Using IS to Improve Processes

Using IS to Improve Processes
Chapter 5 Using IS to Improve Processes Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Learning Objectives Q1. What are the fundamental types of processes in organizations? Q2. What are examples of common business processes? Q3. How can organizations improve processes? As we begin this chapter, we start to take a look at processes. We’ll learn about some of the fundamental types of processes in organizations. There are some common business processes that also deserve our attentions as well as gaining an understanding of how organizations can improve processes. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Learning Objectives Q4. How can organizations use IS to improve processes? Q5. How can IS hinder a process? Q6. How can SOA improve processes? As we move forward, we’ll learn how IS can be used to improve processes, but also see ways in which IS can hinder processes. Finally, we’ll take a look at service-oriented architecture to understand its role in improving processes. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What are the Fundamental Types of Processes in Organizations?
Business Process Sequence of activities for accomplishing a function Activities Tasks within a business process Recall in chapter 2, we defined a business process as a sequence of activities for accomplishing a function. We further defined activities as tasks within a business process. Let’s refresh ourselves on a few other terms of importance. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Resources Items necessary to accomplish an activity Actors Resources who are either human or computers Role Subset of activities in a business process performed by a particular actor Again, taking a look back at business processes, we define resources as items necessary to accomplish an activity. Resources could be humans or computer data. Actors are defined as resources who are either humans or computers. And finally, a role is a subset of activities in a business process performed by a particular actor. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Examples of Processes: Figure 5-1 Five Sequential Processes, Resources, Actors, and Roles at the Pizza Shop In this diagram, we see an example of processes. There are five sequential processes at the pizza shop beginning with an order being placed through delivery. If we look at Assemble, which is a single process in this sequence, it can be broken down into activities, resources, and roles as you also see depicted here. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Scope of Processes: Figure 5-2 Scope and Characteristics of Business Processes Processes can be organized into three main categories that we’ll call scope. As you see here, the scope can be strategic, managerial, or operational. This table not only provides characteristics of each, but also provides us with the types of IS that support each one. Strategic processes are broad in scope, deal with organizational issues, and are supported by Executive Support Systems (ESS). Managerial processes deal mainly with resource use and are supported by Management Information Systems (MIS). Finally, operational processes occur most frequently and are supported by Transaction Processing Systems (TPS). Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Objectives of Processes: Figure 5-3 Process Objectives and Measures Not only is it of value to understand the scope of processes as being strategic, managerial, or operational, but it’s also of value to understand the objectives of business processes. We measure these objectives based on effectiveness and efficiency. Effectiveness deals with evaluating a process on how well it meets the organizational strategies. Efficiency is used to measure a process on how well it conserves limited resources. It looks at whether or not a process creates more output with the same input, or the same output with less input. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Business Process Activities; resources; actors; roles Scope of Processes Objectives of Processes Before we continue, it is well worth our while to revisit our definition of a business process. As we begin to see some common examples of processes, we can now view them with regard to scope and objectives to gain a more sound understanding of such processes. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What are Examples of Common Business Processes?
Inbound Logistics Processes Operations Processes Outbound Logistics Processes Now that we have a better understanding of what a business process is, we can look at some common business processes seen in most organizations. Let’s start with inbound logistics processes. Inbound logistics include such things as procurement, inventory management, and supplier sourcing. An example of a strategic inbound logistics process is vendor sourcing, while procurement is an operational process. We’ll look at procurement more closely in Chapter 7. Operations processes simply transform inputs into outputs. This is common in manufacturing organizations, but is also seen in service organizations. In manufacturing, assembly can be considered an operational process while decisions regarding expansion are strategic processes. Scheduling of equipment in manufacturing would be considered a managerial process. Outbound logistics processes revolve around distributing goods and services to buyers. From an operational perspective, this would include such things as a sales process. An example of a managerial process for outbound logistics would be awarding a refund to a customer. Strategically, outbound logistics processes include things like payment policies and dunning procedures. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Sales and Marketing Processes Service Processes Human Resource Processes Technology Development Processes In addition to the previous processes we just saw, there are other processes common to organizations. Sales and Marketing processes involve the means and incentives for customers to purchase a product or service. An example of a strategic marketing process would be launching a new product, while a managerial process for marketing would be evaluating the effects of marketing campaigns. Service processes can be as those which provide support for post-sales. Operationally, we perform customer service by tracking sales orders or providing additional customer support. Again, here we see a managerial process for services involving evaluation of items, like customer complaints. Human resource processes can be defined as those processes which assess employees and ensure adequate personnel. Operational processes for human resources involves things like, recruiting, hiring, promoting, etc. Managerial processes might revolve around the development of training programs and workforce planning. While strategic processes in human resources address retention issues, like pay sales and other incentives. A final common business process in most organizations is the technology development process. This process involves the designing, testing, and developing of technologies that support primary activities in an organization. An operational process for this would be determining whether or not a specific software will adequately handle the demand from the users. Managerial processes for technology development could include estimating time required in each step of a software development process. Strategically, a technology development process might involve questions surrounding a make versus buy decision for software. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Figure 5-5 Value Chain Activities and Process Examples This diagram helps summarize the common business processes and the operational, managerial, and strategic process examples within each. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How Can Organizations Improve Processes?
