Business Processes

Business Process
Reengineering (BPR)

 The complete overhaul and redesign of

a business process using information
technology.
 Total Quality Management
(TQM)
A business strategy based on three
general principles:

 Customer focus--stated or unstated expectations 

 Process improvement--continuous refinements v. discontinuous
overhaul of processes
 Total Involvement--empowering employees by giving them the
information, tools, and authority to do their work effectively and
to suggest and make changes to improve quality.
 
 Efficiency v. Effectiveness
 Efficiency: less work or fewer expenses to produce the same
outputs.
 Efficiency is related to performance within the business process and
involves measures such as
Capacity Cycle time
Consistency Flexibility
Productivity Security
 Effectiveness: producing different outputs that are more
appropriate.
 Effectiveness is related to producing what the customer wants in terms
of
Price Reliability
Quality Conformance
Responsiveness
 Architectural Characteristics
 Degree of Structure
 Range of Involvement
 Level of Integration
 Complexity
 Degree of reliance on machines
 Attention to planning, execution, and control
 Treatment of exceptions, errors, and
malfunctions
Degree of Structure
 The extent to which a task or business
process can be scripted in advance,
e.g.,
 Order of steps
 Required information
 Validation
 Relationships between inputs and outputs
 Table 3.2
Different Levels of Imposing Structure on Work

DEGREE TO WHICH STRUCTURE IS IMPOSED

Highest: Substitution of technology for people

High: Enforcement of rules or procedures

Low: Access to information or tools

 Attributes of
Highly Structured Tasks
 Information requirements known precisely
 Methods of processing information are known
precisely
 Desired format known precisely
 Decisions or steps within the task are clearly
defined and repetitive
 Criteria for making decisions are understood
precisely
 Success in executing the task can be measured
precisely
 Structured task = possible to exactly
specify how the task is to be performed
and the evaluation criteria
 Ex.: totaling invoices, ATMs, etc.
 Semistructured task – information
requirements and procedures are generally
known, but some aspects rely on human
judgment
 Ex.: medical diagnosis
 Unstructured task – cannot specify what
information is to be used, how to use it,
nor what the evaluation criteria should
be
 Ex.: choosing a picture for the cover of a
fashion magazine
 The desired degree of structure is
sometimes a matter of controversy
 Successful Information systems impose
the amount of structure appropriate for
the task being supported
 Too much structure stifles creativity
 Too little structure may lead to
inefficiencies and errors
 Process Modeling
 A method of defining business process
architecture by identifying the major
processes and dividing them into linked
subprocesses.
 The process of naming business
processes and subdividing them into
their basic elements so that they can be
studied and improved.
 Tools Used in the
Modeling Process
 Data Flow Diagrams (DFDs)
 Flowcharts
 Pseudocode
Data Flow Diagrams (DFDs)
 Represent the flow of data between different
processes within a system
 Simple & intuitive, not focusing on details
 Describe what users do,
do rather than what
computers do
 Limitations:
 Focus only on flows of information
 Ignore flows of materials, decision points, etc.
 Figure 3.1
Symbols used in data flow diagrams
 Flowcharts and
Structured English
 Used to fill in the details left out of the DFD
 Flowchart = use standard symbols to
express the logic & sequence of procedures
 Structured English (pseudocode) = precise
descriptions of the logic in a procedure
 Ford Reengineers
Its Payables Process
 Old process:
 The receiving department accepted orders that did
NOT match the purchasing order
 Lots of overhead to reconcile the inconsistencies
 New process:
 ONLY shipments that match the purchase order
are accepted
 The information is entered into a shared database
 The business process was changed, by
eliminating steps that did not add value
 The new information system was
successful only because of the
reorganized work flow
Ford’s New Payables System

BUSINESS PROCESS
Major Steps:
•Order material
•Receive shipments
•Reconcile receipts with purchase orders
•Pay suppliers

Rationale:
•store purchase orders in a shared database
•accept shipments only if they match the purchase order
•pay on receipt, not invoice
 Ford’s New Payables System

