Chapter 8 Processes, Organizations, and Information Systems

Employee Resistance

- change requires effort and create fear - senior level management must commuincate need for change to organize and reiterate - train key users ahead of time to create buzz about new systems - video demos - encourage change - extra inducemens

Requirement gaps

- licensed products are never perfect fit - features and functions of complex products makes identifying gaps difficult - deciding what to do with gaps - adapt to application or change application?

Trigger

A computer program stored within the database that runs to keep the database consistent when certain conditions arise.

Q8-3 How Do Information Systems Eliminate the Problems of Information Silos?

1. Integrate into single database. 2. Revise applications. 3. Allow isolation, manage to avoid problems. Revise applications to use database < integrate data into single database -Integrate data into single database, then revise all business applications and processes to use that database -Use distributed applications (e.g. PRIDE) to integrate data into inter-enterprise systems

Top ERP Vendors

1. SAP 2. Oracle 3. Infor ERP 4. Microsoft Dynamics 5. Sage

Charter

A legal document giving certain rights to a person or company

process effectiveness

A measure of how well a process achieves organizational strategy. If an organization differentiates itself on quality customer service and if the process requires 5 days to respond to an order request, then that process is ineffective. Companies that provide customized manufacturing might make their processes more effective by using 3D printing.

Enterprise Resource Planning (ERP)

A newer version of Materials Requirement Planning (MRP), that combines the computerized functions of all the divisions and subsidiaries of the firm--such as finance, human resources, and order fulfillment--into a single integrated software program that uses a single database. A suite of applications called modules, a database, and a set of inherent processes for consolidating business operations into a single, consistent, computing platform. The primary purpose of an ERP system is integration; an ERP system allows the left hand of the organization to know what the right hand is doing. This integration allows real-time updates globally, whenever and wherever a transaction takes place. Critical business decisions can then be made on a timely basis using the latest data. Enterprise resource planning (ERP) refers to a type of software that organizations use to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations.

self-efficacy

A person's belief that he or she can successfully perform the tasks required in his or her job.

Workgroup Process

A process that exists to enable workgroups to fulfill the charter, purpose, and goals of a particular group or department. Ex: Sales and marketing Lead generation Lead tracking Customer management Sales forecasting Product and brand management EX: A physicians' partnership is a workgroup that follows processes to manage patient records, issue and update prescriptions, provide standardized postsurgery care, and so forth.

Augmenting a Human Performing an Activity

A second way that information systems can improve process quality is by augmenting the actions of a human who is performing that activity. Consider the process of managing patient appointments. To schedule an appointment, patients call the doctor's office and talk with a receptionist who uses an appointment information system. That information system augments the appointment creation activity.

Controlling Data Quality Process Flow

A third way that information systems can improve process quality is by controlling data quality and process flow. One of the major benefits of information systems is to control data quality. The IS can not only ensure that correct data values are being input, it can also ensure that data are complete before continuing process activities. The cheapest way to correct for data errors is at the source, and it avoids the problems that develop when process activities are begun with incomplete data. Information systems also have a role in controlling process flow. Consider the order approval process in Figure 8-1. If this process is controlled manually, then someone, say, a salesperson, will obtain the order data from the customer and take whatever actions are needed to push that order through the three steps in the order process. If the salesperson gets busy or is distracted or away from work for a few days, or if there are unexpected delays in one of the activities, it is possible for an order to be lost or the approval unnecessarily delayed. If, however, an information system is controlling the order approval process, then it can ensure that steps are performed in accordance with an established schedule. The information system can also be relied upon to make correct process-routing decisions for processes that are more complicated than that in Figure 8-1. SharePoint workflows, discussed in the context of collaboration in Chapter 7, can be used to automate structured processes.

Hybrid Model

An enterprise system in which some of the data is stored in the cloud and managed by cloud vendors and other data is stored in the premises of the using organization and managed by it.

Change Process Resources

Business process activities are accomplished by humans and information systems. One way to improve process quality is to change the allocation of those resources. For example, if the process in Figure 8-1 is not effective because it takes too long, one way to make it more effective is to identify the source of delays and then to add more resources. If delays are caused by the check customer credit activity, one way to increase process effectiveness is to add more people to that activity. Adding people should decrease delays, but it will also add cost, so the organization needs to find the appropriate balance between effectiveness and efficiency. Another way to shorten the credit check process would be to use an information system to perform the customer credit checks. Depending on the development and operational costs of the new system, that change might also be less costly and therefore more efficient.

Q8-6 What Are the Challenges of Implementing and Upgrading Enterprise Information Systems?

Collaborative management Requirements gaps Transition problems Employee resistance New technology

Organizations can improve the quality (efficiency and/or effectiveness) of a process in one of three ways:

Change the process structure. Change the process resources. Change both process structure and resources.

