DEPARTMENT OF INDUSTRIAL AND MANAGEMENT

ENGINEERING

INDIAN INSTITUTE OF TECHNOLOGY

KANPUR

BUSINESS PROCESS MANAGEMENT

(MBA 647)

TERM PAPER - I

ROLLS ROYCE ERP IMPLEMENTATION

SUBMITTED TO: SUBMITTED BY: Group: 13

Dr. Subhas C. Misra
PhD (Carleton), PDF (Harvard) Prakhar Agrawal (18125036)
ADVISOR, Indo Canada Education Council
Associate Professor, IME Department Dhananjay (18125014)
Indian Institute of Technology, Kanpur

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 ACKNOWLEDGEMENT

We wish to thank Dr. Subhas C. Misra for his continued support and guidance for our project

work. We also mention that the material embodied in this project report entitled is based on

our original research work. Our indebtedness to other works, studies and publications have

been duly acknowledged at the relevant places. We would also like to thank Open OME

software which helped us in making & incorporating the i* modelling diagrams.

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 CONTENTS

ACKNOWLEDGEMENT ......................................................................................................... 2

INTRODUCTION ..................................................................................................................... 4

CASE ......................................................................................................................................... 5

ACTIVITY MODELLING TECHNIQUE ................................................................................ 8

E-SUPPLY CHAIN MANAGEMENT ..................................................................................... 9

i* MODELLING TECHNIQUE .............................................................................................. 11

ACTORS & ACTOR LINK..................................................................................................... 12

MODEL VIEWS ...................................................................................................................... 14

CONNECTING CUSTOMER, RETAILER & MANUFACTURER (SR Model) ................. 16

ECONOMICS BEHIND PRICING ......................................................................................... 19

LIMITATIONS ........................................................................................................................ 22

WAY FORWARD ................................................................................................................... 23

CONCLUSION ........................................................................................................................ 24

REFERENCES ........................................................................................................................ 25

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 INTRODUCTION

Today, with increase of globalization and advancement in technologies the customer demands

and expectations have increased a lot. Thus ensuring a correct and timely delivery does not

makes you the market leader; neither has it given you a competitive advantage. Rather it is one

of the basic necessities to stay in the business. This progress has led to an increase in the felt

competition by businesses competing with their products. The situation has forced businesses

to direct their money and attention toward their supply chains.

The supply chain, when working well, can provide high speed and low cost, today necessities

as well as Holy Grails for supply chain management. Perhaps in conjunction, the conventional

saying stated in most supply chain management texts is “the more integration –the better the

performance of the supply chain.” As such, managers see supply chain management as a

competitive tool that can help their companies ‘thrive’ in today’s fierce business climate.

As a result, integration is part of the supply chain of today. Therefore, the main question when

it comes to this element is how can successful integration be achieved? Many authors place

forth at least two key elements

 information sharing and

 operational planning

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 CASE

In the case, “Starbucks Economics – Solving the Mystery of the Elusive ‘Short’ Cappuccino”

by Tim Hartford, Starbucks is trying to make the cheaper cappuccino for its clients. Firstly,

they are doing so, because there might be imperfect competition, otherwise price discrimination

would be unnecessary. The lower price for smaller cappuccino is not mentioned in the menu

board. The producers are changing the market price, because there might be imperfection of

the market. Secondly, price discrimination is satisfied here by selling smaller cappuccino by

lower prices according to customer type or overseas customers. Those who are able to pay

more would not be satisfied with lower prices. Therefore, the producers and sellers may lose

rich customers, who are willing to pay more for the product. Thirdly, price elasticity of demand

in Starbucks may be reduced in order to increase its profits and revenues.

The case shows how Starbucks split the market into consumers with low and high willingness

to pay. Those, who are willing to pay more for traditional size cappuccino, can find the price

in the menu board. On the other hand, those customers, who are willing to pay less, are

proposed to get smaller cappuccino by whisper. This is not usual for serving clients in the

Starbucks cafes.

The author claims that the marginal production costs of a small coffee are the same as a large

one, because it consists of the same amount of coffee. He also claims that the shorter

cappuccino, the better, but tastes differ.

The author mentioned that the early railway companies segmented consumers by building

third-class carriages without roofs. To my mind, this is not an example of price discrimination.

It is rather can be viewed as people`s discrimination. This was done, because the rich did not

want to interact with the poor.

