Concepts in Enterprise Resource Planning 2 nd Edition Chapter 7 Process Modeling, Process Improvement, and ERP Implementation

Concepts in Enterprise Resource Planning, Second Edition2 Chapter Objectives Use basic flowcharting techniques to map a business process Develop an Event Processing Chain (EPC) diagram of a basic business process Evaluate the value added by each step in a business process Develop process improvement suggestions Discuss the key issues in managing an ERP implementation project Describe some of the key tools used in managing an ERP implementation project

Concepts in Enterprise Resource Planning, Second Edition3 Process Modeling Business processes are complex, and require people with various skills and abilities to work in a cooperative fashion Processes will not be efficient and effective unless: They are clearly defined Individuals are adequately trained in their roles Individuals understand how their roles fit in the overall process Process Modeling tools like flowcharting or process mapping provide a way to describe business processes so that everyone involved in the process can understand the process

Concepts in Enterprise Resource Planning, Second Edition4 Flowcharting process models Flowcharts are the simplest process models Originated with computer programmers and mathematicians A flowchart is a clear, graphical representation of a process from beginning to end Flowcharts have been applied to business processes since the 1960s Process mapping is flowcharting applied specifically to an existing business process A range of symbols can be used, but only 5 graphical elements are needed to map a process

Concepts in Enterprise Resource Planning, Second Edition5 Figure 7.1 Basic flowcharting symbols

Concepts in Enterprise Resource Planning, Second Edition6 Fitter Snacker Expense Report Process Defining the process boundaries is important to make the process mapping task manageable and to make sure the efforts are properly focused For the Fitter Snacker expense report process under consideration, the process begins after all expenses are incurred and ends when the employee receives a refund The process does not include: Cash advances or corporate credit card considerations Reservation process Preferred airlines or hotels Rental car policies (type, insurance, fuel)

Concepts in Enterprise Resource Planning, Second Edition7 Figure 7.2 Partial process map for Fitter Snacker expense reporting process

Concepts in Enterprise Resource Planning, Second Edition8 Extensions of Process Mapping Hierarchical Modeling is a process of describing processes in greater or lesser detail With complicated processes, it is frequently desirable to start with a general description of the process, then define different steps in more detail Deployment flowcharting or swimlane flowcharts are useful in clearly displaying the people or organizations responsible for tasks in the process

Concepts in Enterprise Resource Planning, Second Edition9 Figure 7.3 Hierarchical modeling

Concepts in Enterprise Resource Planning, Second Edition10 Figure 7.4 Deployment, or swimlane, flowcharting Sales Person Sales Manager AP Clerk Auditor

Concepts in Enterprise Resource Planning, Second Edition11 Event Process Chain (EPC) Diagrams The EPC format uses only two symbols Events Functions SAP has developed EPC representations for many of the business processes its software supports The EPC modeling technique is available in the IDS/Scheer ARIS Toolset ARIS: Architecture of Integrated Information System

Concepts in Enterprise Resource Planning, Second Edition12 Event Process Chain (EPC) Diagrams Events represent a state or status in the process Events are named using Object  Past Participle Functions represent where change occurs in the process Functions are named using Verb  Object ObjectPast Participle ExpenseIncurred Expense reportApproved Hard copyFiled ObjectPast Participle PrepareExpense report ReviewExpense report MailRefund check

Concepts in Enterprise Resource Planning, Second Edition13 Figure 7.5 EPC components Verb Object Past Participle Event Function

Concepts in Enterprise Resource Planning, Second Edition14 Event Process Chain (EPC) Diagrams EPC Diagrams follow an event-function-event structure EPC Diagrams must begin and end with events Branching is done with three types of connectors: AND OR XOR (exclusive OR)

Concepts in Enterprise Resource Planning, Second Edition15 Figure 7.6 Basic EPC layout

Concepts in Enterprise Resource Planning, Second Edition16 Figure 7.7 OR connector OR connector

Concepts in Enterprise Resource Planning, Second Edition17 Figure 7.8 AND connector AND connector

Concepts in Enterprise Resource Planning, Second Edition18 Figure 7.9 XOR connector XOR connector

Concepts in Enterprise Resource Planning, Second Edition19 Figure 7.10 OR connector with two triggering events

Concepts in Enterprise Resource Planning, Second Edition20 Figure 7.11 Possible connector and triggering combinations Event Function > Event Function > Event Function x Event Function > Event Function > Event Function x Event Function > Event Function > Event Function x Event Function AND OR XOR Event Function > Not Allowed Not Allowed Event Trigger Function Trigger SingleMultipleSingleMultiple

Concepts in Enterprise Resource Planning, Second Edition21 Figure 7.12 Splitting and consolidating process paths Must use same connector to split and consolidate a path

Concepts in Enterprise Resource Planning, Second Edition22 Figure 7.13 EPC diagram with organizational and data elements Organizational Elements Data Elements

Concepts in Enterprise Resource Planning, Second Edition23 Process Improvement Process mapping tools describe processes in a universally understood format Task of completing a process map requires a team of key personnel and frequently uncovers process improvement opportunities Value Analysis is a technique that evaluates the value added by each activity in the process Activities can added: Real value: something the customer will pay for Business value: helps the company run its business No value: an activity that should be eliminated

