Ilovepdf Merged

Kingdom of Saudi Arabia
Ministry of Higher Education

Al-Imam Muhammad Ibn Saud Islamic University
College of Computer and Information Sciences
Chapter 1
Introduction to
Enterprise Resource Planning Systems
IS 395: Enterprise Resource Planning
Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

ERP Background
• Introduction of PC led to narrowly focused

information systems
• Duplicate data across the enterprise not shared
between departments
• Mid – late 1990’s many large companies
implemented Enterprise Resource Planning
(ERP) which would integrate the data across the
enterprise and replace outdated systems (legacy
systems).
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Legacy Systems:
The case for not changing
• The system works fine and the company sees no reason for changing it.
• The costs of redesigning or replacing the system are prohibitive because it
is large, monolithic, and/or complex.
• Retraining on a new system would be costly in lost time and money,
compared to the anticipated appreciable benefits of replacing it (which may
be zero).
• The system requires near-constant availability, so it cannot be taken out of
service, and the cost of designing a new system with a similar availability
level is high. Examples include systems to handle customers' accounts in
banks, computer reservation systems, air traffic control, energy distribution
(power grids), nuclear power plants, military defense installations, etc.
• The way that the system works is not well understood. Such a situation can
occur when the designers of the system have left the organization, and the
system has either not been fully documented or documentation has been
lost.

What is ERP?
• An ERP system is an integrated suite of

information technology applications that support
the operations of an enterprise from a process
perspective.
• Cross-Functional – serves many functions
• Process-Centered – organized around processes
• Built upon relational database systems
• There is one data store, one source of the truth
• Sold in modules
• Don’t need to purchase/implement all modules
• More modules implemented leads to more integration and ROI
• Can cost millions of dollars and take years to implement (for larger
companies – less for smaller – cloud makes faster)

ERP-Supported Business Processes
* Core ERP Processes

Typical Modules in an ERP System
Operations (Core)
· Engineering · Bills of Material · Scheduling
· Capacity · Process Manu. · Quality Control
· Cost Management · Discrete Manu. · Shop Floor Mgmt.
· Inventory · Order Entry · Purchasing
· Product Configuration · Supply Chain Planning · Supplier Scheduling
· Quality Control · Demand Management · Sourcing
Financials (Core)
· General Ledger · Cash Management · Accounts Payable
· Accounts Receivable · Fixed Assets · Controlling
Projects
· Project Costing · Project Billing · Time and Expense
· Activity Management · Resource Availability · Project Contracts
Human Resources (Core)

· Human Resources · Payroll · Training
· Time & Attendance · Benefits · Recruiting
Customer Relationship Management

· Sales and Marketing · Commissions · Service
· Customer Contact · Call Center Support · Analytics
Plus: Various Self-Service Interfaces for Customers, Suppliers, and Employees

Who Uses/Needs to know about ERP?
1. End User
• Purchasing
• Manufacturing
• Sales
• Accounting/Finance
• Human Resources
• etc
2. Internal/external auditor
• Verify that the ERP system is secure and maintains privacy over
individuals. Also has proper segregation of duties (SoD).
3. Consultant (big 4)
• Assist in implementation and or maintenance of ERP systems
4. Developers
• Customize the system

ERP Value – Integration
 The value of ERP is the opportunity to integrate an

entire organization by having a single point of entry and
sharing of data across the enterprise.
• ERP becomes the authoritative data source: a
recognized or official data production source with a
designated mission statement to publish reliable and
accurate data for subsequent use by users.
 Creates less need to reconcile data and rekey which
causes inefficiencies and delays
 Inefficient business processes that were disjointed
become much more efficient.

Before and After ERP
•Legacy systems (islands of automation) may be connected with

enterprise application integration (EAI) - the process of linking such
applications within a single organization together in order to simplify and
automate business processes to the greatest extent possible, while at
the same time avoiding having to make sweeping changes to the
existing applications or data structures. Not as optimal as having an
integrated system, common database, and common technical
infrastructure.

ERP Diffuses Best Practices
• ERP systems are based on best practices

• For instance, SAP has thousands of best practices
embedded in their applications.
• This means that any firm that installs has access to a wide range of best
practices.
• Further, business practices are being added all of the
time. As new best practices are found and embedded in
particular applications, they can become available for
inclusion in new versions of software.
• As a result, there is a cycle of finding best practices,
building them into the software and diffusing them out to
new users.
• Vertical solutions – industry specific version of software

ERP Facilitated Adoption of Client Server
Computing
• In the early 1990’s ,client server computing became available and
offered many advantages over existing mainframe solutions.
• Client/server describes the relationship between two computer
programs in which one program, the client, makes a service request
from another program, the server, which fulfills the request.
• ERP became one of the dominant, initial corporate applications of
client server computing.

Technical ERP System Benefits
• Integrated processes and information systems

• More effective and efficient business processes
• Enables organizational standardization
• Eliminates information asymmetries
• Provides on-line and real-time information
• Facilitates intra- and inter-organization communication
and collaboration
• Can reduce complexity of application and technology
portfolios

ERP System Benefits
• Integrate financials
• Have one view of the customer
• Standardize manufacturing processes
• Reduce inventory/better visibility into inventory
• Standardize information such as HR and Customer
data
there are others……depends on company

ERP System Disadvantages
• Standardized way of conducting business can be a
disadvantage too because levels the playing field
somewhat between companies
• Lack of employee/user acceptance
• Complex solution
• Maintenance of hardware and software
• Costly and time consuming implementations

Implementation Issues
• Employee resistance
• They develop “work arounds”
• Sabotage implementation process
• Caused by lack of training (“how”) or understanding of
organization’s motivation for adoption (“why”)
• Need Change Management to lower resistance
• Technical Issues
• Complex system to implement – configuration issues and possible
customization issues
• Sometimes need expensive external consultants to assist
implementation

ERP Evolution
• Roots are in Manufacturing Requirements Planning
(MRP) & Manufacturing Resource Planning (MRP II)
• Addressed needs of just the manufacturing environment – ERP
manages resources for entire enterprise
• With Y2K looming, companies began implemented new
state of the art systems (ERP) that ran on client server
technology
• Now many companies outsource called Software as a
Service (SaaS)
• Multi-tenancy – serve many clients from a single instance via the
Internet
• Open Source ERP systems are evolving – where’s the
help desk though!?

