PART III:
Next Three Chapters
Chapter 7: Structured Processes and Information
Systems
• Discusses structured business processes and ways
information systems can improve process quality
Chapter 8: Social Media Information Systems
• Addresses dynamic processes used with social
networking applications
Chapter 9: Business Intelligence Systems
• Discusses business intelligence and related
information systems
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Chapter 7
Structured Processes and
Information Systems
Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business Administration
Gonzaga University
Spokane, WA 99258
chen@jepson.gonzaga.edu
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Fox Lake Country Club
•
•
•
•
Exclusive private golf and tennis club
1500 memberships
35 full-time and 100+ seasonal employees
Business units:
 Restaurant, pro shop, facilities, new weddinghosting events
 Tennis, swimming activities and the pro shop are
ignored in the study
• Hit hard by recession
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Fox Lake Country Club Has a Problem
• Mike, facilities manager
• Anne, wedding planner
• Renovation plan interferes with scheduled
weddings
• Could result in lost revenue, unhappy customers,
damaged business reputation and costly law suits
• What are missing and needed for the Fox Lake
Country Club.
• Answer – Structured Processes and “relevant”
Information Systems
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Study Questions
Q1: What are the basic types of structured processes?
Q2: How can information systems improve process
quality?
Q3: How do enterprise systems eliminate problems of
information silos?
Q4: How do CRM, ERP, and EAI support structured
enterprise processes?
Q5: What are the elements of an ERP System?
Q6: What are the challenges of implementing enterprise
systems?
Q7: How will service-oriented architecture impact
enterprise information systems?
Q8: 2022?
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Study Elements
Four important elements can be summarized in this
chapter:
1a. What is “structured processes” and what are the basic
types of structured processes?
1b. How can information systems improve process quality?
2. What is “information silos” and how do enterprise
systems eliminate problems of information silos?
3a. What are CRM, ERP, and EAI and how do “they”
support structured enterprise processes?
3b. What are the elements of an ERP System?
4a. What Are the Challenges When Implementing New
Enterprise Systems?
4b. How will service-oriented architecture (SOA) impact
enterprise information systems?
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Q1. What are Business Process and
Business Process Management?
• Business process: A network of activities that generate
value by transforming inputs into outputs ( and to
achieve a defined business outcome,)
– Fig. 7.1 a three-activity process for approving customer
orders.
• Busisness process management (BPM) is a
management approach focused on aligning all aspects
of an organization with the wants and needs of clients.
It is a holistic management approach[1] that promotes
business effectiveness and efficiency while striving for
innovation, flexibility, and integration with technology.
http://en.wikipedia.org/wiki/Business_process_management
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Management
Information
Systems
Dr. Chen,
The Trends
of the Information
Systems Technology
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TM -7
What are Business Process and Business
Process Management?
• Business process: A set of logically related tasks
performed to achieved a defined business outcome
• Business process management (BPM) is a
management approach focused on aligning all
aspects of an organization with the wants and needs
of clients. It is a holistic management approach[1]
that promotes business effectiveness and efficiency
while striving for innovation, flexibility, and
integration with technology.
http://en.wikipedia.org/wiki/Business_process_management
Dr. Chen,
Management
Information
Systems
Dr. Chen,
The Trends
of the Information
Systems Technology
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TM -8
What Are the Basic Types of Structured Processes?
Fig 7-1 Business Process with Three Activities
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Structured vs. Dynamic Processes
• Structured processes
– Formally defined, standardized processes that involve
day-to-day operations.
– E.g., accepting a return, placing an order, purchasing
raw materials.
• Dynamic processes
– Flexible, informal, and adaptive processes that
normally involve strategic and less specific managerial
decisions and activities.
– E.g., whether to open a new store location or how best
to solve the problem of excessive product returns.
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Q/A
Which of the following is an example of a dynamic
process?
• A) Samsung accepts a return of a defective television from
its dealer.
• B) Starbucks places an order for coffee beans from its local
supplier.
• C) Amazon.com hires customer service respresentatives to
help customers with their online orders.
• D) Nike uses Facebook and Twitter to generate buzz about
its new line of running shoes.
• Answer:
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How Do Structured Processes Differ from
Dynamic Processes?
