STRATEGIC AND MANAGERIAL PERSPECTIVE ON ENTERPRISE SYSTEM MANAGEMENT

Anjali Kaushik Associate Professor, Information Management Management Development Institute, Gurgaon E-Mail: anjalikaushik@mdi.ac.in

Functional View vs. Process View

To understand ERP it is important to understand what we mean by Functional Areas of Operation and Business Processes.

Functional Areas of Operation

A function is a unit in an organisation that carries out a set of related activities. Usually, these activities require special competence or equipment. Examples: Marketing & Sales Production and Materials Management Accounting and Finance Human Resources R&D

Functional View of Organizations

Vision (Business Objectives)

Functional Goals

Sales

Engineering Purchasing Manufacturing

Finance

Functional Business Model

Alfred P. Sloan developed the functional organizational model in the 1930s as chairman of General Motors The functional model was very successful for decades, but foreign competition in the 1980s highlighted problems with the model:
Flexibility and rapid decision-making were not possible Organizations had become overstaffed and top-heavy Ability to respond to change was limited

KEY SYSTEM APPLICATIONS IN THE ORGANIZATION

Types of Information Systems

Figure 2-1

Management Information Systems

Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

The Four Major Types of Information Systems

Figure 2-2

Problems with Functional Organizations

Focus: Lack of customer focus Communication Coordination
Lack of responsiveness Lack of flexibility

Information Flow

Marketing

Information Flow

Sales

Title

Information Flow

Material & Product Flow

Top Management

Manufacturing

Information Flow

Logistics

Figure 2-2 Information and material flows in a functional business model

Information Flow

Finance & Accounting

Business Process Model

In a process-oriented company, the flow of information and management activity are horizontalacross functions The horizontal flow promotes flexibility and rapid decisionmaking Michael Hammers Reengineering the Corporation encouraged managers to take a horizontal business process view of their companies

Top Management

Accounts Payable

Finance & Accounting Marketing & Sales

Accounts Receivable

Suppliers

Procurement

Manufacturing

Logistics

Information Flow Supplies Conversion Storage & Shipping

Material & Product Flow

Figure 2-3 Information and material flows in a process business model

Customers

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Enterprise Application Architecture

Figure 2-13

Need: Process-oriented Organizations

The real voyage of discovery consists not in seeking new lands, but in seeing with new eyes. - Marcel Proust
.

Processes

A business process is a sequence of activities that result in value for a customer Typically resources from several functions are required to carry out a process

Processes cut cross functions

Why Business Processes?

Most organizations are structured as hierarchies working in functional divisions or departments. This hierarchical structure is becoming less appropriate because: Focus is on functional goals rather than business goals; Accountability limited to functional boundaries; No body owns the process, and therefore accountable for it; Cross-functional communication and coordination is poor; little opportunity for cross-functional improvements. Changed business scenario demands that organisations should be structured to work in process teams in order to create more value for less effort. An activity adds value when it is essential to customers wants and needs, and the customers are willing to pay for it.

The Value Chain - Activities

Support activities

Firm infrastructure Human Resource Management Technology development

Procurement
Primary activities Inbound logistics Outbound logistics Marketing & Sales

Operations

Service

Business Process Types

Management Processes
Customer Satisfaction

Customer Request

Core Processes

Support Processes

Stovepipe syndrome
IT systems

Functions in an organisation
Personnel R&D Market/ Sales Production Service Financials

Each IT system supports its own function

Functional Silo View of an Organization

Information?

Cross-Functional Nature of the Order Management Process

Quote Commit Produce

Check Credit

Deliver

Bill

Collect

Sales & Distribution Production Planning Financial Materials Mgmt

Accounting

Integrated IT support

Orderhandling Productdevelopment

Customerservice
Financial reporting
Personnel R&D Market/ Sales Production Service Financials

Business is a set of cross-functional processes

-Michael Hammer

Enterprise systems

Integrating the enterprise through the information system

INFORMATION FLOW

Transfer Transfer

Transfer Transfer

Transfer Transfer

Vendor

Manufacturing

Distribution

Einzelhandelsgeschft Store

Transfer Transfer

Customer

CASH FLOW

Examples of some Key Business Processes

Concept to Release Opportunity to Order Order to Cash Plan to Produce Procure to Pay Financial Consolidation Request to Repair Acquisition to Disposal -PLM -CRM -OM -SCM -PO -FIN -CRM -FA

ERP- BUSINESS PROCESS ORIENTATION

Order Processing
Financial Service Product Development

Customer Service

HR

Finance

Production Services

Sales

Business Process Flows

An Illustrative

Integrated Finance Functionality

Asset Management Cash Management Financial Planning

Financials
Billing & Cash Collection

Financial Consolidation & Analysis

Expenditure Management

Procure to Pay
Manage Requisition
Enter Requisition
Search for item to buy Add item to shopping cart Check out and submit requisition

Approve Requisition
Search for requisition Requisition is approved automatically due to submitters authority

Release Requisition
Auto-release against blanket order no manual intervention

Receive item
Requestor confirms receipt

Manage Payment
Create Invoice
The invoice is created automatically Find and view invoice

Approve Invoice
The invoice is approved

Enter Payment

Query Invoice

The supplier logs in and browses through the invoice data

Manage Suppliers
Review Purchasing History
The purchasing history is reviewed by item, by commodity and by supplier

Review Supplier Performance

The supplier performance is reviewed by defects, delivery exceptions, price, volume and amounts