BCIS 401 Information Systems for Managers

1. BCIS 401Information Systems for Managers Business Processes Dr. J. Affisco Fall 2002

2. Lecture Topics • Why Study Business Processes? • Levels of Processes • The Breakfast Factory • Mapping Business Processes • Managing IT as an Integral Part of the Process

3. Why Study Business Processes? • Process Management is Changing • Shorter Process Life Cycles • Static Processes are a rarity today • Processes change rapidly due to increased product introduction rates and fragmenting markets • Process innovation in pursuit of greater efficiency, new capabilities, or new revenue streams, is becoming increasingly common • IT has become an integral part of successful Business Processes

4. Four Levels of Processes • Elemental Processes • Compound Processes • Business Processes • Managerial and Organizational Processes

5. Elemental Processes • Usually carried out by a single machine or work station that carries out material or information transformation at the most basic level • Examples • Grinding • Hamburger Grilling • Data-Entry • Bypass-graft operation

6. Compound Processes • A collection of elemental processes connected together, often using material handling or communications equipment, to build an overall sequence of activities that change the form of either material or information • Examples • Gearbox production process • Fast-food production • Insurance policy setup • Heart disease treatment

7. Business Processes • A collection of compound processes that are coordinated into an overall sequence that delivers value to the customer • Examples • Order fulfillment process • Capacity management

8. Managerial and Organizational Processes • Occur at the highest level of organizations and are used to make decisions of a strategic nature • Examples • Capital investment appraisal process • Employee development process • Process for deciding on acquisitions

9. The Breakfast Factory Making and Delivering a Breakfast as an Analogy for a Purposive Business Process

10. Operating Task Prepare and deliver a breakfast consisting of A three-minute soft boiled egg Buttered toast Coffee Each are to be fresh and hot when delivered

11. Basic Requirements of Operations To build and deliver products/services in response to demand Products to be delivered at a scheduled delivery time, at an acceptable quality level, and at the lowest possible cost

12. Limitations on the Production System Cannot be expected to deliver to the customer whatever he wants whenever he wants it To do so would require infinite capacity or a very large ready to deliver inventory Both are extremely costly items Customer cannot expect to receive his breakfast the minute he sits down

13. Operation’s Responsibility Deliver a breakfast at some reasonable time (5 to 10 min) and commit to this Prepare & deliver breakfast at a cost that will allow us to charge a competitive price and still make an acceptable profit We accomplish this through design & operation of the process

14. The Breakfast Factory Designing the Production Process

15. Limiting Step Boiling of the egg is the Limiting Step since coffee is already steaming in the kitchen and that takes a minute Not only does the egg take longest to prepare but for most customers, it is the most important part of the breakfast

16. Determine Total Throughput Time Time for preparation of egg Time for preparation of toast Time for pouring of coffee Time for assembly of components on tray for delivery

17. Throughput Times are Used To determine total throughput time for capacity planning and production scheduling To plan process flow so that all components are ready simultaneously for assembly and delivery

18. Planning Process Flow Backshedule (offset) from the time of delivery Allow time for assembly, and processing of egg Next, using egg time as your base, allow time to get bread, toast and butter it Finally, using toast time as your base, you determine when you need to pour the coffee

19. Process Manufacturing - An activity that physically or chemically changes material Assembly Manufacturing - Components are put together to constitute a new entity Test - Subjects the components or the total to an examination of its characteristics Types of Production Operations

20. What if limited not infinite capacity? The Case of the Toaster Queue Process flow must be adjusted for time waiting for the toaster If not, 3-min. egg may become 6-min. egg Egg still determines overall quality of the product, preparing the toast becomes the limiting step How does this change process flow? A Few Complications

21. A Few Complications The Case of Processing Time Conflict Waiting for toaster when it’s time to start egg Consider following alternatives Create Specialists - Increases Overhead Add another toaster - Expensive addition of capital equipment Run the toaster continuously - Build toast inventory, through away what you can’t use but have immediate access to this component. Waste; Expensive

22. A Few Complications What we’ve learned? Equipment capacity, manpower, and inventory can be traded off against each other then balanced against delivery time The correct balance is one that delivers the product on time with acceptable quality for the lowest cost

