Re-engineering and Enterprise

Resource Planning Systems

2-1
 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

2-2
 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
• Inbound logistics, operations, outbound logistics, marketing
and sales, service
– Secondary activities
• Organizational activities, human resources, technology,
purchasing
• Motivations
– Deregulation, consolidation, customer sophistication,
increased competition

2-3
2-4
Business Process Re-engineering
(BPR)
• Technology used to mechanize work
• Create new business rules
• Remove outdated rules
• Improve responsiveness
• Reduce costs

2-5
 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
• Adaptable

2-6
2-7
 Process Modeling

• Business process
– Business activities
• Data store
– Data needed by business process
• Data flow
– Data transferred between processes or from a
process to data store
• Organizational unit
– Units where processes take place
• Event
– Includes triggers and outcomes

2-8
 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

2-9
 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

2-10
 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

2-11
 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
2-12
 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
2-13
 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

2-14
 Case: Re-engineering the
Payment Process System at RFC
Current payment processing system
– Customers:
• Make payments at branch
– Cash, check, money order
• Mail payments to branch
– Manually processed
– Batched for deposit in afternoon
– Home Office mailed an Advice of Payment Received
• Payment made to Home Office
– Manually processed
– Batched for deposit in afternoon
– Branch mailed an Advice of Payment Received
– Each night, batch payment processing runs to
update accounts

2-15
 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
• Major expansion planned
2-16
 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
2-17