Accounting, Information Technology, and Business Solutions-Chapter 2- Hollander

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Chapter 2-Page 1

Chapter 2: Modeling Business Processes

Review Questions

R1. How can using a common language enable us to help organizations define their business processes?

If we want to help organizations define their business processes, we need to use a language that allows us to talk about all aspects of business processes - not just the financial aspects of some business events. The language we present in this chapter is based on understanding and modeling business processes using REAL Business Process Modeling (or REAL BPM). This common

language is intended to help you focus on describing the world around you so you can learn more about business processes, their related information processes, and the decisions associated with them.

R2. What is a model? What are the strengths and weaknesses of modeling?

The chapter is based on the concept of modeling a system before you build and implement it. The chapter discusses modeling approaches, thus it is important to think about what a model is and how it benefits you in building systems.

A model is a pattern or scaled object that represents some existing object. Modeling a system before building allows you to better understand the phenomenon you are trying to support with an information system. In our case, those phenomena are business processes, the related information processes, and the decisions associated with them. You can use your model as a blueprint or roadmap for developing the actual system. Modeling is wonderful if you choose the proper phenomenon to model and if your model is well constructed and represents a thorough understanding of the phenomenon. Modeling is not so beneficial if you model the wrong phenomenon or if you model is poorly constructed.

R3. What is a business process?

Business processes are the activities associated with providing goods and services to customers. Sample business processes include acquiring and paying for various resources (e.g. financing, human skills, materials and supplies, and plant and equipment); converting resources acquired into goods and services for customers; and delivering goods and services to customers and collecting payment. Just like a play that is comprised of four separate acts, business processes are comprised of a discrete, related series of business events that management wants to plan, execute (control), and evaluate. Thus the term business process implies a group of business events.

R4. What is a business event?

A business event is a single business activity within a business process. Examples of business events include paying employees, visiting customers, repairing machines, or training employees.

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When business events are executed, they trigger the need for information processes to record (document) business event data.

R5. Describe the relationship between business processes and events.

Just like a play that is comprised of four separate acts, business processes are comprised of a discrete, related series of business events that management wants to plan, execute (control), and evaluate. Thus the term business process implies a group of business events, while the term business event implies a single business activity within a business process.

R6. What is an information process? How are information processes triggered?

Information processes include three activities: recording data about business events, maintaining other reference data that are important to the organization, and reporting useful information to decision makers. Each business event triggers a recording process needed to document the event. Occasionally, things happen which are important to an organization (e.g., a customer moves or an employee gets married) that trigger maintenance processes. Recording and maintaining processes create and maintain a repository of data that documents and describes an organization's business processes, including the people and resources associated with the processes. This data repository, or collection of data, is used to generate output for information customers. Reporting, the most demanding of the information system responses, provides information and measurements to support decision making activities (planning, controlling, and evaluating). Decision makers trigger reporting processes when they request information.

R7. What is the difference between a business process and an information process?

A business process denotes business actions made by an organization (e.g. the organization sells products and collects cash or the organization purchases products and pays vendors) in an effort to provide goods and services to customers. Information processes are the mechanical or clerical data collection, storage, and output activities of the organization. [A business process is what an organization does, while an information process documents what an organization does.]

R8. How are business and information processes related?

Business process events trigger information processes to record and maintain business data. While performing activities in a business process, decision-makers need data to support their decision. This decision making triggers the need for information processes to report useful information. Decision-makers also need information process reporting to evaluate business processes.

R9. Describe three types of information processes.

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Information processes include recording data that describes an organization's business processes, maintaining or keeping the data about an organization relevant and up to date, and reporting useful information to those who execute and evaluate the business processes. For example, suppose you wanted to document a sale to a customer. You would perform a recording information process to document the sale in the organization's database. If you had a customer change of address or name change, you would perform a maintenance information process to update the address or name

change, so that the data stored in the database remains valid and current. If someone wanted you to provide output about total sales, or customers involved in sales, you or other information users would execute a reporting information process to generate and display needed outputs.

R10. What is a data repository?

A collection of stored data.

