BUSINESS PROCESS RE-ENGINEERING

FINAL REPORT

Re-engineering the Procurement Process in a Public Sector

Organization

Submitted to: Sir Sheikh Abdul Qadir

Submitted by: Omair Khimani (10905)

Spring 2017.
Contents
1. Abstract ......................................................................................................................................... 3
2. Introduction ................................................................................................................................... 3
3. Literature Review.......................................................................................................................... 4
4. Method and Analysis .................................................................................................................... 5
5. Conclusion .................................................................................................................................. 16
6. References ................................................................................................................................... 17
1. Abstract
This paper analyzes and reengineers the procurement process of a state owned enterprise
in Pakistan. The research team used case study methodology to examine the existing
procurement system of M/S XYZ, and collected data through observation and interviews. The
respondents of this study comprise all the employees including managers and executives who
participate in the procurement process, directly or indirectly. The authors used Microsoft Visio to
examine the process flow and to model the existing and reengineered procurement process. The
study reveals the inordinate delays, unnecessary approvals and financial mismanagement in the
procurement process. The bureaucratic steps cause time and cost inefficiencies during the
procurement of local and foreign supplies. The authors conducted expert interviews and applied
BPR principles to reengineer the existing procurement process of M/S XYZ. The proposed
reengineered model attempts to reduce money cost by 81%, time cost by 74% and human
resource involved by 69% using BPR techniques. The net effect endeavors to improve efficiency
and effectiveness, and enabling the organization to earn itself the envious status of a vibrant,
dynamic and progressive concern. This study provides good grounds for furthering the efficacy
of BPR strategy and recommends the installation of customized software to improve the
efficiency of employees and processes.

2. Introduction
st
The 21 century is progressing with all its developments; every enlightened organization is
striving for latest productive techniques. Business Process Reengineering is no more an alien
concept in modern world and is best understood as a never-ending process of improvement in
performance. Most of the organizations, public as well as private, still stick to old ways of doing
things. Traditional bureaucratic procedures are in place which hinders the performance and
productivity level in the enterprises.
Business processes are not customer oriented. These are costly and time consuming
resulting inefficiency and ineffectiveness. There is a desperate need to thoroughly analyze and
reengineer the old-fashioned and obsolete business processes to improve performance.
This study focuses on analyzing and reengineering the procurement process of a state
owned enterprise. The purpose of the study is two fold. First it attempts to identify the
bottlenecks in procurement procedures in public sector organization. Second, it endeavors to
redesign and reengineer the procurement process in the organization so as to realize a system
wherein speed, transparency, quality and economy become the hallmark of all provisioning
actions to acquire supplies from local and foreign vendors that are requisitioned by the
production shops.
3. Literature Review
Hamper and Champy (1993) defines the business process reengineering as 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.
Business process reengineering involves the thorough analysis of the current business processes
and redesign to improve performance (Davenport and Short, 1990; Teng et al., 1994).
The importance of BPR is crucial for public sector organizations (Parys and Thijs, 2003).
It is difficult to deploy BPR efforts in public organizations (Parys and Thijs, 2003; Robert, 1994;
Thong, Yap, and Seah, 2000). The government organizations are usually attached to many other
departments and ministries. The change in one unit requires change in other interlinked
organizations. It is therefore necessary to handle all these problems to successfully implement
the BPR strategy in the public sector organizations (Parys and Thijs, 2003).
Tenner and Detoro (1992) defines process as a single or combination of tasks that add
value to inputs to convert them into outputs by the application of human interactions,
methodologies and techniques. The authors confines the key points and describes stages to
improve business processes using step by step procedure to achieve real performance goals.
Individuals at any level in manufacturing, service or the public sector can benefit from this
approach which enhances the chances of success in improving organization wide performance. It
is designed for leaders at any level who are committed to drastically improving their
organizations performance through redesigning its processes.
The business processes consist of different activities which define the pattern of work in
the organizations (Sethi and King, 2003). The efficient processes serve to satisfy the customers
by converting input resources to desired output (Fields, 2007; Hammer and Champy, 1993;
Harrison and Pratt, 1993; Snee, 1993).
Evans (1993) signifies the importance of analyzing the existing business processes in
organizations to identify bottlenecks in systems. The author translates this phase as As Is step
of BPR. The other important phase is To Be which describes the desired performance
achievement level of business process. BPR attempts to fill the gap between these two
organizational situations. Business process analysis attempts to achieve operational efficiency by
reducing time and cost factors (Cook, 1996; Davenport, 1993; Day, 1994; Roy, 2005; Wang and
Ahmed, 2003; Muthu, Whitman and Cheraghi, 1999).
Fitzgerald and Murphy (1996) suggest four crucial phases for successfully implementing
the BPR strategy in the organizations. First, the core business processes to be redesigned should
be selected. Second, the process team should be established to reengineer the core business
processes. Third, the current business processes may be analyzed and examined to find out
bottlenecks in the systems. This phase also determines the satisfaction level of stakeholders with
process outcomes. The last phase encompasses the strategy to reengineer the process to improve
performance.
McAdam and Donaghy (1999) highlight the importance of BPR in public sector and
examine the views of public sector employees about the critical success factors for the successful
implementation of the strategy in the public sector.
In order to analyze the business processes, it is necessary to examine the step by step flow
of different activities. Process map generates a sequential schematic diagram of process to reveal
the flow of work by using standard symbols (Tenner and DeToro, 2000; Harrington, Esseling,
and Nimwegen, 1997; Cook, 1996). Functional process maps show the responsibility of different
departments in the organization for a business process. Time line flowcharts signify the cycle
time along the process by using a time scale for process map. Top-down charts show major
elements of process in the top and specify details there under. Workflow maps show the
physical movement of entities involved in the business process. Block diagrams represent the
major activities of business processes in the boxes (Tenner and DeToro, 2000).
Hamper and Champy (1993) emphasizes on critical performance measures which should
be achieved during the reengineering process. Cost and speed of process are two important
aspects which determine the efficiency of processes.

