Concepts in

1
Concepts in Enterprise Resource Planning 2nd
Edition Chapter 7 Process Modeling, Process
Improvement, and ERP Implementation
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Chapter Objectives

• Use basic flowcharting techniques to map a
  business process
• Develop an Event Processing Chain (EPC) diagram
  of a basic business process
• Evaluate the value added by each step in a
  business process
• Develop process improvement suggestions
• Discuss the key issues in managing an ERP
  implementation project
• Describe some of the key tools used in managing
  an ERP implementation project

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Process Modeling

• Business processes are complex, and require
  people with various skills and abilities to work
  in a cooperative fashion
• Processes will not be efficient and effective
  unless
• They are clearly defined
• Individuals are adequately trained in their roles
• Individuals understand how their roles fit in the
  overall process
• Process Modeling tools like flowcharting or
  process mapping provide a way to describe
  business processes so that everyone involved in
  the process can understand the process

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Flowcharting process models

• Flowcharts are the simplest process models
• Originated with computer programmers and
  mathematicians
• A flowchart is a clear, graphical representation
  of a process from beginning to end
• Flowcharts have been applied to business
  processes since the 1960s
• Process mapping is flowcharting applied
  specifically to an existing business process
• A range of symbols can be used, but only 5
  graphical elements are needed to map a process

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Figure 7.1 Basic flowcharting symbols
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Fitter Snacker Expense Report Process

• Defining the process boundaries is important to
  make the process mapping task manageable and to
  make sure the efforts are properly focused
• For the Fitter Snacker expense report process
  under consideration, the process begins after all
  expenses are incurred and ends when the employee
  receives a refund
• The process does not include
• Cash advances or corporate credit card
  considerations
• Reservation process
• Preferred airlines or hotels
• Rental car policies (type, insurance, fuel)

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Figure 7.2 Partial process map for Fitter
Snacker expense reporting process
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Extensions of Process Mapping

• Hierarchical Modeling is a process of describing
  processes in greater or lesser detail
• With complicated processes, it is frequently
  desirable to start with a general description of
  the process, then define different steps in more
  detail
• Deployment flowcharting or swimlane flowcharts
  are useful in clearly displaying the people or
  organizations responsible for tasks in the process

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Figure 7.3 Hierarchical modeling
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Sales Person
Sales Manager
AP Clerk
Auditor
Figure 7.4 Deployment, or swimlane, flowcharting
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Event Process Chain (EPC) Diagrams

• The EPC format uses only two symbols
• Events
• Functions
• SAP has developed EPC representations for many of
  the business processes its software supports
• The EPC modeling technique is available in the
  IDS/Scheer ARIS Toolset
• ARIS Architecture of Integrated Information
  System

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Event Process Chain (EPC) Diagrams

• Events represent a state or status in the process
• Events are named using Object?Past Participle
• Functions represent where change occurs in the
  process
• Functions are named using Verb?Object

Object Past Participle Expense Incurred Expense
report Approved Hard copy Filed
Object Past Participle Prepare Expense
report Review Expense report Mail Refund check
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Figure 7.5 EPC components
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Event Process Chain (EPC) Diagrams

• EPC Diagrams follow an event-function-event
  structure
• EPC Diagrams must begin and end with events
• Branching is done with three types of connectors
• AND
• OR
• XOR (exclusive OR)

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Figure 7.6 Basic EPC layout
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Figure 7.7 OR connector
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Figure 7.8 AND connector
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Figure 7.9 XOR connector
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Figure 7.10 OR connector with two triggering
events
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Figure 7.11 Possible connector and triggering
combinations
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Must use same connector to split and consolidate
a path
Figure 7.12 Splitting and consolidating process
paths
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Data Elements
Organizational Elements
Figure 7.13 EPC diagram with organizational and
data elements
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Process Improvement

• Process mapping tools describe processes in a
  universally understood format
• Task of completing a process map requires a team
  of key personnel and frequently uncovers process
  improvement opportunities
• Value Analysis is a technique that evaluates the
  value added by each activity in the process
• Activities can added
• Real value something the customer will pay for
• Business value helps the company run its
  business
• No value an activity that should be eliminated

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Process Improvement

• The Fitter Snacker expense report process does
  not provide real value, because customers would
  not pay for this activity if given a choice
• The process does provide business value, as
  employees should be compensated fairly for their
  expenses and fraud should be avoided
• Costs for this process should be minimized
• Activities should be evaluated by cost and
  elapsed time

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Questions to Identify Areas for Improvement

• Are there unnecessary checks and balances?
• Does the activity inspect or approve someone
  elses work?
• Does it require more than one signature?
• Are multiple copies required?
• Are copies stored for no apparent reason?
• Are copies sent to people who do not need the
  information?
• Is there unnecessary written correspondence?