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PRICE SENSITIVE CUSTOMERS

The price sensitive customers are the ones who choose their products to buy or consume on the

basis of their price only. In a perfectly competitive market, these customers move towards the

product that are more economical than the others. Here, STARTBUCKS, in order to tap these

customers, creates differential pricing. They create another category called ‘Short Cappuccino’,

for such customers having less coffee with less price. But, they do not mention such option in

their menu. This is done to ensure that the customers who can pay more for more coffee are

made to buy at higher prices. This way STARBUCKS creates and retains the customers who

are price sensitive.

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PRICE BLIND CUSTOMERS

The price blind customers are the ones who are the regular customers and loyal customers of

STARBUCKS and drink coffee from Starbucks frequently. These customers do not mind

paying higher rates for more coffee, and hence STARBUCKS earn more through these

customers. More the price, more is the profit margin and vice-versa. Moreover, the option for

the “Short Cappuccino”, is not put on the menu, so that these price blind customers (who can

pay more), do not ask for them and order the high price coffee.

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 ACTIVITY MODELLING TECHNIQUE

Activity modelling is a method used to describe the activities and events of the dynamic aspects

of a system. The dynamic aspects of a system include all behaviour-related components, i.e.,

the sequence of steps and the events affecting that sequence of steps. UML activity diagrams

are used to visually represent the sequence of events that trigger the behaviour.

A behaviour component can be one of the following:

 The entire business

 A business process

 A package of objects or a component

 A use case (internal behaviour)

 An operation

Whereas interaction diagrams focus on the flow of control from object to object (the

messaging), activity diagrams focus on the flow of control from activity to activity and the

events that trigger the transition from one activity to another. Activities eventually produce

some action that causes a change of state in the system. Ultimately, all activity diagrams can

be seen as state transition diagrams.

Activity diagrams can represent both action states and activity states. The difference is that an

action state is atomic and cannot be further decomposed into more granular actions, whereas

an activity state represents a state in which activities can occur.

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 E-SUPPLY CHAIN MANAGEMENT

Electronic Supply Chain Management (e-SCM) is an optimization of business processes and

business value in every corner of the extended enterprise - right from your supplier’s supplier

to your customer’s customer.

It uses e-business concepts and Web technology to manage beyond the enterprise, both

upstream and downstream. This strategic approach unites all the steps in the business cycle,

from initial product design and procurement of raw materials, through shipping, distribution,

and warehousing right up to the point when the finished product is delivered to the customer.

These in turn lead to:

 Improved relations with channel partners

 Better control over budgeting and investments

An e-SCM solution can bring about a dramatic reduction in your costs, and integrate your

enterprise closely with all the other players involved in your processes. In addition, in doing

this, it goes one big step beyond a mere ERP solution. Here, is what it can do for a company:

 Tie together all the players in the extended enterprise, from raw materials to final point

of distribution.

 Give real-time market information to these players, allowing them to anticipate and

adjust their operations in response to market conditions.

 Help eliminate costly stockpiling against demand spikes, freeing up resources and

reducing costs.

 Lower costs, improve speed and increase the accuracy of data sharing within the

extended enterprise.

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  A truly integrated supply chain creates value-for the enterprise, its supply chain

partners, and its shareholders.

e-SCM is particularly relevant to diversified business houses with complex supply chain

networks, to companies with wide distribution systems, and to enterprises that depend on a

large number of out-sourced products. This complex network of multiple supply chains and

several people and their interest can be modelled in the i* modelling technique for purpose of

developing software for the integration.

i* provides the possibility to achieve information in an early phase of the software engineering

process. In former days UML(Unified Modified Modelling) was used to make information

visible, but as UML often focuses on organisational objects, which are not so important in the

early phase, when the emphasis should be on helping stakeholders gain better understanding

of the various possibilities for using information systems in their organizations.