Fig 7-2: Structured vs. Dynamic Processes
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Different Structured Processes and IS
• Structured departmental process
– a structured process that exists to enable departmental employees to fulfill the
charter purpose, and goals of a particular organizational unit (see Fig. 7-3&4)
• Departmental information system
– an IS that exists o support a departmental process
• Structured enterprise processes
– Structured processes that span an organization and support activities in
multiple departments.
• Structured information system
– an IS that exists o support a departmental process
Interenterprise processes
• Structured ________________
– Structured processes that span two or more independent organizations. At Fox
Lake, the process that are restaurant uses to order supplies and ingredients
from its suppliers is an example.
• Structured Interenterprise information system
– an IS that exists o support an interenterprise process
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Common Departmental Information Systems
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Fig 7-3: Common Departmental Information Systems
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How Do Structured Processes Vary by Scope?
Fig 7-4: Scope of Structured Processes
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Q2: How Can Information Systems
Improve Process Quality?
• Processes are the fabric of organizations; they are the
means by which people organize their activities to
achieve the organization’s goals.
• Two dimensions of process quality:
efficiency ratio of process outputs to inputs.
• Process __________:
effectiveness how well a process achieves
• Process ___________:
organizational strategy
• Ways to improve process quality
structure
 Change process ___________
resources
 Change process ___________
 Change both
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How Can Information Systems Improve
Process Quality?
1. Performing an activity
– Partially automated, completely automated
2. Augmenting human performing activity
– Common reservation system
3. Controlling process flow
– Order approval process
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Q3: What is Information Silo?
• Information Silo
– is a condition that exists when data are isolated in separated
information systems.
– For example, if an organization uses one IS for order
processing and a second IS for customer service, the
customer data are isolated in two separate systems.
– Result: the customer service department might provide
thousands of dollars of customer support to a customer who
has only ordered a few hundred dollars of product.
– Other Disadvantages:
• Wasting resources (and then increasing the cost)
• Data are not integrated, consequently, information might be
inconsistent (and inaccurate) and affect the quality of decision
making.
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Q3: How Do Enterprise Systems Eliminate
Information Silo Problems?
• No organization plans to create information silos.
They arise as a consequence of IS that support
departmental rather than enterprise-level
processes.
• Specifically, how do Information System Silos
arise?
–
–
–
–
Data isolated in islands of automation
Different department goals
Different personal and workgroup needs
Duplicate data as organization grows
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Fox Lake Country Club Departmental Goals
Fig 7-5: Fox Lake Country Club Departmental Goals
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Islands of Automation (Information Silo)
[ repeated customers]
[one-time event]
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[ maintenance and problem
solving within budget]
Fig 7-6: Fox Lake Country Club Departmental IS
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Islands of Automation (Information Silo)
• Information silo (or islands automation) are not a
problem until process begin to use and store data
about the same entities (or until they duplicate data).
• At that point they become quite problematic.
• Fox Lake learned when the wedding events
department maintained its own copy of room
reservation data that duplicated same data in the
facilities department.
• By storing isolated data, their activities can conflict,
as they did. (see Figure 7-7 for a Hospital example)
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Examples of Islands of Automation at a Hospital
(stop making
meals)
(issue
discharge
order)
(prepare
patients)
(take-home
medication)
(clean room)
(family to be
notified)
much data are not integrated
Fig 7-7: Examples of Islands of Automation at a Hospital
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What Problems Do Information Silos Cause?
(w/credit return of $5,500
by Acct. dept, but,
Sales/Marketing dept. do
not know)
($32,300=$37,800-$5,500
(IndyMac was acquired
by OneWest Bank)
???
$$$
Fig 7-8: Problems Caused by Information Silos
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How Do Enterprise Information Systems
Eliminate Silos?
(shared database,
consistent information,
quality decision
making/services)
[1a]
[1b]
[1c]
Fig 7-9: Fox Lake Club Enterprise Reservation System
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An Enterprise System for Patient Discharge
[1]
[2a]
[2b]
[2c]
[4a]
[3a]
[4b]
[3b]
[5b]
[5a]
Enterprise systems like the one in Fig. 7-10 were not feasible until network,
data communication, and database technologies reached a sufficient level of
capability and maturity in the late 1980s and early 1990s.
