Chap 7: Business Process Management

What is BPM?

• Systematic process of creating, assessing, altering business processes.

• Consider the example used in your book that discusses the process of ordering a product from a online retailers website

• The process would need to be able to capture a a lot of information

– Items being purchased– Quantity– Size, color– How will customer pay?

BPM: Four stages

Those 4 stages of BPM

1. Create model of business process components– Users review and adjust model– “As-is model” documents current process; it is changed to solve

process problems

2. Create system components– Uses five elements of IS (hardware, software, data, procedures, people)

3. Implement business process

4. Create policy for ongoing assessment of process effectiveness

Adjust and repeat cycles

Scope of BPM

Typical Functional Systems

Problems with Functional Systems• They tend to be isolated.

Often referred to as “Islands of Automation” or “Information Silos”

• This is because they work in isolation from one another

• This type of system cannot not as productive and efficient as organizations would like them to be

• Why?

• Purchasing influences inventory, which influences production, which influences customer satisfaction, which influences, future sales…..

• Cross-functional processes involve activities among several business departments.

• Example: customer relationship management (CRM) is a process that integrates activities of several departments, including sales, marketing, operations, accounting, and customer support.

• Cross-functional processes eliminate, or drastically reduce, problems of isolated systems and data.

• Example: Before an important sales call, salespeople can use a CRM system to learn if the customer has any outstanding issues or problems in customer support. Or, customer support can know which customers have high volume and justify high levels of support.

Cross-Functional Processes

• Activities that process credit card transactions and activities at the shipper

• Supply chain management (SCM) processes involve organizational integration. In some cases, SCM company will have information systems

that directly access processes in your own company.

• Processes much more complex than functional or cross-functional systems Involve different managers and owners Problem resolution occurs via negotiation, contracts, and even litigation.

Interorganizational Processes

• Critical for a team to agree on both what is and what ought to be.

• Must have some notation for documenting processes and one common standard for creating process documentation.

How Do Organizations Solve Process Problems?

• Dozens of definitions are used by authors, industry analysts, and software products.

IBM’S WebSphere Business Modeler uses a different set of terms. It has activities and resources, but uses “repository” for facility and “business item” for data.

Other business-modeling software products use other definitions and terms.

• These differences and inconsistencies can be problematic when two different organizations with two different sets of definitions must work together.

How Do Organizations Solve Process Problems?

• Object Management Group (OMG) created a standard set of terms and graphical notations for documenting business processes.

• That standard, called Business Process Modeling Notation (BPMN), is documented at

How Do Organizations Solve Process Problems?

BPMN Process Diagram of Top-Level Business Processes at MRV

• Software industry standardized notation for BPMN by Object Management Group (OMG)

Business Process Modeling Notation (BPMN)

Figure 7.7

Task Assignments: Business Process with Three Swim Lanes

1. Adding a specialist to each activity in the process

Three Ways of Changing Business Processes

Figure 7.10

Three Ways of Changing Business Processes

2. Changing a process by altering process structure

• Changing a process by altering process structure

3 ways of changing business processes

3. Combination of adding (or reducing) resources and changing the process

• Goal of some business process changes is to enable organization to reduce resources required to obtain the same result.

• Changing both resources and process structure is more complicated and has greater potential, but will cause the organization more turmoil, and be more difficult to implement.

• IS Roles To Implement business process activities May be entirely manual, automated, or mixed

information systems

Role of Information Systems in Business Processes

7-19

• CRM Tracks all interactions with customer from prospect through customer

service Integrates all primary activities of value chain

• Supports four phases of customer life cycle1. Marketing—marketing sends messages to target market2. Customer Acquisition—customer prospects order and need to be

supported3. Relationship Management—support and resale processes increase

value to existing customers4. Loss/churn—win-back processes categorize customers according to

value and attempt to win back high-value customers

Functions and Characteristics of CRM Information Systems

CE12-20

CRM integrates primary value chain activities

Scope of CRM in Value ChainActivities

Four Phases of the Customer Life Cycle

• Figure CE12-4

Major Components of CRM Applications

CRM Centered on IntegratedCustomer Database

1. Integrate primary value chain activities with human resources and accounting

2. Cross-functional, process view of entire organization3. Represent ultimate in cross-functional systems

Track customers, process orders, manage inventory, pay employees, and provide general ledger, payable, receivables, and necessary accounting functions

4. Outgrowth of MRP II

Functions and Characteristics of Enterprise Resource Planning

(ERP) Information Systems

ERP Applications and the Value Chain

• Primary ERP users are manufacturing companies. • First and most successful vendor of ERP software is SAP. • More than 12 million people used SAP in over 91,000 SAP installations.

Worldwide, SAP has over 47,000 different customers (2008).• Oracle is a second major ERP vendor. • ERP vendors provide software and predesigned databases, predefined

procedures, and job descriptions for organization-wide process integration.

• Beware: Some vendors misapply the term ERP to their systems. There is no truth-in-ERP-advertising group to ensure that all of the vendors that claim ERP capability have anything remotely close to it.

ERP Facts

• Entire organization is a collection of interrelated activities and cross-functional processes

• Formal approach based on documented, tested business models

• Process blueprint documents each process with diagrams using standard symbols

• Centralized database• Can be slow to implement • Very costly—new hardware and software, developing new

procedures, training employees, converting data, and other developmental expenses

ERP Characteristics

ERP Characteristics

Example of SAP OrderingProcess

• Efficient business processes that are effective• Inventory reduction• Lead-time reduction• Improved customer service• Greater real-time insight into organization• Higher profitability• No data inconsistency problems due to integrated database• Business process blueprints tested in hundreds of

organizations

Benefits of ERP

CE12-31

1. Model current business processes “as is”2. Identify relevant ERP blueprint processes3. Compare as-is process models with relevant blueprints and

note differences4. Find ways to eliminate differences5. Prepare detailed plan6. Train users on new processes, procedures, use of ERP

features and functions7. Conduct simulation to test new system8. Convert data, procedures, personnel to new system9. Follow phased system conversion approach

How Is an ERP System Implemented?

ERP Implementation