9/20/2007

e-Business Relationships406.306 Management Information Systems

Jonghun Park

jonghun@snu.ac.kr

Dept. of Industrial Engineering

Seoul National University

1

table of contents

value chain

business process management

e-business relationships

electronic links

case studies

2

value chain

proposed by Porter

“every firm is a collection of activities that are performed to design,

produce, market, deliver, and support its products or services. value

chains can only be understood in the context of the business unit”

a model that describes a series of value-adding activities connecting a

company’s supply side (raw materials, inbound logistics, and production

proceses) with its deman side (outbound logistics, marketing, and sales)

provides manageres with a tool to analyze and redesign their internal and

external processes to improve efficiency and effectiveness

analysis objectives:

how activities add value

distinction between activities that directly add value to the customer and

those that indirectly add value

organizations typically support from 3 to 15 value chains

3

value chain model

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound

LogisticsOperations

Outbound

Logistics

Marketing

and sales Service

Support

activities

Primary

activities

Profit

margin

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound

LogisticsOperations

Outbound

Logistics

Marketing

and sales Service

Support

activities

Primary

activities

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound

LogisticsOperations

Outbound

Logistics

Marketing

and sales Service

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound

LogisticsOperations

Outbound

Logistics

Marketing

and sales Service

Inbound

LogisticsOperations

Outbound

Logistics

Marketing

and sales Service

Support

activities

Primary

activities

Support

activities

Primary

activities

Profit

margin

4

an example: financial company

Value chain :

Business Loans

Value chain :

Business Checking and Savings

Value chain :

Individual Checking and savings

Value chain :

New savings Product Development

Marketing Sales Finance Investments New Product

Development

Service

Management

Value chain :

Business Loans

Value chain :

Business Checking and Savings

Value chain :

Individual Checking and savings

Value chain :

New savings Product Development

Value chain :

Business Loans

Value chain :

Business Checking and Savings

Value chain :

Individual Checking and savings

Value chain :

New savings Product Development

Marketing Sales Finance Investments New Product

Development

ServiceMarketing Sales Finance Investments New Product

Development

Service

Management

5

primary activities

inbound logistics: receiving, storing, and disseminating inputs

to the production process or service

operations: transforming the inputs to outputs

outbound logistics: distributing the products or services to

customers

marketing & sales: advertising, pricing, tendering, sales force

mgmt., selection of distribution channels

service: repairs, maintenance, spare parts supply, product

upgrades, follow-up services , training and installation

6

support activities

firm infrastructure: administration and management for overall

planning and control

human resource management: recruiting, traininig, devloping,

appraising, promoting, and rewarding of personnel

product / technology development: all activities related to

product and process development

procurement: purchasing goods, services, and materials

7

benefits of value chain analysis

seen as a major differentiating factor in a company

enterprises that implement value chain planning applications

with a continuous improvement program are likely to increase

ROI by 40% over a 5-year lifecycle (Gartner)

corporations need to

continuously ask themselves questions about the organizaiton,

designing, and management of efficient processes

keep in mind issues such as shareholder value and returns,

competition and margin pressures, M & A, shifts in cost and

service structures, new markets and new products, customer

requirements and demands, capacity constraints and sourcing,

and supplier requirements

8

value chain analysis

value: the amount buyers are willing to pay for what a firm provides them

two main questions for analysis

what activities should a firm perform, and how?

what is the configuration fo the firm’s activities that would enable it to add value to the product and to compete in its industry?

4 steps

defining the strategic business unit

identifying critical activities

defining products

determining the value of an activity

sources of value creation

policy choices (what activities to perform and how), linkages (within the value chain or with suppliers and channels), timing (of activities), locaiton, sharing of activities among business units, learning, integration, scale and instituitional factors

