1. Concepts in
Enterprise Resource
Planning
2nd
Edition
Chapter 7
Process Modeling, Process
Improvement, and ERP
Implementation

2. Concepts in Enterprise Resource Planning, Second Edition 2
Chapter Objectives
• Use basic flowcharting techniques to map a business
process
• Develop an Event Processing Chain (EPC) diagram of a
basic business process
• Evaluate the value added by each step in a business
process
• Develop process improvement suggestions
• Discuss the key issues in managing an ERP
implementation project
• Describe some of the key tools used in managing an
ERP implementation project

3. Concepts in Enterprise Resource Planning, Second Edition 3
Process Modeling
• Business processes are complex, and require people
with various skills and abilities to work in a cooperative
fashion
• Processes will not be efficient and effective unless:
• They are clearly defined
• Individuals are adequately trained in their roles
• Individuals understand how their roles fit in the overall
process
• Process Modeling tools like flowcharting or process
mapping provide a way to describe business processes
so that everyone involved in the process can understand
the process

4. Concepts in Enterprise Resource Planning, Second Edition 4
Flowcharting process models
• Flowcharts are the simplest process models
• Originated with computer programmers and
mathematicians
• A flowchart is a clear, graphical representation of a
process from beginning to end
• Flowcharts have been applied to business processes
since the 1960s
• Process mapping is flowcharting applied specifically to
an existing business process
• A range of symbols can be used, but only 5 graphical
elements are needed to map a process

5. Concepts in Enterprise Resource Planning, Second Edition 5
Figure 7.1 Basic flowcharting symbols
Operation
Decision
1 Connector
Boundaries (beginning/end of process)
Direction of Logic
Operation
Decision
1 Connector
Boundaries (beginning/end of process)
Direction of Logic

6. Concepts in Enterprise Resource Planning, Second Edition 6
Fitter Snacker Expense Report Process
• Defining the process boundaries is important to make
the process mapping task manageable and to make sure
the efforts are properly focused
• For the Fitter Snacker expense report process under
consideration, the process begins after all expenses are
incurred and ends when the employee receives a refund
• The process does not include:
• Cash advances or corporate credit card
considerations
• Reservation process
• Preferred airlines or hotels
• Rental car policies (type, insurance, fuel)

7. Concepts in Enterprise Resource Planning, Second Edition 7
Figure 7.2 Partial process map for Fitter Snacker expense reporting process
Expenses Incurred
Employee Completes
Expense Report
Employee copies
report and reciepts
Employee attaches
receipts for all
expenses > $25
Expense
Report
Approved
?
Employee mails
expense report to
Sales Manager
Sales Manager mails
expense report to
corporate office
Employee
modifies
expense report
Sales Manager
mails report back
to employee
Sales Manager
Reviews Report
Yes
No
1

8. Concepts in Enterprise Resource Planning, Second Edition 8
Extensions of Process Mapping
• Hierarchical Modeling is a process of describing
processes in greater or lesser detail
• With complicated processes, it is frequently desirable
to start with a general description of the process, then
define different steps in more detail
• Deployment flowcharting or swimlane flowcharts are
useful in clearly displaying the people or organizations
responsible for tasks in the process

9. Concepts in Enterprise Resource Planning, Second Edition 9
Figure 7.3 Hierarchical modeling
Expenses Incurred
Employee Completes
Expense Report
Employee copies
report and reciepts
Employee attaches
receipts for all
expenses > $25
Expense
Report
Approved
?
Employee mails
expense report to
Sales Manager
Sales Manager mails
expense report to
corporate office
Employee
modifies
expense report
Sales Manager
mails report back
to employee
Sales Manager
Reviews Report
Yes
No
1
No
Expenses Incurred
Employee Prepares
Expense Report
Expense
Report
Approved
?
Sales Manager mails
expense report to
corporate office
Employee
modifies
expense report
Sales Manager
mails report back
to employee
Sales Manager
Reviews Report
Yes
No
1

