Process Management through

ERP, RM, SOA

Sangeeta Shah Bharadwaj
Are ERPs Process Oriented or
functional?
A business process oriented implementation
approach is required for functionally
developed ERPs

ERPs have configurable modules

All modules necessary to support an entire
business process must be implemented
RMs vs ERP vs SOA
Best practice process definitions

Automation of best practices

Flexible business Processes



ERP Processes: Production Unit
A basic fulfillment Process

Production Process

Procurement Process
Sufficie
nt
Finishe
d
Goods?
Receive
Custom
er
Inquiry
Create
& Send
Quotati
on
Receive
Customer
Purchase
Order
Creat
e
Sales
Order
Prepare
Shipmen
t (Pick &
Pack)
Send
Shipme
nt
(Ship)
Create
& Send
Invoice
Recei
ve
Payme
nt
Go
Warehouse
Sales Accounting
No

A fulfillment Process

Request
Production
Authorize
Production
Sufficien
t Raw
Materials
?
G
o
Issue Raw
Material
Create
Produc
ts
Receive
Finished
Goods
Warehouse
Warehouse Warehouse Production Production
No

Production Process

Create
Requisition
Create &
Send
Purchase
Order
Receive
Shipment
Send
Payment
Receive
Invoice
Warehouse Purchasing Warehouse
Accounting
Continue
in Parallel

Procurement Process

Sufficie
nt
Finishe
d
Goods?
Receive
Custom
er
Inquiry
Create
& Send
Quotati
on
Receive
Customer
Purchase
Order
Creat
e
Sales
Order
Prepare
Shipmen
t (Pick &
Pack)
Send
Shipme
nt
(Ship)
Create
& Send
Invoice
Recei
ve
Payme
nt
Request
Producti
on
Go
Authorize
Production
Sufficient
Raw
Materials
?
Go
Issue
Raw
Mater
ial
Create
Products
Receive
Finished
Goods
STOP
STOP
Create
Requisition
Create &
Send
Purchase
Order
Receive
Shipment
Send
Payment
Receive
Invoice
Warehouse Purchasing Warehouse Accounting
Warehouse Warehouse Warehouse Production Production
Warehouse Sales Accounting
No
No
Procure Goods
Continue
in
Parallel
Procure Raw
Material
Integrated, end-to-end process
ERP : The traditional Path to process
Execution
What are good aspects?

Automation to execute a specific process
Best practices implementation
Pre defined business processes
What are the challenges with ERP
processes?
??



Difficult to change the processes
Customization is very costly
How do you incorporate changes?
Either not able to incorporate changes or
Integration of add on software through
predefined interfaces

Is this sufficient?

Yes for many scenarios
No if processes are critical to achieve competitive
advantage
SOA: New Flexibility in Process
Execution
Enable separation of business process design
and support through appropriate software
application/ component called services.
Enables execution of next practice business
process
SOA a perfect fit for achieving goals of Agility
and innovation.
Promotes reuse of services
SOA will be discussed in detail later
Other process best practices and
Implementation
Does any such practice/ standard exist?



Process definition delivered through standards
Reference Models
APSQ :American Productivity & Quality Center
Process Classification Framework
SM


Reference Models
A process reference model is a powerful
management tool
Process knowledge is formalized and structured
and is a step towards making it a product
a complex management process is captured in
standard process reference model form
It is then easy to measure, manage, and
controlled
It can also be tuned and re-tuned to achieve a
specific purpose or attain a competitive
advantage
How to obtain RMs?
Software Companies: SAP documented business
processes in the form of event driven process
chains
ERP companies are Key drivers in the development of
RM
Consulting companies also structure their
knowledge in the form of RM to increase their
own productivity
PMOLink sells RM as product, RM for Project
Management based on PMBOK
How to obtain RMs?
Industry organization also deliver knowledge
in the form of RM
Supply Chain Council offers Supply Chain
Operations Reference Model (SCOR)
Academic Organization also deliver RM
Scheers Y Model
Beckers Retail H
SCOR Example
SCOR is a business process reference model
that has all supply chain activities, from
suppliers supplier to customers customer
The structural framework of the SCOR
model
standard descriptions of the individual elements
that make up the supply chain processes,
standard definitions of key performance
measurements,
descriptions of best practices associated with
each of the process elements,
identification of software functionality (features)
that enables best practices
identification of information exchanged between
processes.
Supplier
Plan
Customer
Customers
Customer
Suppliers
Supplier
Make Deliver Source Make Deliver Make Source Deliver Source Deliver
Internal or External Internal or External
YOUR COMPANY
Source
Supply Chain Operations Reference Model
Plan Plan Plan Plan
Return
SCOR defines supply chain as the integrated processes of Plan, Source, Make,
Deliver and Return, spanning your suppliers supplier to your customers customer,
aligned with Operational Strategy, Material, Work & Information Flows.
The SCOR Framework
Supply Chain Reference Models (SCOR)
All customer interactions, from order entry
through paid invoice.
All product (physical goods, services, etc.)
transactions, including equipment, supplies,
spare parts, bulk product, software, etc.
All market interaction, from the understanding
of the aggregate demand to the fulfillment of
each order.
SCOR contains three levels of process detail.
The top level (process types) defines the scope
and content. It consists of the five top-level
processes:
Plan
Source
Make
Deliver
Return

The second level of SCOR, the configuration level
(process categories), contains more than 30
process categories
such as make to stock, make to order,
engineer to order, or production execution.