23. High Volume Breakfast Factory Continuous Egg-boiler -constant supply of perfectly boiled 3-min. eggs Continuous Toaster - medium toast Specialized operators - load each piece of equipment and deliver products Can no longer prepare each customer’s order exactly how and when he wants it. Gain is lower cost & more predictable product quality

25. Mapping Business Processes

26. An Overview • The best way to understand the overall process • Determine the part of the process to be mapped • What is the scope? • Decide what to include on the map • customers and suppliers? • Number of employees involved • total process time • duration of each step • information inputs and outputs

27. An Overview • Start with high-level “blocks” - then drill down to process elements if necessary • Key questions: • What are the obvious weaknesses? • What is the overall process designed to do well - is this the right thing to focus on • How would I carry out the process with no constraints (blue sky view)? • How should the performance of the process be measured? • What part does IT play in the process? What part should it play?

28. Process Mapping Steps • Select the Process • Define the Process • Map the Primary Process • Map Alternative Paths • Map Inspection Points • Use Map to Improve Process

29. Select the Process • Begin With Macro (Business) Processes • Determine the Critical Micro Processes • Select the most helpful viewpoint(s) • Employee vs Customer

30. Define the Process • State the output of the process • List the customers for the output • List customer requirements of output • List process participants • List process owner • Determine process boundaries • List inputs and their suppliers

31. Map the Primary Process • Consists of the essential steps or activities that must always occur to produce your output • Each step or activity is represented as a rectangle on your flow diagram • Include inputs and outputs as parallelograms • Storage points or inventories as triangles • Indicate direction of flow by arrowheads

32. Mapping Business Processes Sotheby’s Live Auction Sothebys.com Online Auction

33. IT and Business Processes IT has Become an Integral Part of Managing and Improving Operations By 1996, 87% of Operations’ Managers cited at least joint responsibility for IT decision making.

34. Why the Change? • Dramatic explosion in the volume of information required to manage modern business processes • Companies are combining IS with operations expertise to build new competitive weapons • Example • GE Lighting - innovations in web based purchasing have cut lead time in half and costs by 15%

35. Why the Change? • Nature of ITs employed is changing dramatically and more rapidly than ever • Client-Server architectures now common place • Increasing presence of intranets & Internet • Open Systems Architecture • Facilitates rapidly built “mix-and-match” archs. • Allows “best-of-class” technologies to be joined to construct custom systems

36. Two Models for IT Development in Operations

37. Important Roles in Managing the IT Path • Designing and Orienting the Path • Managing the Path • Building an IT Path that provides the Foundation for Operations Improvement

38. Designing and Orienting the Path • Providing direction so that the progressive addition of modules delivers the form of competitive advantage the operation is seeking

39. Matching IT Function to Competitive Role

40. Matching IT Function to Competitive Role

41. Managing the IT Path • Building design principles that • Ensure the progressive addition of modules results in a harmonious whole • Modules are easy to network to each other • Modules provide flexibility to change as requirements and objectives change • Requires Careful Stewardship of Standards

42. Building an IT Path that Supports Process Improvement • IT can streamline routine & repetitive functions • IT can free operations to improve rather than simply execute a process • IT can reinforce new, more effective ways of coordinating work • IT offers the possibility of broad and open connectivity, allowing networks of operations to improve the way they work together

43. IT-driven Operations Improvement • IT can be used to drive an improvement initiative when • Used as a source of structure to foster and reinforce new ways of working • FMS - 40% of benefits realized before equipment installed • Used to build new IT-based capabilities • Intranets, Wireless capabilities • Used to take advantage of new off-the-shelf IT • ERP - SAP, Oracle

44. Facilitation vs. Substitution • Operator’s roles can be divided into three hierarchical functions • Execution - the performance of the process • Control - Determining the out put of a process, correcting for changing conditions • Learning - the improvement of the process and the development of new skills • Ignoring IS learning, the question becomes, when should IT substitute for the role of operators in execution and control of a task, and when should it be used to facilitate that task

45. Using IT Either to Substitute or Facilitate Control Execution