Chapter 10 Business Process Management and Enterprise Systems The McGraw-Hill Companies, Inc All rights reserved. Irwin/McGraw-Hill

2 Business Process Management Business process management is when the organization attempts to improve efficiency and effectiveness of their operation by focusing on their business processes. –Companies normally hire when the economy is booming. –Companies look for ways to cut costs during down economic times. Downsizing is one option where companies reduce the number of jobs while attempting to increase productivity.

3 Business Process Management Business Process Automation (BPA) involves automating some aspect of the business process through the application of information technology. Business Process Improvement (BPI) involves employees looking for ways to improve the process incrementally. Business Process Transformation (BPT) examines how the business operates and then looks for ways to fundamentally and radically change those operations.

4 Business Processes A process perspective encourages managers to: –See every aspect of the business as customer driven. –Make employees responsible for the whole process, rather than for just one task in it. –Focus on how work is done, rather than just on what is done.

5 Organizational Strategies Organizations generally seek to maximize shareholder wealth. –Strategies to maximize shareholder wealth include Low cost provider Customer centric: Approach identifies the processes that deliver an output to the customer and then implement those processes in the most efficient manner possible.

6 Business Process Automation Business process automation is where a process is replaced by one that is supported by an information system. –Most efforts to automate business processes also result in process improvements. –Order entry system replaced a manual inventory count.

7 BPI and BPT Business Process Transformation (BPT) is used today to define reengineering. –“Re-engineering is the fundamental rethinking and redesign of business processes to achieve dramatic improvements in critical measures of performance.” (Hammer and Champy 1990) –Strategic change projects. –Breakthrough innovation focused on the customer.

8 BPI and BPT Other Philosophies for change: –Continuous Improvement –Total Quality Management (TQM) –These are incorporated into the general term Business Process Improvement (BPI) –BPI takes longer to implement than these other philosophies. –BPI tends to be driven by the bottom up approach, and BPT the top down approach. –See Figure 10.2

9 Principles of Business Process Improvement 1.Quality is what the customer says it is. 2.Think of yourself as the customer. 3.Customer satisfaction is impossible without employee satisfaction. 4.Improve continuously. 5.Leadership and accountability make quality happen. 6.Focusing on quality increases efficiency; focusing on efficiency often decreases quality. 7.If you can’t measure it, you can’t manage it.

10 Principles of Business Process Improvement Quality is what the customer says it is. –Quality is meeting or exceeding customer expectations at a price that represents value to them. Quality encompasses technical parameters as well as service. –Quality is both tangible and perceptual –Customer satisfaction needs to measured regularly, systematically, and consistently.

11 Principles of Business Process Improvement Think of yourself as the customer –Managers should go through the process as their customer. –University President should go through the admission process at their university.

12 Principles of Business Process Improvement Customer satisfaction is impossible without employee satisfaction –Critical for businesses with excessive interaction between customer and employees. –First step toward improving quality is understanding how to keep you employees satisfied.

13 Principles of Business Process Improvement Improve continuously –TQM implies a constant commitment to improving all aspects of the firm. – “Mistakes are treasures” – Consistent level of performance needed for continuous improvement. – Document and eradicate mistakes and eliminate inconsistencies.

14 Principles of Business Process Improvement Leadership and accountability make quality happen. –The word “Quality” should be in the mission statement. –Quality must be built into the incentive programs and evaluation of performance formulas.

15 Principles of Business Process Improvement Focusing on quality increases efficiency; focusing on efficiency often decreases quality. –Process simplification and control. –Consistency in performance.

16 Principles of Business Process Improvement If you can’t measure it, you can’t manage it. –Quality management is a data intensive process. –Improvement implies having targets and reporting progress in achieving those targets. –BPI requires the development of an information system infrastructure that allows tracking of internal performance measures.

17 Principals of BPT 1.Organize around outcome, not tasks. 2.Have those that use the output of the process perform the process. 3.Subsume information processing work into the real work that produces the information. 4.Treat geographically dispersed resources as if they were centralized. 5.Put the decision point where the work is performed, and build control into the process.

18 IS and Process Management Step 1Project Planning (define goals & objectives) Step 2Analysis (define information requirements) Step 3Generate and evaluate alternatives Step 4Design the chosen alternative Step 5Implement (conversion) Step 6Operate and maintain

19 Enterprise Information Systems Enterprise Resource Planning (ERP) –Systems were designed to replace legacy systems. Supply Chain Management (SCM) –Systems allow companies to coordinate entire logistics, production, and distribution. Sales Force Automation (SFA) –Systems manage processes such as contact management, sales forecasting, and order management. Customer Relationship Management (CRM) –Systems focus on connecting various experiences the customer has with the company.

20 ERP and Enterprise Systems ERP –Developed by SAP in the 1970s –First Product was mainframe based, SAP R/2 –System integrated financial and operational data. –Originally focused on back-office operations. –Enforce use of “best practices” –Centralized database is the heart of an ERP system. –Other vendors include Baan, Oracle, J.D. Edwards, & Peoplesoft.

21 Implementing Enterprise Systems CustomizationThe degree of modification to the software package to match it to the company’s needs. IntegrationThe amount of effort needed to tie the software package into the existing information systems. UpgradesIf a software package has been customized and special middleware written to integrate it with other systems, it becomes more difficult to implement new versions (upgrades) of the package.