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Fig 7-10: Example Enterprise Process and Information System
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BUSINESS VALUE & FOCUS –
IS Perspective
IS/E-BUSINESS
•SCM
•CRM
•BPR
•ERP
Customer
centric
Who are the customers?
Where are the customers?
Their purchasing habits
How to reach them?
SCM: Supply Chain Mgt.
CRM: Customer Relationship Mgt.
BPR: Business Process Reengineering
ERP: Enterprise Resources Planning
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Demands
Products
Value
What they need/want?
How many they need/want?
When they need/want?
How to reach them?
Business Models & Strategies
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Manufacturing Industry Value Chain
Product and Service Flow
Support Activities
Administrative and Other
Indirect Value Added
Research and
Development
Production
Engineering
and
Manufacturing
Sales and
Marketing
Distribution
Service
Primary Activities
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N
How do functional systems relate to the
value chain?

Porter’s value chain model from Chapter 3 is reorganized to show primary
and support activities from a customer’s perspective, beginning with
Marketing and Sales on the left, to Service and Support on the right.
(Value)
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Chapter 3. Reorganized Porter Value Chain Model
Q4: How Do CRM, ERP and EAI
Support Enterprise Processes?
Business Process Reengineering (BPR)
• BPR means radically changing how people work changing business policies and controls, systems and
technology, organizational relationships and business
practices, and reward programs.
• Integrated data, enterprise systems create stronger, faster,
more effective linkages in value chains
• Difficult, slow, and exceedingly expensive
• Key personnel determine how best to use new technology
• Requires high-level and expensive skills and considerable
time
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Deconstruction of the newspaper industry:
BPR
Old newspaper industry value chain
Journalists
Editors
Printers
Distributors
Readers
Columnists
New newspaper industry value chain
Editors
Journalists
_____
Readers
Columnists
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BPR
Radical Change =
Types of
Organizational =
Strategies
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New organization +
Industry
Structure +
IT
Competitive Cooperative
Strategies + Strategies
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Emergence of Enterprise Application Solutions.
• The process quality benefits of enterprise-wide systems
became apparent; however, as applications became more and
more complex, in-house development costs became
infeasible.
• The organizations began to look more favorably on the idea
of licensing pre-existing applications with “Inherent
processes”:
 Predesigned procedures for using software products
 Based on “industry best practices”
• Three categories of enterprise applications emerged:
 Customer relationship management (CRM)
 Enterprise resource planning (ERP)
 Enterprise application integration (EAI)
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Customer Relationship Management
(CRM)
• CRM
 Suite of applications, a database, and a set of inherent processes
 Intended to support customer-centric organization
 Integrates all primary activities of value chain
• Manage all interactions with customer though four phases
of customer life cycle: (Fig. 7-11)
1. Marketing—marketing sends messages to target market
2. Customer Acquisition—customer prospects order and need to be
supported
3. Relationship Management—support and resale processes
increase value to existing customers
4. Loss/churn—win-back processes categorize customers according
to value and attempt to win back high-value customers
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Dr. Chen, Management Information Systems
Four Phases of Customer Life Cycle

Figure 7-11 depicts the four phases of the customer life cycle and
shows how a CRM system integrates them into three major
processes: solicitation, lead-tracking, and relationship management.
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Fig 7-11: The Customer Life Cycle
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CRM Applications

Customer Relationship Management (CRM) systems store data
in a single database and link CRM processes to one another.
Fig 7-12: CRM Applications
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A Marketing Strategy – showing the 4 P’s of
a Marketing Mix
Product
Place
C
Price
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Promotion
37
People, Process and Technology
Start with People
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Customer Relationships
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Enterprise Resource Planning (ERP)
• Enterprise Resource Planning (ERP)
a suite of applications called modules, a database,
and a set of inherent processes for consolidating
business operations into a single, consistent,
computing platform.
An ERP system is an information system based on
ERP technology.
ERP systems are not for every organization.
Companies still have problem associated with information
silos.
Companies should choose enterprise application integration
(EAI) to solve their problem (see next topic).
