MIS710
Process Innovation and Management
Individual Assignment
Reengineering the Supply Order Process
I pledge on my honor that I have not given or received any unauthorized assistance on this assignment/examination. I further pledge
that I have not copied any material from a book, article, the Internet or any other source except where I have expressly cited the source.
Signature ____Shravan__________
Date: ___11-16-2014________
Print Name _____________Shravan_Sazawal____________
Assignment
•
Read and Assess IS system
–
–
–
–
3. Develop the following (Rummler)
–
–
–
–
–
Functional specification
PROCESS constituents
Relationship map
Process map
1. Develop SHOULD system
–
–
–
Narrative
Change levers - PROCESS
constituents
4.
Identify the key principles of
reengineering you plan to use
2. Develop a high-level
conceptual data model (e.g.,
ER) for the business process
–
–
–
SHOULD Organizational goals
SHOULD Process goals
SHOULD Process map
SHOULD Relationship map
SHOULD Process Map with Task
Sub-Goals
SHOULD Functional Goal Summary
SHOULD Job/Responsibility Matrix
SHOULD Job Model (Design)
Costs & Benefits
- Not necessarily in dollars terms
5. Extending the Vision
–
–
Other Processes Impacted
Evolution of the System
Reengineering Homework
2
Supply Order Process:
Brief Functional Description (IS)
Some of the steps taken to order supplies include:
– Every employee follows their own personal process with
their own preferred supplier
– Employee requests admin/secretary to order supplies
– Admin/secretary locates supplies in a supplies magazine
– Supplies are ordered via phone
– Invoices are submitted to multiple points of contact and are
often lost
– Some are paid for on expense reports
– Often expenses are not taken into account
– Any employee can order whatever they want
– Little to no oversight or approval for who can order what
Reengineering Homework
3
Supply Order Process:
Brief Functional Description (IS)
Some of the problems with current process:
–
–
–
–
–
–
–
–
–
Visibility into total spend is virtually non-existent
Total spend by supplier is not captured
Aggregated savings opportunities are foregone
No control over where or how many vendor invoices are
outstanding
Quarterly financial closings are challenging
Lack of transparency in ordering process
No checks and balances with current system: 1 person
requests, approves, and authorizes payment for purchases
Purchase records are frequently lost or otherwise not
accounted for
Payments and defective goods claims are frequent and
distracting to the organization
Reengineering Homework
4
Supply Order Process:
PROCESS Constituents (IS)
Purchasing
Process
STRUCTURE
HUMAN
INFO
TOOLS
Company
Individual departments (IT,
Sales)
Receiving
Finance
Accounts Payable
Company
Employee/Buyer
Admin/Secretary
Receiving Employee
Finance Employee
A/P Employee
Supply lists
Purchase Orders
Invoices
Expense Reports
Supply catalogs
Phone
Fax
Desktop PC
Invoicing Software
Bar Code Scanner
Delivery Trucks
Supplier
Order processing
Shipping
Accounts Receivable
Supplier
Order Processing
Employee
Shipping Employee
A/R Employee
Reengineering Homework
5
Supply Order Process:
Relationship Map (IS)
Company
Department
Invoice
Supplier
New
Order
Order
Fulfillment
Invoice
Order
Processing
Illogical steps
• Doesn’t make sense for supplier
to send invoice to customer in
functional area if it’s really just
going to go to Finance anyway
Missing steps
• No central ordering standard
Shipping
• No preferred supplier standards
• No spending limit standards
• No check to correct contact for
invoicing
Finance
AC/
Payable
Payment
AC/
Receivable
Invoice
• No check for outstanding
invoices
• No check for total spend
Extraneous steps
• Customer in function sending
invoice to Finance
Reengineering Homework
6
Process “Red Flags”:
Admin Assistant
Start
Select Items to
Order and
Preferred
Supplier
Supplier
1. No authorization required to order an item of any
cost
2. Invoice can go to a different person each time
ordered, depending on supplier or relationship with
supplier.
3. Invoices can get lost.
4. Invoice can be paid for in various ways.
Receive
Order
Did
employee
expense
this?
Yes
Pay
invoice
No
Locate Items
in Catalog
Send
Invoice to
AC Payable
Generate
Order
Accounts Payable
Company X
Employee
Supply Order Process:
Process Map (IS)
Receive
Invoice
Receive
Invoice
Start
Receive
Order
Process
and Ship
Order
Invoice
Accounts
Payable?
Pay
Invoice
Invoice
Ship-to
Party?
Reengineering Homework
Invoice
ordering
party
End
Receive
payment
End
7
Supply Order Process:
Functional Narrative (SHOULD)
Functional Specification
List in a series of bullet points WHAT the To-Be system will do (its
functionality)
Following is the breakdown of steps that the new system will implement:
•
•
•
•
Selecting suppliers and ordering- the new system will store
information in a format that makes comparing products easy
Purchase order approval – The system will ensure nothing is ordered
without the right people knowing it.
