CHAPTER 2

MODELING BUSINESS PROCESSES

Every organization has three basic business processes.

Acquisition/payment Business Process. Organizations can acquire a wide variety of goods and series including:◦ Human resources◦ Financial resources◦ Supplies ◦ Inventories◦ Property, plan, and equipment◦ New ideas◦ Miscellaneous services

Conversion Business process. Focuses on converting goods and service acquired into goods and services for sale.

Sales/Collection Business Process. Includes the sequence of activities involved in delivering goods and service to customers for payments.

Porter illustrated that each firm is a “collection of activities that are performed to design, produce, market deliver, and support its product.

A value chain is defined as a set of business activities that add value or usefulness to an organization’s product or service.

Margins

Film Infrastructure

Human resources management

Technology development

procurements

Inbound Logistics

Operations Services Outbound Logistics

Marketing &

sales

Primary activities

Revenue

Costs

Sup

port

ac

tiviti

es

EXHIBIT 2-1Porter’s Generic Value Chain

◦ Inbound logistics◦ Operations◦ Out bond Logistics◦ Marketing and sales◦ Service

Porter’s support value activities include:◦ Procurement◦ Technology development ◦ Human resource management◦ Firm Infrastructure

Business Process is a series of activities intended to accomplish the strategic objectives of an organization

Devided each business process into three different event: ◦ Operating events are the operating activities performed

within a business process to provide goods and service to customers.

◦ Information events include three activities: recording data about operating events, maintaining reference data that are important to the organization, and reporting useful information to management and other decision makers.

◦ Decision management events are activities where management and other people make decision about planning, controlling, and evaluating business processes.

Workflow refers to jobs or task performed by members of a workgroup to achieve some objective.

Decision/managements

Events

Operating Events

InformationEvents

Define and often trigger

Trigger Trigge

r

EXHIBIT 2-3Business Process Activities (Events)

DEVELOPING A REAL BUSINESS PROCESS MODEL

◦ Real business process modeling is a formal method of identifying and representing the essential characteristics that collectively describe business processes and events. Real business process model requires you to identify strategically significant business activities and essential characteristics about these business activities.

-What happened?-When did it occur ?-Who was involved and what roles did they play ?-What resources were involved and how much?-Where did the event occur ?-What can go wrong during execution of the event?

EXHIBIT 2-4 Essential Characteristic of Business Activities

The essential characteristics of business in the answers to the following:◦What happened◦When did each event occur◦What roles are performed and who/what

agents perform the roles in executing each event

◦What kinds of resources were involved and how much was used

◦Where did the event occur◦What can go wrong in executing the events

Events Business Objective

Event trigger

Business risk

notes

EXHIBIT 2-5REAK Business Process Model Matrix

Sell merchandise

Receive Customerpayments

EXHIBIT 2-6McKell’s Retail Store REAL Model: Step 2

Merchandise

Receive Customer payment

Sell Merchandise

Register

Cash

Customer

Sales person

EXHIBIT 2-7McKells Retail Store REAL Model: Step 3

Resource Internal

agent

Event

Location (if needed)

Resource

Location

(if needed)

External agent (if needed)

Internal agent

External agent (if needed)

Event

EXHIBIT 2-8Template without Diamonds. Place Relationship Descriptions on the Lines

EXHIBIT 2-9Template with Diamonds. Place Relationship Descriptions Inside the Diamonds

Resource Internal

agent

Event

Location (if needed)

Resource

Location

(if needed)

External agent (if needed)

Internal agent

External agent (if needed)

Event

Merchandise

Receive Customer payment

Sell Merchandise

Register

Cash

Customer

Sales person

increases

Takes place it

Takes

place it

Result

in

Internal agent

External agent

internal

agent

External

agent

Involves

EXHIBIT 2-10McKells Retail Store REAL Model: Step 5

REAL concepts serve as a template for identifying and describing the essential characteristics of operating events.

Resource Internal

agent

Event

Location (if needed)

Resource

Location

(if needed)

External agent (if needed)

Internal agent

External agent (if needed)

Event

ResourceIncrement (+)

ResourceDecrement (-)

ResourceIncrement (+)

ResourceDecrement (-)

ResourceDecrement (-)

ResourceIncrement (+)

ResourceIncrement (+)

ResourceDecrement (-)

EXHIBIT 2-11Partial REAL Diagram for Linked Business Process Example

Human Labor

Pay workers

Hire

Workers Cherry Bee

Store

Cash Hive

workers

Marc

Labor Acquisition/Maintenance/Payment Process

Packaged Honey

Collect Payment

Sell Honey

Cherry BeeStore

Cash Customer

Marc

Sales/Collection Process

Hive

Materials &supplies

Check hilves

Field Extract Honey

Honey in process

Package honey

Store Honey

Strain honey

Hive workers

Conversion Process

Supplybarn

Packaged Honey

Supply Barn

Purchase mat. & supplies

Store mat. & supplies Materials &

supplies

Vendor store

Marc

HiveWorkers

Supplies and Materials Acquisition/Maintenance/Payment Process

Cerry beestore

Cash

Pay for mat & supplies

Vendor

Call on customer

Negotiate Contract

Submit bid

Services

Provide services

Cash

Customer Representatives

Customer

Customer Payment

personnel

Receive payments

Janitor

EXHIBIT 2-15REAL Model of a services Process (Without relationship descriptors)

Greet victim

Assign room

Interview Victim

shelter

Issue clothing

Room

receptionist

Interviewer

Personal counselor

Provide foot

Inventory clerk

Discharge victim

Help set goals, identify resources

Issue personal Care items

Clothing

Personal care items

Food

Goals resources

sourcesVictim

EXHIBIT 2-16REAL Model of a Not-for-Profit Organization (Without relationship descriptors)

Fuel

Blast

Coal

Iron One

Limestone

Oxygen

Bake

Mix

Mill

Coke

Alloys

Pig iron

Steel ingots

Finished steel

Baker

Blast Furnace

Blast Furnace op.

Finishing Furnace

Finishing Furnace op.

Rolling Mill

Milling Operator

EXHIBIT 2-17REAL Model of a Manufacturing Process (Without relationship descriptors)

Hollander, A. S. Eric L. Denna, J. OwenCherrington.2000. AccountingInformation Technology, And BusinessSolutions. Irwin McGraw-Kill, New York-USA.