H. James Harrington, Business Process Improvement
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Questions to Identify Areas for Improvement

• Are there people or agencies involved that impede
  the effectiveness and efficiency of the process?
• Do existing organizational procedures regularly
  impede the efficient, effective and timely
  performance of duties?
• Is someone approving something they already
  approved (for example, approving capital
  expenditures that were approved as part of a
  budget)?
• Is the same information being collected at more
  than one time or location? Are duplicate
  databases being maintained?

H. James Harrington, Business Process Improvement
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Concepts to Improve Business Processes

• Perform activities in parallel, for example,
  approvals
• Change the sequence of activities
• Reduce interruptions
• Avoid duplication or fragmentation of tasks
• Avoid complex flows and bottlenecks
• Combine similar activities
• Reduce the amount of handling
• Eliminate unused data
• Eliminate copies

H. James Harrington, Business Process Improvement
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Evaluating Process Improvement

• Implementing process changes can be
• Challenging
• Costly
• Time consuming
• Risky
• Dynamic process modeling can be used to evaluate
  process changes before they are implemented
• Dynamic process modeling uses computer simulation
  to evaluate the impact of process changes on
  performance measures like cycle time and cost

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Another LookBPI at Nova Chemicals

• Nova Chemicals is using Business Process
  Innovation to move from a function-oriented
  company to a process-oriented company
• According to John Wheeler, CIO
• Business process innovation is the process of
  improving processes. BPI is based on
  understanding the way you work. Once you
  understand the way you work, you can begin to
  improve the way you work.
• Nova has used IDS/Scheers ARIS Toolset to
  document its business processes
• Tool requires structure and discipline to use,
  but allows companies to understand all of their
  processes, not just the workflow

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Another LookBPI at Nova Chemicals

• Wheeler estimates only 10-15 of an IT projects
  cost is spent on technology and 30-40 is spent
  on understanding the current process
• Wheeler sees BPI as just the next step in the
  evolution of process improvement methods
• Quality circles
• Continuous improvement
• Business process reengineering
• BPI
• Innovations in methods and techniques can keep
  innovation fresh and new. BPI is a process,
  which can itself be improved

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ERP Workflow Tools

• The effectiveness of business processes that are
  performed sporadically can be poor, not because
  of negligence, but through lack of practice
• Especially true if process crosses functional
  boundaries
• Example New customer
• Sales can gather basic customer data, but
  Accounts Receivable must determine credit limit
• Workflow tools are software programs that
  automate the execution of business processes
• Workflow tools help coordinate complex processes
  and allow for the tracking of the status of a
  process

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SAP R/3 Workflow

• The SAP R/3 Workflow tool integrates
  organizational data to determine who should
  perform a transaction
• The Workflow tool uses SAPs internal e-mail
  system to route transactions to the appropriate
  person using workflow tasks
• Workflow tasks can include
• Basic information
• Notes
• Documents
• Decision options
• Links to transactions

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SAP R/3 Workflow

• Workflow tasks can be monitored by the SAP system
• If tasks are not completed on time, the workflow
  system can
• Change the tasks priority
• Send an e-mail reminder to the person responsible
• Send an e-mail to other parties
• The Workflow Builder is used to define the
  process behind the workflow
• Process steps
• Individuals involved

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First Step Create Notification of Absence
Process Logic
Figure 7.14 SAP R/3 Workflow Builder screen
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Figure 7.15 Absence request screen
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Figure 7.16 Managers Business Workplace with
workflow task
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Implementing ERP Systems

• Implementation was a major challenge in the late
  1990s as firms rushed to implement ERP systems to
  avoid the Y2K problem
• Implementations were hampered by a lack of
  experienced consultants
• Since 2000, the pace of implementations has
  slowed significantly
• Most Fortune 500 firms have implemented ERP
  systems
• Current growth is in small to midsize business
  market
• New products include Microsoft Great Plains and
  SAP Business One

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Implementing ERP Systems

• Firms that implemented ERP to avoid the Y2K
  problem likely installed ERP systems that covered
  only the basic functionality necessary to operate
  the business
• Many firms are looking to leverage their ERP
  investment by finding ways to improve their
  firms business processes
• These implementation projects are smaller in
  scope, but still require effective management for
  success

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ERP System Costs and Benefits

