Work System Framework
Processes & Activities: Inventory management, budgeting, ordering, sales, and customer service.Impact: Efficiency leads to accurate inventory and satisfied customers, while inefficiencies result in errors and delays.
Participants (People): Sales assistants, CEO, BI Manager, Operations Manager.Impact: Skills and expertise of individuals affect process quality, lack of formal training leads to inefficiencies.
Information: Sales data, budget calculations, order details, customer inquiries. Impact: Accurate and timely information is vital for decision-making; inaccuracies lead to errors.
Technologies: POS system, FTP, email.Impact: Technology reliability directly affects process efficiency; outdated tech can slow operations.
Products and Services: Pet products and services.Impact: Quality and availability affect customer satisfaction and revenue.
Customers: Pet owners and customers seeking pet-related products.Impact: Customer preferences and satisfaction are central to business success.
Surrounding Environment: Costs are high, and margins are generally quite low.Impact: Economic and competitive factors affect profitability and risk tolerance.
Common Infrastructure Shared with Other Work Systems: Shared suppliers or logistics networks.Impact: Collaboration with partners influences product sourcing and supply chain efficiency.
Strategies: Expansion and process optimization.Impact: Strategy guides the system's direction, influences process efficiency, and scalability.
Porter’s value chain:
Inbound logistics → processes for receiving and storing materials or information.
Receiving and storing pet products and supplies.
Operations → processes for converting the inputs into outputs.
converting the purchased stock into finished products.
Outbound logistics → processes for storing and delivering finished goods.
Storing and delivering pet products to customers primarily though their physical stores.
Marketing/Sales → processes used to convince a customer to buy.
Promoting and selling the finished pet products to the customers
Service → processes required to maintain the product or service.
Maintaining and servicing the products, if applicable (e.g., servicing pet grooming equipment or fish tank maintenance). Handling customer complaints and providing support.
Business process types:
Strategic → guiding and changing an organization.
Strategic Planning for Business Expansion: PetSmart's decision to analyze and redesign its budgeting and ordering process is a strategic process.
Primary → gives you money or generates value directly.
The budgeting and ordering process itself, as described in the case, is a primary process for PetSmart. It directly involves managing the budget, processing orders, and ensuring the availability of pet products for customers, which is essential for generating revenue.
Support → supports other processes.
Information Technology (IT) Support: The support process of IT management and support services is crucial for PetSmart. It includes maintaining the Point-of-Sale (POS) system, managing the FTP site for data transfer, and addressing technical issues.
Management → managing an organization.
budgeting and ordering process, which is managed by the CEO, the Business Intelligence (BI) Manager, and the National Operations Manager
BP Change Waves
Throughout history there have been different ideologies towards change.
1st - Process Improvement
Focus is on people, training them, and expecting them to evolve into the best process. Tools: Six Sigma and Lean
Problem: usually only performed in one functional area of the business → limits change.
2nd - Process re-engineering
Radical redesign of existing business processes to achieve breakthrough improvements in performance.
Problems: Was historically used to cut jobs & Tools in IT were often not advanced enough to fully realize the re-engineered designs
3rd v1 - Business Process Technology & automation
Purchasing of external software instead, especially in cases where the in-house tech tools were not advanced enough.
3rd v2 - Business Process Management
In this approach, all the aspects of the previous 3 ways are embraced: 1. Improving processes on an ongoing basis; 2. Have one-off changes associated with business process redesign; 3. Make use of technology.
4th - Outside-in / Customer Experience
In this approach, look at customer touch points. i.e. where does a customer interact with a specific business process. Either: remove the customer for some of those processes; or ensure that those processes improve the customer experience.
5th - Transformative and Explorative Process Change
Process innovation and transformation through the use of design thinking and other creative problem-solving techniques.
PetSmart should focus on the wave 3 v2 BPM management:
Continuous Process Improvement: PetSmart can achieve continuous process improvement by focusing on ongoing enhancements. The case identifies, "outdated technology and poorly designed processes are the root-cause of PetSmart’s process problems". Embracing continuous improvement can address these root causes.