New Technology

Emerging, new technology affects all information systems, but it affects enterprise systems particularly because of their importance and their value. Consider, for example, the cloud. Because of the cost savings of cloud-based computing, organizations would like to move their enterprise systems to the cloud. But legal, risk, and business policy factors may make such a move infeasible. The organization may be required to keep physical control over its data. When moving it to the cloud, the cloud vendor controls the physical location of the data, and that location might not even be in the same country as the organization. So, some sort of hybrid model may need to be devised Similar comments pertain to mobile technology. Employees want to use mobile devices to access and even modify enterprise system data. But mobile devices are just that—mobile. The enterprise system may be exposed to considerable risk while outside the control of the organization. And ERP data is a juicy target for crime. These factors don't mean organizations cannot use new technology with enterprise systems, but they do add challenges.

Dynamic Processes

Flexible, informal, and adaptive processes that normally involve strategic and less specific managerial decisions and activities. are flexible, informal, and adaptive processes that normally involve strategic and less structured managerial decisions and activities. Deciding whether to open a new store location and how best to solve the problem of excessive product returns are examples, as is using Twitter to generate buzz about next season's product line. __________- usually require human judgment. Example: Collaboration; social networking; ill-defined, ambiguous situations . We have already discussed one_________, collaboration, in Chapter 7, and we will discuss another, social media, in Chapter 9.

Structured Process

Formally defined, standardized processes that involve day-to-day operations; accepting a return, placing an order, and purchasing raw materials are common examples. Support operational and structured managerial decisions and activities Standardized Usually formally defined and documented Exceptions rare and not (well) tolerated Process structure changes slowly and with organizational agony For example, the process of a salesclerk accepting a return at Nordstrom, or other quality retail stores, is fixed. If the customer has a receipt, take these steps . . . if the customer has no receipt, take these other steps. That process needs to be standardized so that customers are treated consistently and correctly, so that returned goods are accounted for appropriately, and so that sales commissions are reduced in a way that is fair to the sales staff.

Data Integrity

In a database or a collection of databases, the condition that exists when data values are consistent and in agreement with one another. when an organization has inconsistent duplicated data in has a _____ _______ problem. P. 302 for example

Process Blueprints

In an ERP application, comprehensive sets of inherent processes for all organizational activities, each of which is documented with diagrams that use a set of standardized symbols.

Change the Process Structure

In some cases, process quality can be changed just by reorganizing the process. The order approval process in Figure 8-1 might be made more efficient if customer credit was done first and inventory was checked second. This change might be more efficient because it would save the cost of checking inventory for customers whose credit will be denied. However, that change would also mean that the organization would pay for a credit check on customers for which it did not have appropriate inventory. We will investigate such changes further in Chapter 12. For now, just note that process structure has a strong bearing on process efficiency.

Enterprise Information Systems

Information systems that support cross-functional processes and activities in multiple departments. CRM, ERP, and EAI are three enterprise information systems support one or more enterprise processes. As shown in the second row of Figure 8-4, they typically have hundreds to thousands of users. Procedures are formalized and extensively documented; users always undergo formal procedure training. Sometimes enterprise systems include categories of procedures, and users are defined according to levels of expertise with the system as well as by level of authority.

Change Both Process Structure and Process Resources

Of course, it is possible to improve process quality by changing both the process's structure and resources. In fact, unless a structure change is only a simple reordering of tasks, changing the structure of a process almost always involves a change in resources as well.

Performing an Activity

Partially automated, completely automated Matt works at a take-out restaurant. His job is to take orders over the phone and then pass it on to the kitchen staff. As a result of being short-staffed, the restaurant management decided to automate Matt's job and assign him kitchen duties instead. In this case, information systems is ________. Information systems can perform the entirety of a process activity. In Figure 8-1, for example, the check credit activity could be entirely automated. When you purchase from Amazon or another major online retailer, information systems check your credit while your transaction is being processed. Reserving a seat on an airline is done automatically; all of the reservation activity is done by an information system. (Except, of course, the passenger's activities: When making a reservation, you must choose the seat from available locations, but your time is free to the airline.)

How Can Information Systems Improve Process Quality?

Performing an activity. Augmenting a human who is performing an activity. Controlling data quality and process flow.

Q8-1 What are the basic types of processes

Processes are divided into two broad categories. Structured processes are formally defined, standardized processes that involve day-to-day operations: accepting a return, placing an order, purchasing raw materials, and so forth. Dynamic processes are flexible, informal, and adaptive processes that normally involve strategic and less structured managerial decisions and activities such as deciding whether to open a new store location and how best to solve the problem of excessive product returns. Processes are used at three levels of organizational scope: workgroup, enterprise, and inter-enterprise. A workgroup process exists to enable workgroups to fulfill the charter, purpose, and goals of a particular group or department. Enterprise processes span an organization and support activities in multiple departments. Inter-enterprise information systems support one or more inter-enterprise processes.

