Dr. Chen, Management Information Systems PART III: Next Three Chapters Chapter 7: Structured Processes and Information Systems Discusses structured business

Dr. Chen, Management Information Systems

PART III:Next Three Chapters

Chapter 7: Structured Processes and Information Systems

• Discusses structured business processes and ways information systems can improve process quality

Chapter 8: Social Media Information Systems• Addresses dynamic processes used with social

networking applications

Chapter 9: Business Intelligence Systems• Discusses business intelligence and related

information systems

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Chapter 7Structured Processes and

Information Systems

Jason C. H. Chen, Ph.D.Professor of MIS

School of Business AdministrationGonzaga UniversitySpokane, WA 99258

[email protected]

2


Fox Lake Country Club

• Exclusive private golf and tennis club• 1500 memberships• 35 full-time and 100+ seasonal employees• Business units:

Restaurant, pro shop, facilities, new wedding-hosting events

Tennis, swimming activities and the pro shop are ignored in the study

• Hit hard by recession

3


Fox Lake Country Club Has a Problem

• Mike, facilities manager• Anne, wedding planner

• Renovation plan interferes with scheduled weddings

• Could result in lost revenue, unhappy customers, damaged business reputation and costly law suits

• What are missing and needed for the Fox Lake Country Club.

• Answer – Structured Processes and “relevant” Information Systems

4


Study Questions

Q1: What are the basic types of structured processes?

Q2: How can information systems improve process quality?

Q3: How do enterprise systems eliminate problems of information silos?

Q4: How do CRM, ERP, and EAI support structured enterprise processes?

Q5: What are the elements of an ERP System?

Q6: What are the challenges of implementing enterprise systems?

Q7: How will service-oriented architecture impact enterprise information systems?

Q8: 2022?

5


Study Elements

Four important elements can be summarized in this chapter:

1a. What is “structured processes” and what are the basic types of structured processes?

1b. How can information systems improve process quality?2. What is “information silos” and how do enterprise

systems eliminate problems of information silos?3a. What are CRM, ERP, and EAI and how do “they”

support structured enterprise processes?3b. What are the elements of an ERP System?4a. What Are the Challenges When Implementing New

Enterprise Systems?4b. How will service-oriented architecture (SOA) impact

enterprise information systems?6


Q1. What are Business Process and Business Process Management?

• Business process: A network of activities that generate value by transforming inputs into outputs ( and to achieve a defined business outcome,)– Fig. 7.1 a three-activity process for approving customer

orders.

• Busisness process management (BPM) is a management approach focused on aligning all aspects of an organization with the wants and needs of clients. It is a holistic management approach[1] that promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology.

Dr. Chen, The Trends of the Information Systems Technology TM -7

http://en.wikipedia.org/wiki/Business_process_management7

http://en.wikipedia.org/wiki/Business_process_management


What are Business Process and Business Process Management?

• Business process: A set of logically related tasks performed to achieved a defined business outcome

• Business process management (BPM) is a management approach focused on aligning all aspects of an organization with the wants and needs of clients. It is a holistic management approach[1] that promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology.

Dr. Chen, The Trends of the Information Systems Technology TM -8


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What Are the Basic Types of Structured Processes?

9Fig 7-1 Business Process with Three Activities


Structured vs. Dynamic Processes

• Structured processes– Formally defined, standardized processes that involve

day-to-day operations.– E.g., accepting a return, placing an order, purchasing

raw materials.

• Dynamic processes– Flexible, informal, and adaptive processes that

normally involve strategic and less specific managerial decisions and activities.

– E.g., whether to open a new store location or how best to solve the problem of excessive product returns.

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Q/A

Which of the following is an example of a dynamic process?• A) Samsung accepts a return of a defective television from

its dealer.• B) Starbucks places an order for coffee beans from its local

supplier.• C) Amazon.com hires customer service respresentatives to

help customers with their online orders.• D) Nike uses Facebook and Twitter to generate buzz about

its new line of running shoes.• Answer:

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How Do Structured Processes Differ from Dynamic Processes?

