Deakin University MPM701 Business Process Management

Written Assignment Trimester 2, 2011

Team Members: Name: Ashwini Viswanathan Name: Mohnish Gohil Name: Sujeeth Naik Total: 100% Student No: 900333069Contribution: 33.3% Student No: 211400032 Contribution: 33.3%

Student No: 211148403 Contribution: 33.3%

Submission Date: 26 August 2011

Word count (excluding tables, diagram, executive summary and references) = 1886

Table of Contents:
Executive Summary 3 BPM and Strategy 4 Problem Analysis . 6 Proposed Solution . 10 Solution Considerations 12 Recommendations .. 13 References . 14

Executive Summary
The main purpose of this report is to examine the business processes of Ben's Omnicrons Pty Ltd and provide solutions to the system in existence at the moment. The need for this is due to the decrease in the revenues over the last two years even though the product is unique and has no competition in the market. When investigating the business process of the company, it was revealed that there were a number of problems in the basic structure that needs to be amended. The main area of concern is however paper based and manual methods of running the business which has caused delays in processing orders and hence an increase in customer complaints and dissatisfaction. There is also the problem of underlying tension amongst the managers of various departments in the company which needs to be looked into. After analyzing in detail the various problems in the company, we recommend that the first step to be taken is the installation of the ERP system which will help in facilitating the day to day management of the company. It would help in minimizing operating costs and have easy access to important information by all the departments without depending on each other for simple tasks. A new business process is also proposed that would help in reducing the time taken to complete customer orders. Having more than two decades experience in this industry, we have developed these strategies that would be beneficial to the company and guarantee vast improvement in the business and if the process is followed profits are assured.

BPM & Strategy

Business Process Management (BPM) can be defined as an attainment of an organisations objectives via the enhancement, management and control of essential business processes(Bengough 2011, p.5). The business processes are stable key elements of any business and hence they must be managed and controlled effectively to fit optimally to the companys strategy and goals. Hung (2006, p. 24) in his journal states that BPM affects every aspect of an organization, from its structure (organized around processes) to its management (process leaders versus functional heads). BPM can help Bens Omnicrons Pty Ltd in the following ways: Significant cost and time saving due to elimination of paper based work and unnecessary tasks associated with it. Better control and monitoring as each division can perform their task online and access data from a common database. Increased employee productivity by reduction in manual effort and the act of processing, storing and delivering customer orders within department will not be viewed as a burden.

Thus using BPM will lead to improvement in the quality of service provided which will lead to increase in customer satisfaction and improved sales and profits. The main benefit of implementing BPM for the organisation is that it helps in the improvement of the value chains of the business comprising of internal and external measures. According to Porter (as cited by Harmon 2007, p. 41)value chain in simple terms is the main activity of the organisation whereby a company takes raw materials and turns them into finished goods by adding value at each step. It includes activities performed to design, produce,market, deliver and support a product line.Any process that does not add value along the value chain needs to be eliminated. This is done through internal measures which show the performance achieved by sub processes within the value chain while external measures provide the overall results of performance of the value chain. The value chain is a useful analysis tool for defining firms core competencies. According to Porter firms can maintain competitive advantage for longer periods by adopting a strategy that depends on the goals or position of the company. Also Porter defines the term value proposition as the main value that the product provides its customers. By implementing BPM, the company should be able to identify and describe clearly the value chain and understand how each process and sub processes are adding value to the product. The organization's performance is evaluated mainly using external measures and

youshould use both internal and external measures to analyse each process and eliminate unwanted processes for more effective and time efficient processes. Bens Omnicrons needs to revamp and modernizethe infrastructure. It needs systems which can handle multiple departmental processes. So BPM has to play a major role in how the business should be progressed. Business process management offers a logical approach to improve your companys business processes (Cooper & Patterson, 2007).Creating Enterprise systems (ES) to support the coordination across functions to reduce delays, avoids excess inventory, and increases visibility (Magal & Word, 2009). In this case the company should redesign processes to gain competitive advantage by incorporating an integrated Enterprise System (ES), to offer flexibility, and providing customers with value added service. Depending on the variety and productivity a new software technology that make it easier for IT to manage and measure the execution of process workflow and its applications.Creating Enterprise systems (ES) to support the coordination across functions to reduce delays, avoids excess inventory, and increases visibility (Magal & Word, 2009).

