The Fundamental Rethinking Processes Of BPR

BPR is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service and speed. The major benefit of BPR is that it eliminates redundancies of work and improves accuracy. BPR can transform the basic ways that people and departments work and allow users to work better and often to produce higher quality work. BPR would enable smooth restructuring process of business processes at Velogic Airlines Limited. The chapter discusses BPR process, implementation method and the changes those may have to be made for upgrading the existing ERP system at Velogic Airlines Limited. Details about the modules related to Human Resource and Payroll System, Finance and Accounting System and Inventory Management System have also been elaborated in the chapter.

Business Process Reengineering (BPR) is the organizational procedure required to align people, processes and technology with strategies to accomplish business integration. It can be considered as taking a business in its current state and forming an organizational and operational blueprint to redirect skills, polices, information (data), cultural values, organizational structures, processing and incentives towards targeted improvements15. [1] 

Velogic Airlines Limited are now inspiring to enhance their airline by coordinating their business processes more closely and in some cases integrating these processes so that they can focus more on efficient management of resources and customer service. The oracle application would not require specific non-intuitive software to be installed. Virtually all-new systems available in the market today run in industry standard web browsers, thus reducing software and training costs. Moreover with the emergence of new competitors they need to enhance their service level and be a step ahead of competitors. A powerful type of organization change is brought forward – the business process reengineering (BPR) also known as Business Process Improvement (BPI) or business process redesign.

From the early 1990’s it became familiar for management in many organizations to focus their attention inwards and to consider how proficient business processes can be redesigned or re-engineered. Business Process Re-engineering (BPR) is the popular term for reutilisation of organizational procedures and structure following the introduction of new information technologies into an organization. It is the fundamental rethinking and radical redesign of business processes to accomplish impressive improvements in critical contemporary measures of performance, such as cost, quality, service and speed.

Objectives of BPR

A more significant kind of organizational change is business process reengineering, in which business processes are analyzed, simplified and redesigned. Using information technology, organizations can rethink and streamline their business processes to improve speed, service, and quality. Business Process Re-engineering reorganizes workflows, combining steps to cut waste and eradicating repetitive, paper-intensive tasks (sometimes the new design eliminates jobs as well). It is more ambitious than rationalization of procedures, requiring a new vision of how the process is to be organized [2] 16.

BPR Advantages over Automation and Rationalization

The evolution of the information-processing pattern over the last four decades to build intelligence and administer amendments in business functions and processes has generally progressed over three phases:

1. Automation
2. Rationalization
3. Business Process Re-engineering

Each of them carries different rewards and risk.

The most common form of IT-enabled organizational changes is automation. The first applications of information technology implicated assisting employees with achieving their tasks more efficiently and effectively.

A deeper form of organizational change – one that follows quickly from early automation is rationalization of procedures. Automation frequently reveals new bottlenecks in production and makes the existing arrangement of procedures and structures painfully large. Rationalisation of procedures is the streamlining of standard operating procedures more efficient.

BPR, ERP AND IT

In the majority of cases, information technology powers BPR. Formerly, information technology was used to facilitate companies automate existing business processes but now, technology is being used to transform those processes fundamentally. Current developments in information technology have not only made BPR possible on a radical and extensive scale, but also more efficient. The merger of the two concepts has resulted in the latest concept, namely, business engineering (BE). BE combines the innovations of information technology with BPR’s focus on better business processes. The heart and soul of BE lying in radical, process-oriented business solutions, which have been greatly enhanced by the information technology of client/server computing. ERP is a tool, which acts as a facilitator of BE to mould business processes efficiently [3] 17.

While the objectives of BPR have not been altered by information technology, they have gained an extra dimension in business engineering. The main thrust of BE is the efficient redesign of a company’s value-added chains. By definition, value-added chains are the set of connected steps running through a business which, when quickly and efficiently completed, add value to both, the company and the customer. With the appearance of enterprise software systems, information technology has become a business-modeling vehicle that can assist in the redesigning of those processes.

Method of implementation

Before deciding upon a BE project, the management, IT users, and the IT experts must get together to chart out Velogic Airlines Limited goals and identify the key processes that affect its success. Next, those processes should be reengineered to improve their effectiveness. At this point, the BE team must establish how information technology can enhance the reengineered process. Other potential benefits of information technology should be identified, such as its role in developing a business strategy to satisfy customer requirements. The BE team must maximize and streamline business process and access whether they should be changed or perhaps thrown out, before they apply technology to them.

