609 Assignment 8 & Discussion 8

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Concepts in Enterprise Resource Planning
Fourth Edition

Chapter Seven

Process Modeling, Process Improvement, and ERP Implementation

Concepts in Enterprise Resource Planning, Fourth Edition

Objectives

After completing this chapter, you will be able to:

Use basic flowcharting techniques to map a business process
Develop an event process chain (EPC) diagram of a basic business process
Evaluate the value added by each step in a business process

Concepts in Enterprise Resource Planning, Fourth Edition

Objectives (cont’d.)

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, Fourth Edition

Introduction

Tools that can be used to describe business processes
Flowcharts, event process chains
Not specific to ERP
Can help managers identify process elements that can be improved
Role of process-modeling tools in ERP implementation projects

Concepts in Enterprise Resource Planning, Fourth Edition

Process Modeling

Business processes can be quite complex
Process model: any abstract representation of a process
Process-modeling tools provide a way to describe a business process so that all participants can understand the process

Concepts in Enterprise Resource Planning, Fourth Edition

Process Modeling (cont’d.)

Advantages of process models
Graphical representations are usually easier to understand than written descriptions
Provide a good starting point for analyzing a process
Participants can design and implement improvements
Document the business process
Easier to train employees to support the business process

Concepts in Enterprise Resource Planning, Fourth Edition

Flowcharting Process Models

Flowchart
Any graphical representation of the movement or flow of concrete or abstract items
Clear, graphical representation of a process from beginning to end
Uses a standardized set of symbols
Process mapping
Often used interchangeably with flowcharting
Specifically refers to activities occurring within an existing business process

Concepts in Enterprise Resource Planning, Fourth Edition

Flowcharting Process Models (cont’d.)

Figure 7-1 Basic flowcharting symbols

Concepts in Enterprise Resource Planning, Fourth Edition

Fitter Snacker Expense Report Process

Maria, Fitter Snacker salesperson
Completes a paper expense report after travel
Makes a copy for her records
Attaches receipts for any expenses over $25
Mails it to her zone manager at the branch office
Kevin, zone manager
Reviews expense report
Approves report or mails it back to Maria asking for explanation, verification, or modification
After approval, mails it to corporate office

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-2 Partial process map for Fitter Snacker expense-reporting process

Concepts in Enterprise Resource Planning, Fourth Edition

Fitter Snacker Expense Report Process (cont’d.)

Process at corporate office
Accounts payable (A/P) clerk
Process boundaries define:
Which activities are to be included in the process
Which activities are considered part of environment—external to process
All processes should have only one beginning point and one ending point
Decision diamond asks a question that can be answered with “yes” or “no”

Concepts in Enterprise Resource Planning, Fourth Edition

Extensions of Process Mapping

Hierarchical modeling: ability to flexibly describe a business process in greater or less detail, depending on the task at hand
Modeling software that supports hierarchical modeling
Provides user the flexibility to move easily from higher-level, less detailed views to the lower-level, more detailed views

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-3 Hierarchical modeling of Fitter’s expense-reporting process

Concepts in Enterprise Resource Planning, Fourth Edition

Extensions of Process Mapping (cont’d.)

Deployment flowcharting
Swimlane flowchart
Depicts team members across the top
Each step is aligned vertically under the appropriate employee or team
Clearly identifies each person’s tasks in the process

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-4 Deployment, or swimlane, flowcharting of the Fitter’s expense report process

Concepts in Enterprise Resource Planning, Fourth Edition

Event Process Chain (EPC) Diagrams

Event process chain (EPC) format
Uses only two symbols to represent a business process
Matches the logic and structure of SAP’s ERP software design
Two structures: events and functions
Events: a state or status in the process
Functions: part of the process where change occurs

Concepts in Enterprise Resource Planning, Fourth Edition

Event Process Chain (EPC) Diagrams (cont’d.)

Figure 7-5 EPC components

Concepts in Enterprise Resource Planning, Fourth Edition

Event Process Chain (EPC) Diagrams (cont’d.)

EPC software
Enforces an event-function-event structure
Standardized naming convention for functions and events
Three types of branching connectors
AND
OR
Exclusive OR (XOR)
Basic EPC diagram can be augmented with additional information

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-6 Basic EPC layout

Figure 7-7 AND connector

Concepts in Enterprise Resource Planning, Fourth Edition

Event Process Chain (EPC) Diagrams (cont’d.)

Figure 7-8 OR connector

Figure 7-9 XOR connector

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-11 Possible connector and triggering combinations

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-12 Splitting and consolidating paths

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-13 EPC diagram with organizational and data elements

Concepts in Enterprise Resource Planning, Fourth Edition

Process Improvement

Value analysis
Each activity in the process is analyzed for the value it adds to the product or service
Value added is determined from the perspective of customer
Real value: value for which the customer is willing to pay
Business value: value that helps the company run its business
No value: an activity that should be eliminated

Concepts in Enterprise Resource Planning, Fourth Edition

Evaluating Process Improvement

Disrupting the current process to make changes can be costly and time consuming
Dynamic process modeling takes a basic process flowchart and puts it into motion
Uses computer simulation techniques to facilitate the evaluation of proposed process changes
Computer simulation
Uses repeated generation of random variables that interact with a logical model of the process
Predict performance of the actual system

Concepts in Enterprise Resource Planning, Fourth Edition

ERP Workflow Tools

Workflow tools
Software programs that automate the execution of business processes and address all aspects of a process, including:
Process flow (logical steps in the business process)
People involved (the organization)
Effects (the process information)
ERP software provides a workflow management system
Supports and speeds up business processes

Concepts in Enterprise Resource Planning, Fourth Edition

ERP Workflow Tools (cont’d.)