9

5 steps by which org can impact on value chain by IT

assess the information intensity of the value chain

determine the role of information systems in the industry

structure

identify and rank the ways in which informatin systems might

create competitive advantage

investigate how information systems might spawn new

business

develop a plan for taking advantage of information systems

business-driven rather than technology driven

10

value stream analysis

considers how the whole production and delivery process can

be made more efficient

categorizes activities into those that

create value as perceived by the customer

create no value -> elminated

do not add value -> eliminated

value stream: set of all the specific actions required to bring a

specific product through 3 critical management tasks

problem-solving: from concept to production lanunch

information management: from order-taking to delivery

physical transformation: from raw materials to finished products

delivered to customer

11

unbundling value chain

concentration on what is considered a unique and core

competence and outsourcing the rest

70% of electronics manufacturing use contract manufacturing

result of outsourcing

unbundled value chain

more complex e-business relationships

12

Basic rawmaterial

Assembly Wholesale Retail ConsumerMfg

Demand

Supply

industry value chain

a collection of individual business unit value chains that together produce

and deliver the goods and services to the final customer

every business unit value chain is part of a larger industry value chain

helps a company to position itself relative to other companies

four types of info flows: transaction, customer demand, supplier information,

knowledge flows

13

process

process

an ordering of activities with a beginning and an end

has inputs (in terms of resources, materials and information) and a specified output

can be measured, and different performance measures apply, like cost, quality, time and customer satisfaction

process definition

any sequence of steps that is initiated by an event, transforms information, materials, or business commitments, and produces an output

business process

consists of one or more related activities that together respond to a business requirement for action

defines the results to be achieved, the context of the activities, the relationship between the activities, and the interactions with other processes and resources

implies an horizontal view on a business organization

14

New Product Development

R & D Marketing Manufacturing

Most companies can be broken down into fewer

than 20 processes [Davenport]

process view de-emphasizes the functional structure

15

typical processes in a manufacturing firm (Davenport)

product development

customer acquisition

manufacturing

order management

after-sales service

human resource management

16

a BP example (1)

고 객 영 업 개 발 구 매 고 품Legacy시스템

개발가능성검토

수익성검토

개발의뢰

고객협의

Drop

Inquiry 접수 및 PLC Code 채번

개발가능성검토의뢰

목표원가/개발비 산정

PLC Code 채번

개발비회수계획수립 목표원가

개발진행요청 Pre Spec. 작성

Spec. 승인 의뢰Spec. 승인

Sample 제작의뢰 제품코드 채번 제품코드 채번

개발비

설계

부품코드 채번

E-BOM 등록

개발용 자재의뢰

부품코드 채번

DMS

Sample 제작

개발용 자재발주 맟 입/출고

출하검사 출하검사

기준정보

Sample 승인요청Sample 승인

Sample 승인통보 M-BOM 이관 기준정보

SAP

* 고객 Sample 개발 프로세스 및 관련 Legacy 시스템 적용 현황은 사업별 차이가 있으므로, 사업 시행 시 Gap 분석이 필요

1. 제안개요

17

a BP example (2)

목표 시스템 구성도 - 프로세스 플로우Syste

mBusiness Process Flow

TEAR

S

BPMS

요청 &

투자PRS PR PO 계약 입고

자산등록

SAP

현업요구사항접수

Master Plan확정

년간 프로젝트추진 계왹서

작성

투자필요?

년간 프로젝트실행 계획 확정

구매집행품의서 작성

승인?

PR Release

구매집행품의서 작성

PR Release(결재)

Yes

No

NoYes

PO 발행PR 접수

계약서 작성

계약 체결

계약서 등록

계약서 조회

H/W, S/W입고 자산등록

대금지급

자산 등록

18

subprocess

reusable business service

e.g., identifying a customer

activity

simple: a single step

compound: multiple steps

an activity may invoke another

BP in the same or a different

domain

processes may cross org

boundaries

at run-time, a BP definition

may have multiple

instantiations

BP hierarchy

Value Chain

Business process

Subprocess

Activity

Simple Activity Compound Activity

Step Step

Value Chain

Business process

Subprocess

Activity

Simple Activity Compound Activity

Step Step

19

characteristics of BP

processes exist within the internal business environment as well as

external organizational environment that can trigger the process

every process has a customer and is directly or indirectly initiated by a

customer order (e.g., final customer, another process)

every process implies processing: a series of activities leading to some

form of transformation of data or products

geographic, technological, linguistic, syntactic, semantic transformation

communication is an important part of any process

the more uncertainty, the more communication

workflows have inventories or queues

lack of processing capacity, geographic transformation, availability of all

data to accomplish the process

processes have decision points

routing, allocation

every process delivers a product (and service)

