BCIS 401Information Systems for Managers

Business Processes

Dr. J. Affisco

Fall 2002

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Lecture Topics

• Why Study Business Processes?

• Levels of Processes

• The Breakfast Factory

• Mapping Business Processes

• Managing IT as an Integral Part of the Process

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

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Four Levels of Processes

• Elemental Processes

• Compound Processes

• Business Processes

• Managerial and Organizational Processes

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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

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

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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

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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

Making and Delivering a

Breakfast as an Analogy for a

Purposive Business Process

The Breakfast Factory

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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

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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

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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

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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

The Breakfast Factory

Designing the Production Process

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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

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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

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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

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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

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• 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

• 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

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

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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

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

Comparison of Breakfast Factories

Characteristic Non Automated(Job Shop)

Automated(Continuous)

Products Varied – Possibility ofCustomization

Highly Standardized –No CustomizationPossible

Volume Low Volume – WideVariety of Products

High Volume – LimitedVariety of Products

ProcessFeatures

Flexible General Purpose

Equipment Skilled Workers High Labor Content

Rigid Special Purpose

Equipment Semiskilled Workers Low Labor Content

MaterialsFeatures

Low R/MInventories – Boughtto coincide withorders

Low F/G Inventories– Product not madeuntil ordered

High R/MInventories – Tocushion process flow

High F/GInventories –Products made tostock

InformationFeatures

Mapping Business Processes

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

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?

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Process Mapping Steps

• Select the Process

• Define the Process

• Map the Primary Process

• Map Alternative Paths

• Map Inspection Points

• Use Map to Improve Process

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Select the Process

• Begin With Macro (Business) Processes

• Determine the Critical Micro Processes

• Select the most helpful viewpoint(s)

– Employee vs Customer

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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

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

Mapping Business Processes

Sotheby’s Live Auction

Sothebys.com Online Auction

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.

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%

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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

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Periodic-New-System based Path-based

Role of IT

Project size and number

Development Approach

Delivery of Value

Source oftechnology/software

Primary functional concerns

Locus of Technical Control

Experimentation

Primary Managerial Effort

Supportive/Peripheral toOperation

Large, few, infrequent

Build then install

When project is complete

Custom-built, heavy use ofcustom code, proprietarystandards

Control, efficiency,Accommodating all requirements at once

Vendor/IT group

Limited

Installation, Project andVendorManagement

Integral part of Operation

Small, many, frequent

Prototype and evolve

On-going

Off the shelf, little customcode, standards in commonuse

Integration, interconnection,flexibility, progressivedeliveryof requirements

Operation itself

Frequent opportunities

Ongoing management ofInterconnection standards

Two Models for IT Development in Operations

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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

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Designing and Orienting the Path

• Providing direction so that the progressive

addition of modules delivers the form of

competitive advantage the operation is

seeking

Information Technology Function ConsistentCompetitive Need

Reduce material waste Eliminate labor Reduce cost of a business process

Decreased Cost

Improve consistency of process Trap errors/mistakes Track process parameters Provide better process information to

operators

ImprovedConformanceQuality andProductReliability

Provide broad availability of orderinformation

Ensure information accuracy Track physical flow of material

EnhancingdeliveryReliability

Matching IT Function to Competitive Role

Information Technology Function ConsistentCompetitive Need

Management and distribution of programs forprogrammable machines

Facilitate rapid design changes/modification Deliver production process information to shop-

floor operators

Enhance ability tocustomize product,deliver broad productrange

Connect customers/suppliers to operationselectronically

Speed information flow through operationssystem

Allow reduction in work-in-progress throughgreater control

Improvedresponsiveness

Provide virtual test-beds Facilitate design work Generate automatic recipes/part-programs

Rapid Innovation

Matching IT Function to Competitive Role

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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

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

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

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

Small number of contingencies Concrete rules Predictable set of circumstances Need for ongoing, frequent

decisions System can be made transparent

to accommodate understandingby operators

Many contingencies Abstract rules Unpredictable, novel

circumstances likely Infrequent decisions High potential for learning

Process is at a high stage of knowledge Limited opportunities for new learning

Through execution Hazardous/arduous environment Compelling quality/productivity advantages Variety is within economic programmable range of devices Stable product/services requirements over time Physical manipulation based on strength

Process is at low stage ofknowledge

Customized or very highvariety of output

Nature of Task highlychangeable over time

Physical manipulation basedon dexterity

Tend to Substitute Tend to Facilitate

Control

Execution

Using IT Either to Substitute or Facilitate