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 i* MODELLING TECHNIQUE

i* is a widespread framework in the software engineering field that sup-ports goal oriented

modelling of socio technical systems and organizations. At its heart lies a language offering

concepts such as actor, dependency, goal and decomposition. i* models resemble a network of

interconnected, autonomous, collaborative and dependable strategic actors. Around this

language, several analysis techniques have emerged, e.g. goal satisfaction analysis and metrics

computation. In this work, we present a consolidated version of the i*language based on the

most adopted versions of the language. We define the main constructs of the language and we

articulate them in the form of a meta model. Then, we implement this version and a concrete

technique, goal satisfaction analysis based on goal propagation, using ADOxx. Goal oriented

methods are well known in the software engineering field since the early nineties. They are

used both in broad areas as requirements engineering (van Lamsweerde 2001) and

organizational modelling (Kavakli 2004), and in more specific scopes as adaptive system

modelling (Bencomoand Belaggoun 2013) and software architecture representation (Grau and

Franch 2007). From this seminal version of i*lots of variants have been formulated. Some just

propose some new construct for a specific purpose (e.g., dealing with delegation and trust, with

security and privacy, etc.) but others proposed major changes, which in fact can be considered

as dialects of the seminal version.

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 ACTORS & ACTOR LINK

Actors are active, autonomous entities that aim at achieving their goals by exercising their

know how; in collaboration with other actors. They may be human (e.g. a person, a role played

by a person), organizational (e.g., a company, a department, an agency) or technological (e.g.,

a software agent, cloud system, some device). Actors can appear in an i* model without any

further categorization (i.e., as general actors) or can be classified into any of the two following

types:

 Role: a role represents an abstract characterization of the behaviour of a social actor

within some specialized context or domain of endeavour. For instance, a project

manager or a consultant.

 Agent: an agent is an actor with concrete, physical manifestation. Examples are a

particular organization or person.

The actors are connected to one other using links. These links can be of many types as described

below. The links can be one directional or bi-directional. Every actor has at the least one link

attached to it either incoming or outgoing. There can be actors with several links.

 plays: links an agent to a role. An agent plays a role, committing to take on the

responsibilities of that role. Therefore, a particular person may play the role of project

management for a project.

 is-part-of: links actors of the same type. It represents the classical conceptual modelling

parthood construct, in which one actor of any type is composed of several other actors

of the same type. For instance, the sales department may be part of a given organization.

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  is-a: links actors of the same type. It represents the typical specialization construct, in

which one actor of any type specializes another actor of the same type. For instance a

programmer role may be specialized into junior and senior programmer

 participates-in: represents any kind of association, other than generalization /

specialization, between two actors. No restriction exists on the type of actors linked by

this association. Depending on the connected elements, this link takes different

meanings. Two typical situations are the following:

o When the source is an agent and the target is a role, this represents the plays

relationship, i.e., an agent plays a given role. For instance, Mike White plays

the role of PhD student.

o When the source and the target are of the same type, this will often represent

the part-of relationship. For instance, the University trip management

information system is part of the University of Wonderland. Every actor can

participate-in multiple other actors.

Actor association links are represented using arrows in the diagram. The arrow- head

identifies the target (the participated actor or the superclass, respectively). A label identifying

the type of link must be included.

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 MODEL VIEWS

The elements presented in the sections above are articulated to compose an i* model. It may

happen, however, that the resulting model quickly grows and makes it difficult to embrace all

the details. Scalability is a well-known problem with i* models (see Estrada et al. (2006) and

Franch (2010a) for analysis on i* adoption challenges). One of the solutions to these problems

is the ability to define model views. We may mention two popular views proposed by Yu

(1995):

 Strategic dependency (SD) models: Set of nodes and links where each node represents

an actor and each link between two actors indicates that one actor depends on the other

for something in order that the former may attain some goal. The SD model is used to

express the network of intentional, strategic relationships among actors. SD diagrams

depict the strategic dependencies between Actors, but do not depict the internal rational

behind these dependencies

 Strategic rationale (SR) models: A strategic rationale diagram describes how actors

may achieve goals through tasks. Subtasks are linked to their super-tasks by task-

decomposition edges. Alternative ways of accomplishing a task are linked to the tasks

by means-end edges. Sub-goals are linked to the goal they help achieve by contribute-

to edges. This model includes only elements considered as important enough to affect

the results of a goal.

Quite often, these two models have been used in a methodological framework that recommends

creating first the SD model of the system to be, and then the SR models of the different actors

that appear. However, this needs not to be the case. Other proposals exist to structure the

information encoded in i* models. For instance, Leite et al. (2007) have proposed Strategic

Actor models to show only actors and their actor links (not including dependencies). More

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generally, Franch (2010b) presents a proposal for defining arbitrary modules in order to parcel

the complexity and then create models as a combination of smaller parts. However, we work

only with SD and SR views. We have focused primarily on the detailed SR model. SD model

can be easily derived from the SR model by omitting the inner intentional details of the actor

and providing only the external linkages and reaction of the actors within the model.