R11. List the three general types of business processes common to every organization. Acquisition/Payment Process Conversion Process Sales/Collection Process

R12. Describe the acquisition/payment process. What are the organizational objectives of this process?

List four sample acquisition/payment process events.

The acquisition/payment process includes business events involved in acquiring, paying for, and maintaining the goods and services needed by an organization. Objectives of this process include acquiring only those goods or services that an organization needs and can afford, receiving only those goods and services actually ordered or requested, paying only for goods and services actually received, and making sure that the goods and services acquired are properly maintained and

available when needed. Organizations can acquire a wide variety of goods and services including: Human resources (e.g., people's time and skills), Financial resources, Supplies, Inventories, Property, plant, and equipment, New ideas (e.g., research and development), or

Miscellaneous services (e.g., legal, power, telephone, protection, medical, financial, or custodial).

Regardless of the type of good or service being acquired, the following are typical events in the acquisition/payment process: Request the good or service, Select a supplier, Order the good or service, Receive the good or service, Inspect the good or service,

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Store and/or maintain the resource, and Pay for the good or service.

If you analyze a variety of acquisition/payment business processes, you will notice that some organizations may order the events differently, may use a subset of the events, or may add more detailed events. Nonetheless, the basic nature of the process is fairly stable across organizations and resources.

R13. Describe the conversion process. What are the organizational objectives of this process? List four

sample conversion process events.

The conversion process focuses on converting goods and services acquired into goods and services for sale. Conversion processes across, or even within, organizations are very diverse and depend on the type of good or service being produced, the technology and resources utilized, the restrictions of regulators, governments, society, or customers, and the preferences of customers and management. Some of the more general types of conversion processes include: Assembling, Growing, Excavating, Harvesting, Basic manufacturing (e.g., metals, woods, and chemicals), Finished manufacturing (e.g., tools, instruments, and components), Cleaning, Transporting, Distributing, Providing (e.g., power, water, protection, and communication), Educating, or Discovering (e.g., research and development).

The diversity of conversion processes makes it difficult to propose a single generalized conversion process. Assembling a toy car is vastly different from defending a client in court or discovering a cure for a crippling disease. Furthermore, any one organization may utilize more than one type of conversion process to generate unique goods and services for customers. Nonetheless, at the heart of any conversion process is a sequence of business events that serves to convert goods and services acquired into goods and services for customers.

R14. Describe the sales/collection process. What are the organizational objectives of this process? List four sample sales/collection events.

The sales/collection process includes the sequence of events involved in delivering goods and services to customers for payment. Essentially, the sales/collection process is the mirror image of the acquisition/payment process. Whenever one organization or individual acquires and pays for goods and services, someone else is selling the goods or services and receiving payment. Although there is some diversity across the types of goods and services sold, the basic process typically involves the following events: Receive an order for goods or services, Select the good or service to be delivered,

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Inspect the good or service to be delivered, Prepare the good or service for delivery, Deliver the good or service, and Receive payment for the good or service.

As with the acquisition/payment process, some organizations may order the events differently, may use a subset of the events, or may add more detailed events. Nonetheless, from an event perspective, the basic nature of the sales/collection process remains fairly constant across organizations and industries.

R15. Are the various business processes related or linked? Explain.

Business processes are linked together in two ways: by sharing common resources or by an event in one process triggering an event in another process. For example, the Receive Merchandise event (part of the acquisition/payment process) and the Ship Merchandise event (part of the sales/collection process) are linked by the common resource Merchandise. The Receive

Merchandise event increases the quantity of Merchandise on hand, while the Ship Merchandise decreases the quantity on hand. Another example of a linking resource is Cash. Cash is the

resource involved in the Receive Payment event (the sales/collection process) and provides funds to perform the Pay Vendor event (the acquisition/payment process).

Alternatively, the sales/collection and conversion processes are closely linked by events. An Enter Customer Order event (part of the sales/collection process) will trigger the need for a Provide Service event (part of the conversion process). Furthermore, Provide Services event (part of the conversion process) triggers Receive Payment event (part of the sales/collection process).

R16. What is an extended enterprise process?

Extended enterprise processes are business processes and events that span across organization boundaries.

R17. How do you determine the scope of a business process model?