One-off Changes for Redesign: The case highlights the need for redesign, and this approach allows for one-off changes. It's stated in the case that "They have been struggling with their business processes and are wanting to re-design them". This wave accommodates the necessary business process redesign.
Leveraging Technology: To address the issues caused by outdated technology, technology utilization is crucial. The case mentions, "Investing in a real-time system, such as an ERP, can improve the reliability and efficiency of the procurement process". This approach explicitly includes leveraging technology for improvement.
BP Modelling *
In general, a business process model has three different purposes:
Describing → required for when the process needs to be defined and shared; Analysis → required for improving the process; Enactment → required to implement into an executable process.
An ideal BPML would be one language that can be used for: * process redesign; implementation & enactment (i.e. executing as software); analysis and evaluation.
The primary goal of BPMN * is to provide a notation that is readily understandable by all business users. BPMN provides a bridge between the business process design and process implementation.
Modelling levels:
1. high level value chains; 2. collaboration diagrams → shows how process participants contribute to the process; 3+ → sub-processes and task views
Collaboration Diagram Guidelines
- Correct minimal symbol set; connectors have arrows; model is readable.
- All sequential task with no new inputs done by one role should be aggregated.
- Name task using verb-object notation
- Human roles are the swimlanes; customer can be modelled as part of the organization.
- each pool has one start and one end node
- linked sequence flow within a pool
- pools cannot have crossing sequence flows
- gateway types shown, and gateways have at least 3 sequence flows.
BP Redesign
Process Redesign Method
Phase 1: Understand project → project scope, schedule, business case, value chains
Phase 2: Analyze process → AS-IS analysis, root-cause fishbone; 8 wastes; 5 why’s
Phase 3: Redesign process → TO-BE
Phase 4: Implement redesigned process → New jobs, training
Phase 5: Roll out redesigned process → change management
8 Wastes
Transportation: Unnecessary movement or handling of materials or information. Inventory: Excess stock that ties up resources and can lead to waste. Motion: Unnecessary movement of people or equipment. Waiting: Delays or idle time between steps in a process. Overproduction: Producing more than demanded, resulting in wasted resources. Overprocessing: Doing more work than required or adding excessive features. Defects: Errors or issues that require rework or correction. Underutilized Skills: Failing to tap into the full potential of employees' skills and knowledge.
Process Scoping Diagram
Inputs → things required to start the process; outputs → end results of the process; guides/controls → rules or strategies governing the process; enablers → people or technologies that enable the process; process flow → high-level process activities; management processes → high-level management activities;
Redesign best practices
four main dimensions in the effects of redesign measures: time, cost, quality and flexibility. There is a trade-off with these four dimensions
Control Relocation → Move controls towards the customer; Contact Reduction → Reduce number of contacts with customers; Integration → Integrate with customer or supplier processes; Order-based Work → Remove batch-processing and periodic activities; Resequencing → Rearrange tasks based on dependencies, etc.; Parallelism → Identify parallel tasks to reduce time; Case Manager → Appoint case manager for order handling; Empower → Empower workers for independent decisions; Task Automation → Automate tasks for speed and cost savings; Outsourcing → Consider outsourcing for efficiency
ES Intro
Six phases of ES evolution
1. Materials requirements planning → plans production and materials or future periods; 2. Manufacturing resource planning → includes additional features such as scheduling and capacity planning; 3. Enterprise resource planning → includes modules to integrate different business functions (sales, purchasing, HR, finance, operations); 4. ERPII → includes more modules (product lifecycle management, customer relationship management, supply chain management, supplier relation management); 5. Postmordem EPRIII → use of cloud and AI technologies and closer collaboration with customers; 6. Enterprise business capabilities → focuses on these hallmarks: AI, customer facing, data centric, enabling, consumable, new technology
ES development lifecycle
1. requirements gathering; 2. design; 3. build and test; 4. deploy; 5. operate; 6. optimize;
Changing an ERP system
Table configuration → defining your organizational structure and other parameters to be used in you system (least customizable)
Code modification → changing the source code to match organizational need (most expensive, most customizable)
Programming objects → separate development environment allowing you to add custom objects
Upgrade ERP offering or Migrate to a new ERP
4 ERP Datatypes
Organizational data → represents the structure of the organization
Master data → data that is shared across business systems and processes such as customers, products, suppliers, employees etc.
