For Alma7 Only

Business Processes

Menu Page

Here is a list of the topics you will cover in this lesson. Select a topic to navigate to that screen.

· Lesson Overview

· Topic 01: What Is a Business Process?

· Topic 02: Business Process Modeling

· Topic 03: Business Processes and Information Systems

· Topic 04: Business Process Management

· Lesson Summary

The Business Process

Overview

Everything that you do involves a process. Think about the process steps required to make a peanut butter and jelly sandwich. Can you list and test them? Are you sure it is most efficient way to make the sandwich?

In this lesson, you will learn about processes, how to improve existing ones, and how information systems are created from process models. Business process engineering is used in organizations to improve process models and, ultimately, information systems.

After this lesson, you will be able to go into a retail store, look at all the products, and visualize the processes it took to get them there. You may also improve your process for making a peanut butter and jelly sandwich.

What Is a Business Process?

Introduction

Have you ever stopped in a grocery store, looked around, and wondered where everything came from? An integrated series of processes allowed all the products, equipment, and information systems to come together at that one spot where business is transacted. These business processes allow organizations to provide the goods and services that you may take for granted each day. This topic explains business processes and gives examples.

This topic supports the following objectives:

· Give examples of business processes

· Explain the relationship between business processes and information systems

What Is a Business Process?

A business process is a series of steps that defines how something is done. A process can also be referred to as an activity during which a series of related activities allows inputs to be changed into outputs.

Every task in an organization can be shown to be a process. It is important for business professionals to be able to look at the tasks they complete and to be able to identify the processes associated with them. They can then relate these processes to the information systems they use.

Example of a Business Process

A high-level process for a grocery store might include the following activities:

· Inventory existing stock

· Order needed products

· Receive products ordered

· Process and put stock out for sale

· Sell products

· Dispose of bad products

Continuing the Business Process Example

Each of the activities discussed earlier can be broken down further into subprocesses or a series of steps until you reach the lowest level at which the steps can be divided.

After processes have been broken down, information technology staff members create a process model to outline the components of an information system based on these processes.

This is how information systems are created based on business processes such as the grocery store example.

Review

The next time you are in a grocery store shopping for groceries, look around and think about the processes needed to make the business happen.

Try to identify some of the processes they are using. Do they seem complicated? Are they predictable and understandable to you?

By doing this, you will gain a better understanding of how and why information systems are created based on business processes.

This topic supported the following objectives:

· Give examples of business processes

· Explain the relationship between business processes and information systems

Business Process Modeling

Introduction

Derek works at Berkley Auto Sales as a service manager. His department is responsible for detailing new cars when sold, servicing and maintaining cars, and repairing cars as needed. He does not have a computer system to help him manage his department, so he submits a request to have one created and the request is approved. His first step is to model the processes that are part of his department.

Understanding process modeling and the components used will make systems design easier for Derek to understand. The process model allows him to see a graphic representation of how data flows in the department, and provides a basis for the system being built. If you are on an information system project team that must supply requirements to the information systems department, using a process model will help communicate and relate how each job fits in the system.

This topic supports these objectives:

· Define process model

· Describe the components of a business process

Process Modeling

Process modeling depicts a graphic representation, using process modeling notation, of how data flow and how activities are related in an organization. Typically, there are a variety of process models for each distinct activity. For example, you might find a process model for ordering tires and automotive parts, for diagnosing an engine problem, and other major activities at Berkley Auto. Understanding how processes flow from one activity to another is important when creating information systems to encompass those processes.

Components of a Business Process

Business process modeling is made up of components that are linked together by data flows. When shown graphically, the model allows you to see the relationship between components, which results in a better understanding of how a new system should be created to support all the data flows. In our example, Derek must first understand the components needed in his process model: activities, resources, facilities, and data flows.

Activities		[Glossary] Activities change inputs into outputs and represent the action items in a process model. Examples include Berkley Auto receiving payment, updating their inventory of spare parts, and performing a service on a customer’s car.
Resources		[Glossary] Resources are items of value, such as suppliers, customers, or auto parts to sell.
Facilities		[Glossary] Facilities are storage areas, such as a warehouse that stores spare parts, tires, and other auto products. After the new database for Berkley Auto is created the stored data are also considered a facility.
Data flows		[Glossary] Data flows represent the data that flow between activities in a process. For example, a mechanic for Berkley Auto determines that a certain part is needed to repair a car and notifies the parts manager. The parts manager checks the inventory and pulls the item, and records the inventory reduction for that item. When the number of items is reduced to a certain level (reorder level), an order is placed to buy the part from the supplier.

Process Modeling Symbols

In order for Berkley Auto to create the process model, Derek needs to understand the symbols used. Certain symbols represent a distinct action in a process model:

· A rectangle (usually with rounded corners) represents an activity in a process model.

· A diamond shape represents a decision point where two distinct paths may follow, one representing a "Yes" and the other representing a "No" condition.

· A letter shape (vertical rectangle) represents data.

· Lines with arrows represent data flows in the process model.

· Resources and facilities might be represented by different shapes to identify what they are.

