HIT2416/6416 Enterprise Systems Lecture 2       Business process Value Chain Standard Business Functions SAP Modules SAP Navigation Study- Types of Systems 1 How Organizations Create Business Value   A systems view - organizations transform inputs into goods or services for their customers thereby creating business value for themselves. A value chain1 view - organizations can be seen as a chain of activities each of which adds value or supports the addition of value to the firm’s goods or services. 1Porter, M.E. How competitive forces shape strategy. Harvard Business Review, 1979, pp. 137-145. [Judy McKay, 2005] Commercial Transactions  All organzations buy and sell goods and/or services. Goods, services S B $, or equivalent [Judy McKay, 2005] Organisations play both roles (buyer & seller) End Consumer F Customer C Supplier A End Consumer G Our Borganisation S End Consumer D Supplier B “Supply-side” Key: = individual End Consumer E “Demand-side” = organisation [Judy McKay, 2005] Buyer & Seller Responsibilities Seller Identify customer needs Create products/services to satisfy needs Advertise & promote goods/services Send quotation Negotiate sale transaction Dispatch delivery Invoice customer Receive & process customer payment Provide after-sales support, maintenance, Warranty services Buyer Identify a need Search for products/services to satisfy need Request quotation Negotiate purchase transaction Receive delivery Inspection, testing, acceptance Make payment Warranty claims & regular maintenance [Judy McKay, 2005] Buyer-Seller Communications 1. Order 2.Order acknowledgement S 3. Goods, Packing slip B 4. Invoice 5. Payment [Judy McKay, 2005] Buyer-Seller communications with organisational functions 1. Order 2.Order acknowledgement Sales 3. Goods, Packing slip S Warehouse 4. Invoice Accounts 5. Payment Remember: B also has internal functions! IS are vital in coordinating transactions! [Judy McKay, 2005] B Business Transactions  Business Transaction      This is different from a Database Transaction. In general a single business transaction gives rise to multiple database transactions. Involve flows of information, goods, services & money between sellers and buyers Can be complex, involve many business functions, can generate a LOT of paperwork Expensive & time consuming for organisations 1 transaction costs >$100 in many organisations [Judy McKay, 2005] Business Process  Business   The economically motivated exchange of goods or services. Business Process  A series of events which can be structured and measured and which have been developed to generate a specific service for the customer or the market [Davenport]. Internal Value Chain (Porter) Administration and Infrastructure Human Resource Management Product / Technology development (R&D) B Procurement Inbound Logistics Operations Outbound Logistics Sales & Marketing Service S Administration and Infrastructure SUPPORT ACTIVITIES Human Resource Management Product / Technology development (R&D) Procurement PRIMARY ACTIVITIES Inbound Logistics Operations Outbound Logistics Sales & Marketing Service [Judy McKay, 2005] Why focus on processes? Process W a S r a e l h e o s u s e L o g i s t i c s A c c o u n t s S e r v i c e [Judy McKay, 2005] Downside of Functional Organisations  Specialisation yields efficiency, but creates problems      Ultimately whole processes deliver value, but … Whole processes are not visible. As the process winds its way through many different departments, handoffs can cause delay, added expense, introduce errors, etc Local optimisation may result in overall inefficiencies. Processes are fragmented [Judy McKay, 2005] Process vs Function  Think about a business transaction             Involves many functions process involved crosses many functional boundaries Take an order from external customer (Sales, or Orders received) Check & confirm availability (Warehouse) Organise the flow of goods/services (Logistics) Arrange billing, reflect transaction in company accounts (Accounts) Provide service to customers (Service) [Judy McKay, 2005] Current thinking… Click to edit Master text s S a l e s Take order from customer W a r e h o u s e Confirm availability L o g i s t i c s Organise flow of goods A c c o u n t s Arrange billing, reflect transaction in company accounts S e r v i c e   Second lev  Third level • Fourth le • Fifth l Click to edit Mast Provide service to customers  Second level Third level • Fourth level • Fifth level [Judy McKay, 2005]  ERP Overview    Software used to manage information in every area of the business. Manage company-wide business processes using a common database and shared management reporting tools. Supports the efficient operation of business processes by integrating activities throughout a business. Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Functional Areas of Operation  Most companies have four main functional areas:        Marketing and Sales (M/S) Supply Chain Management (SCM) Accounting and Finance (A/F) Human Resources (HR) Each main functional area consists of a number of narrower business functions specific to the functional area. Historically, businesses have organized themselves according to business functions. Business Schools continue to be similarly organized. Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Functional Areas of Operation Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Information System  An information system includes the:       Computers People Procedures Software Required to store, organize and deliver information Information systems are a critical tool for integrating business functions Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Business Process Key Components:  triggering event  structured sequence of activities  output is of value to the customer of the process  metrics for management Business Processes     A business process is a collection of activities that takes one or more inputs and creates an output that is of value to the customer The customer may be external or internal The business process view is the customer’s perspective. The customer does not care that different functions are involved in processing their order, and will not tolerate mistakes and delays caused by poor coordination of business functions Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Process View of Business Logistics Function Production Function Purchasing Function Accounting Function Sales Function Customer Order Process Material Order Process Figure 1-3 A process view of business Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Integration of Business Functions   Sharing data efficiently and effectively within and between functional areas leads to more efficient business processes Information systems that share data between functional areas are called Integrated Information Systems Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition IS Integration Process S a l e s W a r e h o u s e L o g i s t i c s A c c o u n t s S e r v i c e Integrated IS [Peter Eden] Nova Chemicals   According to John Wheeler, CIO of Nova Chemicals, changing from a function-oriented view to a process-oriented is a complicated process Business processes include:     People with particular skill sets Information Tools Correct organizational culture Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Your first business enterprise…   Think in terms of business processes… What are the processes involved in running a lemonade stand?   Inputs Assume one person Assume cash business Process Outputs Lemonade Process it Master text styles level el level th level Get OK From Mum Get supplies together edit Master text styles d level Is it feasible? What supplies do I need? vel Make lemonade Make Sign(s) How much do we make? How much to charge? h level fth level Rake in the cash Is it worth continuing? Set up table Where do I operate? Choose location Who are my customers? Your enterprise partners… Customers Supplier Friends Mom/Dad Lemonade Stand Functional Areas  Marketing and Sales        Develop products Determine pricing Promote products Take customer orders Make sales forecast Track repeat customers to send flyers or thank-yous Manage credit Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Lemonade Stand Functional Areas  Supply Chain Management     Buying raw materials (purchasing) Making lemonade Manage recipe Maintain manufacturing (cost) records Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Lemonade Stand Functional Areas  Accounting and Finance  Recording raw transaction data  Sales, raw material purchases, payroll, cash receipts  Provide data for sales forecasting, credit management, cash management Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Lemonade Stand Functional Areas  Human Resources    Recruit, train, evaluate and compensate employees Develop personnel plans (staffing) based on sales Determine compensation—depends on labor market Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Functional Area Information Systems Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Marketing and Sales  Inputs      Customer data Order data Sales trend data Per-unit cost Outputs   Sales strategies Product pricing Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Functional Area Information Systems Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Supply Chain Management  Inputs     Product sales data Production plans Inventory levels Outputs     Raw material orders Packaging orders Resource expenditure data Production and inventory reports Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Functional Area Information Systems Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Accounting and Finance  Inputs        Payments from customers Accounts receivables data Accounts payables data Sales data Production and inventory data Payroll and expense data Outputs    Payments to suppliers Financial reports Customer credit data Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Functional Area Information Systems Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Human Resources  Inputs    Personnel forecasts Skills data Outputs    Regulation compliance Employee training and certification Skills database Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition Activities in the Value Chain  Second level Click to edit Master text styles   Third level • Fourth level • Fifth level [John Ward & Pat Griffiths, ‘Strategic Planning for Information Systems’, Wiley 1996] SAP at Home  Download the SAP GUI from QUT     Download the connection file from QUT     http://sap.fit.qut.edu.au/tech_support/download/SAPGUI_Windows Unzip and install WARNING!!! 315.7MB http://queen.fit.qut.edu.au/irj/go/km/docs/documents/Public%20D Unzip and copy files into c:\windows directory Connection file has changed since Sem 2 2009 Installation instructions  http://queen.fit.qut.edu.au/irj/go/km/docs/documents/Public%20D References      Monk & Wagner, 'Concepts in Enterprise Resource Planning', Second Edition, Chapter 1 Harmon, P. (2003) Business Process Change: a Manager’s Guide to Improving, Redesigning & Automating Processes. Morgan Kaufman, San Francisco. Gelinas, Sutton & Fedorowicz (2004) Business Processes & Information Technology. Thomson. Burlton, R. (2001) Business Process Management: Profiting from Process. SAMS, Indiana. Sharp, A. and McDermott, P. (2001) Workflow modelling: tools for process improvement and application development. Artech House, Boston. Portougal & Sundaram, Operational Solutions for SAP Implementation Weekly Reading Reading 1 Monk & Wagner, Concepts in Enterprise Resource Planning 3nd Edition Chapter 2, pages 32-39 Reading 2 Davenport, Thomas H. 1998, ‘Putting the Enterprise into the Enterprise System’, Harvard Business Review, Vol 76 Issue 4, pp121-131, Business Source Complete, EBSCOhost, AN 780261, viewed 05/03/10