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Business Process Reengineering
Business Process Reengineering
Business Process Reengineering
Process
Definition of Reengineering
Thefundamental rethinking
andradical redesignof
core business processesto
achievedramatic improvementsin critical
performance measures such asquality, cost,
and cycle time.
What Business Reengineering Is Not?
Receiving Goods
Copy of
purchase
order
Receiving
Accounts document
Payable
Invoice
? ? Payment
PO = Receiving Doc. = Invoice *Source: Adapted from Hammer and Champy,
1993
Trigger for Ford’s AP Reengineering
•Mazda only uses 1/5 personnel to do the same AP. (Ford:
500; Mazda: 5)
•When goods arrive at the loading dock at Mazda:
–Use bar-code reader is used to read delivery data.
–Inventory data are updated.
–Production schedules may be rescheduled if necessary.
–Send electronic payment to the supplier.
FordProcurementProcess
Purchasing
Vendor
Purchase order
Receiving Goods
Purchase
order
Goods
received
Accounts
Data base
Payable
Payment
Ford Accounts Payable
Before
•More than 500 accounts payable clerks matched purchase order,
receiving documents, and invoices and then issued payment.
•It wasslow
•Mismatches were common.
After
•Reengineer “procurement” instead of AP process.
•The new process cuts head count in AP by 75%.
•Invoices are eliminated.
•Matching is computerized.
•Accuracy is improved.
BPR Principles
•Organize around outcomes, not tasks.
•Have those who use the output of the process perform
the process.
•Treatgeographically dispersed resources as though they
were centralized.
•Link parallel activities instead of integrating their results.
•Put decision points where the work is performed and
build controls into the process.
•Capture information once and at the source.
The Importance Of focusing
Business Processes
•“if you always do what you always did, you’ll
always get what you always got”
•The impatient customer
•Business operations are changing and getting
more complicated
•Managing the move towards enterprise
mobility
•Ability to identify and outsource or buy
business as a service for non core business
processes
There are three types of business
processes:
•Core processes
–Create product/service
–Market communication
–Optimize value for customer
•Support processes
–Order processing
–IT management
–Ensure profitability and liquidity
–Capacity planning
–Staff training, motivation and retention
Six stages of Process Management
New Camera
Design
Camera
Body Parts design
Body design
Final Camera
Design
Camera
Module
Integration
Camera Shutter
& Parts Design CameraBodyPart
Design
Reason-2 Innovation: By using a few sharp tools process improvement can lead to
innovative thinking. Innovative initiatives can take business outside of its operational
core exploit new products and services opportunities.
Reason-3 Customer Centricity:Everyone agrees with the need for customer centricity,
Many find that customer centricity isn’t as easy as it sounds.
Reason 4 Transformation: It can make or break organisations and need huge effort in
terms of process improvement, change management, organisational design, marketing
and technology. There is generally a critical business reason for transformation
projects,
Reasons for Process Improvements
Reason-5 Disaster:When companies face imminent business death or financial
punishment by regulators you can be sure that a shiny new project will spring to meet
the challenge.
Reason-6 Cost:Cost Savings lead to more profits and more profit equals happy CEO’s and
shareholders. It’s hard to increase revenues and even harder to increase profits – but it’s
often not so hard to save money when process initiatives can clearly highlight how to
do it.