OMIS Model Objectives; Measures; and Information Systems Figure 5-6 Steps in the OMIS Model This diagram shows the three fundamental steps towards improving processes. They are Objectives, Measures, and Information Systems. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Process Objectives Specify and Improve Process Measures Metrics As we mentioned earlier, processes have one or more objectives that address efficiency or effectiveness. Yet some of these objectives may not necessarily be stated. In the OMIS model, we need to clearly state these objectives and ensure they are neither vague nor inappropriate. A vague objective is one that isn’t measurable. Terms such as “great”, “better”, and “faster” are relative and can be vague. Inappropriate objectives are those which don’t satisfy strategic goals. Process measures involve metrics, which are values assigned to attributes to make them measurable. Just a second ago, we stated that objectives cannot be vague. If we state, “sales will get better”, that becomes vague and isn’t measurable. It would be more effective to state that objective using metrics like, “Sales will improve by 20% over the next 6 months”. That is measurable and accurate. A less accurate statement would simply be that “sales will improve over the next 6 months”. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

OMIS Figure 5-7 Options for Improving the Objectives of a Process Figure 5-8 Options for Improving the Measures Of a Process In the OMIS model, we addressed Objectives and Measures. These two diagrams help summarize our recent discussion. What we have yet to address is Information Systems in this discussion. The next section will help us get a better understanding as to where IS fits in the OMIS model. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How Can Organizations Use IS to Improve Processes?
Three Ways IS Improve Processes Improve efficiency or effectiveness or activities Provide linkages across activities Improve control of the process Figure 5-9 Options for Improving the use of IS in a Process In this section we need to discuss how IS can be used to improve processes. There are three basic ways in which this can be accomplished. First, IS can be used to improve the efficiency or effectiveness of an activity. As you see in the example in this diagram, a pizza shop can use a GPS to improve the efficiency of their deliveries. Linkages among activities defines how two activities interact with one another. Again, in the example we see here, a pizza shop implemented an IS to record phone orders for pizzas. The orders can then be displayed on the delivery drivers’ GPS allowing them to make better planning decisions on incoming orders. Finally, IS can be used as a means of control of an activity, limiting the behavior of that activity. In the example seen here, waiters and waitresses inside the pizza shop now enter orders in an IS. This reduces chances of error that existed previously where orders were manually written on pieces of paper that often were lost or misplaced. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Non-IS Process Improvements Add more resources Change the process structure Overlaps with IS Figure Non-IS Process Improvements Often processes can be improved without the use of IS. There are two basic ways this can happen. First is to add more resources to the process. In the above example, the delivery process can be improved by adding additional drivers for delivery. A second non-IS method for improving processes is by changing the structure of a process. Let’s suppose the current structure for making pizzas at the pizza shop is to have each cook make the pizza from start to finish, making them individually responsible for each activity in the process. The process can be changed as needed by altering the structure. On nights when it’s busy, the current structure might be inefficient. A better structure would be for each cook to have specialized jobs, meaning each cook perform a unique activity in the process. Often, non-IS and IS improvements overlap. As an example, the introduction of IS to a process will likely also alter the structure of the process. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Six-Sigma Removing causes of defects Minimizing variability in the process % of output free from defects Another approach to process improvement is six-sigma. This is a widely used approach, particularly in the manufacturing industry. The goal of six-sigma is to remove causes of defects and minimize variability in the process. As a result, percent of process outputs would be free from defects. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Participants and Diagrams in Process Improvement As-is diagrams Ought-to-be diagrams In more complex processes than we’ve seen in the pizza shop example, it’s a general practice to use process diagramming to understand how the process currently runs as well as how the process ought to run. These process diagrams can prove beneficial in understanding the process changes that will occur as a result of process improvements. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How Can an IS Hinder a Process?
