Concepts in Enterprise

Resource Planning
Fourth Edition

Chapter Seven
Process Modeling, Process
Improvement, and ERP Implementation
 Objectives

After completing this chapter, you will be able to:

• Use basic flowcharting techniques to map a
business process
• Develop an event process chain (EPC) diagram of
a basic business process
• Evaluate the value added by each step in a
business process

Concepts in Enterprise Resource Planning, Fourth Edition 2

 Objectives (cont’d.)

• Develop process improvement suggestions

• Discuss the key issues in managing an ERP
implementation project
• Describe some of the key tools used in managing
an ERP implementation project

Concepts in Enterprise Resource Planning, Fourth Edition 3

 Introduction

• Tools that can be used to describe business

processes
– Flowcharts, event process chains
– Not specific to ERP
– Can help managers identify process elements that
can be improved
• Role of process-modeling tools in ERP
implementation projects

Concepts in Enterprise Resource Planning, Fourth Edition 4

 Process Modeling

• Business processes can be quite complex

• Process model: any abstract representation of a
process
• Process-modeling tools provide a way to describe
a business process so that all participants can
understand the process

Concepts in Enterprise Resource Planning, Fourth Edition 5

 Process Modeling (cont’d.)

• Advantages of process models

– Graphical representations are usually easier to
understand than written descriptions
– Provide a good starting point for analyzing a process
• Participants can design and implement improvements
– Document the business process
• Easier to train employees to support the business
process

Concepts in Enterprise Resource Planning, Fourth Edition 6

 Flowcharting Process Models

• Flowchart
– Any graphical representation of the movement or
flow of concrete or abstract items
– Clear, graphical representation of a process from
beginning to end
– Uses a standardized set of symbols
• Process mapping
– Often used interchangeably with flowcharting
– Specifically refers to activities occurring within an
existing business process

Concepts in Enterprise Resource Planning, Fourth Edition 7

Flowcharting Process Models (cont’d.)

Figure 7-1 Basic flowcharting symbols

Concepts in Enterprise Resource Planning, Fourth Edition 8
 Fitter Snacker Expense Report
Process
• Maria, Fitter Snacker salesperson
– Completes a paper expense report after travel
– Makes a copy for her records
– Attaches receipts for any expenses over $25
– Mails it to her zone manager at the branch office
• Kevin, zone manager
– Reviews expense report
– Approves report or mails it back to Maria asking for
explanation, verification, or modification
– After approval, mails it to corporate office
Concepts in Enterprise Resource Planning, Fourth Edition 9
 Figure 7-2 Partial process
map for Fitter Snacker
expense-reporting process

Concepts in Enterprise Resource Planning, Fourth Edition 10

 Fitter Snacker Expense Report
Process (cont’d.)
• Process at corporate office
– Accounts payable (A/P) clerk
• Process boundaries define:
– Which activities are to be included in the process
– Which activities are considered part of
environment—external to process
• All processes should have only one beginning point
and one ending point
• Decision diamond asks a question that can be
answered with “yes” or “no”
Concepts in Enterprise Resource Planning, Fourth Edition 11
 Extensions of Process Mapping

• Hierarchical modeling: ability to flexibly describe

a business process in greater or less detail,
depending on the task at hand
• Modeling software that supports hierarchical
modeling
– Provides user the flexibility to move easily from
higher-level, less detailed views to the lower-level,
more detailed views

Concepts in Enterprise Resource Planning, Fourth Edition 12

 Figure 7-3 Hierarchical modeling of Fitter’s expense-reporting process
Concepts in Enterprise Resource Planning, Fourth Edition 13
 Extensions of Process Mapping
(cont’d.)
• Deployment flowcharting
– Swimlane flowchart
– Depicts team members across the top
– Each step is aligned vertically under the appropriate
employee or team
– Clearly identifies each person’s tasks in the process

Concepts in Enterprise Resource Planning, Fourth Edition 14

Figure 7-4 Deployment, or swimlane, flowcharting of the Fitter’s expense
report process
Concepts in Enterprise Resource Planning, Fourth Edition 15
 Event Process Chain (EPC) Diagrams

• Event process chain (EPC) format

– Uses only two symbols to represent a business
process
– Matches the logic and structure of SAP’s ERP
software design
– Two structures: events and functions
• Events: a state or status in the process
• Functions: part of the process where change occurs

Concepts in Enterprise Resource Planning, Fourth Edition 16

 Event Process Chain (EPC) Diagrams
(cont’d.)