• Software licensing fees Most firms charge
  annual fees based on the number of users
• Consulting fees ERP implementations require
  experienced consultants with extensive experience
• Project team member time Key people must
  participate in the ERP implementation project to
  make sure that consultants understand their
  companys requirements
• Employee training Project team members need
  extensive training in the software, and all
  employees need training to work with the system
• Productivity losses No matter how effective the
  implementation, productivity will decrease during
  the first weeks and months after the system is
  implemented

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ERP System Costs and Benefits

• Companies must identify a significant financial
  benefit that will be generated by the ERP system
  to justify the money spent on it
• To only way companies can save money with ERP
  systems is to use them to make their business
  processes more efficient and effective
• It is possible for a company to recreate its
  old information system in SAP using modifications
  via ABAP programming, rather than adopt best
  practices

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Implementation Change and Management

• Key challenge in managing ERP implementations is
  managing people, not technology
• More effective processes require fewer people
• Some employees will not be needed after
  implementation
• It is a challenging task to ask employees to
  participate in a software implementation process
  that will not only change their day-to-day
  activities, but might eliminate their current
  jobs
• Managing the human behavior aspects of
  organizational change is called Organizational
  Change Management
• People dont mind change, they mind being changed

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Implementation Tools

• SAP provides Solution Manager to help manage
  implementation projects
• In Solution Manager, the R/3 Implementation
  Project is presented in a 5 phase Implementation
  Roadmap
• Project Preparation (15 to 20 days)
• Business Blueprint (25 to 40 days)
• Realization (55 to 80 days)
• Final Preparation (35 to 55 days)
• Go Live and Support (20 to 24 days)

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Solution Manager

• Project Preparation Phase
• Tasks include organizing technical team
• Defining system landscape (servers and network)
• Selecting hardware and database vendors
• Defining projects scopewhat the project is
  supposed to accomplish
• Scope creepunplanned expansion of the projectis
  probably the primary reason projects go over
  time and budget

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Solution Manager

• Business Blueprint Phase
• Produces the business blueprint, which is a
  detailed description of how the company intends
  to run its business with the SAP R/3 system
• Process mapping is critical to the business
  blueprint phase
• The business blueprint guides consultants and
  project team members in configuring the SAP R/3
  system
• During this phase, technical team members
  determine how they will transfer data from the
  firms legacy systems

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Solution Manager

• Realization Phase
• Project team members work with consultants to
  configure the SAP R/3 software in the development
  system
• Developers create
• Special ABAP programs
• Connections to legacy systems
• Integration with 3rd party software packages

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Solution Manager

• Final Preparation Phase
• Testing the system throughout for critical
  business processes
• Setting up help desk for end-user support
• Setting up operation of the production system and
  transferring data from legacy systems
• Conducting end-user training
• Setting the Go Live date
• When scope creep results in projects going over
  time and budget, testing and training is usually
  all that is left to be cut
• Cutting testing and training always leads to
  disaster

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Solution Manager

• Go Live Phase
• Company begins using the SAP system
• Go Live date should be scheduled for a slack
  business period
• Properly staffed help desk is critical, as most
  questions occur in the first few weeks of
  operation
• Project team members and consultants should be
  scheduled to work the help desk during this
  period
• Monitoring of system performance is also critical
• Also important to set a project completion date
• New features or enhancements should be a new
  project

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Step detail
Steps in Implementation Project
Figure 7.17 Managers Business Workplace with
workflow task
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System Landscape Concept

• SAP recommends that companies set up three
  completely separate systems
• Development (DEV)
• Used to develop configuration settings and ABAP
  programs
• Quality Assurance (QAS)
• Used to test configuration settings and ABAP
  programs
• Production (PROD)
• Actual system where the company runs its business
• Changes are transported from DEV to QAS to PROD
  via the Change Transport system

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DEV
QAS
PRD
Transport Directory
Figure 7.18 System landscape for SAP R/3
implementation
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Summary

• ERP systems are designed to provide the
  information, analysis tools, and communication
  abilities to support efficient and effective
  business processes.
• This chapter introduced process modeling as a
  fundamental tool in understanding and analyzing
  business processes.

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Summary

• Process mapping is one tool that uses graphical
  symbols to document business processes.
• Other methodologies include hierarchical
  modeling, deployment flowcharting, event process
  chain diagramming, value analysis, and business
  process improvement.
• SAPs Solution Manager, a set of tools and
  information that can be used to guide an
  implementation project, is included in SAP R/3 to
  help manage the implementation of the ERP
  software.

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Summary

• SAPs System Landscape was introduced to show how
  changes to the ERP system during implementation
  (and beyond) are managed.
• The critical issue of organizational change
  management was discussed.
• Most challenges to ERP implementation involve
  managing personnel and their reactions to the
  change, rather than managing technical issues.