4. Method and Analysis

This study uses the case study methodology to analyze the existing procurement system of M/S
XYZ which is a reputed public sector organization. The research team collected data through
observation and interviews. The respondents of study comprise all the employees including
managers and executives who participate in the procurement process, directly or indirectly. The
authors conducted indepth interviews with selected participants to examine the process, and used
Microsoft Visio to model the existing and reengineered procurement process.

3.1. As Is Procurement Process

This study aims to draw the flowchart to describe the procurement process in M/S XYZ which is
located at about 30 Kilometers from headquarter (HQ). The Main Procurement Department
(MPD) is a separate division which is responsible for the procurement of stores required by
various subsidiaries of the main business all over Pakistan. M/S XYZ is a technical organization
involved in the manufacturing of scientific and technical equipments.
The employees of M/S XYZ raise indents for the procurement of local and foreign stores
which is to be approved by MPD in concurrence with finance division and concerned authorities
in the HQ. Historically all the work is manual, full of traditional bureaucratic steps and
procedures.
The procurement process of M/S XYZ starts with the submission of indent form for
procurement of supplies from local or foreign suppliers on limited quotation basis. i.e. 3
quotations are must. Before the formal call of quotations, the indenter already takes exercise of
collecting rates for the required material from its own sources.
Table 1 reports the involvement of human resource at different hierarchal level and
location during the general procurement process of M/S XYZ.
Table 1: Human Resource involved in the process

M/S XYZ Main HQ Main Procurement Department

(Building 1) (Building 2)
Executive Finance Executive MPD
P.A to Executive P.A
Sr. Finance Officer-1 Manager MPD
Assistant-III Assistant-II
 Sr. Finance Officer-2 Attendant-III
Assistant-IV
Attendant-4
Technical Vice President
PA to Technical Vice President
President
PA toPresident
M/S XYZ (30 km from above)
Executive M/S XYZ
PA to Executive M/S XYZ
Indenter
Purchase Manager
Assistant-1
Attendent-1
Finance Officer
Attendant-II
Dispatcher

Table 2 presents process identification worksheet with trigger events and process name

Table 2: Process Identification Worksheet

Area of Business being Reviewed: Procurement of Supplies

Trigger Events Process Name
Indenter has need for specified material/supplies. Process Initiation
Indenter submits request/indent form to the purchase manager Indent submission
Purchase manager process the indent form by taking approvals from higher authority for
Indent Processing
the said purchase.
Purchase manager invites quotations from the prospective suppliers. Inquiry floating
Purchase manager receives quotations and prepares QCS. QCS Preparation
Purchase manager recommends the lowest supplier or other supplier with full justification
Supplier recommendation
after consultation with indenter and get it recommended from Executive M/S XYZ.
Purchase manager submits the case to Main Procurement Department which after
purchase proposal
consultation with HQ finally approves the purchase proposal in favor of recommended
evaluation/approval
supplier.
After approval, MPD places the order to supplier for the said purchase after negotiating
Order placement
certain terms and conditions.
MPD arrange for payment Payment process
Supplier arranges the stores, pack it properly and ship to M/S XYZ. Shipping documents
Stores Delivery Process
are faxed to the MPD.
Indenter checks/inspects the supplies as per specs ordered. Stores inspection
Stores is handed over to the indenter after inspection. Process completion

Figure 1: Reports the flowchart and model of existing procurement process of M/S XYZ.
 The process map of existing procurement system revealed that the process of procuring
supplies from local and foreign vendors/suppliers within the organization is seized with serious
problems and complaints lodged by users. In that, inordinate delay in indents processing as it
goes through different channels of scrutiny and approvals, poor quality, financial
mismanagement, and overexpenditures are frequently observed. Historically all the work is
manual, full of traditional bureaucratic steps and procedures. Process description statements,
block diagrams and flowcharts, illustrating the procurement procedures at M/S XYZ, reveal
areas where BPR techniques can be very effectively applied. A total of 95 different actions have
been identified during the analysis of the XYZ procurement process. Time and cost inefficiencies
are the main problems in the purchasing process as assessed by the respondents.

3.2. To Be Procurement Process

The authors implied BPR principles and incorporated expert opinions to reengineer the existing
procurement process of M/S XYZ. Figure 2 reports the reengineered procurement process of
M/S XYZ.

Figure 2: Reengineered Procurement System of M/SXYZ

5. Conclusion
The proposed reengineered model attempts to reduce money cost by 81%, time cost by 74% and
human resource involved by 69% using BPR techniques. The net effect endeavors to improve
efficiency and effectiveness, and enabling the organization to earn itself the envious status of a
vibrant, dynamic and progressive concern. This study provides good grounds for furthering the
efficacy of BPR strategy and recommends the installation of customized software to improve the
efficiency of employees and processes.
 6. References
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managers, Prentice Hall, New Jersey.
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[7] Fields, J., 2007. Conducting a business process analysis, The Dream Institute. Retrieved
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http://www.achievingthedream.org/_pdfs/_strategyinstitute07/Business_Process_Analysis_Ove
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