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BCIS 401 Information Systems for Managers. Business Processes Dr. J. Affisco Fall 2002. Lecture Topics. Why Study Business Processes? Levels of Processes The Breakfast Factory Mapping Business Processes Managing IT as an Integral Part of the Process. Why Study Business Processes?. - PowerPoint PPT Presentation
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BCIS 401Information Systems for Managers
Business Processes
Dr. J. Affisco
Fall 2002
2
Lecture Topics
• Why Study Business Processes?
• Levels of Processes
• The Breakfast Factory
• Mapping Business Processes
• Managing IT as an Integral Part of the Process
Why Study Business Processes?
• Process Management is Changing– Shorter Process Life Cycles– Static Processes are a rarity today– Processes change rapidly due to increased product
introduction rates and fragmenting markets– Process innovation in pursuit of greater efficiency, new
capabilities, or new revenue streams, is becoming increasingly common
– IT has become an integral part of successful Business Processes
4
Four Levels of Processes
• Elemental Processes
• Compound Processes
• Business Processes
• Managerial and Organizational Processes
5
Elemental Processes
• Usually carried out by a single machine or work station that carries out material or information transformation at the most basic level
• Examples– Grinding– Hamburger Grilling– Data-Entry– Bypass-graft operation
Compound Processes• A collection of elemental processes connected together,
often using material handling or communications equipment, to build an overall sequence of activities that change the form of either material or information
• Examples– Gearbox production process– Fast-food production– Insurance policy setup– Heart disease treatment
7
Business Processes
• A collection of compound processes that
are coordinated into an overall sequence
that delivers value to the customer
• Examples– Order fulfillment process– Capacity management
8
Managerial and Organizational Processes
• Occur at the highest level of organizations
and are used to make decisions of a
strategic nature
• Examples– Capital investment appraisal process– Employee development process– Process for deciding on acquisitions
Making and Delivering a
Breakfast as an Analogy for a
Purposive Business Process
The Breakfast Factory
10
Operating Task
• Prepare and deliver a breakfast consisting of– A three-minute soft boiled egg
– Buttered toast
– Coffee
• Each are to be fresh and hot when delivered
11
Basic Requirements of
Operations
• To build and deliver products/services in
response to demand
• Products to be delivered at a scheduled
delivery time, at an acceptable quality level,
and at the lowest possible cost
12
Limitations on the Production
System• Cannot be expected to deliver to the customer
whatever he wants whenever he wants it
– To do so would require infinite capacity or a very
large ready to deliver inventory
– Both are extremely costly items
• Customer cannot expect to receive his
breakfast the minute he sits down
13
Operation’s Responsibility
• Deliver a breakfast at some reasonable time
(5 to 10 min) and commit to this
• Prepare & deliver breakfast at a cost that will
allow us to charge a competitive price and
still make an acceptable profit
• We accomplish this through design &
operation of the process
The Breakfast Factory
Designing the Production Process
15
Limiting Step
• Boiling of the egg is the Limiting Step since
coffee is already steaming in the kitchen
and that takes a minute
• Not only does the egg take longest to
prepare but for most customers, it is the
most important part of the breakfast
16
Determine Total Throughput
Time
• Time for preparation of egg
• Time for preparation of toast
• Time for pouring of coffee
• Time for assembly of components on tray
for delivery
17
Throughput Times are Used
• To determine total throughput time for
capacity planning and production
scheduling
• To plan process flow so that all components
are ready simultaneously for assembly and
delivery
18
Planning Process Flow
• Backshedule (offset) from the time of
delivery
– Allow time for assembly, and processing of egg
– Next, using egg time as your base, allow time
to get bread, toast and butter it
– Finally, using toast time as your base, you
determine when you need to pour the coffee
19
• Process Manufacturing - An activity that
physically or chemically changes material
• Assembly Manufacturing - Components are
put together to constitute a new entity
• Test - Subjects the components or the total
to an examination of its characteristics
Types of Production Operations
• What if limited not infinite capacity?
