Concepts in Enterprise

Resource Planning
Forth Edition

Chapter Seven
Process Modeling, Process
Improvement, and ERP Implementation
Concepts in Enterprise Resource Planning, 1
Forth Edition
 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
• 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, Third
Forth Edition 2
 Introduction
• we will explore;
– Tools that can be used to describe business
processes such as:
• 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, Forth Edition 3

 Process Modeling
• Business processes can be quite complex
– For business processes to be effective (achieve the desired results)
and efficient (achieve the desired results with the minimum use of
resources), the processes must be clearly defined and individuals
must be adequately trained to perform their roles
• 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, Forth Edition 4

 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
– The interaction required to develop a process
model often reveals misunderstandings and
ensures that all team members are “on the same
page.”
– To train employees who will support the business
process

Concepts in Enterprise Resource Planning, Forth Edition 5

 Flowcharting Process Models
• Flowcharts are the simplest of the process-modeling tools
– 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
• with a goal of exposing weaknesses that need to be addressed.
– it can perform a gap analysis, which is an assessment of disparities
between how the process currently works and how the organization
wants it to work.
• For example, process mapping the purchasing process might show that 50
requisitions are handled (per week) but 10% do not complete the process
due to a lack of information

Concepts in Enterprise Resource Planning, Forth Edition 6

Flowcharting Process Models (cont’d.)

Figure 7-1 Basic flowcharting symbols

Concepts in Enterprise Resource Planning, Forth Edition 7

 Scenario of Fitter Snacker Expense
Report Process

Concepts in Enterprise Resource Planning, Forth 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, Forth Edition 9
 Figure 7-2 Partial process
map for Fitter Snacker
expense-reporting process

Concepts in Enterprise Resource Planning, Forth 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”
• The flowchart ends with a connector
– because Figure 7-2 only shows part of the expense-reporting process

Concepts in Enterprise Resource Planning, Forth Edition 11

• Exercise 7.1
• Complete the process map for the Fitter Snacker
expense-reporting process started in Figure 7-2,
using the description of the process provided at the
beginning of this section and the process-mapping
symbols shown in Figure 7-1

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 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, Forth Edition 13

 Figure 7-3 Hierarchical modeling
Concepts in Enterprise Resource Planning, Forth Edition 14
 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, Forth Edition 15

Figure 7-4 Deployment, or swimlane, flowcharting of the FS expense report
process
Concepts in Enterprise Resource Planning, Forth Edition 16
 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
– represented by an elongated hexagon
• Functions: part of the process where change occurs
– represented by rectangles with rounded corners

Concepts in Enterprise Resource Planning, Forth Edition 17

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

– Figure 7-5 EPC components (Standardized naming convention for

functions and events)

Concepts in Enterprise Resource Planning, Forth Edition 18

 Event Process Chain (EPC) Diagrams
(cont’d.)
• EPC software
– Enforces an event-function-event structure

Figure 7-6 Basic EPC layout

Concepts in Enterprise Resource Planning, Forth Edition 19
 (EPC) Diagrams (cont’d.)
• Basic EPC diagram can be augmented with additional information
– Branching occurs when logic either comes from more than one
source or proceeds to more than one potential outcome
– Three types of branching connectors
• AND
• OR
• Exclusive OR (XOR)

Concepts in Enterprise Resource Planning, Forth Edition 20

 (EPC) Diagrams (cont’d.)
• Figure 7-7 shows how the AND connector
• functions. The figure indicates that the expense
report must be recorded and a hard copy
• must be filed.

Figure 7-7 AND connector

Concepts in Enterprise Resource Planning, Forth Edition 21
 (EPC) Diagrams (cont’d.)
• The OR connector indicates that one or more
potential outcomes could occur
• Figure 7-8 shows an application of the OR connector, which
indicates that after a payment is processed, the salesperson is
notified, or the sales manager is notified, or both the salesperson
and sales manager are notified.

Figure 7-8 OR connector

Concepts in Enterprise Resource Planning, Forth Edition 22

 (EPC) Diagrams (cont’d.)
• The XOR connector can be used to represent the manager’s
decision on whether to approve the expense report.
– Only one event can occur after an XOR connector.
• Figure 7-9 indicates that only one event can occur after reviewing the expense
report: it is approved or it is not approved.

Figure 7-9 XOR connector

Concepts in Enterprise Resource Planning, Forth Edition 23

 (EPC) Diagrams (cont’d.)
• Figures 7-7 through 7-9 show one function connecting to two
events using a branch connector
– It is not always the case that functions lead into the connector,
• Figure 7-10 shows the expense report can be triggered by either of two events:
– The end of the trip or the end of the week. It is also possible that more
than two events could trigger the function.

Concepts in Enterprise Resource Planning, Forth Edition 24

 Figure 7-11 Possible connector and triggering combinations
Concepts in Enterprise Resource Planning, Forth Edition 25
• Figure 7-12 shows the splitting and consolidating of a path through the process.
• In this case, the Fitter salesperson can:
– submit her expense report online if she has Internet access;
– otherwise, she must send in a paper report.

 Note the same type of connector that is used to split the path must be used to consolidate it.

FIGURE 7-12 Splitting and consolidating paths

Concepts in Enterprise Resource Planning, Forth Edition 26
 The basic EPC diagram can be
augmented with additional information ,
called a data element. For example,
Figure 7-13 shows the first part of an
EPC diagram for the Fitter expense-
reporting process; the diagram also shows
data elements (“Unapproved multicopy
expense report”) and organizational
elements (“Salesperson,”“Sales
manager”). The additional elements allow
for a more complete description of the
process, documenting the “who” and
“what” aspects of the process.