Enterprise Processes

Processes that span an organization and support activities in multiple departments At a hospital, the process for discharging a patient supports activities in housekeeping, the pharmacy, the kitchen, nurses' stations, and other hospital departments.

Inter-enterprise Processes

Processes that span two or more independent organizations Processes that support activities in multiple, independent companies or other organizations. for example, the process of buying a healthcare insurance policy via a healthcare exchange involves many insurance companies and governmental agencies. Each of these organizations has activities to fulfill, all of which are affected by laws, governmental policy, and competitive concerns of the insurance companies.

Q8-5 What Are the Elements of an ERP System?

Supply chain (procurement, sales order processing, inventory management, supplier management, and related activities) Manufacturing (scheduling, capacity planning, quality control, bill of materials, and related activities) CRM (sales prospecting, customer management, marketing, customer support, call center support) Human resources (payroll, time and attendance, HR management, commission calculations, benefits administration, and related activities) Accounting (general ledger, accounts receivable, accounts payable, cash management, fixed asset accounting)

for a product to be considered a true ERP product, it must include applications that integrate:

Supply chain (procurement, sales order processing, inventory management, supplier management, and related activities) Manufacturing (scheduling, capacity planning, quality control, bill of materials, and related activities) CRM (sales prospecting, customer management, marketing, customer support, call center support) Human resources (payroll, time and attendance, HR management, commission calculations, benefits administration, and related activities) Accounting (general ledger, accounts receivable, accounts payable, cash management, fixed asset accounting)

Business Process Reengineering

The activity of altering existing and designing new business processes to take advantage of the capabilities of new information systems technology. Unfortunately, business process reengineering is difficult, slow, and exceedingly expensive. Business analysts need to interview key personnel throughout the organization to determine how best to use the new technology. Because of the complexity involved, such projects require high-level, expensive skills and considerable time. Many early projects stalled when the enormity of the project became apparent. This left some organizations with partially implemented systems, which had disastrous consequences. Personnel didn't know if they were using the new system, the old system, or some hacked-up version of both.

Train the trainer

Training sessions in which vendors train the organization's employees, called Super Users, to become in-house trainers in order to improve training quality and reduce training expenses.

Transition Problems

Transitioning to a new enterprise system is also difficult. The organization must somehow change from using isolated departmental systems to using the new enterprise system, while continuing to run the business. Such transitions require careful planning and substantial training. Inevitably, problems will develop. Knowing this will occur, senior management needs to communicate the need for the change to the employees and then stand behind the new system as the kinks are worked out. It is an incredibly stressful time for all involved.

Functional Information System

Workgroup information systems that support a particular business function. Thus, an operations management system is a functional information system, as are a general ledger system and a cost accounting system.

Q8-2 How Can Information Systems Improve Process Quality?

You can do this by: Change the process structure. Change the process resources. Change both process structure and resources.

Activity

a business function that receives inputs and produces outputs. are subparts of processes that receive inputs and produce outputs. ___________ can be performed by humans only, by humans augmented by computer systems, and by computer systems only. Each of these activities is, itself, a subprocess of this overall process.

Stored Procedure

a computer program stored in the database that is used to enforce business rules

Subprocess

a discrete and recognizable portion or component of a process

process efficiency

a measure of the ratio of process outputs to inputs If an alternative to the process can produce the same order approvals/rejections (output) for less cost or produce more approvals/rejections for the same cost, it is more efficient.

Business Process

a network of activities that generate value by transforming inputs into outputs.

Modules

a suite of applications in an ERP system

Customer Relationship Management system

a suite of applications, a database, and a set of inherent processes for managing all the interactions with the customer, from lead generation to customer service Every contact and transaction with the customer is recorded in the CRM database. Vendors of CRM systems claim that using their products makes the organization customer-centric.Though that term reeks of sales hyperbole, it does indicate the nature and intent of CRM packages. This design eliminates duplicated customer data and removes the possibility of inconsistent data. It also means that each department knows what has been happening with the customer at other departments. Customer support, for example, will know not to provide $1,000 worth of support labor to a customer that has generated $300 worth of business over time. However, it will know to bend over backward for customers that have generated hundreds of thousands of dollars of business. The result to the customers is that they feel like they are dealing with one entity, not many.

ERP System

an information system based on ERP technology, integrate all of an organizations purchasing, human resources, production, sales, and accounting data into a single system is an information system based on ERP technology. As shown in Figure 8-10, ERP systems include the functions of CRM systems but also incorporate accounting, manufacturing, inventory, and human resources applications. The primary purpose of an ERP system is integration; an ERP system allows the left hand of the organization to know what the right hand is doing. This integration allows real-time updates globally, whenever and wherever a transaction takes place. Critical business decisions can then be made on a timely basis using the latest data.

