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Q3-5 How Do Business Processes Generate Value?

Note, too, that while none of these three processes involve a customer-service activity, customer
service plays a role in other business processes
Also notice that activities get and put data resources from and to databases. For example, the
purchase-drone parts activity queries the raw materials database to determine the materials to
order. The receiving activity updates the raw materials database to indicate the arrival of materi-
als. The make-drone activity updates the raw materials database to indicate the consumption of
materials. Similar actions are taken in the sales process against the finished goods database.
Business processes vary in cost and effectiveness. In fact, the streamlining of business
processes to increase margin (add value, reduce costs, or both) is key to competitive advan-
tage. You will learn about process design when we discuss business process management in
Chapter 12. To get a flavor of process design, however, consider Figure 3-9, which shows an al-
ternate process for the drone manufacturer. Here the purchase-drone-parts activity not only que-
ries the raw materials inventory database, it also queries the finished goods inventory database.
Querying both databases allows the purchasing department to make decisions not just on raw
materials quantities but also on customer demand. By using this data, purchasing can reduce the
size of raw materials inventory, reducing production costs and thus adding margin to the value
chain. This is an example of using a linkage across business processes to improve process margin.
As you will learn, however, changing business processes is not easy to do. Most process design
requires people to work in new ways and to follow different procedures, and employees often resist
such change. In Figure 3-9, the employees who perform the purchase-drone-parts activity need to
learn to adjust their ordering processes to use customer purchase patterns. Another complication
is that data stored in the finished goods database likely will need to be redesigned to keep track of
customer demand data. As you will learn in Chapter 12, that redesign effort will require that some
Figure 3-9 application programs be changed as well.
Improved Material Ordering
Process

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