10. Concepts in Enterprise Resource Planning, Second Edition 10
Figure 7.4 Deployment, or swimlane, flowcharting
Expenses Incurred
Employee Completes
Expense Report
Employee copies
report and reciepts
Employee attaches
receipts for all
expenses > $25
Employee mails
expense report to
Sales Manager
1
Sales Manager
Reviews Report
Employee
modifies
expense report
Sales Manager
mails report back
to employee
Expense
Report
Approved
?
Sales Manager mails
expense report to
corporate office
Yes
No
Sales
Person
Sales
Manager
AP
Clerk
Auditor

11. Concepts in Enterprise Resource Planning, Second Edition 11
Event Process Chain (EPC) Diagrams
• The EPC format uses only two symbols
• Events
• Functions
• SAP has developed EPC representations for many of the
business processes its software supports
• The EPC modeling technique is available in the
IDS/Scheer ARIS Toolset
• ARIS: Architecture of Integrated Information System

12. Concepts in Enterprise Resource Planning, Second Edition 12
Event Process Chain (EPC) Diagrams
• Events represent a state or status in the process
• Events are named using Object→Past Participle
• Functions represent where change occurs in the process
• Functions are named using Verb→Object
Object Past Participle
Expense Incurred
Expense report Approved
Hard copy Filed
Object Past Participle
Prepare Expense report
Review Expense report
Mail Refund check

13. Concepts in Enterprise Resource Planning, Second Edition 13
Figure 7.5 EPC components
Prepare
Expense Report
Verb
Object
Expense
Incurred
Object
Past Participle
Event
Function

14. Concepts in Enterprise Resource Planning, Second Edition 14
Event Process Chain (EPC) Diagrams
• EPC Diagrams follow an event-function-event structure
• EPC Diagrams must begin and end with events
• Branching is done with three types of connectors:
• AND
• OR
• XOR (exclusive OR)

15. Concepts in Enterprise Resource Planning, Second Edition 15
Figure 7.6 Basic EPC layout
Expense
Incurred
Prepare
Expense Report
Expense Report
Completed
Mail
Expense Report
Expense Report
Received

16. Concepts in Enterprise Resource Planning, Second Edition 16
Figure 7.7 OR connector
Process
Payment
Salesperson
Notified
Sales Manager
Notified
OR connector

17. Concepts in Enterprise Resource Planning, Second Edition 17
Figure 7.8 AND connector
AND connector
Enter
Expense Report
Expense Report
Recorded
Hard Copy
Filed

18. Concepts in Enterprise Resource Planning, Second Edition 18
Figure 7.9 XOR connector
XOR connector
Review
Expense Report
Approved
Not
Approved

19. Concepts in Enterprise Resource Planning, Second Edition 19
Figure 7.10 OR connector with two triggering events
Trip
Completed
Week
Ends
Prepare
Expense Report

20. Concepts in Enterprise Resource Planning, Second Edition 20
Figure 7.11 Possible connector and triggering combinations
Event
Function
>
Event
Event
Function
>
Event
Event
Function
x
Event
Event
Function
>
Event
Event
Function
>
Event
Event
Function
x
Event
Function
>
Event
Function
Function
>
Event
Function
Function
x
Event
Function
AND
OR
XOR
Event
Function>Function
Not
Allowed
Not
Allowed
Event Trigger Function Trigger
Single Multiple Single Multiple

21. Concepts in Enterprise Resource Planning, Second Edition 21
Figure 7.12 Splitting and consolidating process paths
Expense
Incurred
Check
Internet
Availability
Internet
Available
Internet
Not Available
Prepare
Online Report
Prepare
Paper Report
Report
Submitted
Report
Mailed
Review
Expense Report
Must use same
connector
to split and
consolidate a path

22. Concepts in Enterprise Resource Planning, Second Edition 22
Figure 7.13 EPC diagram with organizational and data elements
Expense
Incurred
Prepare
Expense Report
Salesperson
Sales
Manager
Unapproved
Multi-copy
Expense Report
Salesperson
Unapproved
Multi-copy
Expense Report
Expense Report
Completed
Mail
Expense Report
Expense Report
Received
Review
Expense Report
Organizational
Elements
Data
Elements