Transactional data → the information that is generated and recorded whilst executing a business process
Reporting data → summaries of transactional data as well as elements of master data and organizational data for reporting purposes
Procure-to-pay
Organizational Data *
Client → represents the corporate group; Company code → independent unit requiring its own set of accounts; Plant → Physical facilities for manufacturing, distribution, storage or rendering services; Storage location → differentiation of stock of materials in a plant - location where inventory is stored; Purchasing organization → accountable for procuring services or materials; Purchasing group → represents the buyer or group of buyers for certain purchasing activities - main point of contact with the supplier
Master Data *
Material master data → details on the material or service to be purchased; Supplier master data → details on the supplier → Different views include: Basic data → name, weight, unit of measurement…; Accounting information → moving price, currency…; Purchasing information → purchase group responsible; Storage location information → quantity in stock; Purchasing info record → details for combining material master and supplier master data; Conditions → agreements with vendors about prices, surcharges and discounts. extra pricing, tax, and discounts…
Generic Procure-to-pay
Create Purchase Requisition: Internal request for goods or services within a specified timeframe. Two creation methods: Direct (manual) or Indirect (automatic from other orders).
Generate Purchase Order: Formal request to a vendor under specified conditions. Creation methods: Automatic or Manual (with references). Multiple order types available (Standard, Services, Sub-contracting, etc.).
Receive Goods (GR): Acceptance of ordered goods into the system. Receipt referenced against a purchase order. Triggers various updates (material document, accounting document, price updates, etc.).
Invoice Verification: Verify incoming invoices against the purchase order, goods receipt, and content. Ensure a 3-way match between the order, invoice, and receipt. Discrepancies trigger warnings or errors based on system settings.
Vendor Payment: Payment to the vendor can be automated or manual. Process includes payment method, bank selection, payment item calculation, and payment medium printing. Generates a financial accounting document to record the transaction.
Operational and Strategic Reports
Vendor Evaluation
Evaluate vendors based on performance scores and criteria: Price (Level, History) Quality (Goods Receipt, Quality Audit, Rejection Level) Delivery (On-time, Quantity, Compliance, Confirmation Date) Assign scores (1–100) and apply weighted scores.
Management Aggregated Reports
Combine various transactions, master data, organizational data, and time periods. Example: Sales orders by supplier, company, and month.
Procure-to-pay Controls.
ℹ️ controls refer to measures put in place to ensure that the process is carried out effectively and efficiently, and that the desired outcomes are achieved.
General: Integrity controls for data entry and processing Authorization and access control (Restrict access to master data, Review master data changes). Backup and disaster recovery procedures. Ordering: Review and approve purchase requisitions. Competitive bidding. Review purchase orders. Purchase from approved suppliers Goods Receiving: Configuring ERP to flag discrepancies between received and ordered quantities. Audits & Supplier Evaluation. Invoice Receiving: Verify invoice accuracy; Reconcile accounts; Match invoices to supporting documents; Policy to pay only from original copies of supplier invoices.
Sales (order-to-pay)
Organizational Data *
Client → represents the corporate group; Company code → independent unit requiring its own set of accounts; Sales organization → business unit responsible for sales. legal liability for products and customer claims; Distribution channel → different ways that products are made available to customers; Division → groups of products in the business; Sales area → combination of sales org, distribution channel, division. Determines conditions (i.e. pricing) for sales activities; Plant → location from which goods are stored and delivered; Shipping point → responsible for organizing and executing shipping processing;
Master Data *
Customer master data; Material master data; Conditions (pricing) →Prices - Surcharges - Discounts - Freights - Taxes. Can be customer or materials specific.
