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8 CHAPTER 1 Introduction to Business Processes

Figure 1-4: A procurement process

In the preceding discussion a low inventory of materials was the trig-
ger for the process. This discussion illustrates the link between procure-
ment and the inventory and warehouse management process illustrated in
Figure 1-3. Figure 1-3 shows, however, that procurement could be triggered
by activity in other processes as well. The fi gure suggests at least three
alternative scenarios.
1. The material planning process could indicate that the company
needs to procure materials based on a forecasted demand for
products.
2. The asset management or customer service process could trigger
the procurement of a part needed to repair a machine or a product
previously purchased by a customer.

3. A customer order (fulfi llment process) could trigger the need to
buy something, such as raw materials or component parts needed
to manufacture the product.

PRODUCTION—MAKE
In the preceding discussion the company met the need that triggered the pro-
cess via external procurement; that is, it purchased the needed materials from
a vendor. Other times, however, a company uses the production process to
acquire needed materials internally. As we explained in the previous paragraph,
a customer order can trigger the production process. Alternatively, the mate-
rial planning process can trigger in-house production. Figure 1-5 illustrates
the case where the warehouse notices that its inventory of products is low.
Subsequently, it will request production. In turn, the production department
will approve the request. The approval authorizes the warehouse to release
the materials needed to complete production. Once the production depart-
ment has completed its task, the warehouse places the fi nished goods into stor-
age. Note that this last step in the production process, which is concerned with
the storage of the fi nished goods, could trigger IWM processes.

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