12Fig 7-2: Structured vs. Dynamic Processes


Different Structured Processes and IS• Structured departmental process

– a structured process that exists to enable departmental employees to fulfill the charter purpose, and goals of a particular organizational unit (see Fig. 7-3&4)

• Departmental information system– an IS that exists o support a departmental process

• Structured enterprise processes– Structured processes that span an organization and support activities in

multiple departments.

• Structured information system– an IS that exists o support a departmental process

• Structured ________________ processes– Structured processes that span two or more independent organizations. At Fox

Lake, the process that are restaurant uses to order supplies and ingredients from its suppliers is an example.

• Structured Interenterprise information system– an IS that exists o support an interenterprise process

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Interenterprise


Common Departmental Information Systems

14Fig 7-3: Common Departmental Information Systems


How Do Structured Processes Vary by Scope?

15Fig 7-4: Scope of Structured Processes


Q2: How Can Information Systems Improve Process Quality?

• Processes are the fabric of organizations; they are the means by which people organize their activities to achieve the organization’s goals.

• Two dimensions of process quality:• Process __________: ratio of process outputs to inputs. • Process ___________: how well a process achieves

organizational strategy

• Ways to improve process quality Change process ___________ Change process ___________ Change both

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efficiency

effectiveness

structure

resources


How Can Information Systems Improve Process Quality?

1. Performing an activity– Partially automated, completely automated

2. Augmenting human performing activity– Common reservation system

3. Controlling process flow– Order approval process

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Q3: What is Information Silo?

• Information Silo– is a condition that exists when data are isolated in separated

information systems.– For example, if an organization uses one IS for order

processing and a second IS for customer service, the customer data are isolated in two separate systems.

– Result: the customer service department might provide thousands of dollars of customer support to a customer who has only ordered a few hundred dollars of product.

– Other Disadvantages:• Wasting resources (and then increasing the cost)• Data are not integrated, consequently, information might be

inconsistent (and inaccurate) and affect the quality of decision making.

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Q3: How Do Enterprise Systems Eliminate Information Silo Problems?

• No organization plans to create information silos. They arise as a consequence of IS that support departmental rather than enterprise-level processes.

• Specifically, how do Information System Silos arise?– Data isolated in islands of automation– Different department goals– Different personal and workgroup needs– Duplicate data as organization grows

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Fox Lake Country Club Departmental Goals

20Fig 7-5: Fox Lake Country Club Departmental Goals


Islands of Automation (Information Silo)

21Fig 7-6: Fox Lake Country Club Departmental IS

[one-time event]

[ repeated customers]

[ maintenance and problem solving within budget]


Islands of Automation (Information Silo)

• Information silo (or islands automation) are not a problem until process begin to use and store data about the same entities (or until they duplicate data).

• At that point they become quite problematic.• Fox Lake learned when the wedding events

department maintained its own copy of room reservation data that duplicated same data in the facilities department.

• By storing isolated data, their activities can conflict, as they did. (see Figure 7-7 for a Hospital example)

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Examples of Islands of Automation at a Hospital

23Fig 7-7: Examples of Islands of Automation at a Hospital

(issue discharge

order)

(prepare patients)

(take-home medication)

(stop making meals)

(clean room) (family to be

notified)

much data are not integrated


What Problems Do Information Silos Cause?

24Fig 7-8: Problems Caused by Information Silos

(w/credit return of $5,500 by Acct. dept, but,

Sales/Marketing dept. do not know)

(IndyMac was acquired by OneWest

Bank)

($32,300=$37,800-$5,500

???

$$$


How Do Enterprise Information Systems Eliminate Silos?