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Enterprise Resource Planning (ERP)
ERP systems include the functions of CRM systems, it also
include accounting, manufacturing, inventory, and
human resource applications.
Fig 7-13: ERP Applications
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Pre-ERP Information System: Bicycle Manufacturer
Even if parts can
be obtained, until
the order is entered
into the finished
goods database,
purchasing is
unaware of the
need to buy new
parts.
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Fig 7-17: Pre-ERP Information Systems
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Pre-ERP Information System: Bicycle Manufacturer
Information Silos
(not integrated DB)
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Fig 7-17: Pre-ERP Information Systems
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ERP Information System
Fig 7-18: ERP Information Systems
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EAI Automatically Makes Data Conversions Among Different Systems
“Virtual Integrated Database”
T/F: Enterprise application integration is a suite of applications, a
database, and a set of inherent processes for consolidating business
operations into a single, consistent, computing platform.
Answer:
Fig 7-20: Design and Implementation for the Five Components
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Enterprise Application Integration (EAI)
• Enterprise Application Integration (EAI) is a suite of
software applications that integrates existing systems by
providing layers of software that connect applications
together.
• EAI does not contain centralized database.
• EAI does the following:




Connects system “islands”.
Enables communicating and sharing data.
Provides integrated information.
Leverages existing systems – leaving functional applications
as is, but providing an integration layer over the top.
 Enables a gradual move to ERP.
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MRP: Manufacturing Resource Planning
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MRP: Manufacturing Resource Planning
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Q5: What Are the Elements of an ERP
System?
• Integrate primary value chain activities with
application programs, databases, procedures,
training and consulting that integrate:





Supply chain
Manufacturing
CRM
Human
Accounting
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ERP Application Programs
• An ERP solution consists of the following:
 ERP application programs
 Set configuration parameters
ERP databases
 Initial database design included
 Trigger program code
 Stored procedure code
ERP process blueprints
ERP consulting and training
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What is SAP?
S
A
P
Systems
Applications
Products...
in data
processing
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Company
Originated in
Walldorf,
Germany 1972
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SAP Ordering Business Process
Fig 7-21: SAP Ordering Business Process
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What Companies Are the Major ERP Vendors?
Fig 7-22: Characteristics of Top ERP Vendors
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Q6: What Are the Challenges When
Implementing New Enterprise Systems?
• Implementing new enterprise systems (CRM, ERP, or
EAI) is challenging, difficult, expensive, and risky.
• It is not unusual for enterprise system projects to be
well over budget and a year or more late. The
expense and risks arise from four primary factors:




Collaborative management
Requirements gaps
Transition problems
Employee resistance due to threats to self-efficacy
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Benefits of ERP
•
•
•
•
•
•
•
Efficient business processes that are effective
Inventory reduction
Lead-time reduction
Improved customer service
Greater real-time insight into organization
Higher profitability
No data inconsistency problems due to integrated
database
• Business process blueprints tested in hundreds of
organizations
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Dr. Chen, Management Information Systems
Q7. How Will Service-Oriented Architecture (SOA)
Impact Enterprise Information Systems?
• Service-Oriented Architecture (SOA)
 is a software design philosophy in which activities are
organized into modules of functionality called Web
services that are requested and delivered over the Internet
using SOA standards.
• Web service
 Encapsulated software service provided anywhere over
the Internet
 Service description documents how to use service, and
publishes description using Web Service Description
Language (WSDL)
 Services delivered via XML, SOAP, REST, et al.
 Used by SAP, Oracle ERP
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Fig 7-24: Using Enterprise Application SOA Services
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THE CONNECTED CORPORATION:
THE FUTURE OF ERP
• Data points where SCM, CRM, and ERP integrate.
• Lines between SCM, CRM, and ERP will continue to blur
– Internet – continue to help organizations integrate data and
process across functional departments
– Interface – customizable employee browsers
– Wireless technology – support a mobile workforce
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Q8: 2022?
• Islands of Automation, Version 2.0
• Storing of data in various places in the iCloud,
while other versions of data stored in corporate
data in SAP
• Version 2.0 silos more isolated and less secure
than previous silos
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• End of Chapter 7
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