Delivery- Purchase order will be delivered to vendors through preferred
delivery method.
Billing- The system should match invoice to orders and handle ebilling.
Reengineering Homework
8
Supply Order Process:
Behavior Narrative (SHOULD)
List the process steps in your new design
– Once the user need has been recognized, the system will check if
an approved supplier has already been entered into the database.
– If it’s a small dollar amount the system will allow the user to make
the purchase. But when the dollar amount exceeds the permissible
value to generate a purchase order, it goes through an approval
process.
– Employee requests admin/secretary to order supplies
– Admin/secretary locates supplies in a browser catalog
– Supplies are ordered online
– Invoices/E-receipts are sent to the AC/payable section, once the
supplies are delivered.
Reengineering Homework
9
Supply Order Process:
PROCESS Constituents (SHOULD)
List/describe the major changes that will implement your redesign in terms of:
- Human- The roles of employees are more defined now. Earlier invoicing was
being handled by multiple departments, but now it goes directly to AC/Payable
section
- Organization- It’s purchasing process is more structured now. There is a proper
approval procedure by departmental heads before making purchases. The overall
operational efficiency has vastly improved.
- Information – Since all the purchasing documents are electronic now, there are no
chances of lost invoices. Moreover, there is better information management in
terms of transactions history, supplier records etc.
- Tools (software hardware systems, etc.)- All purchasing is done through an
electronic-purchasing software tool. Some features include –
• Access online receipts and view receipt history.
• Track the entire cycle of purchasing.
• Receive supplier notification.
Reengineering Homework
10
Supply Order Process:
Key Principles of Reengineering with
Narrative on How and Where Used
•
List the key reengineering principles (e.g., Hammer, Davenport) that you use in
your redesign and where and how they are employed.
Following are the key reengineering principles that are employed:
1. Organize around outcomes, not tasks – Instead of the invoice going to
different sections and ultimately to the finance section, its better to let the supplier
send the invoice to the concerned AC/payable directly
2. Treat geographically dispersed resources as though they were
centralizedThe new system provide a single repository for employees across the organization
to order supplies. By centralizing information from multiple suppliers into a single
repository, the system makes it easier for the employees to find the best deal on
supplies.
Reengineering Homework
11
Key reengineering principles Continued
3 Put the decision point where the work is performed, and build control into
the process.
The system will give the organization more control over its spend. By making the
interface easy-to-use and allowing searching multiple vendors simultaneously, the
organization will reduce undesirable spending and can effectively utilise its buying
power.
Reengineering Homework
12
Conceptual Data Model (1)
Provide an E-R diagram showing the major information entities that are impacted/used by
your process and the relationships between the entities.
PURCHASE_ORDER
PAYABLE_INVOICE
Processing_ Location_Code
Vendor_Invoice_No
Invoice_Date
Net_Amount
Freight_Charges
VENDOR
[1]
Requisition _Department_No.
Purchase_Order_No.
Purchase_Order_Date
Purchase_Order_Type
Purchase_Order_Total_amount
Status_Code
[1,M]
[1]
PURCHASE_ORDER_STATUS
Status_Code
Status_Description
[1]
Vendor_Number
Vendor_Name
Employee_ID
Contact_Established_Date
Telephone_NO
Fax
[1,M]
SHIPPING_ADDRESS
VENDOR_ADDRESS
Purchase_Order_Number
Requistion_Dept_No
Organization_Name
Address Line 1
Address Line2
Address Line 1
Address Line 2
City
State
Postal_Code
Reengineering Homework
13
Conceptual Data Model (2)
Show the normalized data tables with the data items that are needed to implement the
conceptual model in the previous slide. Hint: think about the data elements that would need
to enter, to read (management reporting), audit, and analyze.
REQUISITION
DEPARTMENT TABLE
PURCHASE ORDER TABLE
Order_no. Order_Date Order_Type
DEPT_ID STATUS_DESC STATUS_CODE
1002
289
08-16-2014 Office supply
Awaiting
Approval
XXO
INVOICE TABLE
Invoice_No
3034
Invoice_date
09-12-2014
Amount
980
Reengineering Homework
14
Supply Order Process:
Rummler Matrix: Organizational Goals
• List the broad organizational goals that are relevant to the
process redesign
Some organizational goals.