ERP Evolution
Modern ERP:SELECT, IMPLEMENT & USE TODAY’S

ADVANCED BUSINESS SYSTEMS
ERP Market
• Billion dollar industry and growing
• 10% growth rate through 2012
• Growth drivers
• Globalization
• Centralization
• Competition
• Best practices etc
Figure 1-2: ERP Application Revenue Estimate 2007-2012 in Billions
Source: AMR research

ERP Tiers
• Tier 1 Vendor – “Enterprise Space” - multi-site, multi-national
corporations, government entities with 1000 or more employees
• #1 SAP
• Stands for Systems, Applications and Products in Data processing
• Formed by 5 former IBM engineers in 1972 in Walldorf Germany
• SAP AG, SAG UK, SAP North America etc
• Nearly 200,000 customers, over 50,000 employees
• Service over 20 different industries
• #2 Oracle
• More than 380,000 customers—including 100 of the Fortune 100—
and with deployments across a wide variety of industries in more
than 145 countries around the globe,
• In 2003 acquired PeopleSoft, Hyperion and Siebel

ERP Tiers
• Tier 2 Vendors
• Market towards medium sized companies, few sites, 100-999 employees
• Largest of all ERP tiers in number of potential customers
• Tier 1 vendors moving into this area and below by reducing prices and
simplifying product
• Some vendors – QAD and SSA
• Tier 3 Vendors
• Market towards small, single site, family run corporations, sales under $40
million and less than 100 employees
• Vendors – Microsoft Dynamics GP, NetSuite, Made-2-Manage, SAP
Business by Design, SAP Business All in One
• Tier 4 Vendors
• Market towards small companies that can manage with basic accounting
software
• Vendors – Peachtree, Accpac, Quickbooks, SAP Business One, SAP
Business by Design

Characteristics of ERP vendor Tiers
Tier 1 Tier 2 Tier 3
High complexity Medium complexity Limited functionality
Highest cost of Medium cost of Lower cost of ownership

ownership ownership
Many industry solutions Fewer industry solutions Fewest industry
solutions
Large companies Mid-market companies Small to mid-sized
companies
Global functionality Global functionality Few locations
Source: Ultra consultants

Sample ERP vendors

An Enterprise System - Reality
In reality, an ERP implementation is usually just one part of a more

complex environment, including bolt-ons, legacy applications retained,
possible data warehouse(s), enterprise application integration (EAI)
solutions and connections to external business partners.

Chapter 2: ERP Technology


Objectives
• Understand the three-tiered client server architecture.
• Be familiar with relational databases and related terms
• Identify the different types of database relationships and
examples of each
• Distinguish between customization and configuration of
ERP software
Introduction
• ERP huge impact on organization, customers, suppliers,
and partners.
• Most important requirement: ERP must be available to
users and properly functioning without unscheduled
service outages.
• Issues:
• Sophisticated and flexible software running on multiple distributed
servers.
• Frequent upgrades, patches and fixes
• Configuration changes
• Server maintenance
• Interface between systems
• Understanding the technology of ERP is critical
EVOLUTION OF
INFORMATION SYSTEMS
The problem with Legacy systems
• Older information systems that do not easily “talk” to each
other.
• Lack of integration created inefficiencies in the
organization such as duplicate data entry and
fragmentation of business processes.
• Legacy systems were built on mainframe architecture
which means that all computing intelligence is within
central host computer.
• User connected via terminals that captured keystrokes
and send it to host computer.
File server architecture using LAN
• Late 80’s , Local area network(LAN) helped in sharing file
among computers in close proximity.
• Files were stored on File Server.
• PCs performed computational jobs.
• Problems : Limit for amount of data ; Solution for limited
number of users.
• Solution not scalable.
Client Server Architecture
• Two-tier architecture.
• Database server
• Client : Provides GUI and business logic for application
• Problem:
• Each client need dedicated connection to database server resulting
in limited number of clients;
• Business logic running on every client computer problems. (e.g.
loan)
File sharing vs
Database server
Results
• Presentation logic is the software logic that displays data to the user and
accepts input from the user.
• Business logic specifies how business transactions are processed and
what data needs to be accessed from the data storage device.
• Data access logic refers to the communication with the database, which is
responsible for data storage and retrieval on the physical storage device.
• Option 1: Fat Client handles presentation logic and business logic.
• Option 2: Thin client handles only presentation logic.
Client-Server
▪ It is service-oriented, and employs a
request-response protocol.
uses a set of rules to send
and receive messages at
the Internet address level
Transmission Control Protocol
TCP/IP
Internet services include HTTP, FTP, DNS
Client-Server
1. in a client-server system architecture,
the terms clients and servers refer to
computers (e.g., relational database
management system--DBMS)
2. in a client-server distributed
computing paradigm, the terms clients
and servers refer to processes.
Three-tier architecture
• 1990’s client server, three-

tier
• Offers better security,
maintenance easier
• Good scaling capability
Figure 2-1: Three-Tier Architecture

Three-tier architecture
• Tier 1: the client contains the presentation logic, including
simple control and user input validation. This application
is also known as a thin client.
• Tier 2: the middle tier is also known as the application
server, which provides the business processes logic and
the data access.
• Tier 3: the data server provides the business data.
http://www.linuxjournal.com/article/3508
PRESENTATION tier: ERP Interface
• With ERP software, the GUI can take the form of a

dashboard customized to suit the needs and preferences
of a set of users or a specific user.
• Can include:
• Business process activity based on production or logistics
information.
• Tasks, reminders and other notifications.
• Calendaring and scheduling resources.
• Messaging including email, instant messaging and
telephone traffic.
• Official communications from designated sources.
SAS Portal
Source: SAS Institute, Inc.

