WEEK2:ENTERPRISESYSTEMS&BUSINESSPROCESSREENGINEERING

BUSINESSPROCESSES:

Missionstatement:expressionoftheorganisation’svision,businessdomain,competenciesandvalues

Strategy:choiceaboutasourceofaction,meansofputtingamisnstatementintoplace

Threelevelsofstrategies:

1. Internal:decisionsthataremadewithinanorganisation2. Competitive:understandingtheindustrythecompanyoperatesin3. Businessportfolio:whichindustrythecompanyshouldcompetewithinandhowtocompete

withnewindustries

Strategy(Cont.):

• Determineshowanorganisationdealswithitscompetitorandwhatproductstoselltowhatmarketsandthroughwhatdeliverymethods

1. Costleadership:Carriesoutactivitiescheaperthanotherfirmse.g.economiesofscale,technology,lowoverheadcosts

2.Differentiationstrategy:businessesaddingextraforcustomers–canchargehigherprice/ offeringuniqueproductsandservicestargetedtoacustomer’sneeds

Implementationandattainmentofthesealternativestrategiesconsistsof5steps[Porter’s]

1. Operationaleffectiveness:beingabletodothingsbetterthancompetitor2. Uniqueness:activitiesdifferenttorestofthemarkets3. Trade-offs:makeconsciouschoicesaboutmarketitwishestoserve,theproductorserviceitwishes

toprovide&meansofdelivery4. Fit:howdifferentactivitiesinanorganisationcombinetoachieveacommonobjective5. Sustainability:moreactivities=harderforcompetitors

5Forcesthatshapeindustry[Porter’s]

1. Rivalryamongexistingcompetitors2. Threatofsubstituteproductsorservices3. Bargainingpowerofsupplies4. Bargainingpowerofbuyers5. Threatsofnewentrants

Reasonsforbusinessprocess(re)design:

• ManagementChange:Functionallybasedstructuremustbechanged.Drivecomesfromthetop• PeopleChange:Narrowlydefinedspecialistjobsmaybecomegeneralistanddiverse.

Note:Businessprocessesarenotstatic.Newtechnology,fiercecompetition,changetobusinessenvironment

2MajorApproachesofbusinessprocess(re)design:

1. TotalQualityManagement(TQM)2. BusinessProcessRe-Engineering(BPR)

TotalQualityManagement:seriesofsmallprogressivestepsisthebestwaytoimproveoperations

1. Quality:costofpoorqualityaregreaterthanthecostsassociatedwithdevelopingandrefiningbusinessprocesstogeneratehigh-qualityoutput

2. People:howpeoplewithinorganisationarevaluedfortheircontributiontowardstheprocessandtheirideaonhowtheprocesscanbeimproved

3. Organisation:ensuredepartmentsdonotoperateseparatelyàneedtointeract4. Management:Managementmustfocusonprocessesratherthanindividualfunctions.Mustcome

fromthetop

BusinessProcessRe-Engineering(BPR)

• Radicalchangestoachievedramaticimprovementso e.g.cost,quality,service&speed

• Thiscanberiskythoughàifgoeswrong,andestroywhatyoualreadyhave• Keycomponents:

o Fundamental:forcesanorganisationtoquestionwhatactivitiesitperformsaspartofitscurrentprocess

o Radical:compelsorganisationstostartagaino Dramatic:expectedreturnontheimprovementso Process:aspectiscentraltoBPR

• Principlesinpractice:o Combinesjobsandletworkersmakedecisionso Createsasinglereferencepointforcustomerso Performstepsinanaturalorderandattheirlogicallocationo Allowprocessestovaryo Reducetheimpedimentofcontrolsandreconciliations

• PrinciplesandapproachesforaBPRteam:o Establishasenseofurgency–convinceeveryonetochangeo Formaleadershipteam–whoshouldbetheteammembers?o Createandcommunicateavisiono Empowerotherstomeetthevision–employeere-training?o Planforandcreateshortteamwins–positivefeedbacko Consolidateimprovementsandencouragefurtherchange–notjustchangetheprocesses,

changingthecompanyo Institutionalisethenewapproaches–newwaybecomestheusualway

• Technology-drivenprocessimprovements:o Technologyenablerofbusinessprocesses–hastobedonecorrectly(e.g.barscanner)

