IST Chapter 7 Enhancing Business Processes Using Enterprise IS1) Managing in the Digital World: Amazon.coma) Amazon has grown from an online bookstore to a complete marketplacei) Almost any product can be purchased through Amazonii) Other businesses can sell products through Amazon’s market placeiii) Amazon provides fulfillment for other companiesiv) Amazon’s IT infrastructure provides cloud services and hosting for other companiesb) Strategic Use of IT with Business Processesi) Amazon has distinguished itself with great business processes and the use of ITii) Recall the major business units in Amazon(1) Retail and affiliates(2) Kindle(3) Web servicesiii) Possible new use of technology- Prime Air(1) What possible issues2) Core Business Processes and Value Chains Learning Objectivea) Organizations and Functionsb) Business Process Categoriesi) Core(1) Order to Cash(2) Procure to pay(3) Make to stock/make to orderii) Support(1) Administration and Infrastructure(2) Human Resources(3) Information Technology (4) Procurementc) Core Business Processes i) Order to Cash  Revenue Cycle(1) Process of selling goods or services and collecting revenue for them(2) E tailors, retailersii) Procure to Pay  Expenditure Cycle(1) Process of ordering goods or services and paying for them (2) For consumption and to make other goodsiii) Make to Stock/ Make to Order  Product Cycle(1) Process of manufacturing goods, either based on function or based on ordersd) Order to Cash Core Business Processi) Create Customer Recordii) Check Creditiii) Create Orderiv) Allocate Stockv) Pick, pack, and shipvi) Prepare and send invoice vii) Collect Payments(1) Functional Areas in Order to Cash(a) Marketing and sales(b) Accounting and Finance(c) Operations and Manufacturing viii) Benefits of Effective OTC(1) Creates customer satisfaction (2) Speeds up billing and collection process(3) Provides business intelligence data(4) Provide customer relationship data ix) Possible Problems of Ineffective OTC(1) Manual data entry can cause errors(2) Recall ways to decrease keying of data(3) Suboptimal picking of orders(4) Suboptimal shipping of orders(5) Customer disputes, leading to ill-will and possible loss of customer e) Procure to Pay Core Business Processi) Negotiate Price and Termsii) Issue Purchase Orderiii) Receive Goodsiv) Receive Invoicev) Settle Payment(1) Functional Areas in Procure to Pay(a) Supply Chain Management(b) Accounting and Finance(c) Operationsvi) Benefits of Effective PTP(1) Obtain favorable conditions from suppliers(a) Prices and shipping(2) Reduce transaction costs(3) Create customer goodwill in subsequently effectively fulfilling ordersvii) Possible Problems of Ineffective PTP(1) Manual data entry can cause errors in PO and invoices(2) Errors undermines relationships with suppliers(3) Result in less favorable cost and shipping from suppliers (4) Could delay shipments to customers, causing ill will and lossf) Make to Stock and Make to Order Core Business Processesi) Make to Stock(1) Procure Inputs(2) Schedule Production(3) Production (4) Quality Control(5) Stock Productii) Make to Order(1) Process Sales Order(2) Design Engineer Product(3) Procure Inputs(4) Schedule Production(5) Production(6) Quality Control(7) Ship Product iii) The Value Chain(1) The set of business activities that add value to the end product(2) IT is critical in supporting the value chain(3) Two types of organizational activities (a) Core and Support iv) Core Organizational Activities on the Value Chain(1) Core(a) Inbound Logistics(i) Receiving, stocking, and updating inventory(b) Operations and Manufacturing(i) Transforms raw materials to finished goods(c) Outbound Logistics(i) Distribution of finished goods(d) Marketing and Sales(i) Pre sales, promotion and pricing(e) Customer Service(i) Post sales, repairs, order status, history, copy invoices (2) Core Support Activities in the Value Chain(a) Support(i) Administration (ii) Firm Infrastructure(iii) Human Resources(iv) Technology Development(v) Procurement (3) Connecting Multiple Organizational Value Chains- A Value System 3) The Rise of Enterprise Systems: Standalone (Legacy) Systemsi) Inbound Logistics  Operations  Outbound Logistics(1) Inventory  Order  Invoice(a) Information (b) Look at Figure 7.9 ii) Centralize procurement, inventory in one locationiii) Walmart example b) The Rise of Enterprise (Integrated) Systems:i) Figure 7.10c) Integrating Systems through Middlewarei) Oracle is an example of a company that provides enterprise software as well as middleware(1) Business process management(2) Efficient processes  competitive advantage(3) Legacy, standalone applications(4) Integration of software with middleware(5) Flow of information through company d) Example of ERP Screen e) Supporting Business Processes within the Company i) Order Entry  Fulfillment  Shipping(1) Order, Packing List, Invoice(2) Figure 7.11f) Supporting Business Processes among Companies i) Shipping- Outbound Logistics (Supplier Business Activity)ii) Receiving- Inbound Logistics (Customer Business Activity)iii) Invoice (External Information from Supplier)iv) Inventory (Internal Information from Customer) v) Figure 7.12g) Sources of Enterprise Systems to Improve Business Processesi) Packaged Software(1) Also called Off the Shelf(2) May or may not require significant configuration ii) Customer Software(1) Designed and developed exclusively for a specific organization (Chapter 9) h) Improving Business Processes through Enterprise Systems: Best Practicesi) Packaged Enterprise Software(1) Designed to operate with Industry Standard Best Practicesi) BPMi) Business Process Management (1) Actively managing business processes(2) Using a structured approach to analyzing processes (3) Companies can gain competitive advantage through more effective and efficient processes (4) Usually an ongoing consideration of process improvement(5) May include radical process reengineering j) Benefits and Costs Issuesi) 56% of Implementation costs over budgetii) Average over budget is $2 million iii) Typically costs under estimated(1) Project scope expanded(2) Unexpected process, people, technical or organizational change management issuesiv) Many potential costs and benefits make implementation planning complex and