PARTICIPANTS INFORMATION TECHNOLOGY

Purchasing department Purchase order Computer system

Receiving department Receipt confirmation supporting a shared
database
Accounts payable department
 Figure 3.3
Data flow diagram showing the main processes
in Ford’s original purchasing system
 Figure 3.2
Context diagram for the Ford purchasing system
 Figure 3.6
Flowchart showing the rules governing a procedure
 Table 3.1
Impacts of Architectural Characteristics of Business Processes

DEGREE OF STRUCTURE
Problem if the level is too high:
•People doing the work are prevented from their judgement.
•People doing the work feel like cogs in a machine because they have too little autonomy.
Problem if the level is too low:
•Easily forseeable errors occur because well-understood rules are not applied consistently.
•Outputs are inconsistent.

RANGE OF INVOLVEMENT
Problem if the level is too high:
•Work is slowed down because too many people get involved before steps are completed.
Problem if the level is too low:
•Work is performed based on narrow or personal considerations, resulting in decisions that
may not be the best for the overall organization.
 Range of Involvement
 The organizational span of people
involved in a business process,
 Interorganizational
 Organizational
 Work Group
 Individual-Mandatory
 Individual-Discretionary
 Table 3.1
Impacts of Architectural Characteristics of Business Processes

LEVEL OF INTEGRATION
Problem if the level is too high:
•Steps in the process are too intertwined.
•Participants in different business processes get in each other’sway.
•To change one step it is necessary to analyze too many other steps or processes.
Problem if the level is too low:
•Steps in the processes are too independent.
•The process needs greater integration to produce results.

COMPLEXITY
Problem if the level is too high:
•Participants, managers, and programmers have difficulty understanding how the system
operates or what will happen if it is changed.
Problem if the level is too low:
•The system cannot handle the different cases that it should be able to handle.
 Level of Integration
 The connection between distinct activities
 Mutual responsiveness and collaboration
between distinct activities.
 Generally affects the speed with which one responds
to events in the various activities
 Information systems can affect integration by
supporting the immediacy of communication and
by making it easier for each business process to
use the information to respond effectively.
 Example: JIT—”just in time” inventory controls
 Figure 3.9
Five levels of integration between
business processes
 Figure 3.9, continued
Five levels of integration between
business processes
 Figure 5.2
Customers link to suppliers using EDI
 Figure 3.9, continued
Five levels of integration
between business processes
 Table 3.1
Impacts of Architectural Characteristics of Business Processes

LEVEL OF INTEGRATION
Problem if the level is too high:
•Steps in the process are too intertwined.
•Participants in different business processes get in each other’sway.
•To change one step it is necessary to analyze too many other steps or processes.
Problem if the level is too low:
•Steps in the processes are too independent.
•The process needs greater integration to produce results.

COMPLEXITY
Problem if the level is too high:
•Participants, managers, and programmers have difficulty understanding how the system
operates or what will happen if it is changed.
Problem if the level is too low:
•The system cannot handle the different cases that it should be able to handle.
Managing Complexity
 Complexity – how many types of
elements the system contains + the
number and nature of their interaction
 Complex systems are difficult to develop
and understand
 Difficult to anticipate the consequences of
changes
 How to handle complexity?
 Eliminate low value variables
 Different versions of processes and information
that exist simply because of historical accident
 Recognize variations explicitly and treat
them differently, instead of using a
fundamentally similar process
 Table 3.1
Impacts of Architectural Characteristics of Business Processes

DEGREE OF RELIANCE ON MACHINES

Problem if the level is too high:
•People become disengaged from their work.
•People’s skills may decrease.
•Mistakes occur because people overestimate what the computers are
programmed to handle.
Problem if the level is too low:
•Productivity and consistency decrease as bored people perform repetitive work
that computers could do more efficiently.

