Summary: This chapter explores processes and their supporting information systems within levels of an organization. There are three types of processes, each with its own scope of information systems. We’ll devil into the concept of process quality and how information systems can be used to increase it. The use of information systems at one level of an organization leads to information silos, which cause problems in the organization. Those problems can be solved by information systems at the next level of organization. There are 3 enterprise systems: CRM, ERP, and EAI. Interenterprise IS can solve the problems of enterprise-level silos.
Topics covered and
details
Q7-1: What at the basic types of processes?
Q7-1: What at the basic types of processes?
Business process- a network
of activities that generate value by transforming inputs into outputs. Activities
are either human
only processes, human processes with computer help, or computer only processes.
A business process with a three-activity process: check inventory, check customer
credit, and approve special terms.
Structured Process: formally
defined, day-to-day operations involved in standardized processes: customer
returns, order entry, purchasing, payroll, slow to change
Dynamic Process: flexible,
informal, adaptive processes involving strategic and less structured managerial
decisions and activities.
Levels of Organizational Scope
Workgroup: help a workgroup
to fulfill the charter, purpose, and goals for a particular group or department.
An example: accounts payable.
Workgroup IS: used to
support one or more IS processes in the workgroup
Enterprise: processes
spanning the organization and supports activities in multiple departments.
Enterprise IS: support
enterprise processes e.g ERP, CRM
Inter-enterprise processes: spans
two or more independent orgs. ex: healthcare-prescription drugs.
Inter-enterprise IS: supports
one or more inter-enterprise processes
Q7-2: How can information
systems improve process quality?
Process efficiency: Ratio of
outputs to inputs.
Process effectiveness: How
well a process achieves organizational strategy
Processes can be improved by changing
the process structure, changing the process resources or by changing both.
Information systems can improve
process quality by performing an activity that is partially automated or
completely automated, by augmenting human performing activity such as common
reservation system, and by controlling data quality such as ensuring data is complete
and correct before continuing process activities.
Q7-3: How do information systems
eliminate the problems of information silos?
Information silo: when data
is isolated in separated information systems.
The problem: data duplication and
inconsistency (integrity), isolated data, disjointed processes, lack of integrated
enterprise information, decisions made in isolation are inefficient, and cost increases
Solution: integrate that data into
a single database and revise applications and business processes to use the
singular database. If that isn’t possible, then the org. can allow the
isolation but will have to monitor it to avoid the problems.
Q7-4: How do CRM. ERP, EAI
support enterprise processes?
Business Process Reengineering
(BPR): changing an org.’s processes to take advantage of its new
capabilities. Integrated data, enterprise systems create stronger, faster, more
effective linkages in value chains. However, it’s a difficult, slow, and exceedingly
expensive process that requires high-level expensive skills and considerable
time. The key personnel are interviewed so the analysists can determine how
best to use new technology since they run the day-to-day operations.
Inherent processes:
predesigned procedures for using the software products, save orgs. from
expense, delays, and risks of BPR
Customer Relationship management
(CRM): Suite
of applications, a database, and a set of inherent processes that manage all
interactions with customer through four phases of customer life cycle: Marketing,
customer acquisition, relationship management, loss/churn. It supports
customer-centric organizations.
Enterprise resource planning
(ERP): a suite of applications a.k.a. modules, a database, and a set of
inherent processes for consolidating business operations into a single,
consistent, computing platform. It’s an IS based on ERP technology.
Enterprise Application
Integration (EAI): a suite of software applications that integrates
existing systems by providing layers of software that connect applications. It connects
system “islands”, enables communicating and sharing data, provides integrated
information, provides integrated layer on top of existing systems while leaving
functional applications “as is”, and enables gradual move to ERP
Q7-5: What are the elements of
an ERP system?
The elements: Hardware, ERP
Application programs, ERP Databases. Business process procedures, Training and
Consulting. A true ERP product must have: supply chain: procurement,
sales order processing, inventory management, supplier management, and related
activities; manufacturing: scheduling, capacity planning, quality
control, bill of materials, and related activities; CRM: sales
prospecting, customer management, marketing, customer support, call center
support; human resources: payroll, time and attendance, HR management,
commission calculations, benefits administration, and related activities; and accounting:
general ledger, accounts receivable, accounts payable, cash management, fixed
asset accounting
Trigger: computer program
within database to keep database consistent when certain conditions arise. Stored
Procedure: database program to enforce business rules.
Q7-6: What are the challenges of
implementing and upgrading enterprise information systems?
Implementation itself is a
challenge since it is difficult, expensive and risky due to it often taking a
long time and going over budget. The five primary factors: collaborative
management, requirements gaps, transition problems, employee resistance, and
new technology
Q7-7: How do inter-enterprise IS
solve the problems of enterprise silos?
Distributed systems: when the
applications processing is distributed across multiple computing devices
Q7-8: 2026?
By 2026, ERP vendors and customers will
have resolved problems of cloud-based ERP. The cloud is the lower cost option for companies;
however, it cannot just jump into a cloud-based solution without causing
considerable organizational issues.
Hybrid model: ERP customers
store most of their data on cloud servers managed by cloud vendors and store
sensitive data on their own servers.
There will be defined governmental,
accounting, financial standards that can be used to monitoring organizations
for appropriate compliance. There’s a delicate balance between risk of loss and
improvement to processes.
Three takeaways from the chapter
1) Business Process Reengineering (BPR) takes a lot of
time and resources to implement due to the complexity of the processes within
the organization. It is a valuable process despite its difficulty and expense.
It allows an organization to take advantage of its new capabilities. By integrating
the data and processes, this enterprise system will create stronger, faster, and
effective linkages in the organization’s value chains.
2) I did not know before that there
were “true” ERPs. They must have a supply chain, manufacturing, customer
relationship management, human resources, and accounting. When I think of the
requirements, I feel a bit confused because I believe them to be normal
requirements for any company. What type of organization would not be a true
ERP?
3) I think it’s interesting that
future users of ERP systems will not only include people but devices and
machines as well. For example, machines will be able to schedule their own maintenance,
which will save labor and time checking each machine periodically. There will
also be more automation in factories such as inventory-picking robots, which
improves the process quality.