The following section provides both the individual and the connected model of our actors. The

actors are:

 Price Sensitive customer

 Price insensitive customer

 Retailer

 Barista

 Starbucks

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CONNECTING CUSTOMER, RETAILER & MANUFACTURER

(SR Model)

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DESCRIPTION OF THE SR MODEL

The ultimate goal of a customer (Suresh in this case) walking in a coffee shop (STARBUCKS

in this case) is demand fulfilment at lower cost. The customer wishes to fulfil his demand

through his purchase of a particular coffee. The customer visits a particular store as he expects

large better quality of coffee at the affordable rates.

Finally, presence of a proper mode of purchase like cash or card should be available with the

customer to complete his purchase. The customer interacts only with the retailer and not his

subsequent suppliers or manufacturers.

The ultimate goal of a retailer (STARBUCKS outlet in this case) is demand fulfilment of

his/her customer in the most efficient way possible. To achieve this a retailer has to implement

a sales management and a billing system in his store. He/she maintains a proper display and

maintains the store in accordance with the rules and regulations of classic STARBUCKS outlet.

To achieve efficiency, retailer has to maintain optimum amount of inventory and at the same

time maintain faster delivery and wide variety of products (both listed and non-listed).

The ultimate goal of a manufacturer (STARBUCKS main factory in this case) is demand

fulfilment of his retailers in the most efficient way possible. Among many duties of a

outsourced manufacturer, the ones we have taken here are roll-out of test products, ordering of

coffee beans, creating new coffee flavours, sales forecasting, manufacturing and arranging

appropriate logistics.

The above diagram shows the said interpretation in i* modelling structure using the appropriate

shapes and connection syntax.

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The three aspects of the problem i.e. customer, retailer and manufacturer are connected in the

following manner:

1. The customer interacts only with the retailer by visiting the given retailer to fulfil his

demand and quality goals and expectations. Customer does not have any connection to

the manufacturer of any type in this case and hence the two blocks are not connected in

any way.

2. The retailer interacts with both customer and his manufacturer. He interacts with the

customer for his/her demand fulfilment and with the manufacturer through the PoS

system (implemented at retailer) to inform him of the upcoming sales requirements and

through his billing system to let manufacturer forecast the sales.

3. The manufacturer connects with the PoS system of the retailer through an international

connection in i*.

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 ECONOMICS BEHIND PRICING

Economic theory says that the price of something will tend toward a point where the quantity

demanded is equal to the quantity supplied. This price is known as the market-clearing price,

because it "clears away" any excess supply or excess demand.

Market clearing is based on the famous law of supply and demand. As the price of a good goes

up, consumers demand less of it and more supply enters the market. If the price is too high, the

supply will be greater than demand, and producers will be stuck with the excess. Conversely,

as the price of a good goes down, consumers demand more of it and less supply enters the

market. If the price is too low, demand will exceed supply, and some consumers will be unable

to obtain as much as they would like at that price--we say that supply is rationed.

Here is an example to illustrate the law of supply and demand. For a particular Saturday night,

we look at the willingness of restaurants in Wheaton to supply a nice dinner for two and the

willingness of couples to dine out in Wheaton, depending on the price of the dinner.

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There are five restaurants, each with a seating capacity of 30 couples. One restaurant is willing

to supply a nice dinner for $15 a couple, but the others require higher prices. If the price were

$15, everyone would show up at the one restaurant, so that it would have a very long line. Only

30 lucky couples would get to eat.

There are 250 couples willing to go out for dinner, if the price were as low as $12 a couple.

Twenty couples would be willing to pay as much as $80, but everyone else requires lower

prices.

One of the ways to capture this surplus is price differentiation, the practice of charging

different prices to different buyers for the same quality and quantity of a product. This

approach is sometimes used to clear extra inventory faster by keeping sales. This is also widely

done to capture the consumer surpluses from the wealthy customers. Various examples are as

follow.

 Dell Products: The exact same product of Dell is sold at different prices depending upon

who purchases it, whether the purchase is made by a private consumer, a small, medium

or large enterprise, federal government or healthcare provider.