ATTENTION TO PLANNING, EXECUTION, AND CONTROL

Problem if the level is too high:
•Too much effort goes into planning and controlling within the process, and not
enough goes into execution.
Problem if the level is too low:
•Insufficient effort in planning and control leaves the business process inconsistent
and unresponsive to customer requirements
 Degree of Reliance on
Machines
 Tasks assigned to computers are:
 Totally structured
 Can be described completely
 Require speed, accuracy, endurance
 Tasks assigned to people require:
 Common sense
 Intelligence
 Judgment
 Creativity
 Figure 3.10
Planning, execution, and control
 Table 3.3
Comparison of Planning, Execution, and Control
PLANNING
Time focus: Future
Important issues related to information:
•Having reliable methods of projecting into the future by combining models, assumptions, and data about
the past and present

EXECUTION
Time focus: Present
Important issues related to information:
•Providing information that tells people what to do now to meet the plan and adjust for any problems that
have occurred recently
•Using current information to identify problems or errors in current work
•Collecting information without getting in the way of doing the work

CONTROL
Time focus: Past
Important issues related to information:
•Having reliable methods of using data about the past to develop or adjust plans, and to motivate
employees
•Provide information current enough current enough that it can be used
to guide current actions
 Table 3.1
Impacts of Architectural Characteristics of Business Processes

TREATMENT OF EXCEPTIONS, ERRORS, AND MALFUNCTIONS

Problem if the level is too high:
•The process focuses on exceptions and becomes inefficient and inconsistent.
Problem if the level is too low:
•The process fails altogether or handles exceptions incorrectly, resulting in low
productivity or poor quality and responsiveness perceived by customers.
 Attention to Errors
and Exceptions
 The process architecture should specify
how the process should respond when
errors, exceptions, or malfunctions
occur
 Tradeoff:
 Wasting resources by being unsystematic
vs. diverting resources from the main
system goals through excessive
formalization of exception handling
 Table 3.6
Process Performance Variables and Related
Roles of Information Systems
PROCESS PERFORMANCE VARIABLE

•Rate of output
•Productivity
•Consistency
•Cycle Time
•Flexibilty
•Security
 Table 3.4
Finding the Right Level for Each Process Performance Variable
ACTIVITY RATE
Problem if the level is too high:
•Wasted effort and buildup of un-needed inventory
Problem if the level is too low:
•Inefficient resource usage and imbalanced work in progress
OUTPUT RATE
Problem if the level is too high:
•Lower productivity and consistency due to increasing rates of errors and rework
Problem if the level is too low:
•Lower productivity due to the cost of unused capacity

CONSISTENCY and FLEXIBILITY

Problem if the level is too high:
•Inflexilbility, making it difficult to produce what the customer wants
Problem if the level is too low:
•Too much variability in the output, reducing quality perceived by the customer
PRODUCTIVITY
Problem if the level is too high:
•Too much emphasis on cost per unit and too little emphasis on quality of the output
Problem if the level is too low:
 Figure 3.11
Control chart for monitoring consistency of a
business process
 Using Information Systems to
Achieve Flexibility
 More input from process participants.
 Maintain products in information form
as long as possible—mass customization
potential.
 Flexible tools—multipurpose.
 Table 3.4
Finding the Right Level for Each Process Performance Variable

CYCLE TIME
Problem if the level is too high:
•Lack of responsiveness to customer
•Excess costs and waste due to delays
Problem if the level is too low:
•Product produced too soon is damaged or compromised before the customer needs it Delivery
before the customer is ready

DOWNTIME
Problem if the level is too high:
•Lower productivity, longer cycle times, less consistency
Problem if the level is too low:
•Exhausted participants if little or no downtime is allowed in some processes

SECURITY
Problem if the level is too high:
•Excess attention to security gets in the way of doing work
Problem if the level is too low:
•Insufficient attention to security permits security breaches
 Figure 3.14
Using an iris scanner for controlling access
 Figure 5.9
Information systems related to Mintzberg’s
management roles
 Table 5.3
Common Sources of Management Information

FORMAL, COMPUTER-BASED
Internal sources: Key indicators generated by internal tracking systems
External sources: Public databases

FORMAL, DOCUMENT-BASED
Internal sources: Planning reports, internal audits
External sources: Industry reports, books, magazines

FORMAL, VERBAL
Internal sources: Scheduled meetings
External sources: Industry forums

INFORMAL
Internal sources: Lunch conversations, gossip, management-by-walking-around
External sources: Trade shows, personal contacts