Velogic Airlines Limited has different kinds of information systems that support different functions, organizational levels, and business processes. Most of these systems are built around different functions; business units and business processes that do not “talk” to each other. Because of the challenges mentioned earlier the company has decided to set up an ERP system. Oracle Application consist of a set of interdependent modules for applications such as sales and distribution, financial accounting, investment management, and human resources that allow data to be used by multiple functions and business process for more precise organizational coordination and control. The modules can communicate with each other directly or by sharing a common repository of data. ERP helps to support organization-wide process coordination and integration. It creates an integrated organization-wide platform to coordinate key internal processes of the firm. They address the issue of organizational inefficiencies created by isolated islands of information, business processes, and technology.

Information that was previously split in different applications can seamlessly flow throughout the company so that business processes in finance, accounts; human resources, payroll and inventory can share it. The systems collects data from various key business processes and stores the data in a single comprehensive data repository where they can be used by other parts of the business. Managers emerge with more precise and timely information for coordinating the daily operations of the business and the company wide view of business processes and information flows.

Select the process & appoint process team for restructuring the process.

Business processes are simply a set of activities that transform a set of inputs into a set of outputs for another person or process using people and tools.

The strategic processes:

• Account Payable/Receivable
• Client Record
• Employee Record
• Training plans
• Inventory

Separate systems were built over a long period of time to support discrete business processes and discreet business functions. The organization’s systems rarely included vendors and customers. Managers also required IT support in order to create accounting and inventory reports, a labour- and time-intensive project that complicated the estimation of future inventory levels and product availability. In many cases, these simple reports took days to complete. It was difficult to assemble data to get an overall picture of the organization’s operations.

Facing increasing accounting and administrative needs, the company wanted to streamline business practices and provide better visibility into financial information. ERP systems integrate the key business processes of the company into a single software system that allows information to flow seamlessly throughout the organization. These systems focus primarily on internal processes but may include transactions with customers and vendors.

The new system proposes to give employees an easy-to-use interface for creating reports, tracking sales and customers, and searching inventory lists. Prime benefits from BPR are:

• positive effect on service quality – the entire organization can respond more efficiently to customer query and deliver information on time
• labor resources (improved employee morale and productivity)
• Customer satisfaction (quicker response to customer requests).
• elimination of bottlenecks and delays between steps
• provide simultaneous access to documents by multiple departments/people
• allow for quick, simple access to information
• elimination of redundancies of work and improves accuracy
• decreasing defects, errors

Business engineering makes companies more customer-focused and responsive to changes in the market. The organisation achieves these results by reshaping corporate structures around business processes. BE implements change not by the complete automation of a business but rather by the redefinition of company tasks in holistic or process-oriented terms. Only companies with innovative staff, products, and services as well as short development cycles, will be able to retain the market or by hope to get a bigger slice of the pie. By maximizing individual and team creativity and emphasizing a process-oriented approach, BE enables a company to realize its goals.

Examples of business processes

With the current practice Accounting and Finance department was not able to tell what the items available in inventory were and when they were ordered without consulting the inventory department. All entry for invoices, credit notes, accounts receivable and checks had to be continually checked with each department before entering data.

Human resource & Payrolls had to send report for all payments. Transferred of information was done on paper and then each department made the necessary entry or adjustment. There was no control over data transmitted and on items ordered.

The traditional system also affected employee productivity. Staff members struggled to use online resources to complete daily tasks. Sales teams had difficulty tracking customer history and face difficulty to extract data from the system. It was time consuming to use the traditional system resulting delay in work and customer dissatisfaction, as they could not get the information they requested on time. After reengineering process all departments will be interconnected. Transfer of information will occur more smoothly and on time.

The process will be as follows:

When a reservation officer enters a customer reservation, the data flows automatically to others in the company who need to see them. The ERP system stores the reservation information where customer service representatives can track progress and know how many seats are available. Updated sales data automatically flow to the Accounting and Finance department. The system transmits the information to calculate the company’s balance sheets, accounts receivable and payable ledgers and available cash. Management can view up-to-date minute data on sales and inventory at every step of the process. With the present system Accounting and Finance department get all the information automatically for instance all checks are printed now instead manually prepared. For any information required each department just have to verify on the system and it is automatically processed whereas before for all information they have to consult respective departments. Now there will be better control and resource management.

After reengineering, staff members can perform customer service-related and inventory-related tasks without having to open multiple programs. Role-based security features keep sensitive information from employees who are not authorized to view it. On the other hand, managers and employees can gain access – without having to call IT support – to the information that they need to perform their jobs well. Employees have access to company information from a centralised point-of-entry. Through powerful analytics-reporting tools, Velogic Airlines Limited decision makers have a way to better manage operational matters, such as reservation fulfillment and inventory levels and improved management with real-time data, such as accounts receivable.