 Centralized data and information management
 Savings in terms of cost and time
 Better relationships with suppliers
 Control of organizational spending
 Customer needs will be give more priority
 Increased quality control
 Better employee morale
Reengineering Homework
15
Supply Order Process:
Rummler Matrix: Process Goals
• List the process goals making clear which organizational goals
they support.
o An elimination of paperwork.
o A reduction in the time between placing the order and the
release and receipt of an order
o Improved communication both within the company and with
suppliers
o A reduction in errors
o Lower overhead costs in the purchasing area
o Less time is spent on processing of purchase orders and
invoices, and more time on strategic purchasing activities
Reengineering Homework
16
Supply Order Process:
Process Map (SHOULD)
Employee
C
o
m
p
a
n
y
x
start
Admin
Approval
Personnel
Select items
To order and
Preferred
supplier
Browse
online
catalog
Receive
order
Order
Supplies
Approve
Supplier
Accounts Payable
s
u
p
p
li
e
r
start
Send e-copy of
Purchase
order
Receive
invoice
Receive
Order
Process and
Ship order
Invoice
Accounts
payable
Reengineering Homework
Pay
Invoice
Receive
Payment
End
End
17
Supply Order Process:
Rummler Matrix: Relationship Map
Provide the To-Be Relationship map (update slide 6)
Company
Department
Supplier
New order
Order
Fulfillment
Ac/Payable
Payment
Order
Processing
Shipping
AC/Receivable
Invoice
Reengineering Homework
18
Supply Order Process:
Process Map with Task Sub-Goals
Repeat process map showing the task/activity sub-goals that are needed to realize
Employee
C
o
m
p
a
n
y
x
the overall process
goals.
Select items
start
Browse
online
catalog
Admin
Approval
Personnel
Receive
order
To order and
Preferred
supplier
Evaluate
Suppliers
Order
Supplies
Approve
Supplier
Match
Purchase
order and invoice
Bid and
Negotiation
Accounts Payable
s
u
p
p
li
e
r
start
Receive
invoice
Receive
Order
Update
record
Send e-copy of
Purchase
order
Process and
Ship order
Invoice
Accounts
payable
Reengineering Homework
Pay
Invoice
Receive
Payment
End
End
19
Functional Goal Summary
Relate process activity goals to functional department goals
(See Table 5.2 in Rummler 2nd Ed, or Table 4.2 in 3rd Ed)
Earlier for all functional departments, preparing and
managing the proper purchasing documents had been a
time-consuming process. Now, all functional departments,
be it IT, Sales, Finance etc. with the help of Electronic
purchasing tool have streamlined the document flow process
to reduce the paperwork and handling required for each
purchase.
All functional departments are E-purchasing tool to manage
the flow of documents by:
(1)Automating the document generation process and
(2)Electronically transmitting purchase documents to
suppliers.
Reengineering Homework
20
Job/Responsibility Matrix
What are the goals and who performs each process step/sub-step
within a department?
Function
Responsibilities
1. Identify office supply needs,
create requisitions, manage
requisitions
1. Any Employee from IT,
Marketing or Sales
department
2. Browse through online catalog 2. Admin of the concerned
and order submission
department
3. Supplier and Order Approval,
view expense life cycle
3. Department Head/manager
4. Invoicing and Payment
4. AC/Payable Staff
Reengineering Homework
21
Job Model (Design)
Show a job model for ONE role in the To-Be process.
(See Rummler Table 9.3 OR Table 12.6 in Rummler.)
Sales Department
Outputs
Soliciting growth
Business Manager
Goals
Outputs
Critical dimensions
adjusts selling
price by supply
and demand
Maintain sales
Measures
Increase market presence
Goals
Determine gross
volume
develops annual
sales quota
profit plans
strategies
Reengineering Homework
22
Supply Order Process:
Costs & Benefits
Note: Dollar figures are not required
LIST:
LIST:
1. Initial investment - Cost of
implementation of the software(IBM
kenexa) and servers-
2.
•
•
•
•
Operational cost –
Cost for license extension
Software support
Software upgrade
User training
Tangible Benefits
-
•
•
•
•
19.2 % growth in income over a period
of 12 months.
Twice employee engagement
Intangible BenefitsIt has substantially improved
operational efficiency
Employee Morale has increased.
It saves a lot of time.
Higher productivity
Reengineering Homework
23
Supply Order Process:
Other Processes Impacted…
•
Describe interactions of the designed process with other processes in
the organization.
The system works in integration with accounting, inventory management,
and manufacturing systems for processing its purchase orders:
1. Accounting- It retrieves supplier payment information, tax information,
from the Accounts Payable system.
2. Distribution- This involves the exchange of information that concerns
inventory items. Some of these distribution systems include Sales
Management, Sales Analysis and forecasting, planning requirements
3. Manufacturing- It interacts with manufacturing systems to help process
product costs and availability.
Reengineering Homework
24
Supply Order Process:
Evolution of the System…
•
Describe how the designed process could be developed further in the
future.
Measure Supplier Performance
Supplier performance measurement is an important part of purchasing
cycle. The system could be further evolved by incorporating an ability to
identify the best suppliers and to track their performance.
With the help of an evaluation system, the company will have the required
performance coefficients that will greatly benefit its decision making.
Reengineering Homework
25