Problem Analysis
The various problems within Bens Omnicrons are: No computer based business processes. Most processes are paper based, viz. purchasing material, controlling production, satisfying customer orders and managing accounts. Lack of marketing strategy base. Lack of communication and conflicts between directors of various departments of the organisation. Improper tracking methods: duplicates of forms are kept in a box, ring binder etc. Delay in attending the orders: Production department attends to orders placed within a week (the company could miss orders which are required on urgent basis). The invoice generated is sent to any address on the sales order form. The customers are not given any preference to which address would they like the invoice to be sent. Too much time is taken to process the purchase request and send it to purchasing department. (Production department takes few days to organize and send the purchase request) Priority to purchase request is given as per the date and not the urgency of requirements. Only 15 computers (only 10 PCs connected on LAN, only 10 PCs have internet access) when the organisation has 46 employees and no company intranet. Only 4 computer literate staff. Information is held on different databases. Production time for 1 Omnicron watch is 9 hours. The production department is given the additional responsibility of service request manufacturing and warehouse management. The sales department is charged with the major responsibility of marketing and hence there is not much importance associated with it.

Since there has been a recent rise in customer complaints about delays in receiving order the major problems facing Bens Omnicrons that needs to be looked at with some exigency are that of paper based style of working and lack of communication and collaboration among various departments. The cause for these major problems is the lack of use of technology and computer based business processes, not working together as a team and not carrying out the processes within departments in alignment with the companys strategy.

The repercussions of these problems have started affecting the company as demonstrated by the reduced sales and profits. The paper based style of working is labour intensive and time consuming, costly, involves human errors, loosely controlled and customer information can be misplaced. Lack of communication and conflict of interest at workplace can contribute to strained employee relation, lower productivity and an unhealthy working environment. Gap Model:

Production time for 1 Omnicron = 9 hrs

Reduction in Production time after processes involved are automated

No. of orders taken is less with the current process

Performance Gap

More no. of orders can be taken after the implemmentation of new system

As-Is Process (Paper based way of working)

To-Be Process (ERP Automated way of working)

Physically check for stocks when order is placed

After the system is implemented, stocks can be tracked online via Inventory & Warehouse management

Paper based way of organising sales order form, purchase request, purchase order and invoices

Capabilities Gap

After the system is implemented, sales order, purchase request, purchase order forms and invoices can be generated online

Physical transfer of related documents from one department to another

Related documents can be accessed via a common database

Lack of collaboration between various departments

The new system will integrate various processes in different departments

As-Is Process diagram:

CUSTOMERS

Customer places order

Receive Invoice

Receive Product

Make Payment

SALES

Prepares Sales Order Form

Sales Order Form

Physically checks for Omnicrons in the stock

Available ?

YES

NO

PRODUCTION
Pack, label, write stock details on sales order form & send material for shipment Organise Purchase Request (PR)

PURCHASING

Organise Purchase Order (PO)

Send PO through surface mail

Receive invoice & send original copy to Accounting

ACCOUNTING

Duplicate copy of sales order form with stock details

Sales order form + Shipping details

Generate Invoice

Send Payment

Receive Payment

LOGISTICS

Sign the sales order form & deliver the material by truck or FedEx

HUMAN RESOURCE

SUPPLIER

Receive PO & generate invoice

Receive payment

Project Scoping Diagram:

Align activities to the business strategy and goals

Employees should be held responsible for their work CONTROLS

S U P P L I E R S

Communication with suppliers through surface mails

Delay in receiving orders I N P U T S O U T P U T S

Paper based work

C U S T O M E R S

ENABLERS Lack of computer literate employees Details held on spreadsheets Delay in processing PO and PR Develop Marketing strategy base

Set up IT department

Proposed Solution
Business Process Architecture: As Harmon (2007, p. 91) describes, business process architecture helps to understand the basic underlying structure of an organisation by breaking down the main activity of the organisation into various processes and sub processes in a hierarchical manner. Business process architecture will help in identifying the extent to which the processes are aligned with strategic goals, the person responsible for the processes and the resources for each process. It serves as a map to identify the area of improvement and devise a plan and strategy to exactly target the area that needs improvement. It will highlight the unnecessary activities that are carried out by Bens Omnicrons Pty Ltd and assist in automating the process which will improve the speed and efficiency of processes. To-Be Process: The To-Be process will help Bens Omnicrons Pty Ltd to overcome the problems associated with the current process. The proposed solution is to implement an Enterprise Resource Planning (ERP) system. This will require a small IT department to be introduced in the organisation. This is where the Human Resource (HR) department can contribute by recruiting IT professionals. The ERP system will integrate the functional and cross functional processes of the various departments (Magal & Word 2009, p.33). This will help carry out each process more efficiently and the communication between various departments will be improved. After the new system will be rolled out the stocks can be tracked online via the inventory and warehouse management system which will be a part of ERP system. Sales order forms, purchase request and purchase order forms and invoices can be generated online. As there will be a common database in place, each department can then access the related documents online. This will make the work of the employees a lot easier and improve the working conditions of the organisation. Instead of sending purchase order forms through surface mail to suppliers, the purchasing department can now send the online purchase order forms through e-mails. This will save a lot of time of the organisation. A Supplier Relationship Management (SRM) system can be implemented which will help the organisation plan their production and demand requirements and also maintain a healthy relationship with the suppliers. However, looking at the balance sheet, Bens Omnicrons Pty Ltd is not in the position to immediately implement this system. This option can be considered for future development.