These process categories can be used to
configure a companys supply chain

Companies implement their operations strategy
through the configuration they choose for their
supply chain.
Plan
P1-Plan supply chain

P2-Plan Source

P3-Plan Make

P4-Plan Deliver

P5-Plan Return
Source
S1-Source stocked product

S2-Source make-to-order products

S3-Source Engineer-to-order products
Make
M1-Make-to-stock

M2-Make-to-order

M3-Engineer-to-order
Deliver
D1-Deliver-stocked product

D2-Deliver Make-to-order

D3-Deliver Engineer-to-order
Return
DR1-Deliver Return Defective product
DR2-DR MRO Product (maintenance repair
overall product)
DR3-DR Excess Product


SR1-Source Return Defective product
SR2-SR MRO Product
SR3-SR Excess Product
The third SCOR level, the process element level
(decomposed processes), is used to fine tune the
operations of a company. It consists of the
following:
Process element definitions
Process element information inputs and outputs
Process performance metrics
Best practices
System capabilities necessary to support best
practices
Systems/ tools to be used
S3 Source Engineer-to-Order
Schedule product
deliveries
Receive
product
Verify
product
Transfer
product
Authorize
support
payment
European
RM Supplier
Key Other
RM Supplier
S2
S1
M2
M1
D2
D1
S2
S1
M1 D1 S1 D1 S1
RM Suppliers
ALPHA
Alpha Regional
Warehouse
Customer
A SCOR thread diagram of a simple supply chain process
Performance
Attribute
Performance Attribute Definition Level 1 Metric
Supply Chain
Delivery
Reliability
The performance of the supply chain
in delivering: the correct product , to
the correct place, at the correct time,
in the correct condition and
packaging, in the correct quantity,
with the correct documentation, to
the correct customer.
Delivery Performance
Fill Rates
Perfect Order
Fulfillment
Supply Chain
Responsiveness
The velocity at which a supply chain
provides products to the customer.
Order Fulfillment Lead
Times
Supply Chain
Flexibility
The agility of a supply chain in
responding to marketplace changes
to gain or maintain competitive
advantage.
Supply Chain Response
Time
Production Flexibility
C
u
s
t
o
m
e
r

F
a
c
i
n
g

A
t
t
r
i
b
u
t
e
s

SCOR performance attributes and Level 1 metrics
Supply Chain
Costs
The costs associated with
operating the supply chain.
Cost of Goods Sold
Total Supply Chain
Management Costs
Value Added
Productivity
Warranty/ Returns
Processing Costs
Supply Chain
Asset
Management
Efficiency
The effectiveness of an
organization in managing assets
to support demand satisfaction.
This includes the management
of all assets: fixed and working
capital.
Cash-to-Cash Cycle Time
Inventory Days of Supply
Asset turns
I
n
t
e
r
n
a
l

F
a
c
i
n
g

A
t
t
r
i
b
u
t
e
s

SCOR performance attributes and Level 1
metrics
Companies implement their supply chain
solution on level 4 (or even more detailed
levels)

Level four, or the implementation level
(decomposed sub process), defines practices
to achieve competitive advantage and to
adapt to changing business conditions

This level is company specific and not in the
scope of SCOR
APSQ :American Productivity &
Quality Center

APQC : Who are they?
APQC is a member-based, non-profit organization
Founded in 1977
Started with donations from 100 corporations
Non-profit, tax-exempt 501(c)(3)
Serves more than 500 organizations around the
world

32-year reputation founded on integrity and the
support of rapid innovation through
Process improvement and
measurement
Best practice research and
implementation
Knowledge capture, transfer, and
reuse

Why do Organizations use APQCs
Process Classification Framework
define the processes that need to be improved,
benchmark internally and with other organizations,
organize improvement efforts,
align IT rollouts and updates for similar processes
across the organization,
discuss organizational performance using the same
terminology across business units and departments,
better understand how their business works, and
organize enterprise content and knowledge.

PROCESS CLASSIFICATION FRAMEWORK : 12
enterprise level categories
1. Develop Vision and Strategy
2. Design and Manage Products and Services
3. Market and Sell Products and Services
4. Deliver Products and Services
5. Manage Customer Service
6. Develop and Manage Human Capital
7. Manage Information Technology
8. Manage Financial Resources
9. Acquire, Construct, and Manage Property
10. Manage Environmental Health and Safety
11. Manage External Relationships
12. Manage Knowledge, Improvement, and Change
Understanding the Numbering
INTERPRETING THE PCF
Category: The highest level within the PCF is indicated by whole
numbers (e.g., 8.0 and 9.0)
Process Group: Items with one decimal numbering (e.g., 8.1
and 9.1)
are considered a process group.
Process: Items with two decimal numberings (e.g., 8.1.1 and
9.1.2)
are considered processes.
Activity: Items with three decimal numbering (e.g. 8.3.1.1 and
9.1.1.1)
are considered activities within a process
One Example
1.0 Develop Vision and Strategy (10002)
1.1 Define the business concept and long-term
vision (10014)
1.1.1 Assess the external environment (10017)
1.1.1.1 Analyze and evaluate competition (10021)
1.1.1.2 Identify economic trends (10022)
1.1.1.3 Identify political and regulatory issues (10023)
1.1.1.4 Assess new technology innovations (10024)
1.1.1.5 Analyze demographics (10025)
1.1.1.6 Identify social and cultural changes (10026)
1.1.1.7 Identify ecological concerns (10027)