Workgroup Information System

an information system that facilitates the activities of a group of people An information system that supports a particular department or workgroup. Ex: An Operations department could implement an IS to support all three of the operations processes shown Order entry Order management Finished goods inventory management exists to support one or more processes within the workgroup. For example, an Operations department could implement an IS to support all three of the operations processes shown in Figure 8-3. Or an Accounting department might implement two or three different IS to support the accounting processes shown. Sometimes, workgroup information systems are called functional information systems.

Enterprise Application Integration (EAI)

connects the plans, methods, and tools aimed at integrating separate enterprise systems A suite of software applications that integrates existing systems by providing layers of software that connect applications together. EAI does the following: It connects system "islands" via a new layer of software/system. It enables existing applications to communicate and share data. It provides integrated information. It leverages existing systems—leaving functional applications as is but providing an integration layer over the top. It enables a gradual move to ERP. Ex: EAI software can be configured to automatically carry out the data conversion required to make data compatible among different systems. When the CRM applications send data to the manufacturing application system, for example, the CRM system sends its data to an EAI software program. That EAI program makes the conversion and then sends the converted data to the ERP system. The reverse action is taken to send data back from the ERP to the CRM.

industry-specific solutions

contain program and database configuration files as well as process blueprints that apply to ERP implementations in specific industries An ERP template designed to serve the needs of companies or organizations in specific industries. Such solutions save time and lower risk. The development of industry-specific solutions spurred ERP growth.

Q8-7 How Do Inter-Enterprise IS Solve the Problems of Enterprise Silos?

distributed systems Systems like that shown in Figure 8-19 are referred to as distributed systems because applications processing is distributed across multiple computing devices. Standards such as http, https, html5, css3, JavaScript, and SOA using Web services enable programs to receive data from and display data to a variety of mobile and desktop devices.

inter-enterprise information systems

information systems that are shared by two or more independent organizations Information systems that support one or more inter-enterprise processes. Supply chain management is the classic example of an inter-enterprise information system. support one or more inter-enterprise processes. Such systems typically involve thousands of users, and solutions to problems require cooperation among different, usually independently owned, organizations. Problems are resolved by meeting, by contract, and sometimes by litigation.

Customer Life cycle

marketing, customer acquisition, relationship management, and loss/churn Taken as a whole, the processes of marketing, customer acquisition, relationship management, and loss/churn that must be managed by CRM systems. marketing, customer acquisition, relationship management, and loss/churn. Marketing sends messages to the target market to attract customer prospects. When prospects order, they become customers who need to be supported. Additionally, relationship management processes increase the value of existing customers by selling them more product. Inevitably, over time the organization loses customers. When this occurs, win-back processes categorize customers according to value and attempt to win back high-value customers.

Natural Language Processing (or natural language understanding)

processing that allows the computer to understand and react to statements and commands made in a "natural" language, such as English

Change the process Structure

reorganizing the process EX: he order approval process in Figure 8-1 might be made more efficient if customer credit was done first and inventory was checked second. This change might be more efficient because it would save the cost of checking inventory for customers whose credit will be denied. However, that change would also mean that the organization would pay for a credit check on customers for which it did not have appropriate inventory. For now, just note that process structure has a strong bearing on process efficiency. Changing process structure can also increase process effectiveness. If an organization chooses a cost-leader strategy, then that strategy might mean that no special terms should ever be approved. If the process in Figure 8-1 results in the authorization of orders with special terms, then eliminating the third activity will make it more effective (most likely it will save on operational costs as well).

Functional Application

software that provides features and functions necessary to support a particular business activity or department (function) Workgroup information systems that support a particular business function.

Distributed Systems

systems in which application processing is distributed across multiple computing devices

Information Silo

the condition that exists when data are isolated in separated information systems For example, consider the six workgroups and their information systems in Figure 8-3. Reflect on these information systems for a moment, and you'll realize that each one processes customer, sales, product, and other data, but each uses that data for its own purposes and will likely store slightly different data. Sales, for example, will store contact data for customers' purchasing agents, while Accounting will store contact data for customers' accounts payable personnel. It's completely natural for workgroups to develop information systems solely for their own needs, but, over time, the existence of these separate systems will result in information silos that cause numerous problems.

Inherent processes

the procedures that must be followed to effectively use licensed software The procedures that must be followed to effectively use licensed software. For example, the processes inherent in ERP systems assume that certain users will take specified actions in a particular order. In most cases, the organization must conform to the processes inherent in the software. which are predesigned procedures for using the software products, saved organizations from the expense, delays, and risks of business process reengineering. Instead, organizations could license the software and obtain, as part of the deal, prebuilt processes that the vendors assured them were based on "industry best practices."

Collaborative Management

• No single manager to resolve disputes • Need committees and steering groups to provide enterprise process management • Slow and expensive