Figure 2-2: SAS Institute Dashboard
Application tier: Back Office/Front Office
• Back-office software (Core ERP) –HR,

Financials, and Operations
• Front-office software integrates with
customers and suppliers – supply chain
management and customer relationship
management
• Bolt-ons are used to integrate more
functionality to Core ERP (e.g. Order Tracking, DM)
Figure 2 -3: Core ERP and ERP Bolt-Ons
Databases Tier: Relational Database Terminology
• Tables are relations

• Tables and forms (visuals of tables) show up on screens in ERP menus.
• Fields are attributes in the table (in columns)
• Records are instances in the table (in rows)
• Each table has a primary key that is the unique.
• Usually the primary key is some sort of code.
• Can not be null or empty
• Entity integrity rule (e.g. part weight is greater than Zero)
• The primary key in one table becomes the foreign key in
another table so the tables can connect and querying can
take place.
• Referential integrity rule: foreign key must have a matching
primary key or it must be null
Entity-Relationship Diagram
• ERDs are a type of system diagramming that show

relationships between tables.
• Relationships are rules that show how tables relate to
one another.
• Types of relationships
• One-to-one: the primary key of one table is associated
with only one record in another table
• One-to-many: the primary key of one table is associated
with more than one record in another table
• Many-to-many: the primary key in one table is
associated with more than one record in a second table
and the primary key in the second table is associated
with more than one record in the first table
Relational Database Example
Figure 2-4: Relational Database Overview

Database Normalization
- Process of efficiently organizing data in
database
Objectives:
Eliminating redundant data (e.g. same name
in more than 1 table)
Ensuring data dependencies make sense
(e.g. storing related data)
Database Query and Manipulation
• A query is a question asked of the database. Again,

ERP systems have many standard queries coded
into the software in the form of menus. Menus can
be customized to add/change/delete queries.
• Structured Query Language (SQL) is a database
querying language
• Simple Query – returns a response without changing the
database
• Update Query – changes records in a database
• Data Manipulation – operations alter the database
• Inserting new rows into tables
• Updating existing rows
• Deleting rows from tables
Configure vs. Customize ERP
• Configuration involves “setting switches” during

implementation that determine how the system
will execute business processes.
• Example of configuring:
Reporting relationships,
Options having to do with how business
processes work,
Auditing mechanisms,
Organizational structure.
• Customization is changing software code.
• This is expensive and time consuming.
• Only do if necessary and believed to lead
to a competitive advantage.
• Don’t customize because you feel your
employees will resist a new way of
work….that is the point of ERP!
• Vanilla is not customizing the software.
• Best of Breed: selection of “mix and match”
modules from different ERP vendors
Chapter 3: ERP and Business Process

Reengineering (BRP)
The Process!
• One of the first people to
describe process was Adam
Smith who in 1776 describes
a new way for process in a
Scottish pin factory.
• He outlines the production
methods and created one of
the first objective and
measureable enterprise
process designs.
• The consequence of 'labour
division' in Smith’s example
resulted in the same number
of workers making 240 times
as many pins as they had
been before the introduction
of his innovation.
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Different organizational
structures possible due
to automation
See following webpage for

further details:
http://www.forbes.com/sites/jacobmorgan/2015/0
7/22/the-complete-guide-5-types-of-
organizational-structures-for-the-future-of-
work/#298a8ed32144
1. Hierarchical Organization
• Communication
• Innovation (-)
• Collaboration (-)
• Bureaucracy
• Employee experience
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2. Flatter Organization
• Communication
• Collaboration
• Employee experience
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3. Flat Organization
• No job titles,
• No seniority,
• No managers,
• No executives
• All are (=)
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4. Flatarchies
Combination of both
types of structures
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5. Holacratic Organization
• Several people without any job title who may have several
roles.
• Circles above others are responsible for setting direction,
priorities, and guidelines.
• Below executing them
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Modern world and corporate structures
• The funny image showing
corporate structures
• Microsoft has tons of
divisions that answer to
Satya Nadella(CEO) that
don't get along,
• Amazon is very traditionally
organized,
• Google had a ton of middle
mangers,
• Apple has an odd structure
that brings everything back
to the CEO,
• Facebook doesn't have a
real internal structure, and
• Oracle has a Legal
department that dwarfs its
actual business.
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http://sethgodin.typepad.com/seths_blog/2011/09/getting-serious-about-your-org-chart.html 10
Common Problems with
Business Process (1/4)
• Authority ambiguity: 2 or more provide
approval - ↑ cycle time of process
• Bottlenecks: limit performance, capacity of
entire system, stopping the process
• Cycle time: related to time consumed by
process. Performance as measurement
and focus on length of time of the process
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• Data duplication: variations of the same
data appear in multiple places.
• Handoffs: create mistakes,
miscommunication, and delay
• Intermediaries: unnecessary step
• Manual steps: create errors and need
more time
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• Old ways: no training for using tech and sys
• Paper records: storing data in e-form. Is the
new process is adding, maintaining, or
eliminating paper records.
• Quality control: do we need it? Prevention is
better than detection
• Rework: minimize spending time fixing errors.
Find the source of the error
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• Role ambiguity: lack of clarity about
expectations, norms, and behavior lead to
process of inefficiency
• Segregation of duties violations:
Activities to be segregated:
➢custody of assets,
➢Authorization of related transactions affecting
those assets,
➢Recording of related transactions
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Business Process Reengineering BPR
• Concept coined by Michael Hammer Reengineering the
Corporation…
• Business Process Reengineering (BPR) is the
fundamental, radical, redesign in business processes
to achieve dramatic improvements in key measures of
performance
such as cost, quality, speed, and service .
BPR (Business Process Reengineering)
Business Process Re-engineering or BPR is
the analysis and redesign of workflow and