Information Silos Data exists in isolated functional IS Why Information Silos Exist Data stored in separate databases IS can also hinder a business process. One of the key ways in which this takes place is through what are referred to as information silos. Information silos exist when data exists in isolated information systems. These systems are often isolated because they were designed for a functional purpose. As a result, you have data that is duplicated in various files and databases. This can be problematic because it often results in inconsistent data. These information silos exist because as we discovered earlier, database design involves user input as to what data they would like to have access to. Users from various functional areas may request the same data, but used for different purposes, resulting in information silos. Information silos also exist because functional departments often find it more cost effective to have their own IS. Only when many processes in many departments all rely on the same IS, will a savings be experienced. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How Can SOA Improve Processes?
SOA: Services-Oriented Architecture Middleware facilitates communication and data sharing Design approach for activities bases on: Service Encapsulation Standards Services-oriented architecture is a design approach that makes it easier to communicate and share data among process activities. It uses middleware, which is a form of software that enables this. SOA itself isn’t software nor is it hardware. Instead it’s a design approach in which every activity is modeled as an encapsulated service and exchanges among those services are governed by a set of standards. Let’s take a deeper look into what is meant by service, encapsulation, and standards. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Service Repeatable task that a business needs to perform Encapsulation Hides data within containers so that services can communicate Standards Standardized formats for data exchange As we see in this slide, a service is defined as a repeatable task that a business needs to perform. Encapsulation is a means of hiding the data within something called containers, so services can communicate with one another. We typically say that services are encapsulated to allow for this communication. Finally, this approach is governed by standards. The standards provide an effective means for ensuring a proper format and protocol for communication. In the next slide, we’ll take a look at an example of two encapsulated services that are able to communicate with one another, following standards. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Figure Example Independent Encapsulated Services In this example, we see two separate, encapsulated services at a book company. One of the services, “Process Credit Order,” is communicating with another, “Authorize Credit”. Each of these services belongs to separate processes. The “process credit order” belongs to the ordering process, while “authorize credit” belongs to the credit authorization process. You can see the data being exchanged between these two services is enabled by standards. Each service is encapsulated meaning the logic for performing the service is known only to that service. To this end, if one of the services changes, it doesn’t impact the other service as long as the capability of communicating still exists. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Ethics Guide Vehicle Tracking System Process Improvement or Privacy Problem? This is a truly interesting read for you. It involves the introduction of a new form of IS being installed in vehicles for various industries. The IS device allows for tracking of the vehicle’s location, driving patterns, etc. It’s argued that such IS will provide process improvements for industries like automobile rental and insurance companies. Read through this article and answer the questions which follow. Let’s see how you feel about this form of IS. Which side of the argument do you favor? Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Conclusion Q1. What are the fundamental types of processes in organizations? Q2. What are examples of common business processes? Q3. How can organizations improve processes? When we began this chapter, we had to refresh ourselves on business processes. We reviewed some fundamental types of processes in organizations and revisited terms like activities, resources, actors, and roles. Processes were also categorized by scope into three areas: strategic, managerial, and operational. We then looked at some common business processes. We reviewed both inbound and outbound logistics processes; operations processes; sales and marketing processes; service processes; human resource processes, and technology development processes. We then explored ways of improving processes and got a glimpse of the OMIS model. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Conclusion Q4. How can organizations use IS to improve processes? Q5. How can IS hinder a process? Q6. How can SOA improve processes? Additionally, we specifically took a look at IS in the OMIS model to see where IS could be used to improve processes. We also identified two forms of Non-IS improvements to processes which included adding resources and restructuring the process for improvement. It was also suggested, that these non-IS improvements often overlap with IS improvements. IS can also hinder processes because of something we defined as information silos. And finally, we looked at services-oriented architecture to understand how this methodology allows for communication across services in different business processes. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

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