ERP and Business Process Terminology - Flashcards

Objectives

• Understand what is meant by the term “business process.”
• Recognize common problems with business processes.
• Distinguish between clean slate and technology-enabled business process reengineering.
• Differentiate between business process reengineering (BPR) and business process improvement (BPI).
• Identify business processes in need of change.
• Know questions to ask for stakeholder analysis.

What is a Business Process?

• A business process is a collection of linked activities used by an organization to produce a product or service.
• It is a set of procedures that, once completed, accomplish a business objective.
• Characteristics of processes:
  • Generic or unique
  • Supporting or core
  • Simple or complex
  • Short or long-running
  • Formal or informal

Optimal Business Process Criteria

• Cost efficiencies: streamline employees’ work.
• Customer satisfaction and differentiation: help the company serve customers better and provide clear differentiation.
• Standardization: as much as possible, different locations/units perform work the same way; shared services aid standardization.
• Value-added activities: processes should add value to the organization.
• Improved agility and speed: processes should be nimble and efficient to anticipate, manage, and respond to market changes.
• Scalability: processes must handle predicted future workload to support growth.

“As Is” vs. “To Be” Processes

• ERP systems require strategic attention to business processes and awareness of pain points.
• “As is” process: the current flawed process in need of change.
• “To be” process: the future design of the new business process.

Problems with "As Is" Business Processes (Common Issues)

• Bottlenecks: multiple information flows converge on a single activity, limiting performance and capacity.
• Cycle time: overall time from start to finish; impacts customer satisfaction, production, and service output.
• Data duplication: due to non-integrated systems and non-standard processes.
• Handoffs: transfer of responsibility creates risk of mistakes, miscommunication, and delays.
• Inflexibility: process cannot adapt to changing requirements or technology.
• Intermediaries: unnecessary steps and bureaucracy.
• Lack of visibility/controls: management lacks end-to-end view; no penalties for non-compliance.
• Manual steps: increases cycle time and errors.
• New tools but old ways: technology available but not properly implemented or adopted.
• Paper records: non-optimal in modern processes.
• Quality control and rework: repeating checks or corrections due to process flaws.
• Role ambiguity: unclear expectations and responsibilities hinder efficiency.
• Lack of scalability: process cannot handle future workload.
• Segregation of duties: to prevent fraud, duties should be separated (custody, authorization, recording).

Business Process Reengineering (BPR)

• BPR is the fundamental, dramatic, radical redesign of business processes to achieve breakthrough performance.
• Goals: improve cost, flexibility, accuracy, quality, speed, and customer satisfaction.
• Core idea: redesign processes to be more efficient and customer-centric, not to replace core competencies.
• Two types:
  • Clean Slate (Reengineering): start from scratch with a fresh design.
  • Technology-Enabled (Constrained Reengineering): use ERP/technology as a roadmap and constraint for process design.

Clean Slate Reengineering

• Start with a blank sheet of paper and redesign from scratch.
• Encourages out-of-the-box thinking, innovation, and potentially highly competitive processes.
• Can yield unique processes far from the status quo.

BPR Principles (Hammer-based framework)

• Have those who use the output of the process perform the process themselves (self-service, e.g., employee self-service, P-cards).
• Treat geographically dispersed resources as if centralized; enable distributed resources to operate as a cohesive unit.
• Use integrated systems from one database to achieve scale and coordination while maintaining flexibility.
• Link parallel activities in the workflow rather than only integrating results at the end.
• Organize around processes, not tasks; subsume information-processing work into the real work that produces information.
• Put the decision point where the work is performed and build in-process controls.
• Capture data once and at the source; avoid re-keying.
• Design the job around outcomes rather than single tasks; eliminate an assembly-line mentality.
• Enable application controls that allow employees to self-manage, shifting managers to a supportive role.
• Use three-way matching (purchase orders, goods receipts, vendor invoices) to reduce manual processing.

Technology-Enabled Reengineering

• Technology-enabled reengineering uses ERP as a roadmap for fundamental process change.
• Often constrained by the ERP’s configurations—limits on how processes can be designed.
• Advantage: leverages a proven process design through an implemented system.

Clean Slate vs. Technology-Enabled Reengineering (Overview)

• Clean Slate: customize “to-be” processes from scratch after benchmarking, potentially using other technology if needed.
• Technology-Enabled: understand the as-is process, determine must-haves and nice-to-haves, select ERP that matches requirements, prototype configurations, configure/customize, and implement the to-be processes through ERP.