25Fig 7-9: Fox Lake Club Enterprise Reservation System

(shared database, consistent information,

quality decision making/services)

[1a]

[1b]

[1c]


An Enterprise System for Patient Discharge

26Fig 7-10: Example Enterprise Process and Information System

[1] [2a]

[2b]

[2c][3a] [3b][4a]

[4b]

[5a][5b]

Enterprise systems like the one in Fig. 7-10 were not feasible until network, data communication, and database technologies reached a sufficient level of capability and maturity in the late 1980s and early 1990s.


Customercentric

Who are the customers?Where are the customers?Their purchasing habitsHow to reach them?

What they need/want?How many they need/want?When they need/want?How to reach them?

Demands Products

IS/E-BUSINESS

BUSINESS VALUE & FOCUS –IS Perspective

• SCM• CRM• BPR• ERP

Value

Business Models & Strategies27

SCM: Supply Chain Mgt. CRM: Customer Relationship Mgt.BPR: Business Process ReengineeringERP: Enterprise Resources Planning


Manufacturing Industry Value Chain Product and Service Flow

Research and Development

EngineeringProduction

and Manufacturing

Marketing Sales and

DistributionService

Primary Activities

Administrative and Other Indirect Value Added

Administrative and Other Indirect Value Added

Support Activities

N28


How do functional systems relate to the value chain?

Chapter 3. Reorganized Porter Value Chain Model

Porter’s value chain model from Chapter 3 is reorganized to show primary and support activities from a customer’s perspective, beginning with Marketing and Sales on the left, to Service and Support on the right.

Com

petitive

Adv

anta

ge

(Value)


Q4: How Do CRM, ERP and EAI Support Enterprise Processes?

Business Process Reengineering (BPR)• BPR means radically changing how people work -

changing business policies and controls, systems and technology, organizational relationships and business practices, and reward programs.

• Integrated data, enterprise systems create stronger, faster, more effective linkages in value chains

• Difficult, slow, and exceedingly expensive • Key personnel determine how best to use new technology • Requires high-level and expensive skills and considerable

time

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Deconstruction of the newspaper industry: BPR

Old newspaper industry value chain

Journalists

Columnists

Editors Printers Distributors Readers

New newspaper industry value chain

_____

Journalists

Columnists

Editors

Readers

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BPR

Radical Change = New organization + IT

Types ofOrganizational =Strategies

IndustryStructure +

CompetitiveStrategies +

CooperativeStrategies

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Emergence of Enterprise Application Solutions.

• The process quality benefits of enterprise-wide systems became apparent; however, as applications became more and more complex, in-house development costs became infeasible.

• The organizations began to look more favorably on the idea of licensing pre-existing applications with “Inherent processes”: Predesigned procedures for using software products Based on “industry best practices”

• Three categories of enterprise applications emerged: Customer relationship management (CRM) Enterprise resource planning (ERP) Enterprise application integration (EAI)

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• CRM Suite of applications, a database, and a set of inherent processes Intended to support customer-centric organization Integrates all primary activities of value chain

• Manage all interactions with customer though four phases of customer life cycle: (Fig. 7-11)

1. 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

Customer Relationship Management (CRM)

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Four Phases of Customer Life Cycle

35Fig 7-11: The Customer Life Cycle

Figure 7-11 depicts the four phases of the customer life cycle and shows how a CRM system integrates them into three major processes: solicitation, lead-tracking, and relationship management.


CRM Applications

36Fig 7-12: CRM Applications

Customer Relationship Management (CRM) systems store data in a single database and link CRM processes to one another.


A Marketing Strategy – showing the 4 P’s ofa Marketing Mix

PlaceProduct

Price Promotion

C

37


People, Process and Technology

Start with People

38


Customer Relationships

39


Enterprise Resource Planning (ERP)

• Enterprise Resource Planning (ERP)a suite of applications called modules, a database,

and a set of inherent processes for consolidating business operations into a single, consistent, computing platform.

An ERP system is an information system based on ERP technology.

