WEEK 2: ENTERPRISE SYSTEMS & BUSINESS PROCESS REENGINEERING BUSINESS PROCESSES: Mission statement: expression of the organisation s vision, business domain, competencies and values Strategy: choice about a source of action, means of putting a misn statement into place Three levels of strategies: 1. Internal: decisions that are made within an organisation 2. Competitive: understanding the industry the company operates in 3. Business portfolio: which industry the company should compete within and how to compete with new industries Strategy (Cont.): Determines how an organisation deals with its competitor and what products to sell to what markets and through what delivery methods 1. Cost leadership: Carries out activities cheaper than other firms e.g. economies of scale, technology, low overhead costs 2. Differentiation strategy: businesses adding extra for customers can charge higher price / offering unique products and services targeted to a customer s needs Implementation and attainment of these alternative strategies consists of 5 steps [Porter s] 1. Operational effectiveness: being able to do things better than competitor 2. Uniqueness: activities different to rest of the markets 3. Trade-offs: make conscious choices about market it wishes to serve, the product or service it wishes to provide & means of delivery 4. Fit: how different activities in an organisation combine to achieve a common objective 5. Sustainability: more activities = harder for competitors 5 Forces that shape industry [Porter s] 1. Rivalry among existing competitors 2. Threat of substitute products or services 3. Bargaining power of supplies 4. Bargaining power of buyers 5. Threats of new entrants Reasons for business process (re) design: Management Change: Functionally based structure must be changed. Drive comes from the top People Change: Narrowly defined specialist jobs may become generalist and diverse. Note: Business processes are not static. New technology, fierce competition, change to business environment 2 Major Approaches of business process (re) design: 1. Total Quality Management (TQM) 2. Business Process Re-Engineering (BPR) Total Quality Management: series of small progressive steps is the best way to improve operations 1. Quality: cost of poor quality are greater than the costs associated with developing and refining business process to generate high-quality output
2. People: how people within organisation are valued for their contribution towards the process and their idea on how the process can be improved 3. Organisation: ensure departments do not operate separately à need to interact 4. Management: Management must focus on processes rather than individual functions. Must come from the top Business Process Re-Engineering (BPR) Radical changes to achieve dramatic improvements o e.g. cost, quality, service & speed This can be risky though à if goes wrong, an destroy what you already have Key components: o Fundamental: forces an organisation to question what activities it performs as part of its current process o Radical: compels organisations to start again o Dramatic: expected return on the improvements o Process: aspect is central to BPR Principles in practice: o Combines jobs and let workers make decisions o Creates a single reference point for customers o Perform steps in a natural order and at their logical location o Allow processes to vary o Reduce the impediment of controls and reconciliations Principles and approaches for a BPR team: o Establish a sense of urgency convince everyone to change o Form a leadership team who should be the team members? o Create and communicate a vision o Empower others to meet the vision employee re-training? o Plan for and create short team wins positive feedback o Consolidate improvements and encourage further change not just change the processes, changing the company o Institutionalise the new approaches new way becomes the usual way Technology-driven process improvements: o Technology enabler of business processes has to be done correctly (e.g. bar scanner) Outcomes from BPR o Functional to process o Job change, people empowered to fit problems o High risk, lots of change o Dictated from the top Examples: o Barcode, vendor managed inventory (outsources inventory), electronic bill payment, BPAY Technology: o Four of benefits 1. Information-based 2. Strategy-based 3. Transaction-based 4. Change-based
Enterprise Information Systems (EIS) Software applications used by businesses to capture transactions and produce outputs for planning, decision making and statutory reporting Three categories of EIS 1. Single-entry systems 2. Inwardly organised systems 3. Outwardly organised systems suggest ways to improve sourcing or raw materials or increasing revenue/increase customer experience Three typical processes: o Sales (= Revenue or Fulfilment ) o Purchasing (= Expenditure or Procurement ) o Production (= Manufacture ) Three Categories of EIS: o Single-entry systems transaction and obligations Designed for individual users Requires little accounting knowledge, easy to use, perform financial MGMT, investment process and track investment performance o Inwardly organised systems and monitor business and manufacturing processes within organisations Capture all internal activities of an organisation o Outwardly organised systems Supposed organisation s internal activities Extend the capture of data to suppliers