• The Case of the Toaster Queue
– Process flow must be adjusted for time waiting for the
toaster
– If not, 3-min. egg may become 6-min. egg
– Egg still determines overall quality of the product,
preparing the toast becomes the limiting step
– How does this change process flow?
A Few Complications
A Few Complications• The Case of Processing Time Conflict
– Waiting for toaster when it’s time to start egg
– Consider following alternatives
• Create Specialists - Increases Overhead
• Add another toaster - Expensive addition of capital
equipment
• Run the toaster continuously - Build toast inventory,
through away what you can’t use but have immediate access
to this component. Waste; Expensive
22
A Few Complications
• What we’ve learned?
– Equipment capacity, manpower, and inventory
can be traded off against each other then
balanced against delivery time
– The correct balance is one that delivers the
product on time with acceptable quality for the
lowest cost
High Volume Breakfast Factory• Continuous Egg-boiler - constant supply of perfectly
boiled 3-min. eggs
• Continuous Toaster - medium toast
• Specialized operators - load each piece of equipment
and deliver products
• Can no longer prepare each customer’s order exactly
how and when he wants it.
• Gain is lower cost & more predictable product quality
Comparison of Breakfast Factories
Characteristic Non Automated(Job Shop)
Automated(Continuous)
Products Varied – Possibility ofCustomization
Highly Standardized –No CustomizationPossible
Volume Low Volume – WideVariety of Products
High Volume – LimitedVariety of Products
ProcessFeatures
Flexible General Purpose
Equipment Skilled Workers High Labor Content
Rigid Special Purpose
Equipment Semiskilled Workers Low Labor Content
MaterialsFeatures
Low R/MInventories – Boughtto coincide withorders
Low F/G Inventories– Product not madeuntil ordered
High R/MInventories – Tocushion process flow
High F/GInventories –Products made tostock
InformationFeatures
Mapping Business Processes
An Overview• The best way to understand the overall process
• Determine the part of the process to be mapped– What is the scope?
• Decide what to include on the map– customers and suppliers?– Number of employees involved– total process time– duration of each step– information inputs and outputs
An Overview• Start with high-level “blocks” - then drill down to process
elements if necessary
• Key questions:– What are the obvious weaknesses?– What is the overall process designed to do well - is this the right
thing to focus on– How would I carry out the process with no constraints (blue sky
view)?– How should the performance of the process be measured? – What part does IT play in the process? What part should it play?
28
Process Mapping Steps
• Select the Process
• Define the Process
• Map the Primary Process
• Map Alternative Paths
• Map Inspection Points
• Use Map to Improve Process
29
Select the Process
• Begin With Macro (Business) Processes
• Determine the Critical Micro Processes
• Select the most helpful viewpoint(s)
– Employee vs Customer
30
Define the Process
• State the output of the process
• List the customers for the output
• List customer requirements of output
• List process participants
• List process owner
• Determine process boundaries
• List inputs and their suppliers
Map the Primary Process• Consists of the essential steps or activities that
must always occur to produce your output
• Each step or activity is represented as a rectangle
on your flow diagram
• Include inputs and outputs as parallelograms
• Storage points or inventories as triangles
• Indicate direction of flow by arrowheads
Mapping Business Processes
Sotheby’s Live Auction
Sothebys.com Online Auction
IT and Business Processes
IT has Become an Integral Part of Managing and Improving Operations
By 1996, 87% of Operations’ Managers cited at least joint responsibility for IT
decision making.
Why the Change?
• Dramatic explosion in the volume of information required to manage modern business processes
• Companies are combining IS with operations expertise to build new competitive weapons
• Example– GE Lighting - innovations in web based purchasing
have cut lead time in half and costs by 15%
35
Why the Change?
• Nature of ITs employed is changing
dramatically and more rapidly than ever– Client-Server architectures now common place
– Increasing presence of intranets & Internet
– Open Systems Architecture
• Facilitates rapidly built “mix-and-match” archs.