Concepts in Enterprise Resource Planning, Second Edition24 Process Improvement The Fitter Snacker expense report process does not provide real value, because customers would not pay for this activity if given a choice The process does provide business value, as employees should be compensated fairly for their expenses and fraud should be avoided Costs for this process should be minimized Activities should be evaluated by cost and elapsed time

Concepts in Enterprise Resource Planning, Second Edition25 Questions to Identify Areas for Improvement* Are there unnecessary checks and balances? Does the activity inspect or approve someone else’s work? Does it require more than one signature? Are multiple copies required? Are copies stored for no apparent reason? Are copies sent to people who do not need the information? Is there unnecessary written correspondence? *H. James Harrington, Business Process Improvement

Concepts in Enterprise Resource Planning, Second Edition26 Questions to Identify Areas for Improvement* Are there people or agencies involved that impede the effectiveness and efficiency of the process? Do existing organizational procedures regularly impede the efficient, effective and timely performance of duties? Is someone approving something they already approved (for example, approving capital expenditures that were approved as part of a budget)? Is the same information being collected at more than one time or location? Are duplicate databases being maintained? *H. James Harrington, Business Process Improvement

Concepts in Enterprise Resource Planning, Second Edition27 Concepts to Improve Business Processes* Perform activities in parallel, for example, approvals Change the sequence of activities Reduce interruptions Avoid duplication or fragmentation of tasks Avoid complex flows and bottlenecks Combine similar activities Reduce the amount of handling Eliminate unused data Eliminate copies *H. James Harrington, Business Process Improvement

Concepts in Enterprise Resource Planning, Second Edition28 Evaluating Process Improvement Implementing process changes can be: Challenging Costly Time consuming Risky Dynamic process modeling can be used to evaluate process changes before they are implemented Dynamic process modeling uses computer simulation to evaluate the impact of process changes on performance measures like cycle time and cost

Concepts in Enterprise Resource Planning, Second Edition29 Another Look—BPI at Nova Chemicals Nova Chemicals is using Business Process Innovation to move from a function-oriented company to a process- oriented company According to John Wheeler, CIO “Business process innovation is the process of improving processes. BPI is based on understanding the way you work. Once you understand the way you work, you can begin to improve the way you work.” Nova has used IDS/Scheer’s ARIS Toolset to document its business processes Tool requires structure and discipline to use, but allows companies to understand all of their processes, not just the workflow

Concepts in Enterprise Resource Planning, Second Edition30 Another Look—BPI at Nova Chemicals Wheeler estimates only 10-15% of an IT project’s cost is spent on technology and 30-40% is spent on understanding the current process Wheeler sees BPI as just the next step in the evolution of process improvement methods: Quality circles Continuous improvement Business process reengineering BPI Innovations in methods and techniques can keep innovation fresh and new. BPI is a process, which can itself be improved

Concepts in Enterprise Resource Planning, Second Edition31 ERP Workflow Tools The effectiveness of business processes that are performed sporadically can be poor, not because of negligence, but through lack of practice Especially true if process crosses functional boundaries Example: New customer Sales can gather basic customer data, but Accounts Receivable must determine credit limit Workflow tools are software programs that automate the execution of business processes Workflow tools help coordinate complex processes and allow for the tracking of the status of a process

Concepts in Enterprise Resource Planning, Second Edition32 SAP R/3 Workflow The SAP R/3 Workflow tool integrates organizational data to determine who should perform a transaction The Workflow tool uses SAP’s internal system to route transactions to the appropriate person using workflow tasks Workflow tasks can include: Basic information Notes Documents Decision options Links to transactions

Concepts in Enterprise Resource Planning, Second Edition33 SAP R/3 Workflow Workflow tasks can be monitored by the SAP system If tasks are not completed on time, the workflow system can: Change the task’s priority Send an reminder to the person responsible Send an to other parties The Workflow Builder is used to define the process behind the workflow: Process steps Individuals involved

Concepts in Enterprise Resource Planning, Second Edition34 Figure 7.14 SAP R/3 Workflow Builder screen Process Logic First Step Create Notification of Absence

Concepts in Enterprise Resource Planning, Second Edition35 Figure 7.15 Absence request screen

Concepts in Enterprise Resource Planning, Second Edition36 Figure 7.16 Manager’s Business Workplace with workflow task

Concepts in Enterprise Resource Planning, Second Edition37 Implementing ERP Systems Implementation was a major challenge in the late 1990s as firms rushed to implement ERP systems to avoid the Y2K problem Implementations were hampered by a lack of experienced consultants Since 2000, the pace of implementations has slowed significantly Most Fortune 500 firms have implemented ERP systems Current growth is in small to midsize business market New products include Microsoft Great Plains and SAP Business One

Concepts in Enterprise Resource Planning, Second Edition38 Implementing ERP Systems Firms that implemented ERP to avoid the Y2K problem likely installed ERP systems that covered only the basic functionality necessary to operate the business Many firms are looking to leverage their ERP investment by finding ways to improve their firm’s business processes These implementation projects are smaller in scope, but still require effective management for success