Choosing a software o Define the business process o Look at business requirements o Determine what the system needs o Look at category of software needed by the organisation o Determine the vendor that will provide the software Single-entry Systems o Software only records transactions and obligations o For individual user or small businesses o cash transactions through a link to the organisations bank o Requires little accounting knowledge + easy to use o Lak of classification in the system o Doesn t look at non-financial information Bookkeeping Systems o Make use of accrual accounting concepts o Used by small business o Can generate non-financial info o Easy to use, can be used on a few networks o All pre-programmed reports, ledgers and charts of accounts o E.g. MYOB Hybrid Systems o Integrates operations and financial functions o Looks at manufacturing, inventory, warehouse and customer information systems o Helps with decisions to do with operations and finance but requires lots of effort to integrates
Enterprise Resource Planning (ERP) Systems Software designed to capture a wide range of info about all key business events including accounting, finance, HR, sales, marking and manufacturing Each vendor has their own business processes and organisation tends to adopt these out for convenience All activities have data on who, what, where and when ERP systems facilitate the flow of information between all business functions (i.e. departments) inside the boundaries of the organisation à ERP is an inwardly organised system ERP support: revenue sales or order cash o Payment purchases or purchases to pay o Production manufacturing or conversion o Human resources and payroll o General ledger and financial reporting They are inwardly organised system: facilitate the flow of information between all business functions Business data: contains financial and non-financial reference information that records and tracks the status of business activities prior to completion Master Data: contains completed transactional info such as sales transactions Benefits: easier global integrations, reduces money barriers o Don t have to update each computer separately o Either quantifiable benefits and intangible benefits o Reduces cost of inventory, materials and labour o Improves customer service and sales o Increased return on investment o No longer have duplicated files Can be identified into two types of benefits o Quantifiable benefits o Intangible benefits Single-sourced ERP: all system or module contained within the system are provided by a single software Best-of-bred: allows organisations to choose multiple ERP vendors with the best functionality Single-Source Best-of-Breed Functionality Fit best in organisation that span a broad range of functions where horizontal structures are required Fit best in organisations that are highly vertically integrated and require special features special features for their operations and business processes. Supply & Support Easy upgrades, supply and support by one ERP vendor Upgrades are unsynchronised and organisations need to run different versions of ERP modules Look and Feel A standardised presentation A different look and feel for each of the modules
User Training Trained in groups for the complete suite of software Users normally specialise in their own applications with separate trainings Code Table Shared database across the organisation. One location of data. Multiple data tables, multiple data formats. Modules in ERP o Sales and distribution o Materials Management o Financial Accounting o Controlling and profitability analysis o Human resources Michael Porter s Value Chain: Inbound logistics receiving, storing and disseminating inputs to the products Operations transforming inputs into final product Outbound logistics collecting, storing and physically distributing the product to buyers Marketing and sales inducing the buyers to purchase the product and providing a means for them to do so Service assisting customer s use of the product and thus maintaining and enhancing the product s value
WEEK 3: SYSTEMS DOCUMENTATION SYSTEM DOCUMENTATION: a way of visually depicting the operations of a system a map how things move around and what they are road maps to understand business and navigate processes Addresses one or more of the following: o Who is involved o What activities occur o Where do the activities occur o Where do the activities fit within the rest of the organisation Why do we need them? Can t rely on verbal description, we need to document it Need to ensure that everyone understands the process, may have several different descriptions o E.g. textual and graphical Organisations have overlapping departments that transfer information Serves as organisation memory Visualises business process and how data moves within an organisation Why do accountants need it? Interested in operations of business processes, internal controls and data flows with organisations Can navigate different process Major types of System documentation: No method will provide everything Process Maps: A simple graphical representation of a business process Solid lines are functional areas Sub-functions separated with dashed lines Lines with arrows are documents Rectangle = process (not documents), diamond = decision Read left to right, top to bottom
