ENTERPRISE RESOURCE PLANNING AND

BUSINESS PROCESS RE-ENGINEERING

(ERP & BPR)

Module 1
INTRODUCTION TO PROCESS CONCEPT

A set of multi-step activities that produce desired outcomes.

ERP is a collection of processes.

Processes consist of interdependent steps in an ERP System.

The steps in a process are completed in different functional areas.
Each process starts with a trigger.

Inputs
Process Outputs
Four Concepts of a Process

1) Triggers
2) Tasks
3) Data
4) Outcome
PROCESS CONCEPT

What is a common trigger in the ERP system that initiates a

process?

Creating a document is a trigger that can start off a

process that needs to be completed in several different
steps, in several different areas.
Value Chains
The value chain categorizes the generic value-adding activities of an
organization
The value-chain concept has been extended beyond individual firms. It can
apply to whole supply chains and distribution networks
Identifying value chain processes enables process improvement efforts to
be focused on the processes that could potentially add the most value to the
customer
The goal of identifying and improving the value chain is to offer the
customer a level of value that exceeds the cost of the activities, thereby
resulting in a profit margin
The firm's profit margin then depends on its effectiveness in performing
these activities efficiently. A competitive advantage may be achieved by
reconfiguring the value chain to provide lower cost or better differentiation

5
Value Chain: Primary Activities
Inbound logistics:
the receiving and warehousing of raw materials, and their distribution to
manufacturing as they are required

Operations:
the processes used to transform inputs into finished products and
services

Outbound logistics:
the warehousing and distribution of finished goods

Marketing and sales:

the identification of customer needs and the generation of sales

Service:
the support of customers after the products and services are sold to them

6
Value Chain: Secondary (Support) Activities

Administrative infrastructure management:

organizational structure, control systems, company culture, etc.

Human resource management:

employee recruiting, hiring, training, development, and compensation

Technology development:
technologies to support value-creating activities

Procurement:
purchasing inputs such as materials, supplies, and equipment

7
Value Chain: Graphic View
These activities are typically shown in a graphic format first developed
by Michael Porter, the person who first wrote about value chains:
Support Activities

Primary Activities

8
Specific Value Chain View
The primary activities of inbound logistics, operations,
outbound logistics, marketing and sales, and service are
often written in a different format:

Inbound Outbound Marketing

Operations Service
logistics logistics and sales

9
Example Value Chain: Wireless Phones
When focusing on a particular organization, the generic primary
activities are made specific to the organizations products or services.
This may also change the number of categories, as shown below:

10
PROCESS ACTIVITIES
1. Has a Goal

2. Has specific inputs

3. Has specific outputs

4. Uses resources

5. Has a number of activities that are performed in

some order

6. May affect more than one organizational unit.

Horizontal organizational impact

7. Creates value of some kind for the customer. The

customer may be internal or external
PRODUCT COMPLEXITIES

Reasons for product complexities

1. Product complexity is overlooked even before

acquisition is decided

2. Mergers with other organization

3. Management lacks incentive to tackle this problem

How to overcome this

1. Assessment

2. Mapping

3. Blueprint design
Reengineering current situation

Todays organisations are confronted with difficult operation

conditions and with continuously increasing competition.
Reengineering and/or continuous improvement of their
business processes seems to be unavoidable in order to
survive in a competitive and continuously changing
environment

For Hammer, suggested the following seven principles in

order to embark a successful reengineering effort
 Reengineering current situation

(1) Organize around outcomes, not tasks,

(2) Have those who use the output of the process perform
the process,
(3) Subsume information-processing work into the real work
that produces the information,
(4) Treat geographically dispersed resources as though they
were centralized,
(5) Link parallel activities instead of integrating their results,
(6) Put the decision point where the work is performed, and
build control into the process,
(7) Capture information once and at the source.
Necessary to re-invent organization
Realize that redefine and reinventis not only about
transforming the products and services; its about
transforming how we do everything.

For example, Amazon redefined not only the bookstore but

also the shopping experience itself. Apple redefined the PC
and has continued to redefine everything it touches, from
phones to how we listen to music to how we purchase
entertainment.

Reinventing is not the same thing as adding a feature, a

tweak, or a twist. Once something is reinvented, it never
goes back to being the way it was before because
reinvention harnesses the power of transformation.
Continuing the mass production concept
Mass production is the production of large amounts of
standardized products, including and especially on
assembly lines.