23. Concepts in Enterprise Resource Planning, Second Edition 23
Process Improvement
• Process mapping tools describe processes in a
universally understood format
• Task of completing a process map requires a team of
key personnel and frequently uncovers process
improvement opportunities
• Value Analysis is a technique that evaluates the value
added by each activity in the process
• Activities can added:
• Real value: something the customer will pay for
• Business value: helps the company run its business
• No value: an activity that should be eliminated

24. Concepts in Enterprise Resource Planning, Second Edition 24
Process Improvement
• The Fitter Snacker expense report process does not
provide real value, because customers would not pay for
this activity if given a choice
• The process does provide business value, as employees
should be compensated fairly for their expenses and
fraud should be avoided
• Costs for this process should be minimized
• Activities should be evaluated by cost and elapsed time

25. Concepts in Enterprise Resource Planning, Second Edition 25
Questions to Identify Areas for
Improvement*
• Are there unnecessary checks and balances?
• Does the activity inspect or approve someone else’s
work?
• Does it require more than one signature?
• Are multiple copies required?
• Are copies stored for no apparent reason?
• Are copies sent to people who do not need the
information?
• Is there unnecessary written correspondence?
*H. James Harrington, Business Process Improvement

26. Concepts in Enterprise Resource Planning, Second Edition 26
Questions to Identify Areas for Improvement*
• Are there people or agencies involved that impede the
effectiveness and efficiency of the process?
• Do existing organizational procedures regularly impede
the efficient, effective and timely performance of duties?
• Is someone approving something they already approved
(for example, approving capital expenditures that were
approved as part of a budget)?
• Is the same information being collected at more than one
time or location? Are duplicate databases being
maintained?
*H. James Harrington, Business Process Improvement

27. Concepts in Enterprise Resource Planning, Second Edition 27
Concepts to Improve Business Processes*
• Perform activities in parallel, for example, approvals
• Change the sequence of activities
• Reduce interruptions
• Avoid duplication or fragmentation of tasks
• Avoid complex flows and bottlenecks
• Combine similar activities
• Reduce the amount of handling
• Eliminate unused data
• Eliminate copies
*H. James Harrington, Business Process Improvement

28. Concepts in Enterprise Resource Planning, Second Edition 28
Evaluating Process Improvement
• Implementing process changes can be:
• Challenging
• Costly
• Time consuming
• Risky
• Dynamic process modeling can be used to evaluate
process changes before they are implemented
• Dynamic process modeling uses computer simulation
to evaluate the impact of process changes on
performance measures like cycle time and cost

29. Concepts in Enterprise Resource Planning, Second Edition 29
Another Look—BPI at Nova Chemicals
• Nova Chemicals is using Business Process Innovation to
move from a function-oriented company to a process-
oriented company
• According to John Wheeler, CIO
“Business process innovation is the process of
improving processes. BPI is based on understanding
the way you work. Once you understand the way you
work, you can begin to improve the way you work.”
• Nova has used IDS/Scheer’s ARIS Toolset to document
its business processes
• Tool requires structure and discipline to use, but
allows companies to understand all of their
processes, not just the workflow

30. Concepts in Enterprise Resource Planning, Second Edition 30
Another Look—BPI at Nova Chemicals
• Wheeler estimates only 10-15% of an IT project’s cost is
spent on technology and 30-40% is spent on
understanding the current process
• Wheeler sees BPI as just the next step in the evolution
of process improvement methods:
• Quality circles
• Continuous improvement
• Business process reengineering
• BPI
• Innovations in methods and techniques can keep
innovation fresh and new. BPI is a process, which can
itself be improved