In your model, you should define the scope to the business processes and events that an organization wants to plan, execute (control), and/or evaluate.

R18. Explain what is meant by a primary value activity.

These are the events that create customer value and provide organization distinctiveness in the marketplace. They are viewed as the critical activities in running a business.

R19. Explain what is meant by a support value activity.

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These facilitate accomplishing the primary activities.

R20. What is a learning organization?

Learning organizations are constantly searching for innovative ways to improve their business

processes. Some people believe an organization’s ability to learn may be \"the single most important factor for creating a sustained competitive advantage.\"

R21. How far do you go when decomposing business processes into business events?

The extent to which business processes should be decomposed into business events is to the level organization members and leadership want to plan, execute, and evaluate. This implies that when you list the events that comprise a business process, you have included all events that an organizations wants to either plan for, control execution of, or evaluate.

R22. List the essential characteristics that define business events.

Defining the essential characteristics of business events involves answering five questions: 1. What happened? 2. When? 3. What roles are performed and who/what performs the roles? 4. What kinds of resources were involved and how much was used? 5. Where did the event occur?

R23. How can the \"why\" of an event be answered?

The answer to the why question requires you to define the strategy of the organization and how the strategy is accomplished. Strategies are operationalized by planning, executing, and evaluating business processes. Therefore, the why question is answered by defining where a particular event fits into the fabric of an organization’s business processes and the event's relative importance in accomplishing the organization’s strategy.

R24. What is REAL business process modeling?

REAL Business Process Modeling, attributed to Dr. Bill McCarthy, is a formal method of

identifying and representing the essential characteristics of business processes and events. The title REAL is an acronym for Resources, Events, Agents, and Locations that collectively describe the essential characteristics of business processes and events.

R25. List and describe the steps in REAL business process modeling.

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Step 1: Review the business process and identify the business events of interest

Step 2: Analyze each event listed in step one to identify the event resources, agents, and locations Step 3: Identify the relevant behaviors, characteristics, and attributes of the events, resources, agents,

and locations

Step 4: Identify the direct relationships between objects

Step 5: Validate the real business process model with business persons

R26. What is the key to modeling business processes?

The key to modeling business processes is identifying business events. Care must be used to distinguish between business processes, information processes, and decision making.

Discussion Questions

D1. Is it better to make one model of an entire organization or several smaller models of individual

processes?

Organizations are complex entities. Thus, when you are developing a model of an organization, initially trying to develop one model would prove difficult and overwhelming. It is less burdensome if you divide the organization into manageable chunks, taking care to incorporate an understanding of how the chunks relate, then merge or synthesize the pieces later.

D2. What is the difference between providing large volumes of information and providing accessible, useful

information in a timely manner? Give an example of each.

The key to providing information is providing something meaningful and useful that helps an information customer achieve his or her goal. More is not always better. For example, suppose someone wanted to know which batter on a baseball team is best. You could provide 497 pages of data that list every at bat for each batter, or you could provide 1 page of data that lists the batting averages of each player. On the other hand, suppose your customer wanted to review the trends of batters over the past 45 at bats. A list of batting averages would not suffice. Giving the customer the current batting averages and the batting averages 45 at bats prior also may not provide the needed information. In this case, you may need to provide a printout of the past 45 at bats with

accompanying graphs that display the trends. Hopefully, you have an information system that provides such flexibility.

D3. Think about the company you work for or the school you attend. Is this organization a learning

organization or a habit-driven organization? Provide evidence of your position.

Your response should be based on the differences between the two. Habit-driven organizations often do things because “that’s the way we’ve always done it”. This is both inappropriate and

dangerous in today’s competitive world. An opportunistic competitor can quickly change the nature

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of the game. Once that happens the habit-driven organization is at a serious disadvantage and can die unless it changes the nature of its processes. The opposite of a habit-driven organization is a learning organization. Learning organizations are constantly searching for innovative ways to improve their business processes.

D4. Think of yourself as a research specimen. Are you a learning individual or a habit-driven individual?

Explain.

