INFO245 An Introduction to Business Functions and Processes

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INFO245 An Introduction to Business Functions
and Processes
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Outline

• Globalization and its impact on organizations
• Business processes and functions
• Impacts of poor cross-functional coordination
• The evolution of information systems to support
  business processes

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Chapter Synopsis

• Competitive pressures brought on by globalization
  has forced organizations to become more efficient
  and flexible in order to succeed.
• Historical development of organizations AND
  information systems has hindered efficiency and
  flexibility.
• Enterprise systems have emerged to help
  organizations become more efficient and flexible
  (maybe)

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globalization
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Apple

• What was the fundamental change to Apples
  business strategy introduced by Steve Jobs?
• Implications for company operations?
• Implications for Apples Information Systems?
• What are the key capabilities of Apples new
  systems?

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Globalization of industry

• Political, economic, cultural and technical
  changes since the 1990s have driven
  globalization
• Customers are global
• Competitors are global
• Operations are global
• Huge implications for organizations
• Information revolution
• Emergence of knowledge workers

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Information revolution

• Increased use of Information and Communications
  Technology (ICT) to create, deliver and use
  information
• Data, documents, voice, video
• Global enterprise needs to share information
  quickly
• Design, forecasts, material availability, etc.
• Monitoring
• Could companies like Apple survive without ICT?

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Knowledge worker

• Today two types of workers task and knowledge
  (dominant)
• Knowledge work is non-routine, non repetitive
• Understand data and impact of work on others and
  impact of others work big picture
• Knowledge workers
• Increasing dependence on information to do their
  work
• Create, acquire, process, synthesize,
  disseminate, analyze and use information
• Executives, Managers, Analysts

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Knowledge workers (cont)

• Key skills
• Strategic thinking big picture, process view
• Information literacy find and use needed
  information
• Communication and collaboration project teams

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Business processes and functions
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Business processes

• Sequence of tasks or activities that take a set
  of inputs and convert them into desired inputs
• The way work is organized for generating value in
  an organization
• Key processes
• Procurement
• Production
• Fulfillment.Others?
• For our purposes think of manufacturer
• Amazon?

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Figure 1 A generic process
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Procurement Process
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Business Functions

• Organizations are structured as functional units
  (departments) rather than around process
• Division of labor / specialization less complex
  to manage
• The individual tasks associated with a process
  are performed within different functional areas

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Function vs. Process

• Who (what functions) are involved with the
  fulfillment process?

Accounting (A/R)
Warehouse
Sales
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Functions / process relationship

• Major processes are cross-functional
• Efficiency comes from functional coordination

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Information systems and process
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The Silo effect

• Functional organization of organizations leads to
  the silo effect focus on functional tasks
  rather than the big picture (process)
• To overcome, communication and collaboration
  between functions is needed
• This is where Information Systems are needed
• Paper
• Functional
• Enterprise

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Paper-based fulfillment process
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Consequences of poor coordination

• Delays
• Increased lead times
• Increased cycle times
• Nintendo
• Excess inventory
• just in case
• Cisco
• Lack of visibility across the process
• Status where is my order
• How is the process doing
• Nike

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Poor coordination no longer acceptable

• Why?
• Globalization
• Increased competition
• Customer expectations -- Dell
• Information systems to the rescue!

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Process using functional systems paper
interfaces
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Process using functional systems automated
interfaces
Sales Info System
Accounting Info System
Warehouse Info System
Automated Interface
Automated Interface
Automated interfaces (custom built programs to
transmit data between systems) can eliminate
delays Any issues ?
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Processes using Enterprise Systems

• Major processes are integrated in a single
  software system
• Data flows seamlessly
• One database containing all data needed to
  support processes
• Replace an assortment of systems and numerous
  databases that typically existed in
  organizations.
• Integrated information available in real-time.

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Framework Key process flows
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Role of ES in organizations

• Execute the process
• Inform, provide data, help complete steps
• automation
• Embedded in the process
• Examples in procurement and fulfillment
• Capture and store data resulting from processes
• Automatic and seamless

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Role of ES in organizations

• Monitor performance of processes
• Instance level information (e.g., individual
  order status)
• Dell, Amazon
• Process level information (aggregate)
• Procurement cycle time (from order to receipt)
• Fulfillment cycle time
• Actual vs. targetted

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Aggregate
Instance
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Example of How ES Works

• Step 1 Brazilian retailer orders, via the
  Internet, 1,000 shoes from International Shoe Co,
  based in Canada. A sales rep takes the order,
  routes it to ERPs ordering module, ES checks the
  retailer credit, price, etc. The order is
  approved.
• Step 2 Simultaneously ESs inventory module
  checks the stocks and notifies the rep that half
  the order can be filled immediately from stock.
  The other half will be manufactured and delivered
  in 5 days directly from the factory in Taiwan.

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Example of How ES Works

• Step 3 ESs manufacturing module schedules the
  production in Taiwan and instructs the warehouse
  (in Chinese) to ship the shoes to Brazil and
  print up an invoice (in Portuguese).
• Step 4 ESs human resources module calculates
  labor requirements. Due to a shortage, the
  personnel manager in Taiwan is instructed to get
  temporary workers.
• Step 5 ESs material planning module notifies
  the purchasing manager about a shortage of purple
  dye. A purchase order is automatically issued.

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Example of How ES Works

• Step 6 The customer logs on via the extranet to
  the companys sneakers division. He can see that
  500 pairs were shipped from the regional
  warehouse. This is done with ES tracing
  capabilities.
• Step 7 Based on data from ESs forecasting and
  financial modules, the CEO can determine both
  demand and profitability per product. The
  financial module also converts all foreign moneys
  to CAD., whenever needed (e.g, New Taiwan dollar
  for cost, Brazilian Real for revenue)

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• Colgate Case

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Colgate Brief History

• William Colgate established Colgate in 1806
• Mainly a starch, soap and candle business
• Merger with Palmolive in 1928 Colgate-Palmolive-P
  eet
• Corporate name changed to Colgate-Palmolive in
  1956

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Colgate Brief History (cont)

• Continuous growth
• Today 9.9 Billion company (2003)
• Operations in more than 200 countries and
  territories
• Colgate is now recognized as one of the leading
  manufacturers of oral care, dental care,
  household surface care, fabric care and pet
  nutrition products

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Colgate

• Divergence of operating platform
• Dozens of platforms
• Low IT skills/knowledge
• No one understood all of the legacy systems
• Each CIO for each country very decentralized IS
  organization no standards or best practices in
  place
• No centralized operation e.g. 80 CIO
• Decided to implement ERP software in 1999

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Integration of Processes Some benefits
Before
Activity
After
Source Hammer
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Outcomes for Colgate

• Availability of information in real time
• Decision making made easy because of availability
  of accurate and up-to-date data
• Business process re-engineered and in some cases
  different departments consolidated into one
• Improved efficiency about 30 for the database
  applications and about 50 reduction in
  processing time

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Outcomes for Colgate Contd

• SAP handles 95 of the companys 9.9 billion
  annual sales.
• Colgate saved 225 million where as target was
  125 million.
• Datacenters shrinks to 1 (and one backup) from 75
• Inventory reduce by 10
• Facilitated move to eCommerce.

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ERP Video

• Questions
• How does an ERP system change the way people
  work?
• Why do you think its important for top business
  managers to have a sound understanding of ERP
  systems?
• What are some of the issues associated with
  implementing an ERP system?