IT Requirements

A commonly disregarded area is the issue of information technology change. Often, the IT infrastructure changes required to implement a new ERP Oracle are not given high priority, which these technology issues otherwise, deserve. Undoubtedly, business issues should drive implementing ERP Oracle, not technology that improves business processes. Ignoring the preparation and education new information technology requires is asking for trouble. Further, IT personnel often must make the technology transition quickly. If the technology and infrastructure transition are not done well, the project, at the very least, will be delayed.

Oracle Technology

Oracle Applications include the license usage for Oracle 9i RDBMS and Oracle 9iAS Enterprise Edition software [4] 18.

Oracle 9i

Oracle Applications run on Oracle technology. Oracle RDBMS 9i is the market leader in reliable and scalable database technology that continuously upgrades its products upgrading to the latest version is made easy with subscription to the Oracle Technical Support Service. Oracle RDBMS is the market leader with a market share of 33.8% compare to IBM which maintained a steady 30% portion of total database sales. Microsoft’s SQL Server product cornered 13.9% of the market.

Oracle is based on three-tier architecture. This is different from the traditional client server architecture in the way that the application instead of residing on the client now resides on the middle-tier i.e. the Application Server. This enables access of application from the client-end, which just needs to have a web browser. The three tiers of Oracle’s architecture are as follows:

Presentation tier (or user interface) – This tier interfaces with the user and consists of hardware such as a PC or workstation and a web browser. This may consist of any number of client machines.

Functionality /Business Logic tier- This tier provides functionality to the end users and contains the business logic (application). It provides the bridge between the first and the third tiers.

Data tier – This tier includes the database that contains all the data of the organization and this is encapsulated from the end users.

This three-tier architecture can work on the Intranet as well as over the Internet. A typical diagrammatic representation of the three-tier architecture of Oracle is as follows:

Figure 4 Oracle’s 3-Tier Architecture

The various software components at the three tiers are as follows:

• Client Tier Operating System (Windows XP/7)
• Java enabled web browser (Internet Explorer 8.0/higher or Mozilla Firefox 4.0 of higher)
• Middle Tier Platform – Windows NT 4.0/Windows 2000/SUN Solaris
• Oracle IAS
• Developer 2000 Server 2.1 (Forms & Reports Server – required for ERP component)
• Database Tier Platform – Windows NT 4.0/SUN Solaris
• Oracle 9i Workgroup server

Technical Strengths

Oracle product being based on three-tier architecture enables resource intensive components to run on Middle tier thereby moving bulk of the processing load away from the client. Oracle Application server has built-in components which deliver high degree of scalability and consist of balancing, logging, automatic failure recovery, security, directory, and transaction components. The ERP based on Oracle is highly scalable and robust to handle volumes of client’s requests concurrently. The Java Servlet Engine runs in a multithreaded environment and can process numerous client requests at one go.

Hardware Infrastructure

Server – Sun Fire x4540

The Sun Fire x4540 storage server delivers 2 to 3 times the storage density of traditional solutions the maximum data throughput at 3 GB/sec from disk to memory, and 30% to 50% power savings at almost half of the total cost [5] 19.

The specifications of Sun Fire x4540

620

Software

Oracle database will be the relational database management system installed on the server. The actual Oracle 8i will be upgraded to Oracle 9i standard Edition.

Operating System

Solaris 9 Operating Systems

The Solaris 9 Operating environment is intended to sustain Multiprocessing & multithreading. SUN Microsystems servers are designed from the ground to have Symmetric Multiprocessing. From Entry level workstation to SUNFire 15k (106 processors), SUN Microsystems employs the same architecture (UltraSparc) and Solaris OS. Also, Solaris OS is less prone to Virus attacks unlike other Operating systems [7] 21.

The Solaris platform supports;

• One million simultaneous processes on a single system
• Up to 128 CPUs on a single system
• More than four billion network connections
• 32- and 64-bit applications
• Two-, four-, and eight-node clusters
• IPv4 and IPv6 network addresses
• Up to 512 CPUs in a clustered environment

Client

Hardware

The client should be linked to the server through a local area network and have the following minimum configuration:

1 processor core 2 duo 3.00 GHz

1 GB RAM

320 GB HDD

Software and Operating System

The client PC should be loaded with Explorer 8.0/higher or Mozilla Firefox 4.0 and should have one of the following OS: Windows XP, or Windows 7.