Outputs (printing, EDI, XML etc.) → Output is information that is sent to the customer (e.g. Quotation - Confirmation - Invoice)
Generic Order-to-pay
Inquiry: Customer requests information or a quotation. No obligation to purchase. Creates a maintained inquiry for potential customer questions. Quotation: Legally binding offer specifying products, quantity, timeframe, and price. Sales Order: Three areas: Header, Line Item(s), Schedule Line(s). Activities: Pricing, Credit Limit Check, Availability Check, Delivery Schedule, MRP Transfer, Shipping Point & Route. Requested delivery date and ATP (Available to Promise) date calculated. Scheduling: Backward and Forward Scheduling rules applied. (Backward Scheduling: Dates work backward from need. Forward Scheduling: Dates move forward from now.) Availability Check: Determines material availability date. Considers inventory movements. Proposes delivery methods. Shipping/Delivery: Outbound delivery document initiates the shipping process. Integrated with MM and FI modules. Involves picking, packing, and goods issue. Goods Issue: Indicates legal ownership transfer. Reduces inventory and updates G/L accounts. Billing/Invoicing: Billing document created from sales order or delivery data. Used for customer invoice generation. Updates G/L accounts automatically. Financial Accounting module handles further steps. Receipt of Customer Payment: Managed by the Financial Accounting department/module. Involves posting payments, reconciling differences, and updating accounts receivable and bank balance.
Order-to-pay Controls
General - Integrity controls for data entry and processing - Authorization and access control - Backup and disaster recovery procedures; Sales order entry - Access control as well as data entry/edit controls - Credit limits; Shipping - Reconciliation of picking lists to sales orders - GPS and RFID technologies; Billing - Reconciliation of billing with shipping and sales order; Cash flow Discounts for early payments
Human Impact
The sociotechnical perspective recognizes that the success of a business process depends not only on the technical aspects but also on the social aspects, such as the people involved, their motivations, and their interactions.
When information systems change, there is a risk of creating “gaps”. Gap → a property of a system that affects the systems’ behavior. A property of a system that if left unattended will reduce the system’s performance and threaten its viability.
Affective response → The emotional response to a situation.
A person’s affective response and job performance/impact are influenced by: Implementation → The approach to implementing the system; System perception → The user’s perception of the system; Support or facilitating conditions → System related support provided to the user.
Sociotechnical approach to job design
Aimed at increasing employees' critical psychological states that lead to intrinsic motivation, job satisfaction, and performance outcomes. There are 5 core characteristics which are optimized: Skill variety → job must be reasonably demanding and offer variety. Task identity → employee needs to be able to relate their job to their social life. Task significance → Employee needs social support and recognition at the workplace. Autonomy → Job must allow employee to make autonomous decisions. Feedback → Employee needs to be able to learn on the job.
Organizational Change Management Guide
There are seven OCM best practices for CIOs to guide change managers: Determine the Change: Define specific, measurable changes using the SMART approach (Specific, Measurable, Actionable, Relevant, Time-bound). Build Executive Support: Secure executive understanding and support, appoint a change champion. Communicate to the Organization: Develop a communication strategy involving executives and all stakeholders, maintaining a consistent shared change story. Develop the Plan: Integrate change plans into project/program planning, covering communication, training, support, and behavior reinforcement. Execute the Plan: Implement the change plan within projects/programs, adjust activities as needed, remove legacy practices. Persist Through Challenges: Monitor stakeholder stages, address anxiety, tailor communications to different segments. Reinforce Adoption: Model, identify, reward steps towards change adoption, involve management in post-project recognition.
BP/ES Reporting & Business Intelligence
Process Measurement/Monitoring
Monitoring BPs includes: Identifying - metrics/measures/KPIs; Measuring - Recording or collecting data; Controlling - Analyzing & Using (Reporting); Sources of Measures: Management - based on strategy and goals; Process owners - based on stakeholder feedback; Process customers – based on their experience and/or expectations.
Why measure a BP?
Management Assessment: Measurement ensures strategic support and achievement. Continuous Improvement: Measures identify defects, trends, and process efficiency. Accountability: Measure performance and improvements in responsibilities. SMART & CLEAR Goals: Specific, Measurable, Attainable, Relevant, Timely, or Collaborative, Limited, Emotional, Appreciable, Refinable; Control/Corrective Actions: Measurements reduce variation and expenses for corrective actions.
Internal vs. External Measures:
External: Reflect process or value chain results (effectiveness). Internal: Indicate process functioning (efficiency). Start with external measures, then address internal improvements. Process success or failure is ultimately judged by external results.