processes within and between
Organizations
• The focus of BPR is not on how a process

is done, but WHY it is done
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What is a Business Process (BP)?
• BP is a collection of activities that takes one
or more kinds of input and creates an output
that is of value to customers
• Examples of BP:
• Issuance of a Driving License or Passport
• Registration of a Company
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Reengineering is not …….
• Automation of existing ineffective
processes
• Sophisticated computerization of
obsolete processes
• Playing with organization structures
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Symptoms of Poor Processes
1. Extensive information exchange, data
redundancy and re-keying
2. Too many Controls and Checks
3. Rework, Iteration & Duplication of work
4. Complexity
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Goals of BPR
1. Customer Friendliness
• Meeting customer requirements closely
• Providing convenience
2. Effectiveness
• Outcome-based approach
• Gaining loyalty of customers
• Image and branding
3. Efficiency
• Cost
• Time
• Effort
Things Right and Right Things
“Effectiveness is the
foundation of success –
efficiency is a minimum
condition for survival after
success has been achieved.
Efficiency is concerned with
doing things right.
Effectiveness is doing the
right things.” (p.45)
Drucker, Peter F. (1973)

Attributes of Customer-friendly Services
1. Simple 6. Responsive
2. Need-based 7. Customer-centric
3. Certainty(confidenc 8. Quality of Service
e) 9. Cost-effective
4. Speed
5. Convenience
• Place
• Time
• Channel
BPR and ERP
• ERP technology is a “disruptive technology” that
essentially forces companies to reengineer their business
processes in order to retain their competitiveness.
• ERP systems equal forced reengineering.
• ERP systems require organization to change their
processes to match best practices inherent in the
software.
• Doing so requires fundamental changes in the way
employees do their work, and the way companies interact
with their customers , suppliers and partners.
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Benefits of BPR
• Benefits
• Cost Reductions
• Improved Customer Satisfaction
• Improved Agility
• Increased Profitability and Reputation
Challenges of BPR
• Risks
• Resistance from employees
• Cost
• Job losses
• Tradition and culture
• Time requirements
• Lack of management support
• Risks to managers
• Retraining
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Types of Reengineering
• Clean Slate Reengineering
• Process design starts with a clean slate
• Also referred to as “starting from scratch”
• Theoretically, no limits
• Software must be made to fit the “needs” of the firm.
• Technology-Enabled Reengineering
• also called constrained reengineering or concurrent transformation
• A particular technology (or portfolio of technologies) is chosen as a
tool to facilitate reengineering
• The technology drives the reengineering
• First select system (vendor) then reengineer
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Clean Slate Reengineering (1/2)
Advantages:
• Not constrained by a particular tool.
• Not constrained to a limited set of processes; can develop
own processes.
• Evolution is not limited by a particular technology.
• Can result in unique processes (which gives a competitive

advantage)
• allows an org to develop innovative software that is not
available through existing ERP software
• Encourages a free flow of ideas
Clean Slate Reengineering (2/2)
Disadvantages:
 Costly
 Excess time and resources (makes it
difficult for smaller companies in an
industry to afford
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Technology-Enabled Reengineering (1/2)
Advantages:
• ERP provides the tool and structure to facilitate change
• Roadmaps lead to less time
• ERP bounds the design which eliminates difficult decisions

•
• Design is feasible and we know it works (it’s been proven)
• Less risk
• Designs likely can be implemented in a timely manner

because they are focused on specific processes
• Fewer overhead costs
Technology-Enabled Reengineering (2/2)
Disadvantage
 Constrained by a technology, evolution
limited by that technology, limited by
certain best practices in that technology
 Not unique – no competitive value perhaps

(which incidentally is why org. may
customize); other companies have access
to the design
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Business Process Reengineering Principles
(1/3)
• Have those who use the output of the process
perform the process
• Reduce or eliminate handoffs
• Empower workers (↑Q of P&S, ↑response time, ↓Mngt Level)
• Give employees information so they can make
decisions
• Treat geographically dispersed resources as
though they were centralized
• Centralized data through a common database
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(2/3)
• Link parallel activities of integrating their results
• Do not wait until the end of a process to merge results
• Organize around process not task or functional area
• Use ERP systems, technology, and best practices
• Use self-services so that employees and business
partners can access information and perform routine
tasks
• Move costs and accountability for work to the
beneficiary of the process and eliminate the need for
interaction with a company representative
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(3/3)
• Put decision point where the work is
performed and build controls into the
process
• Use automated controls in the process and
transfer responsibility for checking from
management to the workers
• Capture information once and at the
source
• Enter data one time where it originates and then
disperse it to those who need it
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Targets for Reengineering(Selecting a Process to
Reengineer (1/5)
Suitable targets for reengineering include:
• process as part of a core competency
• A core competency is a company’s process that
transforms generic inputs into uniquely
developed products or services that provide it
with a competitive advantage
• Key Performance Indicators - allow the company
to compare its performance to industry best
practices, this measuring process known as
benchmarking
Targets for Reengineering(Selecting a
Process to Reengineer (2/5)
• High Volume, Low Margin Activities:
• Include these characteristics:
• High revenue (not necessarily large profit)
• Efficient and controlled (↓profit margin need
efficiency)
• Capital intensive (fix assets: e.g automated equipment
processing) (inverntory cost↑ cos maintain production level)
• E.g. Manufacturing potato chips