Figure 7-5 EPC components

Concepts in Enterprise Resource Planning, Fourth Edition 17
 Event Process Chain (EPC) Diagrams
(cont’d.)
• EPC software
– Enforces an event-function-event structure
– Standardized naming convention for functions and
events
• Three types of branching connectors
– AND
– OR
– Exclusive OR (XOR)
• Basic EPC diagram can be augmented with
additional information
Concepts in Enterprise Resource Planning, Fourth Edition 18
 Figure 7-6 Basic EPC layout Figure 7-7 AND connector

Concepts in Enterprise Resource Planning, Fourth Edition 19

 Event Process Chain (EPC) Diagrams
(cont’d.)

Figure 7-8 OR connector Figure 7-9 XOR connector

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 Figure 7-11 Possible connector and triggering combinations
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 Figure 7-12 Splitting and consolidating paths

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 Figure 7-13 EPC diagram with organizational and data elements
Concepts in Enterprise Resource Planning, Fourth Edition 23
 Process Improvement

• Value analysis
– Each activity in the process is analyzed for the value
it adds to the product or service
– Value added is determined from the perspective of
customer
– Real value: value for which the customer is willing to
pay
– Business value: value that helps the company run its
business
– No value: an activity that should be eliminated

Concepts in Enterprise Resource Planning, Fourth Edition 24

 Evaluating Process Improvement

• Disrupting the current process to make changes

can be costly and time consuming
• Dynamic process modeling takes a basic
process flowchart and puts it into motion
– Uses computer simulation techniques to facilitate the
evaluation of proposed process changes
• Computer simulation
– Uses repeated generation of random variables that
interact with a logical model of the process
– Predict performance of the actual system

Concepts in Enterprise Resource Planning, Fourth Edition 25

 ERP Workflow Tools

• Workflow tools
– Software programs that automate the execution of
business processes and address all aspects of a
process, including:
• Process flow (logical steps in the business process)
• People involved (the organization)
• Effects (the process information)
• ERP software provides a workflow management
system
– Supports and speeds up business processes

Concepts in Enterprise Resource Planning, Fourth Edition 26

 ERP Workflow Tools (cont’d.)

• Workflow tasks: links that can include basic

information, notes, documents, and direct links to
business transactions
• SAP system can:
– Monitor workflow tasks
– Automatically take various actions if the tasks are
not completed on time

Concepts in Enterprise Resource Planning, Fourth Edition 27

 Figure 7-14 SAP ERP Workflow Builder screen
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 Figure 7-15 Create notification of absence screen

Concepts in Enterprise Resource Planning, Fourth Edition 29

 Figure 7-16 Manager’s Business Workplace with workflow task

Concepts in Enterprise Resource Planning, Fourth Edition 30

 ERP Workflow Tools (cont’d.)

• Workflow provides a number of useful features

– Employees can track progress of workflow tasks
– System can be programmed to send reminders to
employee(s) responsible for a task
– For sporadic processes, workflow tools are a
powerful way to improve process efficiency and
effectiveness

Concepts in Enterprise Resource Planning, Fourth Edition 31

 Implementing ERP Systems

• Late 1990s: many firms rushed to implement ERP

systems to avoid the Y2K problem
• Since 2000: pace of implementations has slowed
considerably
– Most Fortune 500 firms have implemented an ERP
system
– Current growth is in the small to midsized business
market
• Implementation of ERP is an ongoing process

Concepts in Enterprise Resource Planning, Fourth Edition 32

 ERP System Costs and Benefits

• ERP implementation is expensive

– Usually ranging between $10 million and $500
million, depending on company size
• Costs of ERP implementation
– Software licensing fees
– Consulting fees
– Project team member time
– Employee training
– Productivity losses

Concepts in Enterprise Resource Planning, Fourth Edition 33

 ERP System Costs and Benefits
(cont’d.)
• Companies must identify a significant financial
benefit that will be generated by ERP system
• Only way companies can save money with ERP
systems is by using them to support more efficient
and effective business processes
• Companies must manage transfer of data from old
computer systems to new ERP system