Paving the Cow Paths

• In ERP implementations, recreating outdated, inefficient processes within the ERP is called paving the cow paths.
• The metaphor: paths cows follow are not necessarily efficient; copying old processes into the new system (new tools, old ways) is costly and suboptimal.
• Avoid customizing ERP to replicate broken as-is processes; aim for redesigned, improved processes.

Fatal BPR Mistakes (Common Pitfalls)

• Unclear definitions: BPR is not downsizing, corporate restructuring, or automation; focus on operations, not strategy.
• Unrealistic expectations: gains should be realistic; identify value-added processes and strategic impact.
• Minimal input: combine internal knowledge with external methodologies; engage both employees and consultants.
• Taking too long: momentum matters; dragging out erodes credibility and enthusiasm.
• Lack of leadership: endorsement from the C-suite is essential due to the extent of changes.
• Wrong scope: address entire processes and cross-organizational boundaries; not all processes are equally important.
• Lack of an effective methodology: use a disciplined redesign approach to choose destinations and routes.
• Inadequate resources: allocate sufficient time and money; ensure team dedication.

Business Process Improvement (BPI)

• BPI involves incremental, slower changes to existing processes.
• Compared to BPR, BPI is gradual, evolutionary, and narrower in scope.

Business Process Improvement Model (Overview)

• Step 1: Identify goals and objectives; assemble a team.
• Step 2: Compile a process inventory identifying key processes and their subprocesses/activities.
• Step 3: Gather information from process owners and experts.
• Step 4: Analyze and measure the process to pinpoint problems.
• Step 5: Embrace a new mindset and drive continuous improvement—Business Process Management (BPM).

Roles for Business Process Redesign

• Leader: sanctions and oversees the work; aligns with the company mission; fosters a change-friendly environment.
• Architect: deep knowledge of end-to-end processes; fluent in ERP implementation methods or BPR techniques.
• Analyst: conducts elicitation of requirements; handles transition from as-is to to-be; understands ERP-process linkages.
• Coordinator: project manager; allocates work and manages budget.
• Modeler: documents processes; governs information about processes from inception to consumption.

Processes in Need of Change (Categories)

• Customer-facing processes: should make it easy for customers to interact with the business and encourage repeat engagement.
• Core competency processes: the company’s bread-and-butter; benchmark against standards to maintain competitiveness.
• High volume, low-margin processes: typical in highly competitive markets with price pressure.
• High defect, high reward processes: distinguish between reactive quality control (identify defects after the fact) and proactive quality assurance (prevent defects in the first place).
• High skill, time-intensive processes: labor-intensive and costly due to highly skilled labor requirements.
• High complexity, specialized resource processes: where simplification can yield advantages; balance with market needs.
• Obsolete or changing technology: legacy systems trap processes in inefficiencies; digital transformation can modernize processes, culture, and customer experiences.
• Digital transformation definition: using digital technologies to create new – or modify existing – business processes, culture, and customer experiences to meet changing business and market requirements.

Stakeholder Analysis (Importance and Purpose)

• Conduct a stakeholder analysis early to identify individuals/groups with influence and those impacted by the redesign.
• Assess risks and mitigate them; gauge support and influence levels to inform an integrated communication strategy.
• Helps in planning and executing change management across the organization.

Questions for Identifying Key Stakeholders in Process Redesign

• Who needs to provide input for the project?
• Who benefits from changes to the process?
• Who could be negatively impacted by changes to the process?
• Who needs to change how they perform tasks when the process changes?
• Who will need training to effectively use the new process?
• Who needs to manage, use, or maintain the process once implemented?

Connections and Real-World Relevance

• ERP systems are not just software; they shape how processes are designed and executed (constrained by configurations).
• Real-world success depends on selecting the right redesign approach (clean slate vs technology-enabled) based on current pain points, strategic goals, and available resources.
• Effective process redesign aligns with organizational goals, reduces waste, improves customer satisfaction, and enables scalable growth.
• Ethical and practical implications include governance, data integrity, accountability, and the risk of implementing changes that shift responsibility without proper controls or training.
• The emphasis on stakeholder analysis and cross-functional collaboration highlights the organizational change management necessary for successful ERP-driven redesign.

Formulas and Quantitative References

• No specific numerical formulas were provided in the transcript. Key quantitative considerations in practice include: cycle time reduction, cost reductions, throughput improvements, and defect rate reductions, which would be measured in organizational KPIs when applying BPR/BPI and ERP implementations.