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Process to Reengineer (3/5) - Defect
- Costly material
& labor wasted
• High Defect, High Reward Activities - Rework
• Quality Controls – reduce error rate, but can be costly

• BPR effort: make Quality Controls more cost
effective Balancing is a
challenge
Q impact Revenue &Expenses:
- defect (manufacturing, packaging, distribution)
- Inbound material flaws & receiving errors Customer
satisfaction
- Outbound shipping errors
- E.g. Toyota
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• High Skill, Time Intensive Activities
• BPR may seek one of two objectives:
1. Reengineer to empower the same people to
perform the job faster
2. Reengineer to allow lower paid workers to
perform the activity or part of the activity
e.g. Home mortgage ( many process for
approval)
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• High Complexity, Specialized Resource Activities

• “KISS” or “keep it simple stupid”
• BPR focus on replace complex activities with
more simpler ones.
• Process Built around Obsolete or Changing
Technology
• Upgrading systems to gain the advantages of BPR.
Lessons Learned through BPR(factor leading to BPR success)
• Low cost labor
• Scalability – (ability to change size or scale) both up and down
• Think outside the functional box – using BPR techniques to

connect silos
• Look at other companies for similar solutions to similar

processes
• Recognize that a process is just one aspect of success

•
• Deliver sooner rather than later – setting and meeting more
short-term goals
Chapter 4: Systems Diagramming and the

Process Map
Objectives of the chapter
• Identify purposes for system
documentations
• Recognize benefits of process maps
• Be familiar with process mapping
symbols
• Know the steps involved in mapping a
business process
Why system documentation?
• As information systems become more
“complex” it becomes increasingly difficult to
comprehend exactly
• what steps are involved in a process and
• what systems support a process.
Supplier, is an individual or company that sells goods or
services to someone else in the economic production chain.
Part of the supply chain
Network of all the individuals, organizations, resources, activities
and technology involved in the creation and sale of a product,
from the delivery of source materials from the supplier to the
manufacturer, through to its eventual delivery to the end user.
Parts manufacturers are vendors of parts to other
manufacturers that assemble the parts into something sold to
wholesalers or retailers
In IT, the term is commonly applied to suppliers of goods and
services to other companies.
• System documentation plays a significant
role in helping stakeholders gain an
understanding of IS
• System documentation includes various
documentation methods such as:
• narratives,
• checklists,
• questionnaires
• system diagrams
Systems Documentation
• Purposes for Systems Documentation

1. Describing business processes
2. Assessing internal control procedures
3. Evaluating, designing, or changing information
systems
• The focus of this chapter is on system
diagramming, perhaps the easiest
documentation technique to read and
understand because of its visual appeal.
• Systems Diagram – a
graphical representation of
systems and includes:
• Flowcharts
• ER Diagrams
• Other techniques
The focus of this
chapter is on method
called
Process map
Type of flowchart that derives from the
manufacturing industry
Importance of Systems Diagramming in
Business
• The graphical natures of SDs enables stakeholders to
gain an understanding of information systems and their
role in the processes.
• Problems with text only:
“A picture is
worth a
thousand
words”
Importance of Systems Diagramming in Business
• A recent study found that 72% of private and 82% of

public companies have increased emphasis on
reading or preparing systems documentation since the
passage of the Sarbanes-Oxley Act of 2002
• A 2006 research study
found that:
Is an act passed by U.S. Congress in 2002
• The ability to read systems to protect investors from the possibility of
diagrams was “very fraudulent accounting activities by
important” or “somewhat corporations.
important” – 77%
• The ability to prepare
systems diagrams was “very
important” or “somewhat
important” – 66%
• Internal controls minimize or reduce the possibility that inaccurate,
incomplete, or unauthorized information is entered into a system
A Popular SD method: Process Maps (1/3)
• A process map, also known as a cross-

functional flowchart, is used by many
organizations seeking to
• document,
• analyze,
• streamline, and
• redesign business activities
• In 1980s, General Electric sought to improve
their manufacturing processes and developed
the process map to assist their analysis.
A Popular SD method: Process Maps (2/3)
• Process map divides a process into a

series of steps and identifies the role, or
function, responsible for each step.
• A role can be an external entity, such as a

customer or vendor, or an internal entity
such as a customer service representative
or a payroll clerk.
• Process maps represent a snapshot in
time. They can provide macro view
perspective of organizational
processes as well as provide micro
view perspective by focusing on
smallest units of work.
Benefits of Process Maps (1/3)
• Defining the “as is” business process
and clarifying the changes necessary
to transform the present process into
the “to be” process
• Determining whether “as is”
measures of performance are
appropriate and potentially
developing new performance
measures to promote efficiency.
• Promoting awareness of employees’
responsibilities
• Showing the impact a certain role’s
performance has on upstream and
downstream activities in the process
• Highlighting workflow inefficiencies
such as delays, queuing times,
excessive handoffs and unproductive
utilization of resources.
• Identifying opportunities to streamline
and improve processes, thereby gaining
efficiencies.
• Pinpointing internal controls that need to
be tested during an audit
Process Map Symbols
• Activities (or events):

transform inputs into
outputs
• Decision points: yes/no
(positive/negative)
outcome that depicts the
alternatives
• Process flow lines:
connect symbols and are
labeled with the type of
information flowing into or
out of the activities
Process Map Symbols
• Data stores: support the

process
• Termination: points at
which the process ends
• On-page connector:
reduce clutter on a page
• Off-page connector: when
processes span multiple
pages
Gathering Information for a Process Map
• Group interview method – all people involved in the