The concepts of mass production are applied to various

kinds of products, from fluids and particulates handled in
bulk (such as food, fuel, chemicals, and mined minerals)
to discrete solid parts (such as fasteners) to assemblies
of such parts (such as household appliances and
automobiles).

Mass production is a diverse field, but it can generally be

contrasted with craft production or distributed
manufacturing. It has occurred for centuries; there are
examples of production methods that can best be defined
as mass production that predate the Industrial
Revolution.
Variation on the Greenfield approach

The Green field Approach, is also known as the radical

turnaround. A Green field Approach, is applied to the
design and formation of a new Organization and its
working practices.

A Green field Approach asks the following question, If a

new organization is formed, what has to be done and how
would it be done?

According to Greenfield approach, for a new Enterprise or

an Enterprise unit to be initiated, Business rules and
policies need to be framed and planning needs to be
undertaken
variation on the Greenfield approach
1. Determine (maintenance)goals
Clearly determining your (maintenance)goals will give guidance to your
organization.
2. Work processes and organization
Design your organization in such a way that tasks, responsibilities and authorities
are arranged in an optimal way. This way it will be clear who does what when and
why..
3. EAM (Enterprise asset management) Package selection
The choice an implementation of a new EAM system has far-reaching
consequences for the (maintenance) organization. Because of the huge financial
and organizational impact some made choices cannot be changed afterwards.
4. Implementation guidance
Implementation of an EAM is a profession on its own and for most organizations
no everyday business. In order to be a decent partner for the software supplier,
knowledge and experience in this field is required.
5. KPI's and Report-failure analysis
The processing of data from the EAM into management information is an
intensive process. Management information gives you a clear view on the
performance of your company, giving you the ability to make the right decisions.
The impact of accounting system on
decision seeking outside help

An accounting system is a management information

system that is responsible for the collection and
processing of data useful to decision-makers in planning
and controlling the activities of a business organization.
The data processing cycle of an accounting system
encompasses the total structure of five activities
associated with tracking financial information: collection or
recording of data; classification of data; processing
(including calculating and summarizing) of data;
maintenance or storage of results; and reporting of
results. The primarybut not solemeans by which these
final results are disseminated to both internal and external
users (such as creditors and investors) is the financial
statement
BPR success determination

Revising reward and motivation systems

Effective communication
Empowerment
Human involvement
Training and education
Creating an effective culture for organisational change
Stimulating the organisation's receptiveness to change
Factors relating to management competence
Committed and strong leadership
Championship and sponsorship
Management of risk
Industry consolidation

Industry consolidation is the process when a few

companies start buying up other companies in the same
industry and the number of competitors in an industry
shrink dramatically. The main goal for the consolidators
is to grab market share, cut costs, boost productivity and
improve investment returns through scale economies.
The value of BPR
1. the world is becoming more competitive both internationally and
domestically
2. there is over capacity in the world because many technological
improvements have resulted in less staff being needed
3. technology will continue to make jobs obsolete
4. it is unclear if demand from emerging markets will fill up that
capacity
5. some Asian markets are already feeling strong competition form
other Asian markets
6. it is unclear whether savings rates will increase
7. it is unclear whether consumption rates will increase
8. it is unclear how much government spending will occur due to large
debt
9. in some countries population is stagnant or decreasing
10.spending by retires in some countries will be much lower than
projected
11.housing gains will not allow for large consumption in many
countries
12.energy prices will take a larger percentage of income
13.water shortages may increase the price of food
BPR experiences
By the mid 1990s, BPR had become a popular tool globally, with many
leading organizations implementing it. However, when M&M undertook
the exercise, it was still a new concept in India.

M&M's workforce, as mentioned earlier, resisted this attempt to

reengineer the organization. Soon after the senior staff began working
on the shopfloors, the first signs of the benefits of BPR became evident.
Around a 100 officers produced 35 engines a day as compared to the
1200 employees producing 70 engines in the pre-BPR days.

After five months, the workers ended the strike and began work in
exchange for a 30% wage hike. As the situation returned to normalcy,
BPR implementation gained momentum. M&M realized that it would have
to focus on two issues when implementing the BPR program:
reengineering the layout and method of working, and productivity...