Leading vs. Lagging Indicators
Leading: Measure factors that can influence future events. Lagging: Report on situations where influence is limited or absent.
Balanced Scorecard
The Balanced Scorecard is a widely used framework and methodology for measuring the performance of an organization across various aspects. It aims to provide a balanced view of an organization's performance by considering multiple dimensions. Often starts with externally facing measures (financial & customer) followed by internal ones.
Levels of reporting→ Executive Reports (Dashboards); Management Reports (Graphs); Operational/Exception Reports (lists)
Business Intelligence
Business intelligence (BI) involves providing decision makers with valuable information by leveraging a variety of sources of data including structured as well as unstructured information.
A typical BI solution has the following capabilities:
Organizational Memory: Store structured information and tacit knowledge for future use (input: Organizational history, data, information, and knowledge, output: Historical information and knowledge). Information Integration: Link data from various sources, both structured and unstructured (input: Real-time data, unstructured information, external information. output: Synthesised information about the past and the present).
Insight Creation: Generate new insights for short or long-term decision-making (input: User inputs on analysis that may be useful. outputs: New insights and information to support decision-making). Presentation: Use reporting and balanced scorecards tools to present data in a user-friendly format (input: Roles, tasks, and user information on preferred presentation. Output: Information presented in user friendly manner that are specific to task, role, and situation).
Transactional (OLTP) and Analytical (OLAP) Data Processing
OLTP (Online Transaction Processing): Designed for data entry efficiency, with high normalization for inserts, updates, and deletes, but can be less efficient for data retrieval due to complex joins.
OLAP (Online Analytic Processing): Optimized for timely data analysis by utilizing specialized data structures for quick complex analytical processing, focusing on read performance.
Recent technological advancements have blurred the line between OLTP and OLAP. OLTP generates standard relational reports for daily, weekly, or monthly distribution, providing regular information updates like billing history, sales orders, etc. OLAP serves as the foundation for business intelligence, enabling interactive, multi-dimensional analysis for meaningful insights supporting decisions and strategies.
BP Risks, Controls & Compliance
Risk: Uncertain event, positive or negative impact. Problem: Past event, negative impact or goal hindrance.
Prioritizing risks
Risks are assessed based on impact and likelihood, resulting in a Risk Exposure or Risk Score.
Likelihood: Rare, Unlikely, Possible, Likely, Frequent
Impact: Incidental, Minor, Moderate, Major, Extreme
Risk Strategies
Avoidance: Eliminate the risk's root cause or change action, especially for high risks. Acceptance: Acknowledge risks, plan contingencies, and accept potential losses. Transference: Shift risk management to a third party, like an insurer. Mitigation: Reduce risk impact by controlling likelihood of occurrence. Exploit: Maximize opportunity probability or impact.
Risk Appetite
Organization's willingness to take risks to achieve objectives and deliver value.
Components of Risk Appetite:
Existing Risk Profile → Current risk level within the organization. Risk Capacity → Amount of risk that the org is able to support. Risk Tolerance → acceptable variation in the risk capacity. Attitudes toward Risk → Values related to growth, risk, and return.
BP Controls Classifications
By Level of Automation: Manual, IT Dependent Manual Controls, Application controls, IT General controls
By Timing: 1. Preventive/Compensating (Design time). 2. Run-time Detective. 3. Retrospective Detective or Monitoring. 4. Retrospective Corrective
By Methods: 1. General Controls → Organizational or Personnel Controls; Documentation Controls; Management Practice Controls; Authorization & Access Controls; IT General Controls. 2. Application Controls → Input Controls; Processing Controls; Output Controls. 3. Security Measures. 4. Risk Aversion, etc.
BP Timing Controls
Preventative Controls: Stop errors from happening → Include input validation and pre-numbering forms Detective Controls: Identify errors that have occurred → Include output checks
Corrective Controls: Correct errors that have been identified → Include backup and recovery, audit trails, and error detection and resubmission
Compliance
Adherence to established norms and requirements in business processes and operations.
