Transcript Slide 1

Concepts in
Enterprise Resource
Planning
2nd Edition
Chapter 7
Process Modeling, Process
Improvement, and ERP
Implementation
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
Concepts in Enterprise Resource Planning, Second Edition
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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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Boundaries (beginning/end of process)
Operation
Decision
Direction of Logic
1
Connector
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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Expenses Incurred
Employee Completes
Expense Report
Employee copies
report and reciepts
Employee attaches
receipts for all
expenses > $25
Employee mails
expense report to
Sales Manager
Sales Manager
Reviews Report
Employee
modifies
expense report
Expense
Report
Approved
?
Sales Manager
mails report back
to employee
No
Yes
Sales Manager mails
expense report to
corporate office
1
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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Expenses Incurred
Employee Completes
Expense Report
Expenses Incurred
Employee copies
report and reciepts
Employee Prepares
Expense Report
Employee
modifies
expense report
Sales Manager
Reviews Report
Expense
Report
Approved
?
No
Sales Manager
mails report back
to employee
Yes
Sales Manager mails
expense report to
corporate office
1 No
Employee attaches
receipts for all
expenses > $25
Employee mails
expense report to
Sales Manager
Sales Manager
Reviews Report
Employee
modifies
expense report
Expense
Report
Approved
?
Sales Manager
mails report back
to employee
No
Yes
Sales Manager mails
expense report to
corporate office
1
Figure 7.3 Hierarchical modeling
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Sales
Person
Sales
Manager
AP
Clerk
Auditor
Expenses Incurred
Employee Completes
Expense Report
Employee copies
report and reciepts
Employee attaches
receipts for all
expenses > $25
Employee mails
expense report to
Sales Manager
Employee
modifies
expense report
Sales Manager
Reviews Report
Expense
Report
Approved
?
Yes
No
Sales Manager
mails report back
to employee
Sales Manager mails
expense report to
corporate office
1
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
Object
Expense
Expense report
Hard copy
Past Participle
Incurred
Approved
Filed
• Functions represent where change occurs in the process
• Functions are named using VerbObject
Object
Prepare
Review
Mail
Past Participle
Expense report
Expense report
Refund check
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Object
Expe nse
Incurr ed
Past Participle
Event
Verb
Pre pare
Expe nse Re port
Object
Function
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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Expe nse
Incurr ed
Pre pare
Expe nse Re port
Expe nse Re port
Com ple te d
Mail
Expe nse Re port
Expe nse Re port
Re ce ive d
Figure 7.6 Basic EPC layout
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Proce s s
Payme nt
Sale s pe rs on
Notified
OR connector
Sale s Manage r
Notified
Figure 7.7 OR connector
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Enter
Expense Report
Expense Report
Recor ded
AND connector
Hard Copy
Filed
Figure 7.8 AND connector
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Review
Expense Report
XOR connector
Not
Appr oved
Appr oved
Figure 7.9 XOR connector
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Trip
Completed
Week
Ends
Prepare
Expense Repor t
Figure 7.10 OR connector with two triggering events
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Event Trigger
Function
Function
Event
Event
Function
>
Event
Function
Event
Event
Event
Event
Function
Function
Event
Function
x
Event
Function
Function
>
Not
Allowed
Event
>
XOR
Not
Allowed
Function
>
OR
Function
>
>
Function
Event
Event
Function
x
AND
Event
>
Event
Multiple
Function
x
Single
Function Trigger
Single
Multiple
Event
Event
Figure 7.11 Possible connector and triggering combinations
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Expense
Incur red
Check
Int ernet
Availabilit y
Int ernet
Not Available
Int ernet
Available
Prepare
Online Repor t
Prepare
Paper Report
Report
Submit ted
Report
Mailed
Must use same
connector
to split and
consolidate a path
Review
Expense Report
Figure 7.12 Splitting and consolidating process paths
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Expe ns e
Incurr e d
Unapprove d
Pre pare
Expe ns e Re por t
Multi-copy
Expe ns e Re por t
Sale s pe rs on
Expe ns e Re por t
Comple te d
Data
Elements
Mail
Expe ns e Re por t
Sale s pe rs on
Organizational
Elements
Expe ns e Re por t
Re ce ive d
Unapprove d
Multi-copy
Expe ns e Re por t
Re vie w
Expe ns e Re por t
Sale s
Manage r
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 else’s
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 Look—BPI at Nova Chemicals
• Nova Chemicals is using Business Process Innovation to
move from a function-oriented company to a processoriented 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/Scheer’s 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 Look—BPI at Nova Chemicals
• Wheeler estimates only 10-15% of an IT project’s 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 SAP’s 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 task’s 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 Manager’s 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 firm’s 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 company’s 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 don’t 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 scope—what the project is
supposed to accomplish
• Scope creep—unplanned expansion of the
project—is 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 firm’s
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 Manager’s 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.
SAP’s 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
•
•
SAP’s 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.
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