• OutcomesfromBPRo Functionaltoprocesso Jobchange,peopleempoweredtofitproblemso Highrisk,lotsofchangeo Dictatedfromthetop

• Examples:o Barcode,vendormanagedinventory(outsourcesinventory),electronicbillpayment,BPAY

• Technology:o Fourofbenefits

1. Information-based2. Strategy-based3. Transaction-based4. Change-based

EnterpriseInformationSystems(EIS)

• Softwareapplications–usedbybusinessestocapturetransactionsandproduceoutputsforplanning,decisionmakingandstatutoryreporting

• ThreecategoriesofEIS1. Single-entrysystems2. Inwardlyorganisedsystems3. Outwardlyorganisedsystems–suggestwaystoimprovesourcingorrawmaterialsor

increasingrevenue/increasecustomerexperience• Threetypicalprocesses:

o Sales(=‘Revenue’or‘Fulfilment’)o Purchasing(=‘Expenditure’or‘Procurement’)o Production(=’Manufacture’)

• ThreeCategoriesofEIS:o Single-entrysystems

§ Recordtransactionandobligations§ Designedforindividualusers§ Requireslittleaccountingknowledge,easytouse,performfinancialMGMT,

investmentprocessandtrackinvestmentperformanceo Inwardlyorganisedsystems

§ Recordandmonitorbusinessandmanufacturingprocesseswithinorganisations§ Captureallinternalactivitiesofanorganisation

o Outwardlyorganisedsystems§ Supposedorganisation’sinternalactivities§ Extendthecaptureofdatatosuppliers

• Choosingasoftware

o Definethebusinessprocesso Lookatbusinessrequirementso Determinewhatthesystemneedso Lookatcategoryofsoftwareneededbytheorganisationo Determinethevendorthatwillprovidethesoftware

• Single-entrySystemso Softwareonlyrecordstransactionsandobligationso Forindividualuserorsmallbusinesseso Recordcashtransactionsthroughalinktotheorganisationsbanko Requireslittleaccountingknowledge+easytouseo Lakofclassificationinthesystemo Doesn’tlookatnon-financialinformation

• BookkeepingSystemso Makeuseofaccrualaccountingconceptso Usedbysmallbusinesso Cangeneratenon-financialinfoo Easytouse,canbeusedonafewnetworkso Allpre-programmedreports,ledgersandchartsofaccountso E.g.MYOB

• HybridSystemso Integratesoperationsandfinancialfunctionso Looksatmanufacturing,inventory,warehouseandcustomerinformationsystemso Helpswithdecisionstodowithoperationsandfinancebutrequireslotsofeffortto

integrates

EnterpriseResourcePlanning(ERP)Systems

• Softwaredesignedtocaptureawiderangeofinfoaboutallkeybusinesseventsincludingaccounting,finance,HR,sales,markingandmanufacturing

• Eachvendorhastheirownbusinessprocessesandorganisationtendstoadopttheseoutforconvenience

• Allactivitieshavedataonwho,what,whereandwhen• ERPsystemsfacilitatetheflowofinformationbetweenallbusinessfunctions(i.e.departments)inside

theboundariesoftheorganisationàERPisaninwardlyorganisedsystem• ERPsupport:revenuesalesorordercash

o Paymentpurchasesorpurchasestopayo Productionmanufacturingorconversiono Humanresourcesandpayrollo Generalledgerandfinancialreporting

• Theyareinwardlyorganisedsystem:facilitatetheflowofinformationbetweenallbusinessfunctions• Businessdata:containsfinancialandnon-financialreferenceinformationthatrecordsandtracksthe

statusofbusinessactivitiespriortocompletion• MasterData:containscompletedtransactionalinfosuchassalestransactions• Benefits:easierglobalintegrations,reducesmoneybarriers

o Don’thavetoupdateeachcomputerseparatelyo Eitherquantifiablebenefitsandintangiblebenefitso Reducescostofinventory,materialsandlabouro Improvescustomerserviceandsaleso Increasedreturnoninvestmento Nolongerhaveduplicatedfiles

