Lect 4 BPR- Enterprise Systems

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4Week

Management Information Systems BPR – Enterprise Systems

• Business Process• Business process improvement• Business Process Re-engineering (BPR)• Enterprise systems

• Supply Chain Management (SCM)• Enterprise Resource Planning (ERP)• Customer Relationship Management (CRM)

Overview

What is a Business Process ?

“A related groups of activities that use people, information, and other resources to create value for internal or external customers.”

CustomersOccur across or between organisational sub units

Business Process

• Organisations carry out a number of processes in order to achieve their business objectives. Within the business process: people, equipment and resources, and business procedures are combined to produce a specific result. For example,

Recruiting staff

handling orders for goods

designing new products

making investment decisions.

Business Process

• Each process demands a set of tasks and each draws on diverse resources within the business

• A process generally involves more than one person or machine: a process is about groups; it concerns collaborative activity

• A process has a goal: it is intended to achieve something

Business Process

• Business processes can be divided into 3 broad types. Core processes: concentrate on satisfying external customers. They

directly add value in a way perceived by the customer of the business

Support processes: concentrates on satisfying internal customers. They might add value to the customer indirectly by supporting a core business process, or they might add value to the business directly by providing a suitable working environment

Management processes: concerns themselves with managing the core processes or the support processes, or they concern themselves with planning at the business level

Business Process

• Functions are parts of the organisation which have responsibilities, staff and resources. They are not processes, though they might take part in a process

• A process may span more than one functional area

• The relationship between functions and processes can be complex and indeed the efficient operation of processes can be hindered by an organisation's structure

Business Process

• Business processes must be improved in order to stay competitive in today's dynamic competitive environment

• Many companies began business process improvement with a Continuous Improvement Model. This model attempts to understand and measure the current process, and make performance improvements accordingly.

Business Process Improvement

• Activities involved in Continuous Process Improvement.

– The first step begins by documenting the existing system or process, then establishing process measurements based on customer needs. The process is carried out and the results measured

– From this improvement, opportunities are identified based on an analysis of the data collected. These process improvements are then implemented together with a performance measurement of the new process

– This is an iterative process which repeats over and over again, and so is called continuous process improvement. Other common terms include business process improvement or functional process improvement


DOCUMENTCURRENT PROCESS

ESTABLISHMEASURES

CARRY OUTPROCESS

MEASUREPERFORMANCE

IDENTIFY ANDIMPLEMENT

IMPROVEMENTS

DOCUMENTCURRENT PROCESS

ESTABLISHMEASURES

CARRY OUTPROCESS

MEASUREPERFORMANCE

IDENTIFY ANDIMPLEMENT

IMPROVEMENTS

• This method for improving business processes is only really effective in obtaining gradual, incremental improvements

• When the business pressure for an organisation is too strong sometimes continuous improvement is not sufficient to sustain the competitiveness gained

• 3 C’s:

– Customers are more demanding, they know what they want, what they are willing to pay, and how to get the products and services on their own terms

– Competition is increasing with respect to price, quality, selection, service, and promptness of delivery. Removal of trade barriers, increased international co-operation, and the creation of technological innovations has caused the competition to intensify

– Change in markets, business environment, technology in an unpredictable manner

(Hammer and Champy, 1993)


• In such case a radical approach innovating the organisation's structure and the way it do business is required. Such a change is called Business Process Reengineering (BPR). In a BPR exercise all organisational, technological and human dimensions of a firm may be changed

• Only one thing remains constant: change

“Progress is impossible without change, and those who cannot change their minds cannot change anything”

(George Bernard Shaw) “The reality is that changes are coming... They

must come. You must share in bringing them”(John Hersey)

Business Process Re-engineering BPR)

Business Process Re-engineering BPR)•Change is inevitable. The challenge is to anticipate the change,

plan for it and use it to our advantage to expand our business .

Globalisation is one of the most powerful factors driving the changes taking place in the business world today. We are competing in a world market in which technology has closed the gap from one country to another. No longer do we operate in a vast world where distance is a factor when conducting business. For this reason, we must adapt and change our strategies and philosophies for conducting business competitively.

No longer is mediocre service acceptable if businesses are to survive and prosper. Quality, customer-service and added value features represent the new criteria used when evaluating and selecting with whom we want to conduct business. Businesses will continue to adapt to the evolution of the global society.

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The change in the business environment is brought about by many factors such as the industry, economy, political environment, improvements in technology, and shift in values of the consumer. As the business environment evolves, the organisation culture, values, and beliefs of the business must be modified. In this environment few organisations can afford the change process to be slow. Therefore, many organisations have sought to develop and improve methods that support a more effective business process improvement, and have moved the focus to major performance changes, not just incremental changes.

New technologies (for example the Internet, mobile computing and groupware) are continuously providing new opportunities for businesses to exploit IT, thereby increasing the need to improve or re-design business processes. In today's global marketplace, constant changes are required to just stay even (remember ‘adapt and survive’ or ‘automate or die’?).

