Sunday, June 19, 2005

BPM Series: ERPs are not enough - Part II

Continued from ERPs are not enough! - Part I

BPM systems make possible end-to-end process management across the enterprise

A business process can be defined as a series of activities (transactions) carried out to produce an output by consuming inputs. Business process has to deal with information flow logic, control flow logic and transaction logic. Control flow logic determines the sequence of activities, information flow logic determines input and output information requirements for each activity, and the transaction logic determines values of output.

Take the example of Sales Order process, which consists of following activities:
- Generation of Order document by sales office executive
- Generation of Shipping document by warehouse executive
- Generation of Billing document by accounts executive

This process requires enforcement of credit control by sales executive. For example, if the sales order exceeds the credit limit, a special approval is required from the sales manager before warehouse executive can generate shipping document. The sales manager in order to take the decision needs the information on order details, credit limit and credit history before he or she could take the decision.

As part of the Order document transaction, the sales office executive has to compute order value based on products ordered, no. of units ordered, sales price, discounts, duties & taxes applicable. The sales office executive also has to provide the delivery date based on the availability of stock, production schedule and dispatch schedule.

In this Sales Order process, control flow logic determines the activity after Generation of Order document, which could be either Generation of Dispatch document or Approval from Sales Manager depending upon credit control. Information logic determines what information is to be provided (input) to and obtained (output) from the sales manager. And Transaction logic determines the value of sales order and delivery date or the decision by the sales manager.

If this sales order process is to be automated or IT enabled, then transaction logic for sales order can be maintained in ERP system and the logic for the delivery date (ATP) can be maintained in SCM system. However, if the entire process logic (control flow + information flow + transaction) is incorporated in ERP or SCM system, then IT brains have to spend huge development and integration efforts in extending the workflow module of the ERP or SCM system to cover the scope of the entire process. Such an approach can be considered as a one-off exercise and is not recommendable if organization aims to automate and manage business processes across the enterprise.

BPM systems, on the other hand, allow users to easily build control flow and information flow logic. Thus they provide a process automation & management layer independent of the enterprise information systems like ERP, SCM, or CRM systems. This allows organizations to manage enterprise processes end to end.

In summary, BPM systems offer benefits to business as well IT users in the automation and management of business processes across the enterprise and end-to-end.

1 comment:

  1. Nicely you have explained the concept of BPM. But somehow Why BPM over ERP or SCM is not coming out clearly. And that is where the confusion lies for everyone. At the end of the day both (BPM and ERP) talk of the something (If watched closely). Only difference that one may try to look into this is Process Logic vs. Transactional Logic. BPM product provides strong Process logic features and ERP product provides strong Transactional Logic for a Business Function.

    Taking your example of Sales Order Processing, a solution build on BPM product would certainly automate triggering of notification event. Even in ERP (Products with new features) with minimum effort same notification logic could be build. So my question would be, do I still need to go for BPM product implementation?

    My view - The good point of differentiation would be how do identify best fit scenario for a BPM or for an ERP implementation. In some cases ERP with fairly 'OK' Process Logic would be good for a BPM type implementation and on the other hand may not be. So how does one identify such type of cases? What should be the Business Case for BPM vs. ERP implementation?

    When we talk about BPM, we look at Organization as an Enterprise and consider all function as part of Enterprise. But when we talk about ERP, we narrow down on a business function.Both BPM & ERP address different set of business requirement and are best for specific solution spectrum.