Business Process Reengineering

By:- Neel Kamal

Introduction

• In today’s ever-changing world, the only thing that doesn’t change is ‘change’ itself. In a world increasingly driven by the three Cs: Customer, Competition and Change,

• companies are on the lookout for new solutions for their business problems[4]. Recently, some of the more successful business corporations in the world seem to have hit upon an incredible solution: Business Process Reengineering (BPR).

• Some of the recent headlines in the popular press read, “Wal-Mart reduces restocking time from six weeks

• to thirty-six hours.”” Hewlett Packard’s assembly time for server computers touches new low- four minutes.”

• The reason behind these success stories: Business Process Reengineering!

What is reengineering?• “Reengineering is the fundamental

rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service and speed”.

• BPR advocates that enterprises go back to the basics and reexamine their very roots. It doesn’t believe in small improvements. Rather it aims at total reinvention.

• BPR focuses on processes and not on tasks, jobs or people.

What to reengineer? :• “A business process is a series of steps

designed to produce a product or a service. It includes all the activities that deliver particular results for a given Customer(external or internal)”.

• Talking about the importance of processes just as companies have organization charts, they should also have what are called process maps to give a picture of how work flows through the company.

Why Reengineer?• Historical ‘reality’ for organizations:– High level of demand: organizations are order takers– Management (and IT!) focus – efficiency and control

of operations• Modern ‘reality’ since 1990s:– Hyper-competiveness – Globalization– Very demanding customers– Management and IT focus: Innovation,

responsiveness/speed, quality and service.

Ford Motor Company• Accounts Payable function• 500 people• Most work on mistakes between

PurchaseOrders

ReceivingDocuments Invoices

Ford (cont)

Ford (cont)

BPR Principles• Organize around outcomes, not tasks. • Have those who use the output of the process perform the

process. • Subsume information-processing work into the real work that

produces the information. • Treat geographically 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.

Process of BPR

• Activity #1: Prepare for Reengineering:• “If you fail to plan, you plan to fail”. Planning and

Preparation are vital factors for any activity or event to be successful, and reengineering is no exception. Before attempting reengineering, the question ‘Is BPR necessary?’ should be asked?

• There should be a significant need for the process to be reengineered.

• A cross-functional team is established with a game plan for the process of reengineering.

• Another important factor to be considered is to understand the expectations of your customers and where your existing process falls short of meeting those requirements.

• Having identified the customer driven objectives, the mission or vision statement is formulated.

Activity #2: Map and Analyze As-Is Process• Before the reengineering team can proceed to

redesign the process, they should understand the existing process.

• The important aspect of BPR (what makes BPR, BPR) is that the improvement should provide dramatic results.

• A large manufacturer spent six million dollars over a period of one year in a bid to develop a parts-tracking system and was all set to go online. Only then did he realize that he had totally overlooked a small piece of information – ‘the mode of transmission of information between the scheduling staff and the shop floor was through a phone call.’

Activity #2: Map and Analyze As-Is Process• The main objective of this phase is to identify

disconnects (anything that prevents the process from achieving desired results and in particular information transfer between organizations or people) and value adding processes.

• This is initiated by first creation and documentation of Activity and Process models.

• Then, the amount of time that each activity takes and the cost that each activity requires in terms of resources is calculated through simulation and activity based costing(ABC).

Activity #3: Design To-Be process• The objective of this phase is to produce one or

more alternatives to the current situation, which satisfy the strategic goals of the enterprise.

• The first step in this phase is benchmarking. “Benchmarking is the comparing of both the performance of the organization’s processes and the way those processes are conducted with those relevant peer organizations to obtain ideas for improvement”

• Having identified the potential improvements we perform simulation and ABC to analyze factors like the time and cost involved.

Activity #3: Design To-Be process• The several To-Be models that are finally arrived at

are validated. By performing Trade off Analysis the best possible To-Be scenarios are selected for implementation.

Activity #4:Implement Reengineered Process:

•The implementation stage is where reengineering efforts meet the most resistance and hence it is by far the most difficult one.•The question that confronts us would be,’ If BPR promises such breath taking results then why wasn’t it adopted much earlier?’

Activity #4:Implement Reengineered Process:

•requirements for the construction of the To-Be components can be added and the result organized into a Work Breakdown Structure (WBS).•The benefit here is that we can now define the causal and time sequential relationships between the activities planned.•Using prototyping and simulation techniques, the transition plan is validated and it’s pilot versions are designed and demonstrated.• Training programs for the workers are initiated and the plan is executed in full scale.

Activity #5: Improve Process Continuously:

• A process cannot be reengineered overnight.• very vital part in the success of every reengineering effort lies in improving the reengineered process continuously.• Two things have to be monitored – the progress of action and the results.• The progress of action is measured by seeing howmuch more informed the people feel, how much more commitment the management shows and how well the change teams are accepted in the broader perspective of the organization.•As for monitoring the results, the monitoring should include such measures as employee attitudes, customer perceptions, supplier responsiveness etc

• 30 steps, 5 departments, 19 persons• Issuance application processing cycle time: 24 hours minimum; average 22 days• only 17 minutes in actually processing the application

Department AStep 1

Department AStep 2

Department EStep 19

. . . .

Issuance Application

Issuance Policy

New Life Insurance Policy Application Process at Mutual Benefits Life Before Reengineering*

*Source: Adapted from Rethinking the Corporate Workplace: Case Manager at Mutual Benefit Life, Harvard Business School case 9-492-015, 1991.

Mutual Benefits Life Before Reengineering*

The New Life Insurance Policy Application Process Handled by Case Managers

Case Manager

UnderwriterPhysician

Mainframe

LAN Server

PC Workstation

• application processing cycle time: 4 hours minimum; 2-5 days average

• Application handling capacity double • Cut 100 field office positions

Enabling IT to Consider• Client/server technology• Groupware and collaboration technologies• Mobile computing (wireless LAN, pen-based computing, GPS, iPhone)• Data capturing technology (scanner/barcode reader/RFID)• Telephony: Integration of computer and telephone systems; VoIP;

Unified communications• 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), Electronic Commerce, WWW, and

Internet

IT Enabling EffectsDimensions & Type Examples IT Enabling Effects

Order from a supplier

Develop a new product

Approve a bank loan

Manufacture a product

Prepare a proposal

Fill a customer order

Develop a budget

Lower transaction costsEliminate intermediaries

Work across geographyGreater concurrency

Integrate role and task

Increase outcome flexibilityControl process

Routinize complex decision

Reduce time and costsIncrease output quality

Improve analysisIncrease participationAdapted from: Davenport, T. H. and Short, J. E., "The New Industrial Engineering: Information Technology and Business Process Redesign," Sloan Management

Review, Summer 1990, p. 17.

Organization Entity• Interorganizational

• Interfunctional

• Interpersonal

Objects• Physical

• Informational

Activities• Operational

• Managerial

The Reengineering Diamond

Business Processes & Functions

Management & Measurement

Systems

Jobs , Skills, & Organizational

Structures

Values andBeliefs

Enlighten

Entail Demand

Foster

Culture

Customers&

Info. Tech.

Competitors

Markets

Customers &Suppliers

Conclusion:

• An intense customer focus, superior process design and a strong and motivated leadership are vital ingredients to the recipe for the success of any business corporation. Reengineering is the key that every organization should possess to attain these prerequisites to success.