Workflow tasks: links that can include basic information, notes, documents, and direct links to business transactions
SAP system can:
Monitor workflow tasks
Automatically take various actions if the tasks are not completed on time

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-14 SAP ERP Workflow Builder screen

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-15 Create notification of absence screen

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-16 Manager’s Business Workplace with workflow task

Concepts in Enterprise Resource Planning, Fourth Edition

ERP Workflow Tools (cont’d.)

Workflow provides a number of useful features
Employees can track progress of workflow tasks
System can be programmed to send reminders to employee(s) responsible for a task
For sporadic processes, workflow tools are a powerful way to improve process efficiency and effectiveness

Concepts in Enterprise Resource Planning, Fourth Edition

Implementing ERP Systems

Late 1990s: many firms rushed to implement ERP systems to avoid the Y2K problem
Since 2000: pace of implementations has slowed considerably
Most Fortune 500 firms have implemented an ERP system
Current growth is in the small to midsized business market
Implementation of ERP is an ongoing process

Concepts in Enterprise Resource Planning, Fourth Edition

ERP System Costs and Benefits

ERP implementation is expensive
Usually ranging between $10 million and $500 million, depending on company size
Costs of ERP implementation
Software licensing fees
Consulting fees
Project team member time
Employee training
Productivity losses

Concepts in Enterprise Resource Planning, Fourth Edition

ERP System Costs and Benefits (cont’d.)

Companies must identify a significant financial benefit that will be generated by ERP system
Only way companies can save money with ERP systems is by using them to support more efficient and effective business processes
Companies must manage transfer of data from old computer systems to new ERP system

Concepts in Enterprise Resource Planning, Fourth Edition

Implementation and Change Management

Key challenge is not in managing technology, but in managing people
ERP system changes how people work
To be effective, change may have to be dramatic
Business processes that are more effective require fewer people
Some employees may be eliminated from their current jobs

Concepts in Enterprise Resource Planning, Fourth Edition

Implementation and Change Management (cont’d.)

Organizational change management (OCM): managing the human behavior aspects of organizational change
People do not mind change, they mind being changed
If ERP implementation is a project that is being forced on employees, they will resist it
When employees have contributed to a process change, they have a sense of ownership and will likely support the change

Concepts in Enterprise Resource Planning, Fourth Edition

Implementation Tools

Many tools are available to help manage implementation projects
Example: process mapping
SAP provides Solution Manager tool
Helps companies manage implementation of SAP ERP

Concepts in Enterprise Resource Planning, Fourth Edition

Implementation Tools (cont’d.)

In Solution Manager, ERP implementation project is presented in a five-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)

Concepts in Enterprise Resource Planning, Fourth Edition

Figure 7-17 Implementation Roadmap in Solution Manager

Concepts in Enterprise Resource Planning, Fourth Edition

Implementation Tools (cont’d.)

Project Preparation
Organizing technical team
Defining system landscape
Selecting hardware and database vendors
Defining project’s scope
Scope creep
Business Blueprint
Produces detailed documentation of business process requirements of the company

Concepts in Enterprise Resource Planning, Fourth Edition

Implementation Tools (cont’d.)

Realization
Project team members work with consultants to configure the ERP software in development system
Final Preparation
Testing the system throughput for critical business processes
Setting up help desk for end-users
Setting up operation of the Production (PROD) system and transferring data from legacy systems
Conducting end-user training
Setting Go Live date

Concepts in Enterprise Resource Planning, Fourth Edition

Implementation Tools (cont’d.)

Go Live and Support
Company begins using new ERP system
Monitoring of system is critical so that changes can be made quickly if performance of the system is not satisfactory
Important to set a date at which the project will be complete

Concepts in Enterprise Resource Planning, Fourth Edition

System Landscape Concept

SAP recommends a system landscape for implementation
Three completely separate SAP systems:
Development (DEV)
Quality Assurance (QAS)
Production (PROD)
Transport directory: special data file location on DEV server

Concepts in Enterprise Resource Planning, Fourth Edition

System Landscape Concept (cont’d.)

Figure 7-18 System landscape for SAP ERP implementation

Concepts in Enterprise Resource Planning, Fourth Edition

System Landscape Concept (cont’d.)

Development (DEV) system used to develop configuration settings and special enhancements using ABAP code
Changes recorded in transport directory
Changes imported into QAS system
QAS system: changes are tested
All settings, programs, and changes that pass testing are transported to PROD system
PROD system: used by company to run its business processes

Concepts in Enterprise Resource Planning, Fourth Edition

Summary

Business processes
ERP systems are designed to provide the information, analysis tools, and communication abilities to support efficient and effective business processes
Process modeling: fundamental tool in understanding and analyzing business processes

Concepts in Enterprise Resource Planning, Fourth Edition

Summary (cont’d.)

Process mapping: process-modeling tool that uses graphical symbols to document business processes
Other methodologies: hierarchical modeling, deployment flowcharting, event process chain diagramming, value analysis, and business process improvement
SAP’s Solution Manager: set of tools and information that can be used to guide an implementation project
Included in SAP ERP to help manage the implementation of ERP software

Concepts in Enterprise Resource Planning, Fourth Edition

Summary (cont’d.)

SAP’s system landscape was introduced to show how changes to ERP system during implementation (and beyond) are managed
Most challenges to ERP implementation involve managing personnel and their reactions to the change, rather than managing technical issues

Concepts in Enterprise Resource Planning, Fourth Edition