Enterprise Resource Planning, 1st Edition by Mary Sumner Chapter 2: Re-engineering and Enterprise Resource Planning Systems © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-1/17 Objectives • Recognize factors associated with the evolution of ERP systems – BPR – Client-server networking – Integrated databases • Examine role of process modeling in redesigning business models © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-2/17 Re-engineering • Fundamental rethinking and radical redesign of business processes Goal is to achieve major improvements in performance Efficient redesign of value chain • • – Primary activities • – Secondary activities • • Inbound logistics, operations, outbound logistics, marketing and sales, service Organizational activities, human resources, technology, purchasing Motivations – Deregulation, consolidation, customer sophistication, increased competition © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-3/17 © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-4/17 Business Process Re-engineering (BPR) • • • • • Technology used to mechanize work Create new business rules Remove outdated rules Improve responsiveness Reduce costs © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-5/17 Business Process Re-engineering (BPR), continued • Decentralize decision making – Become responsive to customer’s needs – Flatten organization • • Facilitated by information technology Redesign of jobs – New levels of judgment – New types of leaders ã Adaptable â Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-6/17 © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-7/17 Process Modeling • Business process – • Data store – • Data transferred between processes or from a process to data store Organizational unit – • Data needed by business process Data flow – • Business activities Units where processes take place Event – Includes triggers and outcomes © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-8/17 Neighborhood Food Cooperative • • • • • • • • Weekly cycle Members submit list Lists merged Orders placed for product by phone Suppliers confirm in writing with invoice Shipments made to cooperative Members collect product Cooperative pays net 10 days © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-9/17 Basis for Best Practices Supported by ERP Modules • Re-engineered process models – Improved process change depictions • Data integration – Among multiple processes • Structural changes – Streamline business functions – Maximized productivity © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-10/17 Reliable Finance Company • • • • • Expansion required redesign of existing system Needs enhanced information system Increase number of branches exponentially Achieve a competitive advantage Analysis of loan application system – – Reduce approval from 10-13 days to 2-3 days Improve access to databases for approval decisions © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-11/17 Failure in Re-engineering Rosenthal: – Apply “clean slate” approach • • • • Continuous training for new roles Measure performance Jobs must be redesigned Use rewards as incentives to change – Move away from status quo – Too narrowly focused – Project too general © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-12/17 Information Technology Facilitates ERP • • Client-server computing allows for increase power and control Integrated databases – Reduces redundancy • – – – Increases data consistency Supports multiple functional units Data maintained separately from application modules Database management systems • • • Central data administration Improved data integrity Improved control © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-13/17 Process Enterprises Changed management structures – Process responsibility given to “process owners” • Has process design authority – Stresses teamwork – Leans toward standardization of processes – Focuses on achieving goals © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-14/17 Case: Re-engineering the Payment Process System at RFC Current payment processing system – Customers: • Make payments at branch – • Mail payments to branch – – – • Manually processed Batched for deposit in afternoon Home Office mailed an Advice of Payment Received Payment made to Home Office – – – – Cash, check, money order Manually processed Batched for deposit in afternoon Branch mailed an Advice of Payment Received Each night, batch payment processing runs to update accounts © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-15/17 Case: Re-engineering the Payment Process System at RFC, continued • • Weekly delinquency analysis run Payment reminders sent out at 15, 30, 45, and 60 days – Computer generated • Settlement figures processed upon request – Urgent requests take overnight ã Major expansion planned â Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-16/17 Summary • • • • BPR allows the organization to rethink and radically redesign their business processes Process modeling of business activities change organizational management structures ERP systems are facilitated by IT Processes are standardized and teamwork enhanced © Prentice Hall, 2005: Enterprise Resource Planning, st Edition by Mary Sumner 2-17/17