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Chapter 1

Chapter 1 – Overview of Business Process Design


Department
Information Technology Management
Course Code
ITM 601
Professor
Amir Gandomi
Chapter
1

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Chapter 1 – Overview of Business Process Design
Operations Management
- Operations Management: The systematic design, direction, and control of processes
that transform inputs into services and products for internal, as well as external,
customers.
- Process: Any activity or group of activities that takes one or more inputs, transforms
them, and provides one or more outputs for its customers.
- Supply Chain: series of processes within a firm and across different firms that produce
a service or product to the satisfaction of customers
- Operation: is a group of resources performing all or part of one or more processes
- Supply Chain Management: The synchronization of a firm’s processes with those of its
suppliers and customers to match the flow of materials, services, and information with
customer demand.
Operations and Supply Chain Management across the Organization
-The below diagram shows that key functions within an organization
oFinance: this part of the organizations, provides the financial capitals (cash) to
buy resources, which leads to Materials & Service Inputs
oOperations: they take the resources and transform them into products and
services, which leads to Product & Service Output
oMarketing: marketing is performed (advertising), responsible for generating sales
revenue of output
-Functions such as Accounting, Information Systems, Human Resources, and
engineering make the firm complete by providing essential information, services and
other managerial support
A Process View
-The reason for process rather than the departments is because it provides a more
relevant picture of the way firm actually work and the can be much broader whereas the
department is more specific
How Processes Work (Figure 1.2)
-All processes have inputs and outputs
- External Customers: who may be end users or intermediates (eg. Manufacturers,
financial institutions, or retailers)
- Internal Customers: who may be employees in the firm whose process input are
actually the outputs of early processes managed within the firm
- External Suppliers: may be other businesses or individuals who provide the resources,
services, products, and materials for the firm’s short term and long term needed
- Internal Suppliers: employees or processes that supply important information’s or
materials

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-Participation by customers occurs not only when they receive output, but also when they
rake an active part in the processes
Nested Processes
-Processes can be broken down into sub processes, this is known as nested process
oNested Process: the concept of a process within a process
Service and Manufacturing Processes
-Manufacturing processes also have longer response times , are more capital intensive,
and their quality can be measured more easily those of service processes and the
outputs can be produced, stored, and transported in anticipation of future demand
-Service processes tend to produce intangible, perishable outputs and the output is not
stored in the inventory
oExample: bank loan, order fulfillment process of the US Postal Service
-There are two types of process: service and manufacturing
-Differences
oThe nature of their output
oDegree of customer contact
-Similarities
oManufacturing process: some don’t inventory because they cost too much
oService Process: they do inventory their inputs
The Supply Chain View
- An activity in the supply chain, that doesn’t add value to preceding activities, should
be eliminated
- There are two main types of processes in the supply chain: core processes and
support processes
-Core Processes: are a set of activities that delivers values to external customers
oSupplier relationship process: A process to select the suppliers of services,
materials, and information and facilitate the flow of these into the firm.
oNew service/product development: a process that designs and develops
new services or products from inputs received from external customers
specifications or from the market in general through the customer relationship
process
oOrder fulfillment process: process to produce and deliver services or
products to the external customer.
oCustomer relationship process: process that identifies, attracts and builds
relationships with external customers and facilitates the placement of orders
and also known as CRM
-Support Processes: process that provides vital resources and inputs to the core
processes and therefore is essential to the management of the business
oAccounting, Human Resources, Engineering, and Information Systems that
provides vital resources and inputs to the core processes
Operations Strategy
-Operation strategy: specifics the means by which operations implements corporate
strategy and helps to build a customer-driven firm
- It is at the heart of managing process and supply chains
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- Operation Strategies is the linchpin that bring these processes together to form
supply chains that extend beyond the walls of the firm, encompassing suppliers as
well as customers
- It starts with Corporate Strategy: the firms overall goals with its core processes,
markets
- Based on corporate strategy, a market analysis categorizes the firm’s customers,
identifies their needs, and assesses competitors’ strengths. This information is used
to develop competitive priorities. These priorities help managers develop the
services or products and the processes needed to be competitive in the marketplace.
Competitive priorities are important to the design of existing as well as new services
or products, the processes that will deliver them, and the operations strategy that will
develop the firm’s capabilities to fulfill them. Developing a firm’s operations strategy
is a continuous process because the firm’s capabilities to meet the competitive
priorities must be periodically checked and any gaps in performance must be
addressed in the operations strategy.
Corporate Strategy
- It provides an overall direction that serves as a framework for carrying out all the
organizations functions. There are four considerations:
oEnvironment Scanning
The organizations need to be able to adapt to changes
It is the process where the managers monitor trends in the
environment for threats and opportunities
New entrants, new technology, social changes, political
changes, availability of resources
oCore competencies: are the unique resources and strength that an
organization’s considers when formulating strategy
Workforce: well trained employees
Facilities: well-located offices, stores and plants
Market and Financial Know How: An organization that can
attract capital from stock sales, market, and distribute its
services or products at different levels of volume provide a
competitive advantage
System and Technology: knowledge on the latest technology
oDeveloping Core Process
The firms core competencies should drive its core processes:
customer relationship, new service/product development, order
fulfillment, and supplier relationship
oGlobal Strategies
Identifying opportunities and threats requires a global perspective
Two effective global strategies:
Strategic alliance and locating abroad
oStrategic alliance: is an agreement with another firm
that may take one of three forms
Collaborative effort: often rises when one firm
has core competencies that needs but is
unwilling to duplicate
Joint venture: two firms agree to produce a
service or product jointly
Technology licensing: one company licenses
its service or production methods to another
(Microsoft and RBC)
oLocating abroad is a key decision in the design of
supply chains because it effect of the flow of materials,
information, and employees in support of the firms core
process
- Market Analysis
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