Process Improvement Cycle
A list of Symbols for Flow charting
Types of FlowchartsPlanning a New
Project, Basic Flowchart:
Documenting a
Process,SwimlaneFlowchart, ERP,
ISO
Modeling a Business Process, EPC Diagram
(Event Driven Process Change) Covers number
of possible situations
Chemical and Process Engineering
| Process Flow Diagram
Managing Workflow | Workflow
Diagram
Top –Down Flow Chart
A BPR Framework
Organization Technology
–Job skills –Enabling technologies
–Structures –IS architectures
–Reward –Methods and tools
–Values –IS organizations
Process
–Core business processes
–Value-added
–Customer-focus
–Innovation
Business Process Reengineering Life Cycle
Define corporate visions
and business goals Visioning BPR-LC
Identify business Enterprise-wide engineerin
processes to be Identifying
reengineered
Analyze and
measure an existing Analyzing
process Process-specific
Identify enabling IT & engineering
generate alternative Redesigning
process redesigns
Evaluate and select
a process redesign Evaluating
Implement the
reengineered Implementing
process
Continuous
improvement of the Improving
process
•Physical/Technical Layer
–Process structure
–Technical structure
–Organization structure
40
The Dimensions of Business
ProcessReengineering
•Infrastructure Layer
–Reward structure
–Measurement systems
–Management methods
41
The Dimensions of Business
ProcessReengineering
•Value Layer
–Organizational culture
–Political power
42
The role of information
technology
•Shared databases, making information available
at many places
•Expert systems, allowing generalists to perform
specialist tasks
•Telecommunication networks, allowing
organizations to be centralized and
decentralized at the same time
•Decision-support tools, allowing decision-
making to be a part of everybody's job
•Wireless data communication and portable
Enabling IT to Consider
•Client/server technology
•Collaborationtechnologies
•Mobile computing (wirelessLAN,iPhone)
•Data capturing technology (scanner/barcodereader)
•Telephony: Integration of computer and telephonesystems
•Web services and Service-Oriented Architecture (SOA)
•Imaging technology, work flow management systems, Business Process
Management (BPM)
•Decision support systems, Data warehouse, Business intelligence, Data
mining, Digital dashboard
•ERP, CRM, SCM
•Electronic Data Interchange (EDI), ElectronicCommerce, Internet
BPR team composition
•Once organization-wide commitment has been
secured from all departments involved in the
reengineering effort and at different levels, the
critical step of selecting a BPR team must be
taken. This team will form the nucleus of the
BPR effort, make key decisions and
recommendations, and help communicate the
details and benefits of the BPR program to the
entire organization. The determinants of an
effective BPR team may be summarized as
Benchmarking
•Benchmarking can be defined as a process for
improving performance by constantly
identifying, understanding and adapting best
practices and processes followed inside and
outside the company and implementing the
results
Types of benchmarking
•Strategic Benchmarking: Aimed at improving a
company's overall performance by studying the
long-term strategies and approaches that
helped the 'best practice' companies to succeed.
It involves examining the core competencies,
product/service development and innovation
strategies of such companies.
•Competitive Benchmarking or Performance
Benchmarking: Used by companies to compare
their positions with respect to the performance
•Internal Benchmarking: This involves
benchmarking against its own units or branches
for instance, business units of the company
situated at different locations. This allows easy
access to information, even sensitive data, and
also takes less time and resources than other
types of benchmarking.
•Broken
•Bottleneck
•Cross-functional or cross-organizational units
•Core processes that have high impacts
•Front-line and customer serving - the moment of the
truth
•Value-adding
•New processes and services
•Feasible
•In this phase, the “as-is” environment is
analyzed
•A danger frequently encountered by project
teams is a tendency to spend too much time
analyzing the current process, organization, and
the financial and technology components under
review.
•Figure 1: Hypothesis Driven Approach of the
Focus Phase Hypothesis-based problem solving
is effective in defining objectives and solving
•The process of determining business context
described above assumes that businesses
compete in three major ways – cost, value or
competence
•Take each process and analyze the necessity of
having the process
•Through a series of management and staff
interviews, BPR determines how each of these
components is viewed from the business
perspective.
•What the reengineering team seeks to learn is:
•How customers see us.
•Willingness to pay for value-added services.
•What they want us to change.
•How our processes link with theirs.
•What our competitors do better than we do
Phase2:Redesigning
Identify enabling IT & generate
alternative process redesigns
How can business
processes be transformed Business
using IT?
Reengineering
Business-pulled Technology-driven
Information
Technology How can IT support business
processes?
Source: Thomas H. Davenport and James E. Short, “The New Industrial Engineering: Information technology and Business Process
Redesign,” Sloan Management Review, Summer 1990, pp. 11-26.
