MODELING BUSINESS PROCESSES

 Every organization has three basic business processes.  Acquisition/payment Business Process. Organizations can acquire a wide variety of goods and series including: ◦ Human resources ◦ Financial resources ◦ Supplies ◦ Inventories ◦ Property, plan, and equipment ◦ New ideas ◦ Miscellaneous services  Conversion Business process. Focuses on converting goods and service acquired into goods and services for sale.  Sales/Collection Business Process. Includes the sequence of activities involved in delivering goods and service to customers for payments.

 Porter illustrated that each firm is a “collection of activities that are performed to design, produce, market deliver, and support its product.  A value chain is defined as a set of business activities that add value or usefulness to an organization’s product or service.

Margins Film Infrastructure Human resources management Technology development procurements Inbound Logistics OperationsServices Outbound Logistics Marketing & sales Primary activities Revenue Costs Support activities EXHIBIT 2-1 Porter’s Generic Value Chain

◦ Inbound logistics ◦ Operations ◦ Out bond Logistics ◦ Marketing and sales ◦ Service  Porter’s support value activities include: ◦ Procurement ◦ Technology development ◦ Human resource management ◦ Firm Infrastructure

 Business Process is a series of activities intended to accomplish the strategic objectives of an organization  Devided each business process into three different event: ◦ Operating events are the operating activities performed within a business process to provide goods and service to customers. ◦ Information events include three activities: recording data about operating events, maintaining reference data that are important to the organization, and reporting useful information to management and other decision makers. ◦ Decision management events are activities where management and other people make decision about planning, controlling, and evaluating business processes.  Workflow refers to jobs or task performed by members of a workgroup to achieve some objective.

Decision/ managements Events Operating Events Information Events Define and often trigger Trigger EXHIBIT 2-3 Business Process Activities (Events)

DEVELOPING A REAL BUSINESS PROCESS MODEL ◦ Real business process modeling is a formal method of identifying and representing the essential characteristics that collectively describe business processes and events. Real business process model requires you to identify strategically significant business activities and essential characteristics about these business activities.

-What happened? -When did it occur ? -Who was involved and what roles did they play ? -What resources were involved and how much? -Where did the event occur ? -What can go wrong during execution of the event? EXHIBIT 2-4 Essential Characteristic of Business Activities

 The essential characteristics of business in the answers to the following: ◦ What happened ◦ When did each event occur ◦ What roles are performed and who/what agents perform the roles in executing each event ◦ What kinds of resources were involved and how much was used ◦ Where did the event occur ◦ What can go wrong in executing the events

EventsBusiness Objective Event trigger Business risk notes EXHIBIT 2-5 REAK Business Process Model Matrix

Sell merchandise Receive Customer payments EXHIBIT 2-6 McKell’s Retail Store REAL Model: Step 2

Merchandise Receive Customer payment Sell Merchandise Register Cash Customer Sales person EXHIBIT 2-7 McKells Retail Store REAL Model: Step 3

Resource Internal agent Event Location (if needed) Resource Location (if needed) External agent (if needed) Internal agent External agent (if needed) Event EXHIBIT 2-8 Template without Diamonds. Place Relationship Descriptions on the Lines

EXHIBIT 2-9 Template with Diamonds. Place Relationship Descriptions Inside the Diamonds Resource Internal agent Event Location (if needed) Resource Location (if needed) External agent (if needed) Internal agent External agent (if needed) Event

Merchandise Receive Customer payment Sell Merchandise Register Cash Customer Sales person increases Takes place it Takes place it Result in Internal agent External agent internal agent External agent Involves EXHIBIT 2-10 McKells Retail Store REAL Model: Step 5

 REAL concepts serve as a template for identifying and describing the essential characteristics of operating events.

Resource Internal agent Event Location (if needed) Resource Location (if needed) External agent (if needed) Internal agent External agent (if needed) Event Resource Increment (+) Resource Decrement (-) Resource Increment (+) Resource Decrement (-) Resource Decrement (-) Resource Increment (+) Resource Increment (+) Resource Decrement (-) EXHIBIT 2-11 Partial REAL Diagram for Linked Business Process Example

Human Labor Pay workers Hire Workers Cherry Bee Store Cash Hive workers Marc Labor Acquisition/Maintenance/ Payment Process Packaged Honey Collect Payment Sell Honey Cherry Bee Store Cash Customer Marc Sales/Collection Process Hive Materials & supplies Check hilves Field Extract Honey Honey in process Package honey Store Honey Strain honey Hive workers Conversion Process Supply barn Packaged Honey Supply Barn Purchase mat. & supplies Store mat. & supplies Materials & supplies Vendor store Marc Hive Workers Supplies and Materials Acquisition/ Maintenance/Payment Process Cerry bee store Cash Pay for mat & supplies Vendor

Call on customer Negotiate Contract Submit bid Services Provide services Cash Customer Representatives Customer Payment personnel Receive payments Janitor EXHIBIT 2-15 REAL Model of a services Process (Without relationship descriptors)

Greet victim Assign room Interview Victim shelter Issue clothing Room receptionist Interviewer Personal counselor Provide foot Inventory clerk Discharge victim Help set goals, identify resources Issue personal Care items Clothing Personal care items Food Goals resources sources Victim EXHIBIT 2-16 REAL Model of a Not-for-Profit Organization (Without relationship descriptors)

Fuel Blast Coal Iron One Limestone Oxygen Bake Mix Mill Coke Alloys Pig iron Steel ingots Finished steel Baker Blast Furnace Blast Furnace op. Finishing Furnace Finishing Furnace op. Rolling Mill Milling Operator EXHIBIT 2-17 REAL Model of a Manufacturing Process (Without relationship descriptors)

 Hollander, A. S. Eric L. Denna, J. Owen Cherrington Accounting Information Technology, And Business Solutions. Irwin McGraw-Kill, New York-USA.