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To keep up with the evolutionary process of business and to meet the challenges of the new era organisations started to apply an innovative management technique called reengineering. Reengineering techniques set bold goals and allow organisations to shed the burden of tradition. In an effort to rapidly bring about radical change in the business necessary to realign operations with the current and future markets businesses initiated reengineering projects.

It includes moving from task based operations to value-added

activity or process-focused operations by focusing on processes and making them more efficient and productive as well as increasing customer service by changing business processes.

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What is BPR ?“The fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.”Michael Hammer and James Champy, 1993)

•The concept of BPR has been modified to Business Process Redesign, which can focus on anything from the redesign of an individual process, to redesign of a group of processes (e.g., all the processes involved in e-procurement), to redesign of the entire enterprise

•Business Process Management (BPM) is a new method for restructuring that combines workflow systems and redesign methods. This emerging technology covers three process categories: people-to-people systems-to-systems systems-to-people

Interactions, all from a process-centered perspective

Business Process Re-engineering (BPR)

• Globalisation is one of the most powerful factors driving the changes taking place in the business world today. We are competing in a world market in which technology has closed the gap from one country to another. No longer do we operate in a vast world where distance is a factor when conducting business. For this reason, we must adapt and change our strategies and philosophies for conducting business competitively

• BPR includes moving from task based operations to value-added activity or process-focused operations by focusing on processes and making them more efficient and productive as well as increasing customer service by changing business processes


Fitting commercial software Streamlining the supply chain Participating in public or private e-marketplaces Improving customer service Conducting e-procurement Enabling direct online marketing Reducing cost and improving productivity Restructuring old processes prior to automation Transformation to e-business Reducing cycle time Incorporating customisation Empowering employees


Drivers

Customer driven Automobile (e.g., VW) Retail industries (e.g., Wal-mart) Needs:

company-wide perspective Top management support Functional integration

Reduce the cost of doing business Uarco - $500 Million printing company

order management processFord - accounts payable Hewlett-Packard - decentralised autonomy with

centralised control


Case Studies

Objectives• Eliminate:

Obsolete(no longer in use) and inefficient processes

Obsolete regulations and controls

Unnecessary management overhead

Lengthy review and approval cycles


IT plays a major role in BPR. It is the tool business needs to change the processes for delivering new products and services.

It provides: automation, flexibility in manufacturing; allows businesses to be conducted in different locations; it permits quicker delivery to customers; it creates or facilitates new business models; and it supports rapid and paperless transactions among suppliers, manufacturers, and retailers

IT allows the redefinition of business processes, the breaking up of old rules and the establishment of new ones.

ISs can serve to position our organisations to take full advantage of the global market. However, failure to align our technologies to support globalisation of our core business processes will surely lead to extinction.

Relation between BPR & IT)

Risks for BPR Projects Poor implementation Poor change management practices Failure to overcome resistance by key

managers Failure to deal with fear and anxiety Poor training and recruitment practises


Support of:

Business processes and operations

Managerial decision making

Strategies for competitive advantage

Role of IS in the Enterprise

OVERALL INTEGRATION

Customer Relationship Management (CRM)

Partner Relationship Management

(PRM)

Other systems

Supply chain related systems

DSS

KM

Intelligent System Business intelligence

MRP

MRP II

SCM

ERP

(Turban et al, 2006:296)

Enterprise Systems

Overview

Enterprise Systems

(O’brien, 2004:p 163)

Equipment design

Needs analysis

Research

Market Test

Component Design

Product Test

Product Release

Process design

Production start

Marketing

R&D/Engineering

Manufacturing

The New Product Development Process of a Manufacturing Company

Cross-Functional Enterprise Applications

Cross the boundaries of traditional business functions in order to re-engineer and improve vital business processes all across the enterprise

A strategic way to use IT, Share information resources and improve the efficient and

effectiveness of business processes, and Develop strategic relationships with customers, suppliers,

and business partners

Enterprise Systems

Functional main-framed legacy systems

Integrated cross-functional client/server systems

Enterprise Resource Planning (ERP)Supply Chain Management (SCM)


Enterprise Systems

Customer Relationship Management Marketing. Sales. Services

Supply Chain Management Sourcing. Procurement

Enterprise Resource Planning Internal business processes

SUPPLIERSE

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O’brien p 164

What is a supply chain?“Describes the flow of material, information, money, services, from raw material suppliers through factories and warehouses to the end customer.”

(Turban et al., 2006:63)SCM – planning, organising, and optimising one or more activities of the supply chain

E-SCM – when a supply chain is managed electronically

Supply Chain Management (SCM)

An IS that supports several areas of business, e.g. order handling, manufacturing, shipping, financing

Combines a number of applications with a single database

“An integrated set of programs that provides support for core organisational activities such as:

manufacturing and logistics, finance and accounting, sales and marketing, and human resources.”(Aladwani, 2001)

Enterprise Resource Planning (ERP)

What is an ERP ?