Concepts in Enterprise Resource Planning, Second Edition39 ERP System Costs and Benefits Software licensing fees: Most firms charge annual fees based on the number of users Consulting fees: ERP implementations require experienced consultants with extensive experience Project team member time: Key people must participate in the ERP implementation project to make sure that consultants understand their company’s requirements Employee training: Project team members need extensive training in the software, and all employees need training to work with the system Productivity losses: No matter how effective the implementation, productivity will decrease during the first weeks and months after the system is implemented

Concepts in Enterprise Resource Planning, Second Edition40 ERP System Costs and Benefits Companies must identify a significant financial benefit that will be generated by the ERP system to justify the money spent on it To only way companies can save money with ERP systems is to use them to make their business processes more efficient and effective It is possible for a company to “recreate” its old information system in SAP using modifications via ABAP programming, rather than adopt “best practices”

Concepts in Enterprise Resource Planning, Second Edition41 Implementation Change and Management Key challenge in managing ERP implementations is managing people, not technology More effective processes require fewer people Some employees will not be needed after implementation It is a challenging task to ask employees to participate in a software implementation process that will not only change their day-to-day activities, but might eliminate their current jobs Managing the human behavior aspects of organizational change is called Organizational Change Management People don’t mind change, they mind being changed

Concepts in Enterprise Resource Planning, Second Edition42 Implementation Tools SAP provides Solution Manager to help manage implementation projects In Solution Manager, the R/3 Implementation Project is presented in a 5 phase Implementation Roadmap Project Preparation (15 to 20 days) Business Blueprint (25 to 40 days) Realization (55 to 80 days) Final Preparation (35 to 55 days) Go Live and Support (20 to 24 days)

Concepts in Enterprise Resource Planning, Second Edition43 Solution Manager Project Preparation Phase Tasks include organizing technical team Defining system landscape (servers and network) Selecting hardware and database vendors Defining projects scope—what the project is supposed to accomplish Scope creep—unplanned expansion of the project—is probably the primary reason projects go over time and budget

Concepts in Enterprise Resource Planning, Second Edition44 Solution Manager Business Blueprint Phase Produces the business blueprint, which is a detailed description of how the company intends to run its business with the SAP R/3 system Process mapping is critical to the business blueprint phase The business blueprint guides consultants and project team members in configuring the SAP R/3 system During this phase, technical team members determine how they will transfer data from the firm’s legacy systems

Concepts in Enterprise Resource Planning, Second Edition45 Solution Manager Realization Phase Project team members work with consultants to configure the SAP R/3 software in the development system Developers create: Special ABAP programs Connections to legacy systems Integration with 3 rd party software packages

Concepts in Enterprise Resource Planning, Second Edition46 Solution Manager Final Preparation Phase Testing the system throughout for critical business processes Setting up help desk for end-user support Setting up operation of the production system and transferring data from legacy systems Conducting end-user training Setting the Go Live date When scope creep results in projects going over time and budget, testing and training is usually all that is left to be cut Cutting testing and training always leads to disaster

Concepts in Enterprise Resource Planning, Second Edition47 Solution Manager Go Live Phase Company begins using the SAP system Go Live date should be scheduled for a slack business period Properly staffed help desk is critical, as most questions occur in the first few weeks of operation Project team members and consultants should be scheduled to work the help desk during this period Monitoring of system performance is also critical Also important to set a project completion date New features or enhancements should be a new project

Concepts in Enterprise Resource Planning, Second Edition48 Figure 7.17 Manager’s Business Workplace with workflow task Steps in Implementation Project Step detail

Concepts in Enterprise Resource Planning, Second Edition49 System Landscape Concept SAP recommends that companies set up three completely separate systems Development (DEV) Used to develop configuration settings and ABAP programs Quality Assurance (QAS) Used to test configuration settings and ABAP programs Production (PROD) Actual system where the company runs its business Changes are transported from DEV to QAS to PROD via the Change Transport system

Concepts in Enterprise Resource Planning, Second Edition50 Figure 7.18 System landscape for SAP R/3 implementation DEVQASPRD Transport Directory

Concepts in Enterprise Resource Planning, Second Edition51 Summary ERP systems are designed to provide the information, analysis tools, and communication abilities to support efficient and effective business processes. This chapter introduced process modeling as a fundamental tool in understanding and analyzing business processes.

Concepts in Enterprise Resource Planning, Second Edition52 Summary Process mapping is one tool that uses graphical symbols to document business processes. Other methodologies include hierarchical modeling, deployment flowcharting, event process chain diagramming, value analysis, and business process improvement. SAP’s Solution Manager, a set of tools and information that can be used to guide an implementation project, is included in SAP R/3 to help manage the implementation of the ERP software.

Concepts in Enterprise Resource Planning, Second Edition53 Summary SAP’s System Landscape was introduced to show how changes to the ERP system during implementation (and beyond) are managed. The critical issue of organizational change management was discussed. Most challenges to ERP implementation involve managing personnel and their reactions to the change, rather than managing technical issues.