Your response should be based on the differences between the two. Habit-driven individuals often do things because “that’s the way we’ve always done it”. This is both inappropriate and dangerous in today’s competitive world. An opportunistic competitor can quickly change the nature of the game. Once that happens the habit-driven individual is at a serious disadvantage and can die unless he changes the nature of his activities and strategies. The opposite of a habit-driven individual is a learning individual. Learning individuals are constantly searching for innovative ways to improve their activities and strategies.

D5. What are some advantages an accountant has over another business professional in modeling business

processes? What are some disadvantages an accountant has in business process modeling?

An information age accountant who has a high level of business, systems, and accounting knowledge has an advantage in modeling an information system that supports the planning, execution, and evaluation of business processes. If, however, an accountant views the business using an accounting process perspective, they are at a disadvantage.

D6. Suppose you wanted to implement REAL business process modeling concepts when you enter the

workplace. What obstacles and challenges would you expect to face?

Lack of systems knowledge, resistance to change, and an unwillingness to acknowledge the need for changes, will challenge the profession as it strives to re-invent itself in today’s dynamic business world. Do not assume that all accountants are convinced that there is a need to change. Even if they are receptive to discussing updates to accounting, they may desire alternatives that retain the traditional accounting process.

Some people will choose not to change from the traditional architecture. They may feel a change in the accounting architecture will reduce an organization’s ability to adhere to GAAP (generally

accepted accounting principles). It is important to remember that GAAP addresses the way financial statement information is reported. GAAP does not deal with or mandate the method of data collection, storage, or processing. Still others view the clerical procedures of classifying and recording a journal entry, posting to a ledger, and generating a trial balance as an integral part of accounting. Such a perspective emphasizes the how of accounting rather than the why of accounting. It is important to remember that the traditional general ledger accounting cycle process has lasted many years and people are not quick to replace it with any alternative that is different and new. Accountants and many other business people learned accounting using debits, credit, journals, ledgers, and posting, and some people can not envision accounting without these features.

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D7. Are some events outside organizational boundaries? Should information system designers focus on

events that lie beyond an organization’s boundaries?

Not only are business processes linked within an organization, processes and events can span organizational boundaries. We call these extended enterprise processes. Organizations have a growing number of extended enterprise processes. For example, suppliers for automobile

manufacturers are interested in evaluating the event Assemble Car. The reason for this interest is because automobile manufacturers are implementing “just-in-time” inventory processes. This means the manufacturer only wants enough inventory on hand for a short period’s work (usually a day or less). To make this possible, the supplier must know both what is planned and what has happened. Similar relationships are forming between shipping organizations and their customers. For example, Federal Express allows customers to access its records to find out exactly where their packages are in the shipping process. Efforts to better coordinate processes across organizational boundaries require us to view business processes in a multi-firm context. The REAL business

process model discussed in this chapter provides a conceptual basis for developing models of these processes. Focusing on events that are beyond your organizational boundaries may give you the feeling that identifying business events is like the famous final exam question, “Model the universe and give three examples.” Where in the world do you draw the line? We are back to the answer to all modeling questions relating to scope: “What do you want to plan, evaluate, and execute/control?”

D8. All business organizations have at least three broad business cycles: acquisition/payment cycle,

conversion cycle, and sales/collection cycle. In which of these cycles do each of the following activities belong? Explain your response.

a. Delivering a new product to a customer b. Hiring new employees

c. Paying for a new capital tool

d. Assembling sub-components for a finished product

Delivering a new product to a customer – Sales/collection process. The sales/collection process includes the sequence of events involved in delivering goods and services to customers for payment.

Hiring employees – Acquisition/payment process. The acquisition/payment process includes business events involved in acquiring, paying for, and maintaining the goods and services needed by an organization.

Paying for a new capital tool – Acquisition/payment process. The acquisition/payment process includes business events involved in acquiring, paying for, and maintaining the goods and services needed by an organization.

Assembling sub-components for a finished product – Conversion process. The conversion process focuses on converting goods and services acquired into goods and services for sale.

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Mini-Cases and Other Applied Learning

C1. This case helps you identify operating events, information events, and decision/management events.

