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Chapter 7
Business Process Management
David Kroenke
Chapter Preview
Explore information systems within an organization, extend the business process discussion from Chapter 3, and work from the general to the specific. We begin with an overview of business process management, a systematic approach that modern businesses use to review and improve their business processes. Next, well discuss the three ways of fixing business processes. Then, well examine the role information systems play in business processes, and conclude the chapter with specific examples of information systems. Well survey functional IS and discuss the two most important crossfunctional IS: Customer Relationship Management (CRM) and Enterprise Resource Planning.(ERP). MRV has a process problem that has caused Mr. Butterworth to become not a happy camper. Well use that example to illustrate concepts in this chapter
Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall 7-2
Study Questions
Q1 Why is business process management important to organizations?
Q2 Q3 Q4 Q5 Q6 Q7 Q8 How do organizations solve process problems? What role do information systems play in business processes? What are the most common functional applications used today? What are the problems with functional information systems? What are the functions and characteristics of customer relationship management (CRM) information systems? What are the functions and characteristics of enterprise resource planning (ERP) information systems? 2020?
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Video
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BPM
Business Process Management (BPM) Systematic process of creating, assessing, altering business processes. Four stages of BPM 1.Create model of business process components
Users review and adjust model As-is model documents current process; it is changed to solve process problems
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BPM
2. Create system components
Uses five elements of IS (hardware, software, data, procedures, people)
3. Implement business process 4. Create policy for ongoing assessment of process effectiveness
Adjust and repeat cycles
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Functional Processes
Functional processes involve activities within a single department or function. Examples are accounting, human resources, sales forecasting, and other processes that are contained in a single department. BPM is easier to accomplish with functional processes:
A single department manager has authority over all of the activities and the resources assigned to them. If the department decides to change a business process, the change and attendant problems are localized within that managers authority.
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Functional Processes
Problem with functional processes is their isolation Islands of automation, a.k.a, information silos because they work in isolation from one another. Independent, isolated processes cannot produce the productivity and efficiency necessary for many businesses.
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Cross-Functional Processes
Cross-functional processes involve activities among several business departments. Example: customer relationship management (CRM) is a process that integrates activities of several departments, including sales, marketing, operations, accounting, and customer support. Cross-functional processes eliminate, or drastically reduce, problems of isolated systems and data. Example: Before an important sales call, salespeople can use a CRM system to learn if the customer has any outstanding issues or problems in customer support. Or, customer support can know which customers have high volume and justify high levels of support.
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Cross-Functional Processes
Process management is more difficult for crossfunctional systems because no manager has authority over all of the activities and resources assigned to them. BPM for cross-functional processes is shared across several departments that most frequently need to resolve conflict via committee and policy. CRM and ERP are two most common crossfunctional IS.
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Interorganizational Processes
Activities that process credit card transactions and activities at the shipper Supply chain management (SCM) processes involve organizational integration. In some cases, SCM company will have information systems that directly access processes in your own company. Processes much more complex than functional or cross-functional systems
Involve different managers and owners Problem resolution occurs via negotiation, contracts, and even litigation.
Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall 7-15
Study Questions
Q1 Why is business process management important to organizations?
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Figure 7.7
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Study Questions
Q1 Why is business process management important to organizations? Q2 How do organizations solve process problems?
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Study Questions
Q1 Why is business process management important to organizations? Q2 How do organizations solve process problems? Q3 What role do information systems play in business processes?
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Operations Applications
Management of finished-goods inventory and movement of goods from that inventory to the customer Operations applications Especially prominent for nonmanufacturers, such as distributors, wholesalers, and retailers In manufacturing companies, many, if not all, of operations functions are merged into manufacturing systems.
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Manufacturing-Scheduling Applications
Materials requirement planning (MRP)
Application that plans need for materials and inventories used in manufacturing process
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Manufacturing-Scheduling Applications
Generate master production schedule (MPS)
Analyzes past sales to estimate future sales
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Accounting Applications
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.
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Study Questions
Q1 Why is business process management important to organizations? Q2 How do organizations solve process problems? Q3 What role do information systems play in business processes? Q4 What are the most common functional applications used today?