Internal Requirements→ Guideline and policy compliance; Alignment with strategic goals; Efficient resource utilization.
External Requirements → Compliance with business partner contracts; Adherence to legislation; Conformity with standards and codes of practice
Importance of Compliance:
→Costly consequences: Financial, reputation, and market share implications.
→Endangers organizational objectives.
→Risk of penalties, fines, and imprisonment.
→Resource wastage.
Achieving Compliance in 5 Steps:
1. Identify compliance sources, requirements, and control objectives. 2. Assess compliance risks for business operations. 3. Define controls to meet compliance requirements. 4. Integrate internal controls into processes and applications. 5. Monitor the effectiveness of controls.
Controls for PetSmart
A. By Level of Automation: manual controls → reviewing orders before submission and ensuring supplier contact information is up to date; IT dependent manual controls → emailing orders to suppliers; application controls → budget limits for orders; IT general controls → implementing a real-time ERP system.
B. By Timing: preventive/compensating controls → setting a budget limit for orders, run-time detective controls → reviewing orders before submission; retrospective detective or monitoring controls → monitoring supplier performance; retrospective corrective controls → revising orders if they exceed the budget limit.
C. By Methods: general controls → organizational or personnel controls such as ensuring supplier contact information is up-to-date; documentation controls → maintaining a budget spreadsheet; management practice controls → reviewing orders before submission; authorization controls → requiring CEO approval for orders that exceed the budget limit.
ES Implementation
ERP Implementation Failure Avoidance
1. Invest in organizational change management and training to reduce the risk of failure, as it's a leading cause. 2. Define clear business processes to minimize disruptions during implementation. 3. Prioritize testing, especially User Acceptance testing. 4. Ensure a comprehensive data migration plan with adequate time for proper execution. 5. Use knowledge-specialist super-users within departments. 6. Address resistance to change effectively. 7. Align the organization's project team, executives, and stakeholders. 8. Avoid using immature or unsuitable technologies. 9. Involve super users, managers, and end-users from the start. 10. Treat ERP implementation as a business project, not just an IT project.
Suggested ERP Implementation Approach
Implement BPM-driven changes for edge processes that provide a competitive advantage. For core processes, opt for ERP-driven redesign (vanilla implementation).
Suggested ES Implementation Approach for PetSmart
In the case of PetSmart, the organization is experiencing process problems due to outdated technology and poorly designed processes. Therefore, implementing an ERP system that aligns with the standard features and functions of the software could help to address these process problems quickly and at a lower cost. This approach would involve using the standard features and functions of the ERP software, which would not require customization and would be easier to implement.
However, the disadvantage of this approach is that it may not fully meet the organization's unique business requirements. The standard features and functions of the ERP software may not be sufficient to meet the organization's specific needs, which could result in inefficiencies and limitations in the organization's business processes. Additionally, the organization may need to modify their existing business processes to align with the ERP software, which could result in resistance from employees who are used to the existing processes.
BP Focus in ERP Implementation
1. ERP Driven Re-design → Align business processes with ERP software, referred to as "vanilla" implementation.
Advantages → Reducing software development risk and costs by matching business processes to ERP; Simplifying software updates and long-term IT management; Streamlining implementation.
Disadvantages → Sacrificing some business benefits for technical cost reduction; Automating existing problems within business processes; Potential loss of competitive advantage.
2. BPM Driven ERP Implementation → Redesign existing business processes before ERP implementation, aligning ERP with the "to-be" processes.
Advantages → Adapting ERP to existing business processes, maintaining competitive advantage; Avoiding the "paving the cowpaths" trap, ensuring process improvements; Streamlining ERP configurations and decision-making.
Disadvantages → Time-consuming due to blueprinting and process mapping; Challenging business process redesign; Resistance to change due to job loss concerns.
IT Investment Governance
Information Economics Process for IT investments
The process of IT spend decisions using Information Economics: 1. Briefly describe the industry (e.g. finance, retail, etc.) 2. Briefly describe the organisation
3. Establish the organisation’s evaluation criteria (what you value):
To objectively compare various options, create a table summarizing criteria with weightings. Include factors like cost, risk, benefits, and alignment with project needs. Weight each criterion on a scale from 5 (high importance) to 1 (low importance) and then evaluate contenders.