For each of the following scenarios,

 Identify the operating events and related resources, events, agents, and locations  Identify any information events, including the type of event and the operating or

decision/management event that triggered the information response.

a. Gewirts, Inc. is a small manufacturing company that produces longboard skateboards to customer

specifications. The company has several departments: Sales, Production, Customer Service,

Accounting, and Data Processing. Sales people occasionally call on the Data Processing Department for customer lists and buying trends. The Customer Service Department answers questions about orders and directs potential customers to the proper Sales representatives. Orders prepared by Sales representatives are sent to Data Processing to be entered into the computer system. Production obtains order information from terminals on the shop floor, manufactures the longboards, and sends the finished products to the customer. Because of the unique requirements of each longboard, the

Production Department is responsible for purchasing raw materials and maintaining an adequate stock of materials and supplies. Accounting sends an invoice to the customer demanding payment as soon as the order is filled. Terms of the sale are net 30. Upon receiving the customer’s payment, the Accounting Department pays the sales commission.

b. On June 7, Quality Mart, a small retail grocer, realized it was low on several inventory items.

Quality’s purchasing clerk placed a large purchase order with Quick Groceries Company. The clerk added the order to the company’s data file of outstanding purchase orders. On June 9, Quality received the inventory items, recorded the receipt, and placed the items on its shelves for resale. On June 11, Quality received an invoice (bill) from Quick Groceries. An accounts payable clerk used a computer program to compare the order, the goods received, and the vendor invoice. When she was satisfied that they matched, she recorded the purchase and increased the amount owed to Quick Groceries in accounts payable.

c. A retail store customer takes his merchandise to the counter. The clerk scans the item’s control tag to

enter the price. The customer presents a credit card to pay for the merchandise and the clerk scans the credit card at his point of sale terminal to verify the payment. The customer then signs the credit card receipt and exits the store with his package.

d. On March 10, a Huntoon Company sales order clerk received a phone order from Gibbs, Inc. for 20

pontoons. She entered the order data using an order entry software program. The order was added to the list of items to be moved from Huntoon’s inventory warehouse to their shipping dock. When Huntoon’s Shipping Department received the goods, they packed the order, shipped the goods, and recorded the shipment in the information system. In Huntoon’s Billing Department, a billing clerk

compared the Gibbs order with the shipping information received from the Shipping Department. Then, the billing clerk generated a sales invoice, which was mailed to Gibbs to request payment for the order, and increased Gibbs’ accounts receivable balance. a.

Events Resources Internal Agents External Agents Assist customers and Customer service Customer service Potential customers direct to salesperson personnel Take customer order Merchandise Inventory Sales Representative Customer End of Chapter Materials and Suggested Solutions

Manufacture longboards for customer Ship board to customer (Sale) Cash Receipts for Sales Cash Disbursements for commissions Purchase Raw Materials Cash Disbursements for purchases

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Raw Materials; Merchandise Inventory Merchandise Inventory Cash Cash Raw Materials Cash Manufacturing Personnel Shipping Personnel Cashier Cashier Purchasing Agent Cashier None – internal event Customer Customer Salesperson Vendor Vendor This example includes events from the Acquisition/Payment process (Purchase Raw Materials, Cash Disbursements for purchases, and Cash Disbursements for commissions); the Sales/Collection process (Assist customer, Take customer order, Ship boards to customer, and Cash receipts for sales); and the Conversion process (Manufacture longboards for customers). The customer order event triggers an information event to record the details of the order (e.g. the who, what, when, where, how much, etc.). The order data supports an information event to report order information to the manufacturing personnel. The manufacture board event triggers an information event to record the details of the manufacture (e.g. the who, what, when, where, how much, etc.). In reality, the conversion process is often decomposed into more than just one event. The ship/sale event triggers an information event to record the details of the shipment and sale (e.g. the who, what, when, where, how much, etc.) and the information event to record and update data in the accounting records. The cash receipt event triggers an information event to record the details of the cash receipts (e.g. the who, what, when, where, how much, etc.). The purchase order event triggers an information event to record the details of the order (e.g. the who, what, when, where, how much, etc.). The cash

disbursements events trigger information events to record the details of the cash disbursements (e.g. the who, what, when, where, how much, etc.) and supports the information event to generate the necessary check source document. Data recorded during the sales/collection process support the information event of reporting customer data requested by salespeople. Note: in this example we did not include location so we could illustrate an example where locations are derivable from other data in the model, and you do not need to explicitly model locations. We do not recommend this practice as a “shortcut.” List locations in your model as often as needed.

b.