ERP Application in Comparison to separate functional applications

Enterprise Resource Planning SystemM

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Informix Coda MRP II Oracle Peoplesoft

New

Old

Bocij, p678


History 1960s - MRP (Material Requirements Planning)

integration of production, purchasing and inventory management

1970s - MRP II (Manufacturing Resource Planning) MRP + labour requirements and financial planning

ERP

integration of functional IS

Integrates transaction processing activities of all functional areas in the entire enterprise


Acts as the backbone for the whole business

help an organisation to: assess the data it holds how that data can be better managed how to create better corporate intelligence what further data is needed

Aims to automate basic business processes - covers all routine transactions within a company including the internal suppliers and customers


Function

“ERP systems can be considered as an IT infrastructure able to facilitate the flow of information between all business processes in an organisation”

(Martin, 1998) Late 1990s – end of the First Generation ERP


Function

Second Generation ERP Aims to increase efficiency in handling

transactions, improve decision making, and (further) transform ways of doing business into e-commerce.


• Focused on specific business area– Combining logistics across business units– Global order management – showing a single face to

global customers– Shared services for manufacturing…etc.

Third Generation ERP

Enterprise Application Integration (EAI)

Front-Office CRM Applications

Customer Service Field Service Product Configuration Sales Order Entry

Back-Office ERP Applications

Distribution Manufacturing Scheduling Finance

EAI

(O’Brien, 2004, page 165)

software


Challenges Demands an unprecedented degree of

teamwork, process expertise, and business knowledge

Getting existing production data into the new system


Implementation Issues Strategy first – understand how ERP meets the organisation’s

large business objectives; necessity to treat as a business project rather than an IT project

Building a supportive IT infrastructure Skill shortage Continuing project A way of life Extensive training The need to update Ensuring a dedicated senior management Evaluation Standardisation Managing details Pilot programs


Benefits Reduced cost of buying from a single supplier Better transfer of information within the

organisation since all modules of the system are compatible

Support and maintenance through a single supplier

Use of ‘best-of-breed’ solutions applied by other companies


Success Stories Owens-Corning - was spending $30 million a year to

maintain its former ad-hoc collection of computer systems. Now, with a fully functional ERP system installed, their costs have reduced to a fraction of this

Compaq - the deployment of SAP R/3 allowed to reduce its inventories from $2.2 to $1.2 billion while sales were increasing rapidly


• CRM is in fact an approach that recognises that customers are the core of a particular business and that a company’s success depends on effectively managing relationship with them (Turban, 2002)

• CRM refers to a large variety of information systems from simple ones used for customer record maintenance to very sophisticated ones that can dynamically analyse and detect buying patterns of customers. More sophisticated systems can even predict when a customer is about to switch to a competitor

• CRM allows a view on the whole history of a customer’s relationship with a company

• To be a successful and viable firm in the actual competitive world, companies must have a customer-centric capability

• The new foundation for profitability is the customer relationship; sales to existing customers are more profitable than sales to new customers

• It can cost more for a company to acquire a new customer in terms of marketing, advertising and effort than to sell with an existing one. (Seybold, 2001)


The main goals of CRM are : To increase the customer service quality by using the one-to-

one relationship To reduce the amount of labour involved in serving customers

by quickly accessing useful information about each individual customer and learn as much as possible about the preferences of individual customers

(Oz, 2006).


CRM is an enterprise approach to understanding and influencing customer behaviour through meaningful communications in order to improve Customer acquisition, Customer retention, Customer loyalty and Customer profitability Customer acquisition - the marketing goal of getting new clients, that is

selling to people who were not already customers. (Glossary of VDP terms, 2006)

Customer retention - the marketing goal of striving to keep customers from going to competitors. The prime rule is that it can cost ten times less to keep a customer than it does to acquire a new one. (Glossary of VDP terms, 2006)

Customer loyalty - planning to provide incentives to a company’s top customers, the company select the best customers with whom it wishes to form lifelong associations (Prenhall Glossary, 2000).

Customer Profitability - the aptitude to comprehend revenue contribution by individual customer or a customer group; examination of customers and findings which type of clientele bring revenue most and to what extent, but also which products or services are profitable and what are the reasons behind


Support to Marketing CRM systems provide support to direct marketing

campaigns by enabling the capture of prospect and customer records, these are then used for providing products and service information, used for qualifying leads for targeted advertising and for setting up and tracking of direct marketing correspondence

CRM modules that are related to marketing would also comprise tools for analysing markets and customer figures, spot profitable and unprofitable clients, help design new products or services to suit precise customer requirements and interests. These tools would also discover opportunities for Cross-selling, Up-selling and Bundling


Support to Marketing Cross-selling - promotion of corresponding products to

customers (e.g., persuading a customer who has recently bought a mortgage to take a home improvement loan)

Up-selling - selling of upper-value products or services to present customers (e.g., proposition and persuasion to a customer to upgrade his or her conventional credit card to a ‘platinum’ card with a larger credit line. These offers normally comes with supplementary services and an elevated annual bill)

Bundling - a type of cross-selling in which a mixture of products is offered as a package at a lower cost than the total cost of the individuals (e.g., Verizon promotes telephone services packages that comprise local and long distance calls, voice mail services, caller identification and DSL access)


Documents

Lect 4 BPR- Enterprise Systems