process are interviewed as a group
• Employs a skilled facilitator to promote and focus the
discussions, questioning conventional wisdom and
providing an unbiased, objective point of view
• One-on-one interview method – each person

involved in the process is interviewed separately
• Less effective than the group interview method
• Walkthrough – physically reviewing a process in

scope
• To confirm if a documented process is accurately
reflecting current workflow
Guidelines to Developing a Process Map
• Have a defined purpose for mapping a process

and explain it to those participating
• Identify the scope of the process. The scope
should not be too broad.
• Determine the roles participating in the process
• Roles become horizontal bands called swim
lanes
• Determine the trigger, the event that must
occur to get the process started
• The trigger should be in the first swim lane
Guidelines to Developing a Process Map
• Events should move left to right/top to bottom to

indicate the passage of time
• The information being exchanged is entered on
the process flow lines
• Decision descriptors should end with a question
mark, and the process flow lines coming out of
the decision are labeled with outcomes(e.g.
yes/no)
• The last swim lane is reserved for the
information systems that support the process
Process Map Example 1
Excerpt from text book: Page no 54

Additional Hints for Constructing Process
Maps
• Make sure every area of the map contains approximately
the same amount of effort
• Start with a high level process map, and explode
activities into subsequent process maps that are more
detailed.
• Take notes while mapping and create a glossary of
acronyms
• Use humps when flow lines intersect on the process map
• Allow swim lanes to retain the same role throughout the
map even if the map spans multiple pages
• Terminate the process in the swim lane where the
process ends.
Advanced Process Map Example
Advanced Process Map Example
Exercise
In groups develop a draft process map

for one of the student registration
process
Process Problems/issues to Uncover (1/2)
• Handoffs – transferring of responsibility from one role to
another
• Provides the opportunity for mistakes, miscommunications, and
delay
• Bottlenecks – a number of process flows lead to a single
activity
• Limit the performance or capacity of the entire system, delaying or
completely stopping the process
• Rework – people spending time fixing errors or remediating
problems
• Role ambiguity – people not knowing what they are
responsible for and others do
• Eliminating confusion among the participants in the process
• Data duplication – flows that point to and from information
systems can be analyzed, to identify the extent to which the
necessary data and the activities that create or use the data
can be shared among the organization’s many processes
Process Problems/issues to Uncover (2/2)
• Cycle time – the time consumed during process flow from
start to finish..how long is it and how long should it be?
• Should be at the heart of performance measurement
• Flow time – time between activities can be measured to
identify substantial contributors to delay and
underutilization
• Non value-added steps – looking at processes from the
customer’s point of view provides focus on roles or
activities that add little or no value
• Unnecessary or repetitive steps – process flows that dead
end with suboptimal results or wind back around to the same
event or role a number of times
Process Decision Issues to Uncover
Each decision in the process should be examined to determine:
• Authority ambiguity –clearly defines who owns the

decision
• Eliminate a potential source of confusion
• Decision necessity – when decision point output flows
lead toward the same or similar events, the process may
include unnecessary decisions that may generated
unwarranted delays
• Decisions too early – when decision point output flows
continue for a long time before encountering subsequent
events, the decision point may, in fact, be made too early
• Leads to unnecessary downstream complications
• Decisions too late – when decision point output flows
lead to errors or rework, decision points might need to be
moved to earlier to provide quality assurance or
confirmation of customer satisfaction and eliminate costly
remediation
Developing the “To-be” Process
The following questions should be asked during development of the “to be” process
• Who is the customer? What is the customer willing to pay for?

What does the customer receive?
• What level of performance does the customer expect? How

well are we satisfying the customer? How can we increase
customer satisfaction?
• What is our first interaction with the customer that starts the
process? Where do our processes end and which endings are
optimal?
• What are the most important value-added steps?
• What activities are in scope that we can change and what

activities are out of scope that we cannot change?
A model that incorporates
BPR using process maps
to help with reengineering
initiative.
Chapter 5 : ERP Life Cycle: Planning and

Package Selection
Objectives of the chapter
• Know why organizations change their information system
• Describes activities that take place in the planning stage
of the ERP life cycle
• Identify rationales used by companies for investing in
ERP
• Recognize the cost components of an ERP system
• Describe activities that take place in the package
selection stage of the ERP life cycle.
Why Organization Change their Information Systems
• Research has suggested today’s information system

has an average life span of about 5 years.
• Replacing or upgrading an information system is

motivated by many factors.
Why Organization Change their Information Systems (1/4)
• Obsolescence: As systems age, they

may become incapable of taking
advantage of advancing technology.
• High operational costs: As systems
age, they often become very expensive
to operate, requiring more patches and
custom code to maintain their
usefulness.
• Lack of vendor support: Software vendors may

go out of business or be acquired. Additionally,
software vendors will cease supporting older
versions and providing technical assistance.
• Lack of compliance: Government and
institutional compliance requirements continue
to grow and evolve. It needs upgrades or
replacements to Information system.
• Different or enhanced functionality: A

company may delve into a new line
of business, go global, or need more
internal controls and procedures in
their system
• Changing business model:
Organization’s new business model
or practices result in upgrading or
replacement of IS
• Lack of scalability: New information

systems are often needed to support
planned or unexpected growth.
Systems must be able to scale up to
increased numbers of users and
transaction volume
• Too many business problems and
unanswered questions
The ERP Life Cycle
• Planning (Chapter 5)
• Package Selection (Chapter 5)
• Implementation (Chapter 6)
• Maintenance (Chapter 6)
ERP Life Cycle: Why Planning? (1/9)
• An ERP system is one of the most costly