 Volume Discounts: One method that businesses use to establish differential pricing is

granting volume discounts. The volume discounts allow the business to bring in more

revenue in a single transaction while granting the buyer a lower price per unit. For

instance, if a small shoe store has a sale where the customer buys the first pair of shoes

at the regular price and gets a second pair at half price, the store owner sells more

merchandise, and the customer gets a bargain.

 Seasonal Discounts: Hotels, airlines and resorts all employ differential pricing based on

the day of the week and season of the year. The travel industry drops its prices during

times of low demand and raises them during peak demand periods. A mid-day, off-

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 season hotel reservation at a small boutique hotel is frequently much cheaper than one

booked for a weekend during the height of the tourist season. Custom transport services,

such as shuttle buses and limousine services, also employ differential pricing based on

the season and time of day.

 Entertainment: Restaurants, movie theatres, amusement parks and numerous other

entertainment venues employ differential pricing practices. Movie theatres offer

reduced-price tickets for matinee screenings in an attempt to bring in more moviegoers

during daylight hours. Family-owned restaurants often promote lunch specials on many

of the same meals they serve during dinner hours. Bars and clubs offer "Happy Hour"

drink specials during early evening hours but raise their drink prices for the late evening

crowds.

 Pricing Novels: Differential pricing is exercised for pricing the newly published novel.

While on it’s inception for the initial period it sells as the hard cover for much higher

price, but later the same novel is released as the paperback edition for relatively very

lower price.

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 LIMITATIONS

This technique has few limitations as mentioned below:

 This technique is not intended and is thus, not directly capable of assisting users during

the actual implementation phases. It can help the designers and architects of the system

to understand some of the early phases of implementation and accordingly plan the

change management

 The objective of this technique was not to model by taking care of precision and

completeness, which are considered by conventional conceptual modelling techniques.

This should be considered to be complementary to conventional techniques

 I* modelling relies on existing information that may be limited or estimated.

 Because nature is a complex system, the i* model can only account for certain situations

 The model can only give a likelihood or possibility that a certain outcome will happen.

This is usually done in percentages, just like weather (for example, a __% chance of

salmon numbers decreasing because of water temperature)

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 WAY FORWARD

One of the issues could be how this technique scales up with the increase in the size of the

projects. With the increase in the size of the projects, a large number of modelling elements

might occur that would complicate the individual models. However, it can be tackled by

segmenting the complex models at different levels of abstraction. Thus, it can be used in

complex modelling problems.

It can be concluded that this proposed early-phase change management modelling technique

will help the requirements of the engineer to complement modelling the changes associated

with the implementation and thus improve enterprise productivity.

Also, such usage of price segmentation is now known to all firms and these techniques to use

consumer surplus might not give STARBUCKS a competing edge over the rival firms. Hence,

a new economic & marketing model needs to be developed in order to gain higher market share

and increase the profit margins through better, effective & efficient supply chain operations.

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 CONCLUSION

The Strategic Rationale (SR) Model depicts the following things

 Here the position of Implementation partner covers the role of Methodology and tools

which has the goal of successful business integration at various level of the supply chain

 The tasks of Formation of committees and workgroups, continuous communication

during changes and allocation of roles and responsibilities support the goal of smooth

and error free method of conducting business between the key stakeholders.

 The actor which “depends” is called a “Depender”

 The actor on which the Depender is dependent is called a “Dependee”.

 The centre of this Depender - Dependee relationship is “Dependum”.

Talking and learning about the differential price and price segmentation, the equivalence drawn

by the author between the coffee & railway class seems bit too far. The price segmentation in

STARBUCKS is done to reduce the consumer surplus whereas the train coach class separation

is done to separate the rich and the poor. Nonetheless, such price segmentation to monetize the

consumer surplus seems to be the smart use of marketing as well as economics in order to earn

higher profit margins along-with retaining the consumers.

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 REFERENCES

1. https://en.wikipedia.org/wiki/Supply-chain_management

2. https://en.wikipedia.org/wiki/I*

3. Logistics & supply chain management- M Christopher

4. Defining supply chain management- Mentzer, Dewitt

5. Strategic pricing differentiation in services: a re-examination -Mitra,Capella

6. http://itiserp.blogspot.in/2012/12/what-is-bolt-on.html

7. http://www.cs.toronto.edu/km/istar/#Software

8. http://www.cs.toronto.edu/~eric/#Publications

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