Events Identify need and place order with vendor Receive ordered goods

The purchase order event triggers an information event to record the details of the order (e.g. who, what, when, where, how much, etc.). The receive goods event triggers an information event to record the details of the receipt (e.g. who, what, when, where, how much, etc.). This event also

Resources Merchandise Inventory Merchandise Inventory Internal agents Purchasing clerk Receiving personnel External agents Vendor Vendor Locations Receiving dock End of Chapter Materials and Suggested Solutions

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triggers the information event of reconciling the vendor’s invoice with the receipt documentation and recording and updating the information in the accounting records.

c.

Events Sale Cash receipt for sale

The sale event triggers an information event to record the details of the sale (e.g. who, what, when, where, how much, etc.). The cash receipt event triggers an information event to record the details of the cash receipts (e.g. who, what, when, where, how much, etc.). In this retail sale example, the sale and cash receipt event (and thus the recording of those events) will occur simultaneously.

d.

Events Receive customer order Pick and move goods Pack and ship goods to customer (Sale)

The order event triggers an information event to record details of the order (e.g. who, what, when, where, how much, etc.). The order event data supports a reporting process for warehouse personnel who need information about items to be picked and moved. The pick and move goods event triggers an information event to record the details of the pulling the goods in warehousing and moving them to the shipping area (e.g. who, what, when, where, how much, etc.). The ship/sale event triggers an information event to record the details of the shipment and resulting sale (e.g. who, what, when, where, and how much, etc.) and the information event to bill, then record and update data in the accounting records. The ship/sale event data also triggers a reporting event that generates sales invoice documents.

C2. K.L. Musical Instruments is a retail store that sells a variety of types of musical instruments. K.L. also

has a repair shop to repair the instruments they sell. A purchasing agent is responsible for all purchases. A 30-day inventory of instruments is maintained. Most of the items purchased are bought through manufacturer’s catalogs. Occasionally a manufacturer will send a sales representative to demonstrate a new instrument and the order will be placed through the sales representative. Shipment of all purchases is FOB destination and the manufacturer handles the payment of the freight. Several sales clerks are employed at K.L. They manage the store, assemble and display the instruments, service walk-in

customers, make personal calls to some of the major accounts (such as schools with bands or orchestras), and deliver instruments sold to customers. Sales are made on account and for cash. Broken instruments are brought to the store by customers for servicing. A sales representative writes the repair orders. The instrument and repair order go to the Repair Department for service. Customers pick up the repaired

Resources Merchandise Inventory Merchandise Inventory Merchandise Inventory Internal agents Sales order clerk Warehousing personnel Shipping personnel External agents Customer None – internal event Customer Locations Order received via phone Warehouse ID Shipping dock Resources Merchandise Inventory Cash Internal agents Sales clerk Sales clerk External agents Customer Customer Locations Register; store Register; store End of Chapter Materials and Suggested Solutions

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instruments when they are completed. Occasionally the store will run low on cash and Krista, the

owner, will make arrangements with the bank for a short-term loan. Krista and the store manager handle all personnel matters such as hiring, promoting, and firing. They also train the sales clerks. People in the repair shop are sent to special schools sponsored by the instrument manufacturers for training. A bookkeeper is employed to handle accounting and develop other reports required by management to operate the business.

Required:

a. Group the operating events of K.L. Musical Instruments into the separate business processes using a

format similar to Exhibit 2-12.

b. Identify the information events described in this case. For each instance, define the event type (e.g.,

recording, maintaining, or reporting) and list the operating or decision/management event that triggered the information event.

c. Perform the first five steps to create a REAL model for each of the business processes.