Concepts in Enterprise Resource Planning, Fourth Edition 34

 Implementation and Change
Management
• Key challenge is not in managing technology, but in
managing people
• ERP system changes how people work
– To be effective, change may have to be dramatic
– Business processes that are more effective require
fewer people
– Some employees may be eliminated from their
current jobs

Concepts in Enterprise Resource Planning, Fourth Edition 35

 Implementation and Change
Management (cont’d.)
• Organizational change management (OCM):
managing the human behavior aspects of
organizational change
• People do not mind change, they mind being
changed
• If ERP implementation is a project that is being
forced on employees, they will resist it
• When employees have contributed to a process
change, they have a sense of ownership and will
likely support the change

Concepts in Enterprise Resource Planning, Fourth Edition 36

 Implementation Tools

• Many tools are available to help manage

implementation projects
– Example: process mapping
• SAP provides Solution Manager tool
– Helps companies manage implementation of SAP
ERP

Concepts in Enterprise Resource Planning, Fourth Edition 37

 Implementation Tools (cont’d.)

• In Solution Manager, ERP implementation project

is presented in a five-phase Implementation
Roadmap:
– Project Preparation (15 to 20 days)
– Business Blueprint (25 to 40 days)
– Realization (55 to 80 days)
– Final Preparation (35 to 55 days)
– Go Live and Support (20 to 24 days)

Concepts in Enterprise Resource Planning, Fourth Edition 38

 Figure 7-17 Implementation Roadmap in Solution Manager

Concepts in Enterprise Resource Planning, Fourth Edition 39

 Implementation Tools (cont’d.)

• Project Preparation
– Organizing technical team
– Defining system landscape
– Selecting hardware and database vendors
– Defining project’s scope
• Scope creep
• Business Blueprint
– Produces detailed documentation of business
process requirements of the company

Concepts in Enterprise Resource Planning, Fourth Edition 40

 Implementation Tools (cont’d.)

• Realization
– Project team members work with consultants to
configure the ERP software in development system
• Final Preparation
– Testing the system throughput for critical business
processes
– Setting up help desk for end-users
– Setting up operation of the Production (PROD)
system and transferring data from legacy systems
– Conducting end-user training
– Setting Go Live date
Concepts in Enterprise Resource Planning, Fourth Edition 41
 Implementation Tools (cont’d.)

• Go Live and Support

– Company begins using new ERP system
– Monitoring of system is critical so that changes can
be made quickly if performance of the system is not
satisfactory
– Important to set a date at which the project will be
complete

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 System Landscape Concept

• SAP recommends a system landscape for

implementation
– Three completely separate SAP systems:
• Development (DEV)
• Quality Assurance (QAS)
• Production (PROD)
– Transport directory: special data file location on
DEV server

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 System Landscape Concept (cont’d.)

Figure 7-18 System landscape for SAP ERP implementation

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 System Landscape Concept (cont’d.)

• Development (DEV) system used to develop

configuration settings and special enhancements
using ABAP code
• Changes recorded in transport directory
• Changes imported into QAS system
• QAS system: changes are tested
• All settings, programs, and changes that pass
testing are transported to PROD system
• PROD system: used by company to run its
business processes
Concepts in Enterprise Resource Planning, Fourth Edition 45
 Summary

• Business processes
– ERP systems are designed to provide the
information, analysis tools, and communication
abilities to support efficient and effective business
processes
– Process modeling: fundamental tool in
understanding and analyzing business processes

Concepts in Enterprise Resource Planning, Fourth Edition 46

 Summary (cont’d.)

• Process mapping: process-modeling tool that uses

graphical symbols to document business
processes
– Other methodologies: hierarchical modeling,
deployment flowcharting, event process chain
diagramming, value analysis, and business process
improvement
– SAP’s Solution Manager: set of tools and information
that can be used to guide an implementation project
• Included in SAP ERP to help manage the
implementation of ERP software

Concepts in Enterprise Resource Planning, Fourth Edition 47

 Summary (cont’d.)

• SAP’s system landscape was introduced to show

how changes to ERP system during
implementation (and beyond) are managed
• Most challenges to ERP implementation involve
managing personnel and their reactions to the
change, rather than managing technical issues

Concepts in Enterprise Resource Planning, Fourth Edition 48