• Allows “best-of-class” technologies to be joined to construct custom systems
36
Periodic-New-System based Path-based
Role of IT
Project size and number
Development Approach
Delivery of Value
Source oftechnology/software
Primary functional concerns
Locus of Technical Control
Experimentation
Primary Managerial Effort
Supportive/Peripheral toOperation
Large, few, infrequent
Build then install
When project is complete
Custom-built, heavy use ofcustom code, proprietarystandards
Control, efficiency,Accommodating all requirements at once
Vendor/IT group
Limited
Installation, Project andVendorManagement
Integral part of Operation
Small, many, frequent
Prototype and evolve
On-going
Off the shelf, little customcode, standards in commonuse
Integration, interconnection,flexibility, progressivedeliveryof requirements
Operation itself
Frequent opportunities
Ongoing management ofInterconnection standards
Two Models for IT Development in Operations
37
Important Roles in Managing the IT Path
• Designing and Orienting the Path
• Managing the Path
• Building an IT Path that provides the
Foundation for Operations Improvement
38
Designing and Orienting the Path
• Providing direction so that the progressive
addition of modules delivers the form of
competitive advantage the operation is
seeking
Information Technology Function ConsistentCompetitive Need
Reduce material waste Eliminate labor Reduce cost of a business process
Decreased Cost
Improve consistency of process Trap errors/mistakes Track process parameters Provide better process information to
operators
ImprovedConformanceQuality andProductReliability
Provide broad availability of orderinformation
Ensure information accuracy Track physical flow of material
EnhancingdeliveryReliability
Matching IT Function to Competitive Role
Information Technology Function ConsistentCompetitive Need
Management and distribution of programs forprogrammable machines
Facilitate rapid design changes/modification Deliver production process information to shop-
floor operators
Enhance ability tocustomize product,deliver broad productrange
Connect customers/suppliers to operationselectronically
Speed information flow through operationssystem
Allow reduction in work-in-progress throughgreater control
Improvedresponsiveness
Provide virtual test-beds Facilitate design work Generate automatic recipes/part-programs
Rapid Innovation
Matching IT Function to Competitive Role
41
Managing the IT Path
• Building design principles that
– Ensure the progressive addition of modules
results in a harmonious whole– Modules are easy to network to each other– Modules provide flexibility to change as
requirements and objectives change
• Requires Careful Stewardship of Standards
Building an IT Path that Supports Process Improvement
• IT can streamline routine & repetitive functions
• IT can free operations to improve rather than simply execute a process
• IT can reinforce new, more effective ways of coordinating work
• IT offers the possibility of broad and open connectivity, allowing networks of operations to improve the way they work together
IT-driven Operations Improvement
• IT can be used to drive an improvement initiative when
– Used as a source of structure to foster and reinforce
new ways of working• FMS - 40% of benefits realized before equipment installed
– Used to build new IT-based capabilities• Intranets, Wireless capabilities
– Used to take advantage of new off-the-shelf IT• ERP - SAP, Oracle
Facilitation vs. Substitution• Operator’s roles can be divided into three hierarchical
functions– Execution - the performance of the process
– Control - Determining the out put of a process, correcting for changing conditions
– Learning - the improvement of the process and the development of new skills
• Ignoring IS learning, the question becomes, when should IT substitute for the role of operators in execution and control of a task, and when should it be used to facilitate that task
Small number of contingencies Concrete rules Predictable set of circumstances Need for ongoing, frequent
decisions System can be made transparent
to accommodate understandingby operators
Many contingencies Abstract rules Unpredictable, novel
circumstances likely Infrequent decisions High potential for learning
Process is at a high stage of knowledge Limited opportunities for new learning
Through execution Hazardous/arduous environment Compelling quality/productivity advantages Variety is within economic programmable range of devices Stable product/services requirements over time Physical manipulation based on strength
Process is at low stage ofknowledge
Customized or very highvariety of output
Nature of Task highlychangeable over time
Physical manipulation basedon dexterity
Tend to Substitute Tend to Facilitate
Control
Execution
Using IT Either to Substitute or Facilitate
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