[Note: as discussed in the chapter, events can be decomposed at a variety of levels, so your response may vary slightly from the suggested solution and still be correct. Simply make sure your response includes business events (rather than information events) and that you have decomposed to a point where you are helping decision makers plan, evaluate, and control/execute business events. Also make sure each event links to at least one resource, one internal agent, and one external agent (unless it is an internal event). Also link each event to any related event(s).]

a. Materials and supplies Labor Financing Instrument and repairs acquisition/payment acquisition/payment acquisition/payment sales/collection process process process process  Order materials and  Hire employees  Acquire financing  Make sales calls and supplies provide customer  Terminate  Receive funds from services  Receive/purchase employees financing materials and  Receive customer  Promote employees  Disburse cash to re-supplies orders pay financing  Train employees  Disburse cash for  Sell products to  Employees work purchases of customers or repair  Pay employees materials and instruments for supplies customers  Cash receipts from customers for sales and repairs

b. The only information event explicitly referenced in the case narrative involves the sale representative writing a repair order. This recording information event is triggered by the business event of a customer submitting an instrument for repair.

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Instrument Sales/Collection ProcessPotentialSaleCustomerCalls &ServicesCustomerOrderCustomerSalesClerkRepairPersonnelInstrumentsDelivery(Sale)CashCashreceiptfor SaleCustomerAcquire Financing ProcessCashAcquireFinancingKrista, theOwnerSaleCashierCash receiptfor SaleCashierFinancingDebtInstrumentReceiveFundsFundsRepaymentFinancingInstitutionCashierLabor Acquisitions/Payments ProcessLocationof trainingHireEmployeesOwner orManagerCashPurchase Acquisition/Pay ProcessCatalogOrderGoodsMaterials& SuppliesPurchasingAgentVendorReceivingClerkTrainEmployeesEmployeesEmployeesWorkPayEmployeesTerminateEmployeesTrainersPayrollCashierCashReceive GoodsDisbursepaymentCashCashierC3. Coral’s See-The-Reef, located on the Gulf of Mexico, is famous for its fast service. Coral’s business is renting scuba and snorkeling gear. Coral needs someone to analyze her business and help her use that analysis to plan and design a new information system. Coral employs four fitting clerks, three rental clerks, and four cashiers. The fitting clerks enter equipment items and sizes and experience codes into the computer. The computer searches the rental inventory, by experience code, for the requested equipment. For example, a beginner is a code one, which tells the computer to locate the oldest

equipment available in the requested size. If the requested size is unavailable, the fitting clerk is asked to change the size. Once the requested equipment is located, a duplicate rental invoice is printed. The rental clerk uses the second copy to retrieve the equipment. While this clerk gets the equipment, the customer pays the rental fee to a cashier. A deposit is added to the rental fee, and a code indicating the condition of the equipment is noted. When rental equipment is returned by a customer, it is checked in by a rental clerk who enters a

condition code into the computer. If the difference between the return condition code and the rental condition code is one or less, the equipment is restocked and the deposit is returned. If the difference is greater than one, Coral determines a charge for excessive wear. The customer pays the cashier and the customer’s deposit is returned. If the equipment is broken or lost, Coral estimates the value of the equipment and adds twenty percent. In the records, Coral transfers the damaged rental equipment to a sale inventory account. The customer then buys the equipment at the price set by Coral.

Cashiers also ring up new scuba equipment sales. Coral purchases any needed inventory and makes cash disbursements to vendors and employees. At the end of the year, Coral transfers any rental equipment to be sold to the sale inventory account.

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Required:

a. Group the business events of Coral’s See-The-Reef into separate business processes using a format

similar to Exhibit 2-12.

b. Identify the information events described in this case. For each instance, define the event type (e.g.,

recording, maintaining, or reporting) and list the operating or decision/management event that triggered the information event. c. Perform the first five steps to create a REAL model for each of the business processes.

a. Inventory Acquisition/ Payment Labor Acquisition/ Equipment and Repairs Process Payment Process Sales/Collection Process Order Inventory Hire employees Take customer order Receive/Purchase Inventory Employees work Pick equipment and deliver to Disburse cash for purchase Pay employees customer (Sale) Receive customer payment Customer returns equipment Sell equipment to customer Sales due to excessive wear, loss, or damage of equipment Return customer deposit b. The case scenario includes several examples of information processes:

- \"Fitting clerks enter equipment items and sizes, and experience codes into the computer\" initiates a reporting information process. The clerks need output information to assist users who may want to rent equipment. This information process helps the fitting clerks decide whether the needed equipment is available. If Shaun's shop has the needed items and the customer decides to rent from Shaun's shop, this same input data can be used to initiate a recording information process to document the rental.