Figure 7-13 EPC diagram with organizational and data elements

Concepts in Enterprise Resource Planning, Forth Edition 27
Concepts in Enterprise Resource Planning, Forth Edition 28
Case Study : staff-recruiting process
• Develop an event process chain (EPC) diagram for the following staff-recruiting process at
Yellow Brook Photography:
• The current recruitment process for Yellow Brook Photography takes approximately 90 days. It
begins when a manager completes a requisition and sends it to the Human Resources
Department. The Human Resources Department reviews and assigns a number to the
requisition and returns it to the manager for approval. He or she approves it, obtains the
required approval signatures, and then returns it to Human Resources.
• Next, Human Resources creates a job posting and announces the position internally through
the company’s intranet, bulletin boards, or a binder of current job openings. Human Resources
collects responses internally for eight days. After that, Human Resources solicits résumés from
external sources by advertising in newspapers and online. Human Resources then prescreens
the résumés and forwards information on qualified candidates to the hiring manager for review.
The hiring manager tells Human Resources which candidates should be interviewed. Human
Resources conducts brief phone interviews of candidates recommended by the hiring manager;
if the phone interview is promising, Human Resources schedules an on-site interview.
Candidates interview with the hiring manager and with a Human Resources staff member.
Human Resources records the interviews in an applicant flow log.

Concepts in Enterprise Resource Planning, Forth Edition 29

 Case Study : staff-recruiting process
• Once a candidate is selected for hire, Human Resources and the hiring manager prepare an
offer, and a background check on the candidate is initiated. Then, the hiring manager must
approve the offer and obtain the required approval signatures on a job offer approval form.
Subsequently, the hiring manager extends the offer verbally to the candidate, while Human
Resources sends the written offer, including an employment start date. Once the applicant
accepts the offer, a drug screening is scheduled for the candidate, who must also sign the offer
letter and return it to Human Resources. At that point, Human Resources notifies the hiring
manager of the candidate’s acceptance. Finally, if the drug test comes back negative, the new
employee completes new-hire orientation on the first day of work.

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 Process Improvement
• Using the simple technique of value analysis can also generate
process-improvement ideas.
• 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
• The expense-reporting process added business value with minimum cost
• “Mail expense report” function of Fitter’s expense-reporting process
– cost upwards of $50(cost of the envelope , postage, the time spent by the salesperson to
mail the expense report)
• including the time find a mailbox, the time to deliver the expense report to the company, and the
time to deliver it to the sales manager.

Concepts in Enterprise Resource Planning, Forth Edition 36

 Evaluating Process Improvement
• Disrupting the current process to make changes can be costly and
time consuming
• using dynamic process modeling to evaluate process changes
before they are implemented
– 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 (such as
customer orders) that interact with a logical model of the
process
– Predict performance of the actual system
• using measures such as cycle time (how long the process takes), productivity, total
cost, idle time
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 ERP Workflow Tools
• Most business processes are performed regularly
• For example, the sales order process
• Some business processes, however, are performed only
sporadically
• For example, the process of establishing credit limits
• 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, Forth Edition 38
 Figure 7-14 SAP ERP Workflow Builder screen
In the first step in this process, an employee completes the Create Notification of Absence screen to
request time off from work.
Concepts in Enterprise Resource Planning, Forth Edition 39
 Figure 7-16 Manager’s Business Workplace with workflow task
Concepts in Enterprise Resource Planning, Forth Edition 40
 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
– Managers can also build flexibility into workflow
tasks in terms of who can perform the task
• Example: The A/R manager could create a workflow task to set a new
customer’s credit limit and send it to the Workflow inbox of all three A/R
employees
– For sporadic processes _ that are repeated
frequently enough to justify the development costs_,
workflow tools are a powerful way to improve
process efficiency and effectiveness

Concepts in Enterprise Resource Planning, Forth Edition 41

 *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

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 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
• most ERP vendors charge annual license fees based on the number of users
– Consulting fees
• consultants with the skills to configure the software to support the
company’s business processes
– Project team member time
• ERP projects require key people within the company to guide the implementation
– These are team members who have detailed knowledge of the company’s
business
– Employee training
– Productivity losses
• companies normally lose productivity during the first weeks and months after
switching to a new ERP system
Concepts in Enterprise Resource Planning, Forth Edition 43
 ERP System Costs and Benefits
(cont’d.)
• To justify the costs associated with an ERP system
– 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, Forth Edition 44

 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

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 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, Forth Edition 46

 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, Forth Edition 47

 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, Forth Edition 48

 Figure 7-17 Implementation Roadmap in Solution Manager

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 Implementation Tools (cont’d.)
• Project Preparation
– Organizing technical team
– Defining system landscape
• the computer servers, networking hardware, and peripherals necessary to
operate the ERP system
– Selecting hardware and database vendors
– Defining project’s scope
• A common problem in ERP implementations is scope creep
– which is the unplanned expansion of the project’s goals and
objectives
• Business Blueprint
– Produces detailed documentation of business process
requirements of the company

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 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 system and
transferring data from legacy systems
– Conducting end-user training
– Setting Go Live date
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 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 (Advanced Business Application Programming) code
• Changes recorded in transport directory
– which is a special data file location on the DEV server
• 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, Forth Edition 55

 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, Forth Edition 56

 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, Forth Edition 57

 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, Forth Edition 58