business process activities Entirely manual Automated Mixed information systems Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

IS Alternatives for Implementing the Register Clients Activity Entirely manual—using word processor to record data, prepare documents of client roster and special requests list Use spreadsheet or database application to accomplish above activities, plus determine trip availability, collect deposits and trip payments Entirely automated—create Register Client system Clients use Internet to register and pay for trips Equipment is automatically reserved in inventory Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Information Systems for Facilitating Linkages Among Activities 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Equipment Database Resource Completely Automated Figure 7-11 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Q6: What Are the Advantages of the Service-Oriented Architecture (SOA)? 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Non-SOA Business Model Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Service Interactions Governed by Standards Encapsulation — places logic for a service in one place and all other services go to it for that service Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Active Review 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)? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Functional Processes, Applications, and Systems Chapter Extension 11 Functional Processes, Applications, and Systems

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Study Questions 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? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Q1: How Do Functional Processes Relate to Functional Applications and Systems? 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. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Functional Applications and Business Process Management (BPM) Functional process Model of “as-is” functional process Create components Evaluate functional applications and select one that provides closest fit (Off-the-Shelf) Implement processes/application Build remaining components of information system 4. Review and Assess effectiveness Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q2: What Are the Functions of Sales and Marketing Applications? 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q3: What Are the Functions of Operations 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Functions of Operations Applications Figure CE11-3 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q4: What Are the Functions of Manufacturing Applications? Facilitate production of goods Manufacturing applications include: Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Manufacturing-Scheduling Applications Generate master production schedule (MPS) Analyzes past sales to estimate future sales Three philosophies of manufacturing 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) Push manufacturing process Analyze past sales levels, make estimates of future sales, create master production schedule. Produce and push into sales (Supply-side method) Combined push and pull systems Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Manufacturing-Scheduling Applications (cont’d) 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q5: What Are the Functions of Human Resources Applications? HR Functions Support: Recruitment Compensation, pensions, bonuses, and so on in liaison with Payroll Training and Development Assessment Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q6: What Are the Functions of Accounting 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q7: What Are the Problems of Functional Processes? Data is duplicated because each functional application has its own database Business processes disjointed because supporting applications separated Difficult for activities to reconcile data and increases chances of errors Lack of integrated enterprise information Inefficiency Increased costs due to duplicated data, disjointed systems, limited information, and inefficiencies Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Active Review 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? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Cross-Functional Processes, Applications, and Systems Chapter Extension 12 Cross-Functional Processes, Applications, and Systems

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Study Questions 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? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q1: Why Is Cross-Functional BPM Not Quite So Easy? 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q2: What Are the Benefits of Inherent Processes? 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Example of an Inherent Process in SAP R/3 Figure CE12-1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Q3: What Are the Functions and Characteristics of Customer Relationship Management (CRM) Applications? CRM Tracks all interactions with customer from prospect through customer service Integrates all primary activities of value chain Supports four phases of customer life cycle Marketing —Marketing sends messages to target market Customer Acquisition—Customer prospects order and need to be supported Relationship Management—Support and resale processes increase value to existing customers Loss/churn—Win-back processes categorize customers according to value and attempt to win back high-value customers Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

CRM and the Value Chain Model Figure CE12-2 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Q4: What Are the Functions and Characteristics of Enterprise Resource Planning (ERP) Applications? Integrate primary value chain activities with human resources and accounting 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 Outgrowth of MRP II Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

ERP Applications and the Value Chain Figure CE12-6 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Characteristics of ERP Figure CE12-7 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Q5: What Are the Functions and Characteristics of Enterprise Application Integration (EAI) Applications? 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Q6: What Is a Realistic Role for BPM in Cross-Functional Processes? 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 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Active Review 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? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Business Process Management Chapter 7 Ch. Ext. 11, 12 Business Process Management