Small Business Systems


A business process is a set of tasks or activities that produce desired outcomes. Every process is triggered by some event, such as receiving a customer order or recognizing the need to increase inventory. The columns in the figure represent different parts, or functional areas, within an organization, such as sales, warehouse, manufacturing, and accounting. Thus, the specific steps in the process are completed in different functional areas. For example, when a retailer (customer) places an order for bicycles, the manufacturer (seller) uses a specific process to ensure that the correct Business Processes 5 products are shipped to the customer in a timely manner and that payment for the order is received. 

These process steps can include validating the order, preparing the shipment, sending the shipment, issuing an invoice, and recording the receipt of payment. The sales department receives and validates the customer order and passes it on to the warehouse, which prepares and ships the order. The accounting department handles the invoice and payment steps. This is a very simplistic example. However, it highlights the fact that processes consist of interdependent steps that are completed in different parts of the organization.

 The procurement process (buy ) refers to all of the activities involved in buying or acquiring the materials used by the organization, such as raw materials needed to make products. 

• The production process (make) involves the actual creation of the products within the organization. Whereas the production process is concerned with acquiring needed materials internally (by making them), the procurement process is concerned with obtaining needed materials externally (by buying them). Each is appropriate for different types of materials, as we will discuss later in the book.

• Finally, the fulfillment process (sell ) consists of all the steps involved in selling and delivering the products to the organization’s customers. Closely related to buying, making, and selling are four processes used to design, plan, store, and service products. Once again, organizations use specific terms for these processes. 

• The lifecycle data management process (design) supports the design and development of products from the initial product idea stage through the discontinuation of the product. 

• The material planning process ( plan) uses historical data and sales forecasts to plan which materials will be procured and produced and in what quantities. 

• The inventory and warehouse management (IWM) process (store) is used to store and track the materials. 

• The asset management and customer service processes (service) are used to maintain internal assets such as machinery and to deliver after-sales customer service such as repairs. Going further, two support processes are related to people and projects. 

Human capital management (HCM) processes (people) focus on the people within the organization and include functions such as recruiting, hiring, training, and benefits management.

Project management processes (projects) are used to plan and execute large projects such as the construction of a new factory or the production of complex products such as airplanes. All these processes have an impact on an organization’s finance. This brings us to the last two processes, which track the financial impacts of processes. 

Financial accounting (FI) processes (track–external ) track the financial impacts of process steps with the goal of meeting legal reporting requirements—for example, the Internal Revenue Service (IRS) or the Securities and Exchange Commission ( SEC). 

Management accounting or controlling (CO) processes (track–internal ) focus on internal reporting to manage costs and revenues.

Each of these processes can include numerous subprocesses. For example, each of the components of HCM, such as recruiting and benefits management, is itself a process. Similarly, IWM can include complex processes for receiving materials from a vendor and shipping products to a customer

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