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Study Questions
Q1 Why is business process management important to organizations? Q2 How do organizations solve process problems? Q3 What role do information systems play in business processes? Q4 What are the most common functional applications used today? Q5 What are the problems with functional information systems?
Q6 What are the functions and characteristics of customer relationship management (CRM) information systems?
Q7 What are the functions and characteristics of enterprise resource planning (ERP) information systems? Q8 2020?
Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall 7-54
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Figure CE12-4
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Study Questions
Q1 Why is business process management important to organizations? Q2 How do organizations solve process problems? Q3 What role do information systems play in business processes? Q4 What are the most common functional applications used today? Q5 What are the problems with functional information systems? Q6 What are the functions and characteristics of customer relationship management (CRM) information systems?
Q7 What are the functions and characteristics of enterprise resource planning (ERP) information systems?
Q8 2020?
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4. Outgrowth of MRP II
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ERP Facts
Primary ERP users are manufacturing companies. First and most successful vendor of ERP software is SAP. More than 12 million people used SAP in over 91,000 SAP installations. Worldwide, SAP has over 47,000 different customers (2008). Oracle is a second major ERP vendor. ERP vendors provide software and predesigned databases, predefined procedures, and job descriptions for organizationwide process integration. Beware: Some vendors misapply the term ERP to their systems. There is no truth-in-ERP-advertising group to ensure that all of the vendors that claim ERP capability have anything remotely close to it.
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ERP Characteristics
Entire organization is a collection of interrelated activities and cross-functional processes Formal approach based on documented, tested business models Process blueprint documents each process with diagrams using standard symbols Centralized database Can be slow to implement Very costlynew hardware and software, developing new procedures, training employees, converting data, and other developmental expenses
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ERP Characteristics
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Benefits of ERP
Efficient business processes that are effective Inventory reduction Lead-time reduction Improved customer service Greater real-time insight into organization Higher profitability No data inconsistency problems due to integrated database Business process blueprints tested in hundreds of organizations
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ERP Implementation
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Study Questions
Q1 Why is business process management important to organizations? Q2 How do organizations solve process problems? Q3 What role do information systems play in business processes? Q4 What are the most common functional applications used today? Q5 What are the problems with functional information systems? Q6 What are the functions and characteristics of customer relationship management (CRM) information systems? Q7 What are the functions and characteristics of enterprise resource planning (ERP) information systems?
Q8 2020?
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Q8 2020?
By 2020, most organizations and software vendors will design their processes and applications using SOA service-oriented architecture (SOA). SOA: A design philosophy in which every activity is modeled as an encapsulated service, and exchanges among those services are governed by standards. There are three key terms in that definitionservice, encapsulation, and standards. Consider each.
1. Service is a repeatable task that a business needs to perform. MRV has following services: Check space available on a river trip Enroll client on a river trip Bill clients credit card
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Encapsulation
Encapsulation places the logic in one place, which is exceedingly desirable. All other services know to go to that one place for that service. Even more important if the managers of the credit department decide to change how they make credit authorizations. As long as structure and meaning of customer credit data and credit authorization data do not change, Process Credit Order is completely isolated from changes in Authorize Credit or any other service in the Credit Authorization Process.
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Standards
Data, and more generically, messages, are exchanged among services using standardized formats and techniques.
In the past, the programmers of Process Credit Order program would meet with programmers of the Authorize Credit program and design a unique, proprietary means for exchanging data via this interface. Such a design is expensive and time consuming.
Computer industry developed standard ways for formatting messages, for describing services, and standard protocols for managing exchanges among services. Those standards eliminated the need for proprietary designs and expanded scope and importance of SOA.
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Significant amount of unsold product probably will be sent back next quarter for refund. Q: Is it ethical to write an agreement to take back product in an email? Q: What would the boss do if he finds out?
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Benefits
Saves time identifying needed processes
Saves moneyno software development needed if firm adapts to standard blueprint of ERP package
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Active Review
Q1 Why is business process management important to organizations? Q2 How do organizations solve process problems? Q3 What role do information systems play in business processes? Q4 What are the most common functional applications used today? Q5 What are the problems with functional information systems? Q6 What are the functions and characteristics of customer relationship management (CRM) information systems? Q7 What are the functions and characteristics of enterprise resource planning (ERP) information systems? Q8 2020?
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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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