Communications

Computers and communications equipment can be connected in networks for sharing voice, data, images, sound, or even video. It is to be noted that the number of user at the company will be 60 persons. In the existing environment 30 data points are being used and with speed up to 10 mbps (megabits per second), and the proposal is to move to 100 mbps, using 60 data points, assuming that their will be 60 users. The company will need cabling whose speed is up to 100 mbps at an affordable price. Secondly, there are routers device that forwards packets of data from one LAN to another. Local Area Network (LAN) are recommended for applications transmitting high volumes of data and other functions requiring high transmission speeds, including video transmissions and graphics. LANs often are used to connect PCs in an office to shared printers and other resources or to link computers and computer-controlled machines in factories [8] 22.

Application Software

Oracle Financials for Accounting Software

Oracle Integrated Payroll/HR System

Application supporting BS7799 Information Security Standard

Information is an asset that, like other business assets, has value to an organization and consequently needs to be suitably protected. Information Security protects information from a wide range of threats in order to ensure business continuity, minimize business damage and maximize return on investment and business opportunities.

Information can exist in many forms. It can be printed or written on paper, stored electronically, transmitted by post or by using electronic means, shown on films and spoken in conversation. Whatever form the information takes, means by which it is shared or stored, it should always be appropriately protected.

Information security is characterized as the preservation of:

Confidentiality: ensuring that information is accessible only by those authorized to have access;

Integrity: safeguarding the accuracy and completeness of information and processing methods;

Availability: ensuring that authorized users have access to information and associated assets when required.

Figure 5

Source: BS 7799-2/2002: ISMS Specifications with Guidance for Use

Increasingly, organizations and their information systems and networks are faced with security threats from a wide range of sources, including computer-assisted fraud, espionage, sabotage, vandalism, fire or flood, sources of damage such as computer hacking and denial of service attacks have become more common, more ambitious and increasingly sophisticated.

The following diagram suggests a structure for the ten domains of the standard. Each domain deals with a separate topic built around administrative, technical and physical measures and driven from the top down, in other words such that its impact is felt from the management level all the way to the operational level.

The 10 main control points of BS 7799 are:

1. Security Policy – To provide management direction and support for information security.

2. Organizational Security – To manage information security within the company

3. Asset Classification and Control – To maintain appropriate protection of corporate assets

4. Personnel Security – To reduce risks of human error and ensure that users are aware of information security threats

5. Physical and Environmental Security – To prevent unauthorized access to information

6. Computer & Operations Management – To ensure the correct and secure operation of information processing

7. System Access Control – To control access to information

8. System Development and Maintenance – to protect the confidentiality, authenticity and integrity of information.

9. Business Continuity Planning -To ensure business continue to operate from the effect of a disaster

10. Compliance – To avoid breaches of any criminal or civil law

Technical Design Requirements

The current system runs as three distinct and separate databases (Human Resource & Payroll system, Finance & Accounts system, and Inventory Management system). Currently, Velogic Airlines Limited has separate, elements in all three systems; examples include the definition of departments and divisions, which is handled manually now. While they try to maintain consistency, the systems do not demand it, so they cannot easily pull department costs across the Human Resource & Payroll, Finance & Accounts, and Inventory databases. Departments should be defined only once and used by all data elements. Similarly, Human Resource data on employees should only be defined once on a master screen and all databases use this same information.

The proposed modules for ERP are:

• Human Resource and Payroll System
• Finance and Accounting System

Inventory Management System

Systems Interconnection Diagram

The figure below shows the interconnection of the three modules and gives a brief description of the systems that will support Velogic Airlines Limited main activities and their requirements.

Payroll System

Human Resource and Payroll System

Human resource and payroll systems help business develop staffing requirements; identify potential new employees; maintain employee records; track employee training, skills, transportation (allowances), salary, overtime and job performance; and help managers develop appropriate plans for employee compensation and career development. ERP systems help the company coordinate their staffing levels with sales activities and financial resources.

Employee Details

Basic Information on: Surname, Name, Maiden Name, Marital Status, Gender,

Date of Birth, Age, NID, Social Security Number, Telephone Number, Residential Address.

Manage Recruitment process

Leaves management

Sick Leaves, Casual Leave, Computation of Annual Leaves, Refund for Contract Officers, Maternity Leave: Study Leave, Leave without Pay, Leave with Pay: Record and Listing, Miscellaneous Leaves: e.g. Injury / Special

Leaves: Record and Listing

Staff Development Plan

Database of qualifications: Professional! Academic/Vocational possessed by Staff. Record of all training programmes provided to Velogic Airlines Limited staff.

Performance Management

Monitor employee competencies for career planning.