31. Concepts in Enterprise Resource Planning, Second Edition 31
ERP Workflow Tools
• The effectiveness of business processes that are
performed sporadically can be poor, not because of
negligence, but through lack of practice
• Especially true if process crosses functional
boundaries
• Example: New customer
• Sales can gather basic customer data, but Accounts
Receivable must determine credit limit
• Workflow tools are software programs that automate the
execution of business processes
• Workflow tools help coordinate complex processes and
allow for the tracking of the status of a process

32. Concepts in Enterprise Resource Planning, Second Edition 32
SAP R/3 Workflow
• The SAP R/3 Workflow tool integrates organizational
data to determine who should perform a transaction
• The Workflow tool uses SAP’s internal e-mail system to
route transactions to the appropriate person using
workflow tasks
• Workflow tasks can include:
• Basic information
• Notes
• Documents
• Decision options
• Links to transactions

33. Concepts in Enterprise Resource Planning, Second Edition 33
SAP R/3 Workflow
• Workflow tasks can be monitored by the SAP system
• If tasks are not completed on time, the workflow system
can:
• Change the task’s priority
• Send an e-mail reminder to the person responsible
• Send an e-mail to other parties
• The Workflow Builder is used to define the process
behind the workflow:
• Process steps
• Individuals involved

34. Concepts in Enterprise Resource Planning, Second Edition 34
Figure 7.14 SAP R/3 Workflow Builder screen
Process Logic
First Step
Create
Notification
of Absence

35. Concepts in Enterprise Resource Planning, Second Edition 35
Figure 7.15 Absence request screen

36. Concepts in Enterprise Resource Planning, Second Edition 36
Figure 7.16 Manager’s Business Workplace with workflow task

37. Concepts in Enterprise Resource Planning, Second Edition 37
Implementing ERP Systems
• Implementation was a major challenge in the late 1990s
as firms rushed to implement ERP systems to avoid the
Y2K problem
• Implementations were hampered by a lack of
experienced consultants
• Since 2000, the pace of implementations has slowed
significantly
• Most Fortune 500 firms have implemented ERP
systems
• Current growth is in small to midsize business market
• New products include Microsoft Great Plains and
SAP Business One

38. Concepts in Enterprise Resource Planning, Second Edition 38
Implementing ERP Systems
• Firms that implemented ERP to avoid the Y2K problem
likely installed ERP systems that covered only the basic
functionality necessary to operate the business
• Many firms are looking to leverage their ERP investment
by finding ways to improve their firm’s business
processes
• These implementation projects are smaller in scope,
but still require effective management for success

39. Concepts in Enterprise Resource Planning, Second Edition 39
ERP System Costs and Benefits
• Software licensing fees: Most firms charge annual fees
based on the number of users
• Consulting fees: ERP implementations require
experienced consultants with extensive experience
• Project team member time: Key people must participate
in the ERP implementation project to make sure that
consultants understand their company’s requirements
• Employee training: Project team members need
extensive training in the software, and all employees
need training to work with the system
• Productivity losses: No matter how effective the
implementation, productivity will decrease during the first
weeks and months after the system is implemented

40. Concepts in Enterprise Resource Planning, Second Edition 40
ERP System Costs and Benefits
• Companies must identify a significant financial benefit
that will be generated by the ERP system to justify the
money spent on it
• To only way companies can save money with ERP
systems is to use them to make their business
processes more efficient and effective
• It is possible for a company to “recreate” its old
information system in SAP using modifications via ABAP
programming, rather than adopt “best practices”

41. Concepts in Enterprise Resource Planning, Second Edition 41
Implementation Change and Management
• Key challenge in managing ERP implementations is
managing people, not technology
• More effective processes require fewer people
• Some employees will not be needed after
implementation
• It is a challenging task to ask employees to participate
in a software implementation process that will not only
change their day-to-day activities, but might eliminate
their current jobs
• Managing the human behavior aspects of organizational
change is called Organizational Change Management
• People don’t mind change, they mind being changed

42. Concepts in Enterprise Resource Planning, Second Edition 42
Implementation Tools
• SAP provides Solution Manager to help manage
implementation projects
• In Solution Manager, the R/3 Implementation Project is
presented in a 5 phase Implementation Roadmap
• Project Preparation (15 to 20 days)
• Business Blueprint (25 to 40 days)
• Realization (55 to 80 days)
• Final Preparation (35 to 55 days)
• Go Live and Support (20 to 24 days)

