Chapter 15 Summary

1. Chapter 15 Summary Business and Information Systems Planning

2. Questions that the Topic of Planning Raises • How important is planning? • What is its purpose (Objective)? • Who needs to do what? • What is the impact on the organization? • How can the process be kept dynamic? • What is the relationship with information • systems? • Is there a right planning methodology? • Are there consistent planning success factors?

3. Strategy Versus Planning Strategy is thinking through a company’s basis for competitive advantage. Planning is a means of establishing a strategy but italsofocuses on making the strategy work.

4. Strategic Planning Model Mission Vision Environment (External) Strategic Plan Tactical Plan Business Plan Opportunities Threats Detailed Projects Resources: Headcount, Capital and Expense Budgets Business Unit Functional Programs Major Projects Goals Objectives Strategic Positioning Enterprise (Internal) Strengths Weaknesses Culture (Explicit/Implicit) Figure15-3

5. Planning Methodologies • There are many planning methodologies. • Methodologies are seldom the reason for planning success or failure. • Planning methodologies are like systems with input, processing and output all being key elements. • Key to planning is communicating the intended direction through practice.

6. Traditional Approach in IS Planning Vision Strategy Tactics Traditional I/S Role Figure 15-2

7. Business - IS Planning Opportunities Technology Environment Corporate Strategy Business Strategy Dictates I/S Strategy 1) Strategic Capability 2) Technology Driven Business Change Benefits Determines Information Technology Figure 15-7

8. Why IS Planning Fails Management Authority and Responsibility 1. A lack of support of the planning process. 2. A failure to support the final plan through actual implementation. 3. The unexpected happens that was not anticipated by the plan. The key here is systems flexibility. 4. Too much time is spent on “turf battles” or other political issues and not enough on the desired results. 5. Impatience by senior management for results.

9. Why IS Planning Fails IS and General Business-related Issues 1. Its outcome is stated in terms of technology and not business results. 2. A lack of user understanding of how IS relates to the business objective or a failure to accept or support the proposed approach. 3. Tends to place blame on today’s environment rather than project a new and better way of doing things. 4. A lack of risk taking leads to an incremental approach that fails to motivate people.

10. Final Thoughts on Planning Planning is a tool. There is an organizational learning curve regarding methodologies. A good plan with no execution borders on a waste of the entire effort. A relatively weak plan with a few strong thoughts followed by tenacious implementation can provide major business benefits.

11. Possible Exam Questions • Identify and explain three reasons why a company would have problems developing and implementing a strategic plan. • What factors are most important to successfully align information systems with the strategic plan of the company?

12. Chapter 16 Was -- Total Quality Management and The Role of Information Systems New -- Business Innovation Based on Process Reengineering

13. DELIGHTED CUSTOMERS SATISFIED STOCKHOLDERS PROUD EMPLOYEES ENHANCED COMMUNITY SUCCESSFUL PARTNERS A WIN - WIN PROPOSITION Figure 16-5

14. A Definition of Quality “Quality” is conformance to customer wants, needs and expectations, at a price he or she will pay.

15. Total Quality Management Of the three letters in TQM, the T is most important. Total says that you maintain a balanced focus on major business factors and business results while guarding against becoming process myopic.

16. TQM ALONE IS NOT ENOUGH Competitive Advantage Business Process Reengineering Competitor Competitive Advantage TQM Alone You Time Today

17. BPR Reputation BPR is much discussed, often belittled and even criticized as the latest business fad or buzz words. Those that believe in its merits suggest that its critics either don’t understand what it is or grossly underestimate the challenge to apply the approach successfully. There is no doubt that a BPR project represents a major challenge because of its broad scope and recommended clean slate approach. A typical high-risk, high-return effort.

18. BPR is a Huge Challenge! For a company to achieve and sustain a competitive advantage it must continually address: • Business Strategies • Core Business Processes • Organizational Structure • Company Culture • Internal Infrastructure and Support Technology After validating existing business strategies or formulating new strategies, a vehicle to address the other factors can be business process reengineering (BPR).

19. BPR Focus • Core Business Processes • Organizational Structure • Company Culture • Internal Infrastructure and Support Technology The results can be input to strategies and company policies and practices.

