Business processes and information systems

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1 T Information and Communication Technology (ICT) Enabled Commerce Business processes and information systems Jari Talvinen Ph.D.(Econ), Docent, Business Development Executive,

2 Agenda Business Processes & IT Outsourcing Change Management key to success

3 What is an Information System? Components of Information Systems: Hardware is a set of devices such as processor, monitor, keyboard, and printer. Software is a set of programs that enable the hardware to process data. Database is a collection of related files, tables, relations, and so on, that stores data. Network is a connecting system that permits the sharing of resources between computers. Procedures are the set of instructions about how to combine the above components. People are those individuals who work with the system or use its output.

4 Functions vs. processes

5 What is Supply Chain Management? Fibre Primary Conversion Secondary Conversion Transportation C U S T O M E R Demand Information Product Flow The complete set of activities, resources and information needed to plan, source, manufacture, store, sell and deliver products to customers.

6 Typical SCM - Order Fulfillment Issues Fibre Primary Conversion Secondary Conversion Transportation C U S T O M E R Demand Information Product Flow A broken process comprised of organizational silos and information system silos

7 SCM conflicts within a company The production manager I want big batches in order to reduce my set up costs The bigger the production run, the better productivity Few batches, (long runs) simplifies my planning, makes less transactions The sales manager My customer will have all products with very short notice, thus I need to have the full assortment in stock The lead times from manufacturing is so long, thus I need more safety stock My competitors can deliver everything next day The transport manager I want to fill up my transport capacity. The lower frequency, the easier it is to fill, the better transport rates The finance manager We don t have the cash to finance all our stock, more must be made direct on customer request Many new products we only make once on optimistic forecasts, then I have to write them down as obsolete products

8 Typical Order Fulfillment Issues Fibre Primary Conversion Secondary Conversion Transportation C U S T O M E R Demand Information Product Flow The result: local optimization at best

9 Four Dimensions of Change Process Organization Information Technology People & Communication

10 Order Fulfillment Process Cuts Across Conventional Organization President Sales & Mrktg. Production Services Supply Chain / Order Fulfillment

11 Order Fulfillment Solution Strategy For optimal results all of these must be aligned Process Organization People & Communication Information Technology

12 Order Fulfillment Solution Fibre Primary Conversion Secondary Conversion Transportation C U S T O M E R Demand Information Product Flow Complete processes End-to to-end Performance Measures Clear process ownership and supporting organization Share information across processes in real-time

13 Order Fulfillment Solution Fibre Primary Conversion Secondary Conversion Transportation C U S T O M E R Demand Information Product Flow This enables the ability to optimize across the entire Order Fulfillment process

14 SCM opportunities within a company Jari Talvinen SoberIT The production manager Due to my high flexibility in manufacturing, I am always on line with customer demand The reduction of set up time has reduced my overall cost and increased my productivity The new small batch philosophy has forced me to solve some underlying quality problems, which I never had seen before The transport manager Due to my flexible transport set up, I have been able to reduce the overall capacity, which previously handled peak loads of sales companies stock build up. This has reduced total costs As I always on line with demand, I don t have to plan any more The sales manager My short delivery times is giving me more sales orders I can always follow the customers variations in demands, and my responsiveness is my key selling argument I never have to scrap any articles and have rebate sales any more, this has really brought up my margin Since production radically reduced the batches, our lead times have drastically been reduced, and forecasting future demand is no issue any more The finance manager My cash flow is always positive, and our share holders really love our profitability

15 From Functions to Process-based and Customer-driven Organization Operations Service Sales... Operations Service Sales... Operations Service Sales... Sales process Order-delivery process Customer service process Functions are controlling activities Main processes are identified, functions still dominating Main processes are guiding activities

16 Business Process Reengineering Business process reengineering (BPR) refers to a situation in which an organization fundamentally and radically redesigns its business process to achieve dramatic improvement. Initially, attention was given to a complete restructuring of organizations. Later, the concept was changed due to failures of BPR projects and the emergence of Web-based applications. Today, BPR can focus on anything from the complete restructuring of an organization to the redesigning of individual processes. Major objective of BPR = Information Integration.

17 Integrated Information System

18 Total Quality Management and Reengineering

19 TQM and BPR - synergy TQM Impact on quality and service TQM BPR BPR TQM Time

20 Concurrent Process Re-engineering The Old Way - Business Process Re-engineering Process re-engineering then IS/IT design then Organisation & people Concurrent Business Process Re-engineering and Implementation Process Re-engineering Mobilised programme IS/IT Design Organisation & people Realised goal Infrastructure

21 Outsourcing Many organizations may not be able to manage IT as well as firms that specialize in managing IT. For such organizations, the most effective strategy is outsourcing. Outsourcing is the process of obtaining services from vendors, rather than from within the organization. The decision to outsource usually considers two factors: (1) Which source is less expensive? (2) How much control is necessary? Since the late 1980s, many organizations are outsourcing the majority of their IT functions rather than just incidental parts. In the mid-1990s,, EDS, and Computer Sciences Corp. were winning approximately two-thirds of the largest outsourcing contracts.

22 Models of Outsourcing Strategic Outsourcing (SO) Client Partner Management of department by external service provider (mainly applications and Information Technology systems) Service for single clients May include transfer of IT employees and IT assets to service provider Service providers results are measured against service level agreements Business Process Outsourcing (BPO) Client Partner Business Transformation Outsourcing (BTO) Management of one or more business processes by external service provider (mainly support processes) Service for single clients Service provider supplies service according to defined & measurable performance metrics Client 1 Client 2 Client 3 Partner Transformation of the client enterprise Operation of client s value chain and/or support processes, organization, applications and infrastructure by external service factory Service for multiple clients Service factory s results are measured against business outcomes

23

24 Business Transformation - Does Company X Need Change Management? Jari Talvinen SoberIT Are new skills needed? Do job profiles change? Do organisational processes change? Is everybody ready for change? Is top-management s commitment needed? Do you have competencies for change?

25 3 out of 4 Change Programmes Fail to Fulfil their Promise Top 10 Barriers % of 500 companies Competing resources 48% Functional boundaries 44% Lack of change skills 43% Middle management resistance 38% Long IT lead times 35% Communication 35% Employee opposition 33% HR (people/training) issues 33% Initiative fatigue 32% Unrealistic timetables 31% Top 10 Success Factors % of 500 companies Ensuring top sponsorship 82% Treating people fairly 82% Involving employees 75% Giving quality communications 70% Providing sufficient training 68% Using clear performance measures 65% Building teams after change 62% Focusing on culture/skill changes 62% Rewarding success 60% Using internal champions 60% 9 out of 10 barriers are people related

26 Key Questions to be Answered Where do we want to go and what will the future look like? Why do we do this project? How will the new processes and systems impact the organisation? How will the results of the project impact the people in our firm? Culture Change Job Description Job Reductions Training requirements Who are the key people and what are there goals and preferences? What shall we communicate and to whom? Vision Case for Change Organisation Design HR Management Job Design Training Redeployment Stakeholder Mgmt Communication

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