investments a company will make.
• There is significant risk of failure if a company
approaches an ERP implementation without the
priority, commitment, and attention to detail
required.
• Proper planning is imperative to the financial
and operational success of ERP.
• Poor planning can lead to missed opportunities,
mistakes, or total failure.
ERP Life Cycle: Planning .. Rationales (2/9)
• Need a rationale grounded in a business case (high level

reason why a company undertakes an ERP implementation)
• Types of rationales:
1. Technology rationale – IS are failing, desperately need new
technology.
•Too expensive to patch and maintain old,
•outdated systems,
•need better visibility of data.
• A technology rationale can include:
• upgrading systems to a client-server model,
• better visibility and utility of data across the company
• extending information to speed customer and supply chain
communication.
2. Competitive rationale – adopting a

system because the competition has
it, need to keep up to maintain
competitive parity
3. Strategic rationale – reasons why ERP is needed to support

the organization’s strategic direction
• Examples of strategic rationales include:
• Drive growth,
• support mergers and acquisitions,
• market diversification,
• globalization
4. Business process rationale – benefits in key processes
(KPIs)
• Attain targeted,
• specific
• measureable performance improvements
Management can use any or all of these rationales to
justify their company's decision to implement an ERP
system.
ERP Life Cycle: Planning (5/9)
• Executive Leadership – The ERP champion..

• rally support
• distribute resources
• delegate management of implementation to team
• CEO, CFO, or other high level sponsor should
take ownership of the project and be actively
involved in its activities .
chief executive officer (CEO),

chief operations officer (COO),
chief financial officer (CFO)
• Project Scope – project team should determine the

scope and the procedures to enforce against the
“never ending project” syndrome
• Project scope includes:
• business processes that will be included in the
implementation,
• the ERP functionality that will support these
business processes,
• the divisions or business units that will be included
in the roll-out.
• the technical infrastructures that will be replaced
• Scope management –
• define and control what is and what is not
included in the project;
• guard against scope creep – changes to the
scope of the project.
• Project charter should be drafted
• Project Team
• Given the discretion to make all important decisions
regarding the implementation
Consists of :-
• key process owners,
• end users,
• managers,
• IT people,
• executives who span functional boundaries,
• business units,
• organizational levels.
 Project Manager
 Understand both technology and
business processes
 Knowledge of the effect of ERP on the
business
 Work with professionals to organize a
smooth transition from the “as is” state to
the “to be” state
 Envision the end results and make tough
decisions
ERP Costs (1/6)
• Total cost of ownership (TCO) – total

costs that will likely be incurred throughout
the system’s life cycle.
• TCO is influenced by:
• Transaction volume
• Number of users
• Functionality
ERP Costs (2/6)
• Application license – govern the software’s use

• Named users – company identifies the total number
of users who will access the system
• Site license – blanket contract covering the use of
the ERP system at a particular location
• Concurrent users – maximum number of users who
would potentially access the system at a given time
• Heavy users – those who use more of the systems
functionality and may be charged a higher license fee
than casual users who may only view reports or run
occasional queries
ERP Costs (3/6)
• Database License – based on
• the number of simultaneous users that will log
into the system or
• the number/type of database servers required
• Hardware – varies depending on the scope of
implementation and platforms
• Will need database and application servers,
• storage systems,
• network components,
• wiring,
• power,
• user workstations,
ERP Costs (4/6)
• Implementation Services – Budget overruns due to

them most of the times.
• Prepare before consultants arrival
-> Maximum their productivity
-> Minimize the cost
• Consultants can be:
1. implementation specialists,
2. Subject matter experts
3. project managers
4. testing or training specialists.
• Implementation services expenses can be difficult
to estimate.
ERP Costs (6/6)
• Internal HR Costs – varies among companies and projects

• Full time equivalents
• Ongoing Maintenance –
• typically 20 – 30% of the software license costs per year
• Hidden Costs –
• scope creep,
• training,
• customization,
• data conversion,
• developing interfaces between the ERP system and other
systems
ERP Benefits
• Integrate financial information – creates one version of the

truth, which can not be questioned because everyone uses
the same system
• Integrate customer order information – customer order
travels from the salesperson through credit, picking,
packing, shipping, invoicing and cash receipt
• Standardize and speed up manufacturing processes
• Reduce inventory – help manufacturing process flow more
smoothly, improving visibility of the order fulfillment process
• Standardize human resource information – consolidates
employee information into a single system and provides
self-service accessibility to manages and employees
ERP Life Cycle: Package Selection
• Package selection  Key steps in selecting an
presumes that a high- ERP system:
level organizational 1. Market Survey
group has approved 2. Request for Information
funding based on the 3. Narrowing Down the
business case outlined by Choices
the project team 4. Site Survey
• Choosing the “best” 5. Requirements Analysis
application for a company 6. Request for Proposal
is based on: 7. Demo Days
1. functionality, 8. Reference Visits
2. affordability, 9. Fit-Gap Analysis
3. user-friendliness, 10. Implementation
4. customizability, Methodology Discussion
11. Proposal
5. vendor support
12. Decision and Negotiations
• Market Survey – to determine which vendors’ systems

might be potential alternatives
• Websites, industry magazines, trade exhibits, suppliers,
competitors, etc.
• Request for Information – issue a request for information
to the vendors indentified in the market survey
• Request for information (RFI) – vendors supply written
information about the capabilities of their solutions and the
skills they offer
• Narrowing Down the Choices – project team should
narrow down the ERP vendor candidates based on criteria
important to them
• Site Survey – invitation for each of the prospective vendors

to meet with the project team on-site so that the vendor’s
sales team can better understand the buyer’s functional
requirements and the peculiarities of their business .
• Requirements Analysis – detailed analysis to determine all

the functionalities they need and desire
• Request for Proposal – formal document developed by the

potential buyer that details requirements in order to seek
vendor offerings
• Enables the requestor to evaluate and compare various
proposal fairly
• Demo Days – vendor must “walk the walk” and “talk the talk”
• Must be detailed, showing how key business process work using the
prospective customer’s own data
Table 5-2: 10 Rules to Make an ERP Demo as Smooth as Possible