20. BPR Project Team • The best of five or six experienced people. • Really know the business. • Broad business function representation. • Excellent interpersonal skills. • Full time for a month or two. • Empowered with responsibility and authority. • Clean slate approach. • May decide to include a consultant.

21. BPR in Summary An approach that incorporates: • Business leadership. • Rethinking how work is done within the organization. • Core business process analysis. • Project management. • Change management.

22. BPR in Summary • Done well, BPR can make a major contribution to the on-going success of a business. • Done poorly, it can prove costly and very disappointing.

23. 4. Continuous Improvement 3. Stabilization 2. Business Process Re-engineering BENEFIT 1. Analysis & Benchmarking Dramatic Short Term Gains Continuous Long Term Gains Four Logical Phases . . . minimizing the time to realize sustainable benefits

24. Business Management • Customer Service • Flexibility • Lead time • Innovation • Quality • Cost Vision Values & Beliefs Strategies COMPANY LEVEL Tactics Implementation INDIVIDUALLEVEL Performance Measures Methodologies & Techniques

25. Over Time Companies Have Taken a Simple Manufacturing Process and . . . Make Assemble Pack & Ship CUSTOMER ORDER

26. . . . Complicating It ORDER Purchasing Manufacturing Distribution CUSTOMER Planning Design Finance Sales Functional Measures Departmental Barriers Systems Constraints

27. Complex Manufacturing Results In: • Large Production Batches • Long Lead Times • High Inventory Levels • Many Suppliers • Inflexibility • Complex Scheduling & Paperwork • Wrong Products in Stock

28. Order Order Order Order Order Complex Distribution Manufac -turing Local Warehouse Regional Warehouse Local Warehouse Customer Warehouse Supplier • Long Lead times • High Stock Levels • Poor Service • Many Parties Involved • Poor Quality Leads to: High Logistics Costs

29. Sales Design Planning Purch -asing Manuf- acturing Finance Distr- ibution Complex Business Processes • More Complexity • More Overhead Costs • Longer Cycle Times • More Levels of Management Leads to: Higher Overhead Costs

30. Sales Design Planning Purch -asing Manuf- acturing Finance Distr- ibution Sales Design Planning Purch -asing Manuf- acturing Finance Distr- ibution Sales Design Planning Purch -asing Manuf- acturing Finance Distr- ibution Resulting in a Tendency to Automate the Complexity ERP CRM MRP Suppliers Manufacturing Distribution

31. Core Business Processes Customer Order Processing $ New Product Introduction Manufacturing Supplier Development Supply Chain Logistics . . . 5 or 6 Core Processes Represent 80% of the Costs

32. A Better Approach? Current Processes Sales Design Planning Purch -asing Manuf- acturing Finance Distr- ibution Value added (VA) ‘Ideal’ Process Non Value Added (NVA) • Eliminate all non-value add activities • The goal is a process consisting of only value-add activities

33. Which of These Processes Add Value to the Customer? * Purchasing Vendors Planning Expediting * Receiving * Customer Inspection Management Engineering Materials Handling * Distribution Data Collection Accounting Automated Warehouse Stores Information Systems * Manufacturing Robots Direct Operator * Conveyors Work-in- Process Supervision

34. IS as an Integral Part of the Solution Sales Design Planning Purch -asing Manuf- acturing Finance Distr- ibution Automates much of the Waste (NVA) IT Solution Business Process Reengineering Eliminates Waste IT Enhanced Enhances Value Add The ultimate objective ‘Ideal’ Process

35. A BPR Case Study Microsoft Europe

36. WORLD CLASS MILESTONES World Class Business Processes for Europe 1995 World Class Logistics in Europe 1993 World Class Manufacturing in Ireland 1991

37. A New Manufacturing Approach FROM ONE LARGE FACTORY • Two-stage manufacturing • Duplicate disk • Assemble product • Functionally organized • Complex planning and tracking process • Many short-term vendors (Job-by-job tendering) • TO FOUR FOCUSED FACTORIES • Cellular manufacturing • Kitted materials • Round Tables • Self-directed, multi-skilled flexible teams • Kanban, visible controls • A few, long-term, quality-assured contract vendors

38. Manufacturing Results • Lead time 12 weeks to 1 day • Raw Material & WIP 4 weeks to 1 day • Finished Goods Inventory 12 weeks toNONE • Quality (defect rate) 1 in 100 to 1 in million Result: Rapid low cost, high quality, response to market demand Consequence: Traditional logistics began to look inappropriate . . .