Process Data
•Basic Overall process data:
–Customers and customer requirements
–Suppliers and suppliers qualifications
–Breakthrough goals
–Performance characteristics: Cost, cycle time, reliability, and
defect rate.
–Systems constraints: Budgetary, business, legal, social,
environmental, and safety issues and constraints.
•Measure critical process metrics
–Cycle time
–Cost
–Input quality
–Output quality
–Frequency and distribution of inputs
Re-Engineering-Implementation
Phase
•State theBPR objectives
–Improved operational performance (by closing
performance gaps (business management))
–Reduced costs and manpower savings (by
application of management analysis tools and
techniques)
–Improved competencies (by closing skill and
competency gaps (human capital))
–Others
•Identify affected activities, employees,
Implement the reengineered process
•Plan IT implementation
•Plan organization implementation
•Conduct a pilot project
•Develop a prototype system
–Technical Design
•Evaluateresults from the pilot project and the
prototype
•Prepare large-scale roll out
Rules for Process Redesign
a) The Golden Rule: Always redesign from the customer's
point of view not your own.
b) The Silver Rule: Always redesign processes before
designing or procuring your IT.
c) The Bronze Rule: Always redesign your processes before
redesigning your organisational structure.
BPR Team
•Size: up to 8 members in the core team
augmented by subject-matter experts when
needed.
•Commitment: half- to full-time.
•Skills: team skills, process engineering, quality,
information systems, benchmarking,
organizational and job design, and change
management.
•Composition: Employees, customers, suppliers,
and external consultants.
Facilitated BPR Meetings
•Centered around a workshop: It is an organized, controlled, and
structured process
•Participated by users, managers, and IS personnel (if necessary)
–User orientation
–Management direction
–IS technical assistance
•Facilitated by a BPR facilitator to ensure thorough analysis
•Employ a BPR analysis and design methodology to ensure usable
requirements or specifications
•Focused on a consensus-based decision making process
•Use multi-media audio-visual equipment or BPR tools to bridge
knowledge gap among participants
Qualifications of a BPR Facilitator
•Is skillful in team building and leading
•Manages group process and dynamics
•Has energetic and outgoing personality
•Summarizes discussion
•Is a good communicator (listening and speaking)
•Has project management ability
•Has mastered facilitation skills
•Understands BPR methods
Obtaining Top Management
Commitment
•Seriousness
•Information Input and to convince
•Commitment
•Resistance to change
•Management can see the efforts as a
insignificant
•Carries risk
•Affected people may feel that it is injustice to
their dedication
•Sometimes results takes more than estimated
Reasons for BPR Failures
lLack of support from senior management
lPoor understanding of the organization and the infrastructure
lInability to deliver necessary technology
lLack of guidance, motivation and focus
lFixinga process instead ofchangingit
lNeglecting people’s values and beliefs
lWillingness to settle for marginal results
lQuitting too early
lAllowing existing corporate cultures and mgmt attitudes to prevent redesign
lNot assigning enough resources
lWorking on too many projects at the same time
lTrying to change processes without making anyone unhappy
lPulling back when people resist change
Etc…
74
Reengineering and its Relationships to
Other Improvement Programs (II)
RightsizingRestructuringAutomationTQMReengineering
AssumptionsStaffingReportingTechnologyCustomerFundamental
questionedrelationshipsapplicationsneeds
OrientationFunctionalFunctionalProceduresProcessesProcesses
ImprovementUsuallyUsuallyIncrementalIncrementalDramatic and
goalsincrementalincrementalsignificant
75
Relationship between Discontinuous
(Radical) and Continuous Improvement
Theoretical
Improvement
Capability
Statistical
Process
Incremental Radical Control
Improvement Improvement
Time
76
Dysfunctional or Broken Processes
Symptoms and diseases of broken processes
SymptomDisease
Organization Entity
•Interorganizational Order from a supplier Lower transaction costs
Eliminate intermediaries
Manager as Coach