Enterprise Resource Planning, 1st

Edition by Mary Sumner

Chapter 2:
Re-engineering and Enterprise
Resource Planning Systems

Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-1
 Objectives

Recognize factors associated with the

evolution of ERP systems
BPR
Client-server networking
Integrated databases
Examine role of process modeling in
redesigning business models

Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-2
 Re-engineering

Fundamental rethinking and radical redesign of

business processes
Goal is to achieve major improvements in
performance
Efficient redesign of value chain
Primary activities
Inbound logistics, operations, outbound logistics, marketing
and sales, service
Secondary activities
Organizational activities, human resources, technology,
purchasing
Motivations
Deregulation, consolidation, customer sophistication,
increased competition

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 Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-4
Business Process Re-engineering
(BPR)
Technology used to mechanize work
Create new business rules
Remove outdated rules
Improve responsiveness
Reduce costs

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 Business Process Re-engineering
(BPR), continued

Decentralize decision making

Become responsive to customers needs
Flatten organization
Facilitated by information technology
Redesign of jobs
New levels of judgment
New types of leaders
Adaptable

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 Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-7
 Process Modeling

Business process
Business activities
Data store
Data needed by business process
Data flow
Data transferred between processes or from a
process to data store
Organizational unit
Units where processes take place
Event
Includes triggers and outcomes

Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-8
 Neighborhood Food Cooperative

Weekly cycle
Members submit list
Lists merged
Orders placed for
product by phone
Suppliers confirm in
writing with invoice
Shipments made to
cooperative
Members collect
product
Cooperative pays net
10 days

Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-9
 Basis for Best Practices
Supported by ERP Modules

Re-engineered process models

Improved process change depictions
Data integration
Among multiple processes
Structural changes
Streamline business functions
Maximized productivity

Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-10
 Reliable Finance Company

Expansion required redesign of existing

system
Needs enhanced information system
Increase number of branches exponentially
Achieve a competitive advantage
Analysis of loan application system
Reduce approval from 10-13 days to 2-3 days
Improve access to databases for approval
decisions

Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-11
 Failure in Re-engineering

Rosenthal:
Apply clean slate approach
Continuous training for new roles
Measure performance
Jobs must be redesigned
Use rewards as incentives to change
Move away from status quo
Too narrowly focused
Project too general
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 Information Technology
Facilitates ERP
Client-server computing allows for increase
power and control
Integrated databases
Reduces redundancy
Increases data consistency
Supports multiple functional units
Data maintained separately from application
modules
Database management systems
Central data administration
Improved data integrity
Improved control
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 Process Enterprises

Changed management structures

Process responsibility given to process
owners
Has process design authority
Stresses teamwork
Leans toward standardization of
processes
Focuses on achieving goals

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 Case: Re-engineering the
Payment Process System at RFC
Current payment processing system
Customers:
Make payments at branch
Cash, check, money order
Mail payments to branch
Manually processed
Batched for deposit in afternoon
Home Office mailed an Advice of Payment Received
Payment made to Home Office
Manually processed
Batched for deposit in afternoon
Branch mailed an Advice of Payment Received
Each night, batch payment processing runs to
update accounts

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 Case: Re-engineering the Payment
Process System at RFC, continued

Weekly delinquency analysis run

Payment reminders sent out at 15, 30,
45, and 60 days
Computer generated
Settlement figures processed upon
request
Urgent requests take overnight
Major expansion planned
Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner 2-16
 Summary

BPR allows the organization to rethink

and radically redesign their business
processes
Process modeling of business
activities change organizational
management structures
ERP systems are facilitated by IT
Processes are standardized and
teamwork enhanced
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