4. Scan for contenders 5. Identify a short list
6. Select the best alternative:
Construct a matrix with criteria on one side and a list of applications on the other. Assign ratings from 1 (poor) to 5 (excellent) for each criterion. Multiply scores by weights and sum to gauge how well applications meet requirements.
7. Recommend
Different ways of Valuing IT – criteria
Examples of software evaluation criteria:
General Criteria: Costs; Vendor record (support, stability, liquidity, client base); Expected benefits; Organizational impact; Training; Conversion
Functional Requirement Criteria: Required functions (business process requirements)
Technical Requirement Criteria: Application robustness; Compatibility with operating systems, DBMS, and hardware; Documentation; User-friendliness; Scalability; Security and recovery measures; Adherence to open industry standards and source code availability
ERP Valuing Criteria
IT Benefits Realization
IT alone doesn't generate value. Value comes from how a business utilizes IT. Realizing IT's value entails altering the business, processes, skills, and organization. To achieve this, you need active accountability, relevant metrics, and change management led by senior management.
Quantitative Cost Benefit Analysis
TCO (Total cost of ownership & operating) → Includes ALL costs
Cost-Benefit (C-B) Ratio → Total benefits/Total costs → Ratio greater than 1 is profitable.
Payback period → amount of time required for the firm to recover its initial investment. Advantages: Simple computation, Easy to understand, Focuses on cash flow. Disadvantages: Ignores time value of money, Ignores risk, Relies on an arbitrary cutoff period, Doesn't lead to value-maximizing decisions
payback period < acceptable payback → accept
Return on Investments → ROI % = (Total Benefits – Total Cost) *100 / (Total Cost). Advantage: Easy to compute; Gives an indication of profit
ROI > 1 → accept
Net present value → The sum of the present values of a project’s cash inflows and outflows. Cash Flows (CF) for years 1,2,3…N. Advantages: Focuses on cash flows; Adjusts for time value of money; Accounts for risk variations. Disadvantage: Less intuitive than payback and ROI
NPV = Σ [CFt / (1 + r)^t] - P
Where:
CFt represents the cash flow at time "t"
r is the discount rate, which reflects the time value of money
t represents the time period
The summation symbol "Σ" indicates that you need to sum up the cash flows for each time period.
Accept projects if NPV > 0
Hardware and Software Costs:
ERP system deployment options, such as on-premise or cloud (SaaS, PaaS, ASP), impact hardware and software costs. On-premise ERP systems involve server hardware and software. Hardware costs encompass servers, networking, and local workstations. Software costs include the ERP software, operating system, and database management system.
Implementation Services Costs
The most underestimated costs often lie within implementation services.
These costs cover critical tasks, including configuration, development, training, project management, and change management. Acknowledging the IT skills required for configuration and development tasks is essential.
ERP Benefits:
Integration: ERP systems offer integration on multiple levels, including application, interface, global, data, and business integration.
Improvement of Business Processes: ERPs facilitate business process enhancement through automation, data integration, central data storage, built-in controls, report provision, and adherence to best practices.
Implementing an ERP and Best Practices:
The misconception that ERP systems automatically incorporate "best practices" for easy implementation and optimal results is widespread. Best practices evolve through continuous learning and adaptation to an organization's context. ERP processes, though standardized, should guide the development of suitable processes and be adapted continually with managerial involvement for relevancy.
ERP Features for PetSmart
Inventory Management: PetSmart relies on efficient inventory management. An ERP system with robust inventory features will help optimize stock levels, track movements, and enhance the supply chain. Order Management: PetSmart's sales assistants use a POS system to record sales. An ERP system with order management will streamlines order handling, tracking, and ensures timely deliveries. Financial Management: PetSmart, operating within budget constraints, can benefit from ERP financial features for expense tracking and budget optimization. Customer Relationship Management (CRM): PetSmart can use ERP CRM features to manage customer relationships, track orders, and provide personalized service. Business Intelligence (BI): PetSmart's BI Manager can use ERP BI tools to analyze sales data and make data-driven decisions. Supply Chain Management: An ERP system with supply chain features can help PetSmart manage multiple suppliers and optimize procurement processes.