39. LOGISTICS ‘A’ class (rate-based) products (60% value) - 100 items Ireland Manufacturing Distributor’s Warehouse Ireland FGS ‘B’ & ‘C’ class products (40% value) - 2300 items • Ireland ships to customers every day. • Rate-based products made every day and shipped directly off the manufacturing line every day. • 60% of products are not warehoused. • Non Rate-based products are made periodically as required for replenishment and are shipped from the warehouse. • Lead-time from the warehouse is just transit time. • Worst case is three days to Central Europe • The daily rate of deliveries is reviewed weekly. • Safety stock holding is calculated as five days plus the difference between the set rate and actual sales rates.

40. Results of Better Logistics Microsoft Europe • 1100 customers 96 • 6 warehouses 1 warehouse • 10,000 square meters 1,000 sq. meters • Inventory turns from 4 x 32 x Result: Short lines of communication with fewer, larger customers Consequence: Traditional Pan-European business processes began to look inappropriate.

41. Results of BPR Microsoft Europe • Reduced complexity and volume of transactions allowed closure of Regional Business Systems • Six AS/400 installations around Europe were closed. • The AS/400 installation in Dublin was enlarged. • Connections to sales and marketing subsidiaries maintained by MS Network. • Reduction of Regional Establishments • Forecasting/accounting/inventory mgmt/purchasing/distribution/ sales order processing/credit control/returns/financials was centralized in Ireland. Result: Rapid supply through a short supply chain using fewer, simpler transactions. Consequence: Competitive advantage and high customer satisfaction.

42. Critical Success Factors • Find out what the customerreally wants and/or needs. • Do things in the right sequence: Manufacturing - Logistics - Business Processes • Get commitment from senior management at an early stage. Functional manager views may need to be overridden. • Have a clear vision of where you want to get to and communicate it internally and externally. • Meticulously plan all transitional steps. It is during this period that customer service is likely to deteriorate. • When designing pan-European processes, evaluate all local differences and then provide a consensus solution where possible. • Do not underestimate the time required to mobilize and implement large scale change programs.

43. Improvement Projects Problem Definition and Linkages: Ensure that improvement projects are focused on critical business issues and key success factors. Project Management and Execution: Provide a framework for organizing, implementing and following up on improvement projects. Improvement Process Effectiveness: Provide a way for the entire organization to learn from improvement projects and standardize results learned from them.

44. Leadership and Participation • Leadership: define management’s role in sponsoring change and focusing on achieving business success. • Managing change • Empowerment • Employee development Participation: address methods used to motivate and involve all employees to contribute to business success.

45. Hammer Reengineering Principles • Organize around outcome and not tasks. • Have those that use the output of the process perform the process. • Integrate information processing work into the real work that produces the information. • Treat geographically dispersed resources as though they are centralized. • Link parallel activities. • Put decision making where the work is performed and build control into the process.

46. BSP Phases

47. BSP Motivation • Improve value to customer. • Pursue new business opportunities. • Strengthen alignment of core processes to business strategies. • Optimize cross-functional performance. • Broaden scope of activities and individual jobs to improve operational responsiveness or flexibility. • Reduce operating costs.

48. Vendor Software/Support • Project management: budgeting and project scheduling. • Problem solving and diagnosis, diagramming and cognitive mapping. • Customer requirements analysis. • Process capture and modeling, flowcharting, activity diagramming and interaction modeling. • Process measurement: activity based costing, statistical process control and time and motion studies. • Process prototyping and simulation. • IS systems analysis and design and software reengineering.

49. Vendor Software/Support • Business planning such as critical success factors or core process analysis. • Organizational analysis and design: employee and team attitude opinion assessment, job design and team building techniques. • Change management: search conferences, assumption surfacing, persuasion techniques • Techniques for project management, problem solving and diagnosis are essential for management and basic problem analysis.

50. Reasons BPR Projects Fail 1) The lack of sustained management commitment and leadership. 2) Unrealistic scope and expectations. 3) Employee resistance to change.