ERP systems are not for every organization.Companies still have problem associated with information

silos.Companies should choose enterprise application integration

(EAI) to solve their problem (see next topic).40


Enterprise Resource Planning (ERP)

41Fig 7-13: ERP Applications

ERP systems include the functions of CRM systems, it also include accounting, manufacturing, inventory, and

human resource applications.


Pre-ERP Information System: Bicycle Manufacturer

42Fig 7-17: Pre-ERP Information Systems

Even if parts can be obtained, until the order is entered into the finished goods database, purchasing is unaware of the need to buy new parts.


Pre-ERP Information System: Bicycle Manufacturer

43Fig 7-17: Pre-ERP Information Systems

Information Silos (not integrated DB)


ERP Information System

44Fig 7-18: ERP Information Systems


EAI Automatically Makes Data Conversions Among Different Systems

“Virtual Integrated Database”

45Fig 7-20: Design and Implementation for the Five Components

T/F: Enterprise application integration is a suite of applications, a database, and a set of inherent processes for consolidating business

operations into a single, consistent, computing platform.

Answer:


Enterprise Application Integration (EAI)

• Enterprise Application Integration (EAI) is a suite of software applications that integrates existing systems by providing layers of software that connect applications together.

• EAI does not contain centralized database.• EAI does the following:

Connects system “islands”. Enables communicating and sharing data. Provides integrated information. Leverages existing systems – leaving functional applications

as is, but providing an integration layer over the top. Enables a gradual move to ERP.

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Dr. Chen, Management Information Systems 47

MRP: Manufacturing Resource Planning



MRP: Manufacturing Resource Planning


Q5: What Are the Elements of an ERPSystem?

• Integrate primary value chain activities with application programs, databases, procedures, training and consulting that integrate: Supply chain Manufacturing CRM Human Accounting

50


ERP Application Programs

• An ERP solution consists of the following: ERP application programs

Set configuration parameters

ERP databases Initial database design included Trigger program code Stored procedure code

ERP process blueprintsERP consulting and training

51


What is SAP?

S

A

P

Systems

Applications

Products...

in data processing

Company Originated in Walldorf, Germany 1972

52


SAP Ordering Business Process

53Fig 7-21: SAP Ordering Business Process


What Companies Are the Major ERP Vendors?

54Fig 7-22: Characteristics of Top ERP Vendors


Q6: What Are the Challenges WhenImplementing New Enterprise Systems?

• Implementing new enterprise systems (CRM, ERP, or EAI) is challenging, difficult, expensive, and risky.

• It is not unusual for enterprise system projects to be well over budget and a year or more late. The expense and risks arise from four primary factors:

Collaborative management Requirements gaps Transition problems Employee resistance due to threats to self-efficacy

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• 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

56


Q7. How Will Service-Oriented Architecture (SOA) Impact Enterprise Information Systems?

• Service-Oriented Architecture (SOA) is a software design philosophy in which activities are

organized into modules of functionality called Web services that are requested and delivered over the Internet using SOA standards.

• Web service Encapsulated software service provided anywhere over

the Internet Service description documents how to use service, and

publishes description using Web Service Description Language (WSDL)

Services delivered via XML, SOAP, REST, et al. Used by SAP, Oracle ERP

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Fig 7-24: Using Enterprise Application SOA Services


THE CONNECTED CORPORATION:THE FUTURE OF ERP

• Data points where SCM, CRM, and ERP integrate.• Lines between SCM, CRM, and ERP will continue to blur

– Internet – continue to help organizations integrate data and process across functional departments

– Interface – customizable employee browsers – Wireless technology – support a mobile workforce

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Q8: 2022?

• Islands of Automation, Version 2.0• Storing of data in various places in the iCloud,

while other versions of data stored in corporate data in SAP

• Version 2.0 silos more isolated and less secure than previous silos

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• End of Chapter 7

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Documents

Dr. Chen, Management Information Systems PART III: Next Three Chapters Chapter 7: Structured Processes and Information Systems Discusses structured business