- \"..a duplicate rental invoice is printed\" is a reporting information process. The invoice source document is an output generated to provide a hardcopy documentation of the rental (sale) business event.

- \"Rental equipment is checked in by a rental clerk who enters a condition code into the

computer\" is a recording information process triggered by the need to document the receipt of inventory and (possibly the recording of additional rental revenue if there is an excessive wear fee).

- \"In the records, Shaun transfers the damaged rental equipment to a sale inventory account\" is a maintaining information process initiated to reflect the change in the status of the equipment. - \"Cashiers also ring up both equipment sales and ski pass sales\" is an example of a recording information process triggered by the need to document sales events.

Each of the events listed in (a). will trigger a recording information process to record data that documents the who, what, when, where, and how much, relating to execution of the event. After this data is edited for accuracy and completeness, it is stored in the organization's data structures and used to generate reports, source documents, and other outputs requested by decision-makers. Information customers will use outputs to plan, evaluate, and control the execution of the business events of Coral’s See-The-Reef. When something happens to change the status of

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resources, agents, or locations of Coral’s See-The-Reef, maintaining information processes will be executed to update the data stored about these resources, agents, and\\or locations so that Coral's stored data better reflects reality.

Rental Sales/CollectionProcessEquipmentOrderFitting ClerkLocation ofEquipmentLabor Acquisition/PaymentProcessEmployeesHireEmployeesCoralRentalSaleCustomerCashCustomerPaymentsReturn Equip.,Loss, orStolenCashierEmployeesWorkCoralCashPayEmployeesRental ClerkReturn DepositEquipment Sales/CollectionEquipmentCashRegisterLocationSalePurchase Acquisition/PaymentProcessOrderinventoryInventoryVendorPurchaseinventoryCustomerCashCustomerPaymentCashierCashDisbursepaymentCoral c.

C4. Go to a local restaurant. It can be any type, from fast-food to an elegant sit-down restaurant. Purchase

and pay for a meal. Retain the receipt. As you are in the restaurant, keep a log so that you can answer the following questions about the restaurant’s sales/collection process based on your experience (note: answer the questions from the restaurant’s perspective). a. What happened?

b. When did each event within the sales/collection process occur?

c. What roles are performed and who (what agents) performed the roles in executing each event? d. What kinds of resources were involved and how much was used? e. Where did the event occur?

f. What can go wrong in executing the event? g. What information is available on your receipt?

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h. Based on your answers to a-f above, identify the events as information (include the type), operating,

or decision/management. For each information event, list the operating or decision/management event that triggered the information event.

i. Perform the first five steps to create a REAL model for the restaurant’s sales/collection process.

Answers to this question will vary considerably depending on the specific restaurant chosen,

therefore this suggested solution only includes some rough guidance. For a fast-food type restaurant, the events in the sales/collection process likely include Take Customer Order, Take Customer Payment, Cook Food, Give Food to Customer. For a sit-down restaurant, the events likely include Seat Customer, Take Customer Order, Cook Food, Bring Customer Food, Take Customer Payment. Resources typically include cash and food/drink/paper goods inventory. Agents typically include hosts or hostesses (for a sit-down restaurant), cashiers, waiters/waitresses (for sit-down restaurant), managers, cooks or chefs, and customers. The events typically occur on site. Things that can go wrong include taking the order incorrectly; cooking the wrong food, accepting an incorrect payment amount, giving the wrong food order to a customer (i.e., giving the wrong customer the food), running out of ingredients, cooking the food incorrectly (e.g. burning it). Information available on receipts will vary considerably from different restaurants, but likely include the date, the specific food and drink items purchased, identification of the cashier or waiter/waitress who served the customer, the price of each food and drink item purchased, the amount included for a tip, and the restaurant name and location.