BP TECH
BP Technologies: BP Technologies encompass the tools and systems used to manage and optimize business processes. These technologies play a pivotal role in improving efficiency, agility, and effectiveness within an organization. They include a wide range of software applications, from Business Process Management Systems (BPMS) to automation tools and analytics platforms.
5 Core BPMS Components:
Process Modeling: This component involves the creation of visual representations of business processes, often using standardized notations like BPMN (Business Process Model and Notation). These models serve as blueprints for understanding, documenting, and improving processes.
Process Execution Engine: The execution engine is responsible for running, monitoring, and controlling business processes. It ensures that tasks are executed in the correct sequence, manages process instances, and enforces business rules.
Process Analytics: This component focuses on gathering and analyzing data related to process execution. It provides insights into process performance, identifies bottlenecks or inefficiencies, and helps in making data-driven decisions for process optimization.
Content and Document Management: Many business processes involve handling documents and content. This component helps manage documents, files, and data associated with processes, ensuring that information is readily available when needed.
Process Monitoring and Optimization: Process monitoring involves tracking the real-time performance of processes. Optimization aims to improve processes based on monitoring data. Continuous process improvement is a fundamental aspect of BPMS.
BP TECH TRENDS
BP Tech Trends: Keeping abreast of the latest trends in BP technology is crucial for organizations seeking to enhance their processes. These trends drive innovation and offer new ways to tackle process-related challenges. Five notable trends are:
Analytics / iBPMS (Intelligent Business Process Management Systems) → The industry is witnessing a shift towards intelligent BPMS solutions that offer agility, cost-effectiveness, and the empowerment of citizen developers and project teams.
Application in PetSmart Case: PetSmart can leverage iBPMS to achieve agility in managing its complex supply chain processes. This technology can provide real-time analytics to optimize inventory management and demand forecasting. It empowers PetSmart's teams to make data-driven decisions swiftly and adapt to market changes effectively.
RPA (Robotic Process Automation) → RPA is revolutionizing businesses by automating rule-based, high-volume tasks, resulting in increased efficiency and reduced human error.
Application in PetSmart Case: PetSmart can implement RPA to streamline routine tasks such as order processing, inventory tracking, and customer support. This would reduce operational costs and minimize errors, ensuring a better customer experience.
Low-code Automation → Low-code platforms enable organizations to develop applications with minimal coding, allowing business users to contribute directly to application development.
Application in PetSmart Case: PetSmart can harness low-code platforms to create custom applications for tasks like sales reporting, customer relationship management, and order tracking. This empowers business users to participate in software development, improving process efficiency and customization.
Process Mining → Process mining involves data-driven analysis, visualization, and optimization of business processes based on event logs.
Application in PetSmart Case: PetSmart can use process mining to analyze its order fulfillment process. By examining event logs, the company can gain insights into bottlenecks, inefficiencies, and areas for improvement, ultimately enhancing supply chain operations.
AI (Artificial Intelligence) → The integration of AI technologies enhances business processes, enabling intelligent decision-making and process automation.
Application in PetSmart Case: AI can be applied to PetSmart's customer service processes. AI-powered chatbots can handle customer inquiries, improving response times and providing a better customer experience.
PROCESS MINING
Process Mining: Process mining is a data-driven approach that utilizes event logs to discover, monitor, and enhance business processes. It offers a transparent view of how processes are actually executed, making it a valuable tool for process analysis and improvement.
3 Uses:
Process Discovery: Process mining helps uncover the real process model by analyzing event logs. It identifies the sequence of activities, their dependencies, and variations in process execution. This insight is useful for understanding complex business processes.
Conformance Checking: Comparing discovered process models to ideal or designed models reveals deviations and non-compliance. Conformance checking highlights where actual process execution differs from expected or desired behavior.
Process Enhancement: By using Machine Learning (ML) techniques and advanced process mining tools, organizations can enhance processes. This involves predicting delays, optimizing process flows, and improving overall process efficiency. These enhancements are based on insights obtained from event logs and historical data.
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