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To-Be Process Diagram:

Customer places order

CUSTOMERS

Receive Invoice

Receive Product

Make Payment

Prepare Sales Order Form (online)

SALES

Check for Omnicrons in the stock

Available ?

PRODUCTION

YES

NO

Pack, label & send material for shipment

Organise Purchase Request (online)

PURCHASING

Organise Purchase Order (PO) online after PR is generated

Send PO through e-mail

Receive invoice through mail and update it in ERP system

ACCOUNTING

Generate invoice online after the details are filled by logistics (online)

Send payment after details updated by Purchasing dept.

Receive Payment

LOGISTICS

Add shipping details on the sales order form

Deliver the material by truck or FedEx

INFORMATION TECHNOLOGY
ENTERPRISE RESOURCE PLANNING SYSTEM

ENTERPRISE RESOURCE PLANNING SYSTEM

HUMAN RESOURCE

SUPPLIER

Receive PO & generate invoice

Receive Payment

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Solution Considerations
Bens Omnicrons Pvt Ltd will have to make special considerations as the implementation of new system will have some sort of impact on the organisation. The implementation of new system could impact the processes and possibly risk in increased delay times. This will also require extra managerial effort and higher commitment so as to ensure success of ERP. As time is limited there has to be a possible consideration of IT consultationto train employees who have less computer knowledge to ensure smooth transition at implementation stage. It is also important to ensure all the required computers and peripherals are installed in the given time. Problem may arise during implementation of ERP systems as ERP system is not universal and is designed as per the companys requirement and Ben Omnicronsmust be prepared for it. Care has to be taken with regards to the risk associated with the implementation of ERP and should be made sure that it is not carried on for months as there are costs associated with the implementation phase. Another important consideration is that with regards to the opportunity cost that is the cost for gone in investing in other opportunities or the cost of investing in the next best alternative. The benefits from the ERP system should exceed the opportunity costs.

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Recommendations
The main drawback of the company is its paper based system that has to be completely removed and new automated technology induced processes should be introduced. This can be achieved by implementing the ERP system as outlined earlier. This will help in the reduction of delay of purchase requests and delivery of the goods to customers. Hence customers will get satisfaction and also more orders can be taken and new customers can be catered for. Communication between the company and the suppliers can be enhanced through emails. The supplier relationship management as mentioned earlier will also help in speeding the process involving the suppliers and will also help maintain professional relation with the suppliers. This can be done in the near future when the profits of the company increases due to the use of the new business processes recommended. Business is all about the people and the way they interact and work together. It is also very important to have a motivated team of managers to lead and steps should be taken to increase employee morale in the company through continuous motivation. A new Marketing strategy also needs to be adopted and the company should just not rely on word of mouth marketing. The HR department should be involved in recruiting IT professionals which would help the company set up a new IT department.The company should build a systematic infrastructure which includes more computers, software licenses and smart phones for managers which would enable them to work more efficiently. Cash that is available in the bank at present should be utilized to invest in the new and improved business process system as recommended to increase sales and profits for the company and at the same time reduce costs.

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References:
Bengough, M 2011, pp.5, week 4 lecture, Business Process Management, Deakin University, Burwood, Melbourne. Cooper,M & Patterson, P. 2007, Business Process Management(BPM) topics covering definition, objectives, systems and solutions , Managing partner, Athens Group. Harmon, P 2007, Business Process Change, A Guide for Business Managers and BPM and Six Sigma Professionals, Second edition, Morgan Kaufmann Publishers, MA, USA. Hung, R 2006, 'Business process management as competitive advantage: a review and empirical study', Total Quality Management and Business Excellence, vol. 17, no. 1, pp. 21-40, retrieved 29 July 2011, E-Journals. Magal, S.R & Word, J 2009, Essentials of Business Processes and Information Systems, John Wiley & Sons, NJ.

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