• Canbeidentifiedintotwotypesofbenefitso Quantifiablebenefitso Intangiblebenefits

• Single-sourcedERP:allsystemormodulecontainedwithinthesystemareprovidedbyasinglesoftware

• Best-of-bred:allowsorganisationstochoosemultipleERPvendorswiththebestfunctionality

Single-Source Best-of-Breed

Functionality Fitbestinorganisationthatspanabroadrangeoffunctionswherehorizontalstructuresarerequired

Fitbestinorganisationsthatarehighlyverticallyintegratedandrequirespecialfeaturesspecialfeaturesfortheiroperationsandbusinessprocesses.

Supply&Support Easyupgrades,supplyandsupportbyoneERPvendor

UpgradesareunsynchronisedandorganisationsneedtorundifferentversionsofERPmodules

LookandFeel Astandardisedpresentation Adifferentlookandfeelforeachofthemodules

UserTraining Trainedingroupsforthecompletesuiteofsoftware

Usersnormallyspecialiseintheirownapplicationswithseparatetrainings

CodeTable Shareddatabaseacrosstheorganisation.Onelocationofdata.

Multipledatatables,multipledataformats.

• ModulesinERPo Salesanddistributiono MaterialsManagemento FinancialAccountingo Controllingandprofitabilityanalysiso Humanresources

MichaelPorter’sValueChain:

• Inboundlogistics–receiving,storinganddisseminatinginputstotheproducts• Operations–transforminginputsintofinalproduct• Outboundlogistics–collecting,storingandphysicallydistributingtheproducttobuyers• Marketingandsales–inducingthebuyerstopurchasetheproductandprovidingameansforthem

todoso• Service–assistingcustomer’suseoftheproductandthusmaintainingandenhancingtheproduct’s

value

WEEK3:SYSTEMSDOCUMENTATION

SYSTEMDOCUMENTATION:

• awayofvisuallydepictingtheoperationsofasystem• amap–howthingsmovearoundandwhattheyare• roadmapstounderstandbusinessandnavigateprocesses• Addressesoneormoreofthefollowing:

o Whoisinvolvedo Whatactivitiesoccuro Wheredotheactivitiesoccuro Wheredotheactivitiesfitwithintherestoftheorganisation

Whydoweneedthem?

• Can’trelyonverbaldescription,weneedtodocumentit• Needtoensurethateveryoneunderstandstheprocess,mayhaveseveraldifferentdescriptions

o E.g.textualandgraphical• Organisationshaveoverlappingdepartmentsthattransferinformation• Servesasorganisationmemory• Visualisesbusinessprocessandhowdatamoveswithinanorganisation

Whydoaccountantsneedit?

• Interestedinoperationsofbusinessprocesses,internalcontrolsanddataflowswithorganisations• Cannavigatedifferentprocess

MajortypesofSystemdocumentation:

• Nomethodwillprovideeverything

ProcessMaps:

• Asimplegraphicalrepresentationofabusinessprocess• Solidlinesarefunctionalareas• Sub-functionsseparatedwithdashedlines• Lineswitharrowsaredocuments• Rectangle=process(notdocuments),diamond=decision• Readlefttoright,toptobottom

SystemFlowchart:

• Illustratedinputs,processesandoutputsinmoredetailthanDFDorprocessmaps• Hasinformationaboutdocumentsandprocessesperformedwiththesystemaswellasthoseinvolved

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DataFlowDiagram(DFD)

• Graphicalrepresentationofthedataflowthatoccurwithinasystem.• Threetypes

o Contextdiagrams§ Outlinesgeneralscenario§ Providesarepresentationofthesystemandtheentitiesthatprovideinputsto,or

receiveoutputsfromthesystemofinterest§ Onlyhasonebubble§ Mustbeatleastoneexternalentity§ Canhavemultipleflowsfromentity§ Saysnothingaboutwhatishappening§ Showshowmanyexternal/internalentities§ Rectangles=externalentities