Payroll

– Basic Salary + Gross Salary

– Allowances paid by Type, e.g. Acting / Responsibility, etc

– Overtime paid

– Record of all Staff having received Incremental Credits

– Record of all Staff eligible to Uniform Allowances

– Deductions made

– Car Loan entitlement: Staff entitled to Car Loan and Amount

– Other categories of staff eligible to Car Loan

2) Finance and Accounting System

Finance and accounting systems help firms keep track of their assets and fund flows. ERP systems integrate financial information with productions and sales information so that the impact of transactions can be immediately reflected on the company’s balance sheets, accounts receivable and payable ledgers, and reports of cash flows. ERP systems will help to obtain up-to-the-minute reports of the company’s overall financial performance. The accounting system should be operated on an integrated standard accounting package incorporating the following modules/functions: [23]

• General Ledger
• Purchasing
• Accounts Payable
• Accounts Receivable
• Fixed Assets Register

A. General Ledger

The system should also provide for:

• Unlimited number of sets of accounts for as many divisions as required.
• Balance forward facility creating new year open balances
• All journal entries should automatically balanced
• Cash movement report to show the net in flow/out flow of cash
• Financial statements and reports such as the Profit and Loss, Balance Sheet and Sources and
• Support for VAT Tax system. Rate of VAT must be more definable.
• The general ledger system should allow analysis of transactions by cost ­centres at division as may be appropriate.

B. Purchasing

The purchase order processing system should integrate with the general ledger, purchase ledger and stock control systems. The system should provide for:

• identification of suppliers by name, product, order number, etc
• monitoring of purchase orders
• checking of purchase invoices against orders and deliveries for quantities and price
• report on outstanding orders, purchase and overdue deliveries
• link multiple purchase orders or Goods Received Notes to a supplier invoice

C. Accounts Payable

The purchase ledger should integrate with the general ledger and the purchase order processing systems. It should provide for:

• Unlimited number of suppliers accounts
• Recording and analysis of credit purchases returns and adjustments in accordance with user defined
• Analysis codes
• The recording of payment due date for each purchase invoice for settlement within credit period
• Printing of checks as per Velogic Airlines Limited format
• Support for VAT Tax system. Rate of VAT must be more definable.

D. Accounts Receivable

The Debtors Ledger system should integrate with general ledger system and provide for:

• Unlimited number of customers accounts
• The recording and analysis of credit sales in accordance with user-defined analysis codes
• Debtor classification by category
• Automatic generation of invoices
• Support for VAT Tax system. Rate of VAT must be more definable.

E. Fixed Assets Register

It is desirable that the Fixed Assets register be integrated with the general Ledger but, this is not an essential requirement. The system should provide for the following:

• User defined fixed assets codes as well as analysis codes for divisions, location, and types of assets, etc.
• Calculation of depreciation using either straight line or written down value methods
• Re-evaluation of assets
• Memorandum entries for each asset to keep track of the asset’s profile from acquisition to disposal in terms of maintenance, repairs, insurance, down-time replacement date, on loan

3). Inventory Management System

Since the inventory system is a perpetual system, all transactions are posted at the time of entering, regardless of the transaction date. Therefore, if an inventory valuation is required for month-end, this report must be produced at the last working day after all current month transactions are posted and before any transactions for the next period are entered. The ERP system is designed to provide complete inventory capabilities. The keystone is the system flexibility inventory master file design. The inventory master file provides a complete description of each item as well as numerous fields for retaining, accumulating and reporting pertinent data about each item. Included in each item record are fields for periodic-to-date figures and all transactions affecting the item.

• Item Detail
• Storage
• Maintenance
• Reorder
• Inventory Purchase Account
• Inventory Trade Discount Account
• Inventory Control Account
• Cost of Goods Sold Account
• Issue Number and Transactions

The stock control system should be integrated with the general ledger and purchase ledger processing systems. The system should be able to cater for many divisions as concerned

• Unlimited inventory items
• Receipts from and returns to suppliers
• Issues to and returns from various division
• Stores adjustments (i.e. following physical stock take)
• User definable codes for each stock item
• Monitoring and reporting of stock movements including slow moving items and stock ageing
• Stock price listing according to products, product group s location etc.
• Reports to identify slow moving inventory items

Overall Reports Generated by the Systems

• Enrolment – full time &part time staff
• Profile of staffs with personal details such as name, age, address,
• Attendance of staff
• Punctuality of staff
• Records of disciplinary actions against staff
• Records of transfer / dropouts
• Performance of staff
• Overtime
• Contact hours of staff