20

representation of a BP

Work-

flow

WF

Mngtm

: Decision point

: Inventory or Queue

: Processing step

: Coordination of decision points

: Transfer of activity

: transfer of workflow decision

Environment

Business Process

Cu

sto

mer o

rd

er

21

types of BP

type of activity

workflows where information processing supports a physical

process

workflows where information processing is the process itself

degree of repetition

low degree of repetition -> ad hoc

expertise required to execute the process

high level of expertise -> project style BP

level of anticipation of the stimulus that triggers process

low anticipation -> highly customized services & products

22

Mintzberg’s typology of organization

01/06/2004 Pieter Ribbers 31

Four Basic Forms (Mintzberg)

Simple StructureMachine

BureaucracySimple

AdhocracyProfessional

BureaucracyComplex

DynamicStableEnvironments

Divisions: each division may have a different structure

23

functional coupling framework for BP

degree of mediation: the sequential flow of different functions

involved in the process

degree of collaboration: the extent of collaboration between

functions involved in a process

Degree of Collaboration

Low High

Deg

ree

of

Med

iati

on

Low

High

CC

C

AA

BB

AA

AA AA

BB

BB BB

CC CC

CC

A B

: The final step in the process

: participating functions

: Collaborative activities

:input/output relationship

24

improvement possibility

low mediation / low collaboration

functions that directly contribute to the output w.o. interaction

few possibilities of improvement

high mediation / high collaboration

functions participate in the process sequentially and with mutual

information exchanges

most opportunities for BPR

e.g., development of a highly customized product

low mediation / high collaboration

functions contribute to directly to the process outcome, but have an

intensive collaboration

CSCW can help

high mediation / low collaboration

functions participate in the process sequentially with no mutual

exchange of information

e.g., highly standardized processes

25

impact of IT on BPs

CAPABILITY ORGANIZATIONAL IMPACT / BENEFIT

TRANSACTIONAL UNSTRUCTURED PROCESS INTO ROUTINIZED TRANSACTIONS

GEOGRAPHICAL ELECTRONIC TRANSFER MAKES PROCESSES INDEPENDENT

OF GEOGRAPHY

AUTOMATIONAL REPLACES/REDUCES HUMAN LABOR

ANALYTICAL USES COMPLEX ANALYTICAL METHODS

INFORMATIONAL BRINGS GREAT AMOUNTS OF DETAILED INFORMATION

INTO PROCESS

SEQUENTIAL ENABLES CHANGES IN SEQUENCE OF TASKS; POSSIBLE

TO RUN SIMULTANEOUSLY

KNOWLEDGE CAN CAPTURE, DISSEMINATE KNOWLEDGE, EXPERTISE

MANAGEMENT TO IMPROVE PROCESS

TRACKING ALLOWS DETAILED TRACKING OF TASK STATUS, INPUTS,

OUTPUTS

DISINTERMEDIATION CAN CONNECT PARTIES DIRECTLY, NO LONGER REQUIRING

INTERMEDIARY

Source: Davenport & Short “The New Industrial Engineering”(1990)

26

types of e-business relationships

27

types of e-business relationships (cont.)

operational level

companies decide internally what they need, and look outside to see who can deliver at the lowest possible price

no sharing of information, only exchanging order information for spot buying / selling

advantages: flexibility, quick change

disadvantages: uncertainty -> long delivery times, high inventories, …

tactical level

agreements for some period about amount and type of products to buy or sell, manufacturing series and reservation of production capacity, moments of delivery, inventories, …

joint planning: weekly demand forecasts, distribution and transportation planning, production planning, MRP

reduced uncertainty

strategic level

act collaboratively in a specific market

joint decision making on investments, market approach, design, location, production decisions, …

28

problems for which e-business can provide solutions

most interactions between businesses are complex and

information intensive

supply chains suffer from inefficiencies because of the inability

to forecast the right product volumes and mixes

markets are fragmented and lack transparency

price transparency

availability transparency

supplier transparency

product transparency

29

electronic links

examples of electronic links: EDI, JIT, e-markets, virtual

organizations

impact

producers of information: information products can be sold,

transported, and delivered on demand at almost no cost

producers of physical goods: the level of possible customization

of products and services is affected

e-tailers

physical and e-markets

physical distribution networks: simplified by disintermediation

access to buyers and sellers