•

o PhysicalDFD§ Outlineswho,whereandhow§ Number=structurednarrative§ Doublelines=representswherethedataisstored§ Havesamenumberofrectanglesasitscorrespondingcontextdiagram§ Bubblesnamescanbeaperson,departmentorthing§ Depictsthenormalprocess§ Inotherwords,errorroutinesareNOTdepictedinphysicalDFD

o o LogicalDFD

§ Outlineswhatishappening§ Showswhatproceduresarehappeninginthesystem§ Notallnumberspresent§ Canshowmanydifferentlevels

§ CircledepictsprocessNOTentity(e.g.entersales,createbatchtotal)

• Itcanbeexplodedintomanylevelsdependinguponthecomplexityofthesystemofinterest• Errorroutinesareonlydepictedonlowerleveldiagrams(i.e.belowlevel0)

o Level0logicalDFD–highestlevelofdepictionofthemajorgroupofactivitiesinthesystemofinterest

o Level1logicalDFD–takesoneoftheprocessbubblesfromlevel0andexpandsittoprovidedetailabouttheactivities

Entities:anyperson(who)orthing(what)involvedintheactivitiesofabusinessprocess

• DFDsidentifytwotypesofentities:

o Anexternalentityisanyentitythatprovidesinputsintoaprocessorreceivesoutputsfromaprocess.

• Contextdiagrams,physicalDFDandlogicalDFDusesrectanglestorepresentexternalentities

o Aninternalentityisanentitythatprocessesortransformsthedatawithinthebusinessprocessofinterest.

• ContextdiagramsandlogicalDFDdonotshowinternalentities

• PhysicalDFDusecirclestorepresentinternalentities

• Notethat,anexternalentityisnotnecessarilyexternaltoanorganization

Structurednarration:writtendescriptionofhowaprocessoperates

WEEK4:DATAFLOWDIAGRAMS:

BALANCING:

• Diagrams(context,physicaldataandlogicaldataflow)withthesameexternalentitiesandflowstoandfromtheseexternalentitiesarecalledbalanceDFD)

• Canhavedifferentnumberorbubbles,theflowneedtobalance• Theyarebalancedwhere

o TwoDFDshaveequivalentexternaldataflowso Todrawthemcorrectly,thefollowingpairsshouldbebalanced

• Contextandphysical• Physicalandlogicallevel0• Contextandlogicallevel0

• DevelopingaCONTEXTDiagram:(Narrationisgiven)1. Identifythesystemofinterest

• Drawabubbleandlabelittorepresentthesystemofinterest2. Identifytheexternalentities

• Drawandlabelarectangleforeachexternalentity3. Identifyanydataflowsbetweentheexternalentitiesandsystemofinterest4. Drawinthedataflowsconnectingtheexternalentitiesandsystemofinterestand

labelthemaccordingly• Rectanglesaroundentities• Circlearoundactivities• Doublelinesarounddatastores

o Checklist§ Only1bubble§ Nodatastore§ Bubblenameistodescribeprocess§ Alldataflowshavelogicalnames

• DevelopingaPHYSICALDFD1. Identifytheexternalentities

• Drawandlabelarectangleforeachexternalentity2. Identifytheinternalentities

• Drawandlabelarectangleforeachexternalentity3. Drawinabubbleforeachinternalentityandlabelaccordingly4. Identifyanydataflowsbetweenexternalandinternalentities

• Drawintheseflowsandlabelthedataflowarrows5. Identifythedataflowsbetweentheinternalentities

• Drawinthedataflowsbetweeninternalentitiesandlabelthearrowswiththephysicaldocument/informationthatisbeingsentorreceived

o 6.Identifyanydatastoresthatareaccessedtogetdataortostoredataaspartoftheprocess.Thesemaybepaperbasedorelectronic

• Drawthesedatastoresinandlinkthemtotheentitythataccessesthembyincludingdataflowarrows