Use the same team to view all vendor demonstrations
Agree the agenda with vendor well in advance and stick to it
Confirm the “must haves” first and then the “nice to haves” and lastly the
“bells and whistles”
Compare fits and identify gaps
Focus on the system’s operation avoiding the influence of freebies, a
flashy appearance, and slick suits
Notice their culture
Allow the vendors to share their new ideas
Leave enough time for a post-demo Q&A
Use a weighted score sheet for scoring and ranking vendors
Cover implementation and support/maintenance separately
Figure 5-2: ERP Weighted Score Sheet
Vendor
A B C
Weight
Weight
Weight
Import
Rating
Rating
Rating
Rating
Rating
Rating
(1-10)
(1-10)
(1-10)
ance
(1-3)
ed
ed
ed
ERP Selection Criteria
Manufacturing Functionality 3 8 24 10 30 7 21
Planning Functionality 2 6 12 7 14 8 16
Distribution Functionality 2 6 12 5 10 4 8
Financials Functionality 3 4 12 7 21 6 18
Ease of use 3 6 18 9 27 3 9
Customizability 1 5 5 9 9 6 6
Compatibility with Existing Applications 2 6 12 7 14 8 16
Matched to Our Growth 3 4 12 6 18 5 15
Pricing Structure 2 6 12 5 10 4 8
Implementation Costs & Time 3 2 6 8 24 6 18
Single Source - Total Solution 2 6 12 7 14 8 16
Integration with Third Party Applications 1 4 4 6 6 8 8
Commonly Used in Our Industry 2 8 16 5 10 3 6
Quality, Accessibility & Cost of Support 3 3 9 5 15 7 21
Partnership Potential 1 3 3 8 8 10 10
Understands Our Business 3 7 21 7 21 2 6
Understands Our Processes 3 5 15 9 27 4 12
Business Stability 2 5 10 8 16 9 18
R & D Resources 1 5 5 8 8 7 7
Implementation & Training Resources 3 4 12 8 24 10 30
• Reference Visits – visit to a “like” customer site of the final

short-lived vendors
• Before making a decision the project team should visit one or
more of the vendor’s customer sites to observe how the ERP
system works in real life
• Issues to discuss with “like” customers include:
• Satisfaction with functionality and performance
• Satisfaction with look and feel of the system
• Implementation time and cost
• Impression of the vendor as an implementation partner
• Local vendor support
• Lessons learned from issues that were not anticipated but arose after the
implementation began
• Fit-Gap Analysis – used to compare the company’s

requirements with what the ERP systems under
consideration offer
• The more functionality “gaps” the less attractive a system is to
the customer; however process gaps are opportunities to
reengineer to best practices
• Requirements gaps must be closed by customization or bolt-
ons.
• Example: if package A has 50 major gaps and package B has
15 major gaps, package A will likely create more problems
implementing.
• The project team should provide an unbiased analysis of the
alignment of the software to org.
• Implementation Methodology Discussion – discussion of the

understanding of implementation needs
• Project team and implementation team should agree on project
scope, roles and responsibilities of customer and
implementation team, implementation methodology and
defined deliverables that will be used to guide the project and
gauge its success
• Proposal – includes the recommended modules for the defined
scope, annual fees for support and software assurance(that
provides rights to future release of the system at little or no
cost), a high level project plan, and the defined hardware,
network, and software requirements necessary to support the
new ERP systems
• Decision and Negotiations – the team should discuss all critical
information obtained from demos and reference visits, then rate
each vendor, a selection is made, and a contract is signed by
both parties
• Role of CIO: compares the suitability of the technology and
its cost.
• Role of CFO: Evaluates the vendor’s financial health and the
contract as well as consider purchasing, leasing, and
outsourcing options.
• Communicating clearly and openly about needs, budget, and
challenges is often the best way to reach a “win-win”
solution.
• After whole exercise,… the contract is signed by both parties
and the ERP journey begins!

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Kingdom of Saudi Arabia

Ministry of Higher Education

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

• Introduction of PC led to narrowly focused

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

• An ERP system is an integrated suite of

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

ERP-Supported Business Processes

* Core ERP Processes

Human Resources (Core)

Customer Relationship Management

Plus: Various Self-Service Interfaces for Customers, Suppliers, and Employees

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

 The value of ERP is the opportunity to integrate an

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

•Legacy systems (islands of automation) may be connected with

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

• ERP systems are based on best practices

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

• Integrated processes and information systems

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

there are others……depends on company

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S

Source: AMR research

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Tier 1 Tier 2 Tier 3

High complexity Medium complexity Limited functionality

Highest cost of Medium cost of Lower cost of ownership

Source: Ultra consultants

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S

In reality, an ERP implementation is usually just one part of a more

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Chapter 2: ERP Technology

Modern ERP:SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

• 1990’s client server, three-

Figure 2-1: Three-Tier Architecture

• With ERP software, the GUI can take the form of a

Source: SAS Institute, Inc.

• Back-office software (Core ERP) –HR,

• Tables are relations

• ERDs are a type of system diagramming that show

Figure 2-4: Relational Database Overview

• A query is a question asked of the database. Again,

• Configuration involves “setting switches” during

Chapter 3: ERP and Business Process

See following webpage for

the analysis and redesign of workflow and

• The focus of BPR is not on how a process

2. Too many Controls and Checks

3. Rework, Iteration & Duplication of work

Drucker, Peter F. (1973)

• Can result in unique processes (which gives a competitive