System Flowchart: Illustrated inputs, processes and outputs in more detail than DFD or process maps Has information about documents and processes performed with the system as well as those involved SEMANTICS LIMITED - FLOWCHART CHIEF BILLING MANAGER COMPUTER BILLING ASSISTANT START A Authorisation Code Generate confirmation Number Billing jobs Updated Billing Confirmation Calculate batch total Prepare Billing Run Open File BT Prepare s Cash Recpts Data Billing Run Refunds & Credits Granted Reconcile totals Batch Summary Customer Master Data BT Updated Update ACCOUNTS MANAGER CUSTOMER Updated A
Data Flow Diagram (DFD) Graphical representation of the data flow that occur within a system. Three types o Context diagrams Outlines general scenario Provides a representation of the system and the entities that provide inputs to, or receive outputs from the system of interest Only has one bubble Must be at least one external entity Can have multiple flows from entity Says nothing about what is happening Shows how many external/internal entities Rectangles = external entities o Physical DFD Outlines who, where and how Number = structured narrative Double lines = represents where the data is stored Have same number of rectangles as its corresponding context diagram Bubbles names can be a person, department or thing Depicts the normal process In other words, error routines are NOT depicted in physical DFD o o Logical DFD Outlines what is happening Shows what procedures are happening in the system Not all numbers present Can show many different levels
Circle depicts process NOT entity (e.g. enter sales, create batch total) It can be exploded into many levels depending upon the complexity of the system of interest Error routines are only depicted on lower level diagrams (i.e. below level 0) o Level 0 logical DFD highest level of depiction of the major group of activities in the system of interest o Level 1 logical DFD takes one of the process bubbles from level 0 and expands it to provide detail about the activities Entities: any person (who) or thing (what) involved in the activities of a business process DFDs identify two types of entities: o An external entity is any entity that provides inputs into a process or receives outputs from a process. Context diagrams, physical DFD and logical DFD uses rectangles to represent external entities o An internal entity is an entity that processes or transforms the data within the business process of interest. Context diagrams and logical DFD do not show internal entities Physical DFD use circles to represent internal entities Note that, an external entity is not necessarily external to an organization Structured narration: written description of how a process operates WEEK 4: DATA FLOW DIAGRAMS: BALANCING: Diagrams (context, physical data and logical data flow) with the same external entities and flows to and from these external entities are called balance DFD)
Can have different number or bubbles, the flow need to balance They are balanced where o Two DFDs have equivalent external data flows o To draw them correctly, the following pairs should be balanced Context and physical Physical and logical level 0 Context and logical level 0 Developing a CONTEXT Diagram: (Narration is given) 1. Identify the system of interest Draw a bubble and label it to represent the system of interest 2. Identify the external entities Draw and label a rectangle for each external entity 3. Identify any data flows between the external entities and system of interest 4. Draw in the data flows connecting the external entities and system of interest and label them accordingly Rectangles around entities Circle around activities Double lines around data stores o Checklist Only 1 bubble No data store Bubble name is to describe process All data flows have logical names Developing a PHYSICAL DFD 1. Identify the external entities Draw and label a rectangle for each external entity 2. Identify the internal entities Draw and label a rectangle for each external entity 3. Draw in a bubble for each internal entity and label accordingly 4. Identify any data flows between external and internal entities Draw in these flows and label the data flow arrows 5. Identify the data flows between the internal entities Draw in the data flows between internal entities and label the arrows with the physical document/information that is being sent or received o 6. Identify any data stores that are accessed to get data or to store data as part of the process. These may be paper based or electronic Draw these data stores in and link them to the entity that accesses them by including data flow arrows