43. Concepts in Enterprise Resource Planning, Second Edition 43
Solution Manager
• Project Preparation Phase
• Tasks include organizing technical team
• Defining system landscape (servers and network)
• Selecting hardware and database vendors
• Defining projects scope—what the project is
supposed to accomplish
• Scope creep—unplanned expansion of the project
—is probably the primary reason projects go over
time and budget

44. Concepts in Enterprise Resource Planning, Second Edition 44
Solution Manager
• Business Blueprint Phase
• Produces the business blueprint, which is a detailed
description of how the company intends to run its
business with the SAP R/3 system
• Process mapping is critical to the business
blueprint phase
• The business blueprint guides consultants and project
team members in configuring the SAP R/3 system
• During this phase, technical team members
determine how they will transfer data from the firm’s
legacy systems

45. Concepts in Enterprise Resource Planning, Second Edition 45
Solution Manager
• Realization Phase
• Project team members work with consultants to
configure the SAP R/3 software in the development
system
• Developers create:
• Special ABAP programs
• Connections to legacy systems
• Integration with 3rd
party software packages

46. Concepts in Enterprise Resource Planning, Second Edition 46
Solution Manager
• Final Preparation Phase
• Testing the system throughout for critical business
processes
• Setting up help desk for end-user support
• Setting up operation of the production system and
transferring data from legacy systems
• Conducting end-user training
• Setting the Go Live date
• When scope creep results in projects going over time
and budget, testing and training is usually all that is left
to be cut
• Cutting testing and training always leads to disaster

47. Concepts in Enterprise Resource Planning, Second Edition 47
Solution Manager
• Go Live Phase
• Company begins using the SAP system
• Go Live date should be scheduled for a slack
business period
• Properly staffed help desk is critical, as most
questions occur in the first few weeks of operation
• Project team members and consultants should be
scheduled to work the help desk during this period
• Monitoring of system performance is also critical
• Also important to set a project completion date
• New features or enhancements should be a new
project

48. Concepts in Enterprise Resource Planning, Second Edition 48
Figure 7.17 Manager’s Business Workplace with workflow task
Steps in Implementation Project
Step detail

49. Concepts in Enterprise Resource Planning, Second Edition 49
System Landscape Concept
• SAP recommends that companies set up three
completely separate systems
• Development (DEV)
• Used to develop configuration settings and ABAP
programs
• Quality Assurance (QAS)
• Used to test configuration settings and ABAP
programs
• Production (PROD)
• Actual system where the company runs its
business
• Changes are transported from DEV to QAS to PROD via
the Change Transport system

50. Concepts in Enterprise Resource Planning, Second Edition 50
Figure 7.18 System landscape for SAP R/3 implementation
DEV QAS PRD
Transport Directory

51. Concepts in Enterprise Resource Planning, Second Edition 51
Summary
• ERP systems are designed to provide the
information, analysis tools, and communication
abilities to support efficient and effective business
processes.
• This chapter introduced process modeling as a
fundamental tool in understanding and analyzing
business processes.

52. Concepts in Enterprise Resource Planning, Second Edition 52
Summary
• Process mapping is one tool that uses graphical
symbols to document business processes.
• Other methodologies include hierarchical modeling,
deployment flowcharting, event process chain
diagramming, value analysis, and business process
improvement.
• SAP’s Solution Manager, a set of tools and
information that can be used to guide an
implementation project, is included in SAP R/3 to
help manage the implementation of the ERP
software.

53. Concepts in Enterprise Resource Planning, Second Edition 53
Summary
• SAP’s System Landscape was introduced to show
how changes to the ERP system during
implementation (and beyond) are managed.
• The critical issue of organizational change
management was discussed.
• Most challenges to ERP implementation involve
managing personnel and their reactions to the
change, rather than managing technical issues.