Enterprise Resource Planning, 1 st Edition by Mary Sumner

1. Enterprise Resource Planning, 1st Edition by Mary Sumner Chapter 2: Re-engineering and Enterprise Resource Planning Systems © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner

2. 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, 1st Edition by Mary Sumner

3. 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 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner

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5. Technology used to mechanize work Create new business rules Remove outdated rules Improve responsiveness Reduce costs Business Process Re-engineering (BPR) © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner

6. 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 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner

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8. 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 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner

9. 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, 1st Edition by Mary Sumner

10. 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, 1st Edition by Mary Sumner

11. 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, 1st Edition by Mary Sumner

12. 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, 1st Edition by Mary Sumner

13. 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, 1st Edition by Mary Sumner

14. 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, 1st Edition by Mary Sumner

15. 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 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner

16. 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 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition by Mary Sumner

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, 1st Edition by Mary Sumner