Using Process Models

In our example, let’s say that Berkley Auto needs to create a process model for ordering spare automotive parts. Derek needs to pass this model to the information system team members so they can use it to define the system to be built.

Derek notes the following: To begin, the purchasing department (an activity) queries the parts inventory database (a facility) to determine the quantity of each item on hand. Purchasing then sends a purchase order (data flow) to a supplier (a resource), and forwards a copy of the purchase order to shipping and receiving (an activity). The Supplier sends the items ordered to shipping and receiving and remits an invoice to the accounts payable department (an activity). Shipping and receiving then matches the purchase order with the actual quantity received (a decision point, "Yes" if all items ordered are received, “No” if only partial items ordered are received), sends the payment authorization to accounts payable, and adds the quantity received for each product in the parts inventory database. Accounts payable then sends payment to the supplier.

Check Your Understanding

Read the terms on the left side of the chart and their correct matches on the right to check your understanding.

Answer Options		Correct Match
Activities		Which component of the business process changes inputs and outputs, and represents the action items in a process model?
Resources		Which component of the business process model includes items of value such as suppliers, customers, and inventory?
Facilities		Which component of the business process model includes physical storage areas like warehouses, as well as databases that store important information?
Data flows		Which component of the business process model represents the information that travels between activities in a process?

Review

Every event and activity in a business can be shown in a business process model. Many businesses have numerous process models that are interconnected and show all the data flows and activities. If you are able to visualize the process model of your area of responsibility, you are a major asset to your company. Try to model a simple process that you do daily, such as get ready for work, to help you understand process modeling.

This topic supported these objectives:

· Define process model

· Describe the components of a business process

Business Process and Information Systems

Introduction

Derek created the process model to order spare parts for Berkley Auto.

By completing this activity, he was able to understand the relationship between activities in the business processes and how they interact with each other. Now he understands how the process model is actually the blueprint for development of the information system so that the activity can be automated.

This topic supports these objectives:

· Give examples of business processes

· Explain the relationship between business processes and information systems

Business Processes and Information Systems

[Glossary] Business processes are a part of every business. Consider a grocery store in which high-level business processes (a series of steps defining an activity) are inventory, ordering, receiving, processing, selling, and disposal. This grocery store might do all these processes manually. However, they still need to be able to model these processes to see graphically the interrelationships that exist between activities. After this is done, the model is used as a blueprint to create an [Glossary] information system . The process model provides the series of steps necessary to create a blueprint for building the information system.

Automating the Business Process

Business processes may be fully automated (such as the inventory system at Walmart), partially automated (such as a grocery store where the inventory is taken manually, entered into a computer system, and then the remaining activities are automated), or totally manual (such as the way Berkley Auto currently operates). Berkley Auto has decided to automate its high-level business process. What are the next steps? The graphical business process model is used as a guide to reveal how activities interact and relate. From this model, a spare parts inventory system can be designed and implemented.

Relationship between Business Processes and Information Systems

The relationship between business processes and information systems depends on how extensive the processes are. If the processes are extensive, there might be several systems that support one process.

For example, Walmart relies on its cash register system to record a sale and reduce the inventory when items are purchased. A separate inventory system is used to record products received and add the quantity to inventory. Both systems are used to update the quantity in inventory.

If a process is simple, it might share an information system with other processes. For example, both a sales process and marketing process might share one information system. A third possibility is that one process is supported with just one information system. For example, you may have an inventory system that supports only the inventory maintenance process.

Contemplate

Read the question below and take a moment to consider how you might respond. Next, look at the Response of the Online Mentor.

Question: Describe the relationship between information systems and business processes, including examples of different types of business processes, and then compare your answer with your online instructor’s.

Compare your response to that of your Online Mentor: The relationship between business processes and information systems depends on how extensive the processes are. For example, if the processes are very extensive you might find several systems supporting one process. For example, Walmart relies on its cash register system to record a sale and reduce the inventory when items are purchased. A separate inventory system is used to record products received and add the quantity to inventory. Both systems are used to update the quantity in inventory. If a process is simple, it might share an information system with other processes. For example, both a sales process and marketing process might share one information system. A third possibility is that one process is supported with just one information system. For example, you may have an inventory system that supports only the inventory maintenance process. Business processes are a part of every business. Consider a grocery store in which high-level business processes (a series of steps defining an activity) are inventory, ordering, receiving, processing, selling, and disposal. This grocery store might do all these processes manually. However, they still need to be able to model these processes to see graphically the interrelationships that exist between activities. After this is done, the model is used as a blueprint to create an information system. The process model provides the series of steps necessary to create a blueprint for building the information system.

Review

If you study a process model in detail and then the information system that supports it, you will see and understand the important relationships that exist between the two. This ability is a valuable skill. If you study a process model in detail and then the information system that supports it, you will see and understand the important relationships that exist between the two.

This topic supported these objectives:

· Give examples of business processes

· Explain the relationship between business processes and information systems

Business Process Management

Introduction

Imagine working for an organization that uses an information system and your boss informs you that the company is going to build a new system to replace the old one you’ve been using. You think the old system works fine and wonder why they want to make a change. Now you have to learn a whole new system. You think the company is wasting time and money. However, what looks wasteful to you may be necessary for organizations to compete in the marketplace.

What does this change mean? First, the organization needs to identify all of its current business processes; then, use business process engineering to create a process model. This model becomes the basis for the new information system. Although this change seems sudden to you, it may reflect a long decision-making process by the organization. In fact, top management most likely followed a clearly defined set of steps to arrive at this decision.

This topic supports this objective:

· Explain the differences between business processes and business process engineering

Business Processes

[Glossary] Business process engineering (BPE) is the systematic process of creating, assessing, and altering business processes. This is done using a four-phase model that allows organizations to update their systems and the way they do business (processes). The systematic tool they use is BPE.

It is not unusual for organizations to spend a great deal of resources on BPE. In this way, they make sure they are doing things the best way possible before they embark on building new and improved information systems.

Phase 1: Create the As-Is Model

The BPE methodology consists of four phases that, when followed, gives organizations a great chance of success. This first step involves studying the organization as it currently stands and then creating a business process model (using process modeling notation) of all its activities. System users may help with this step to ensure its accuracy. The reason for this phase is to be sure the current system is understood so that areas for improvement can be identified. Let’s consider an auto repair shop, for example. Berkley Auto’s current processes include the following:

· Purchasing notifies the stock manager to inventory the spare parts.

· The stock manager inventories the stock and sends the results back to purchasing.

· The products to order are identified.

· Purchasing sends a purchase order to the supplier.

· Purchasing then prepares a parts ordered form and sends it to receiving.

· Receiving accepts delivery of the products from the supplier.

· And the cycle continues.

Phase 2: Create the Components

All five components are then created (hardware, software, data, procedures, and people) if it is a fully automated system. If it is a semi-automated system, only some components are created, such as hardware, software, and data, and procedures and people are omitted. Areas of improvement are identified and incorporated into the “to-be” process model. This model becomes the basis for the new information system. It is important to be sure that every improvement is made to the future processes.

For example, Berkley Auto’s future processes include the following:

1. The purchasing department queries the inventory database to ascertain the quantity on hand for each product and the quantity to be ordered. 2. Purchasing sends a purchase order to the supplier and a copy of the purchase order to receiving. 3. Receiving receives products from the supplier. 4. The cycle continues.

Phase 3 and 4

· Phase 3: Implement the processes: The system built based on the new process model is now implemented. The new process should be more efficient, streamlined, and easier than the old process.

· Phase 4: Assess the results: As time passes, Berkley Auto creates procedures to follow to assess the processes. The results are used to monitor the effectiveness of the new processes. When changes need to be made or problems are identified, the entire BPE process is restarted.

Business Process Engineering Scope

Business process engineering can be applied to any size and type of organization. Small functional systems, enterprise wide systems, nonprofit organizations, for-profit organizations, interorganizational systems, and government agencies all use BPE to improve their information systems. Astute businesses identify needs and concerns quickly, and use BPE to remain competitive in their markets. The value of BPE cannot be understated.

Contemplate

Read the question below and take a moment to consider how you might respond. Next, look at the Response of the Online Mentor.

Question: Explain the processes and methodology used in developing information systems with business process engineering (BPE). Be sure to include the different phases of the BPE methodology in your response and compare it with your instructor’s online.

Compare your response to that of the Online Mentor: A business process is a series of steps that defines how something is done. A process can also be referred to as an activity in which a series of related activities allows inputs to be changed into outputs. When an organization decides to build an information system, it goes through a series of steps to make sure it has the correct business processes as the basis for its new information system. This series of steps is referred to as business process engineering (BPE). The methodology behind the BPE is laid out in four phases. This first step involves studying the organization as it currently stands and then creating a business process model (using process modeling notation) of all its activities. System users may help with this step to ensure its accuracy. The reason for this phase is to be sure the current system is understood so that areas for improvement can be identified. During the second phase, all five components are then created (hardware, software, data, procedures, and people) if it is a fully automated system. If it is a semi-automated system, only some components are created, such as hardware, software, and data, and procedures and people are omitted. Areas of improvement are identified and incorporated into the “to-be�_ process model. This model becomes the basis for the new information system. It is important to be sure that every improvement is made to the future processes. During the third phase, the system built based on the new process model is now implemented. The new process should be more efficient, streamlined, and easier than the old process. During the fourth phase, an organization creates procedures to follow to assess the processes. The results are used to monitor the effectiveness of the new processes. When changes need to be made or problems are identified, the entire BPE process is restarted.

Review

Business processes, or activities, allow you to see the systematic way in which all activities in an organization interact. These processes are documented in a process model that uses modeling notation. Information systems are built on these process models. When changes to processes need occur, business process engineering is an effective tool to use to model new processes and build better systems.

This topic supported this objective:

· Explain the differences between business processes and business process engineering

Summary

In this lesson, you have learned about processes, how to improve them, and how they affect information systems. It would be interesting to recreate your process for making a peanut butter and jelly sandwich. Would you be able to apply business process engineering to improve the process?

One advantage of this lesson is that it helps you look at an activity that is not business oriented and understand what steps (processes) are involved in making it happen. This skill is more valuable to you than you think because you will become process minded.

9