Business Process Reengineering

by
LEHAN LE ROUX

Student Number: 214324265

Part Time

Research Report
Submitted in fulfillment of the requirements for the

Subject:

INF400S

Qualification:

BTECH: INDUSTRIAL ENGINEERING

In the
Faculty of Engineering
Department of Industrial and Systems Engineering

At the

CAPE PENINSULA UNIVERSITY OF TECHNOLOGY

Lecturer: NGETICH WK

Bellville Campus

Submitted: 18 April 2017

Contents

1. Introduction ............................................................................................................ 3
2. What does reengineering involve in companies today? ......................................... 4
3. Is BPR as popular as we are supposedly lead to believe? ..................................... 5
4. Is BPR fundamentally different from old Taylorian approaches to industrial
engineering based on task decomposition and specialization? .................................. 6
5. Is Business Process Reengineering the same as TQM, restructuring and Quality
approaches? .............................................................................................................. 7
6. What is the relationship between process redesign and organizational structures 8
7. Under what conditions will BPR be most effective.................................................. 9
8. Analysis of BPR related to a familiar company ..................................................... 10
8.1 Are there methods relevant to my organisation for effectively accomplishing
BPR? .................................................................................................................... 10
8.2 Is there a logic behind reengineering as applied to Agrico? ........................... 13
8.3 Is Agrico content and productive applying performance measures such as
Quality techniques like Lean, Six Sigma etc.? ...................................................... 13
8.4 How do we best plan, organize and control BPR efforts, if we were to apply it at
Agrico? ................................................................................................................. 14
9. Conclusion ........................................................................................................... 15
10. Bibliography ....................................................................................................... 16

2
1. Introduction

We live in an era where a company’s ability to adapt to change has become a key
aspect to stay competitive. Technology is growing at an increasing rate and the
companies leading their sectors are the ones making the best use of the latest
technologies and implementing it to suit their goal in the most productive manner
possible. One of the best ways to implement change within a company is to make use
of Business Process Reengineering (BPR). There is a lot of talk around BPR and most
companies are eager to implement radical change within their companies to increase
overall productivity, quality and service but are not exactly sure how to go about it.

Within this report, we will discuss BPR through a variety of frameworks and how it
relates to a company that I am currently attached to. The following questions will be
investigated and answered in relation to the company at hand.

1. What does reengineering involve in companies today?

2. Are there methods relevant to my organisation for effectively accomplishing
BPR?
3. Is BPR as popular as we are supposedly lead to believe?
4. Is there a logic behind reengineering as applied to my organisation?
5. Is BPR fundamentally different from old Taylorian approaches to industrial
engineering based on task decomposition and specialization?
6. Is my company content and productive applying performance measures such
as Quality techniques like Lean, Six Sigma etc.?
7. Is BPR the same as TQM, restructuring... Quality approaches etc.?
8. What is the relationship between process redesign and organizational
structures?
9. How do we best plan, organize and control BPR efforts, if we were to apply it
at my organisation?
10. Under what conditions will BPR be most effective?

The answers to these questions should give an in-depth understanding of BPR in

relation to the company and if it is a viable and effective method of reaching the
companies goals as a whole.

3
2. What does reengineering involve in companies today?

BPR is the radical change and restructuring of a company’s fundamental operating

processes to improve on key performances to make a company more productive and
effective towards its goal. While growing technology is erasing market borders the
competitiveness increases between companies. BPR stems from this environment
and encompasses ideas such as lean manufacturing, total quality management
(TQM), continuous process improvement, concurrent engineering, just-in-time
manufacturing and agile manufacturing. As BPR takes all these ideas and methods
into account it is much more than just a manufacturing paradigm (Gunasekaran &
Sandhu, 2010:117).

A big problem with introducing change into a company processes today is that it is
done on part of the process which only results in temporary improvements. By doing
this, problems are normally moved or created elsewhere in the system and offers only
temporary or small benefits. Reengineering involves taking account of all the different
departments or sectors within a company and how they relate to each other and then
making use of all the available resources and technology the modern world has to
offer to redesign more efficient and effective processes. This radical redesign of
business processes when implemented correctly would have a great effect on
improving the measures of performance such as cost, quality, service and speed
according to Hammer and Champy (1993).

Information systems plays a major role in BPR. The capabilities provided by

computers, software applications and telecommunications have forever changed the
way companies are performing their operations. With IT having such a big role within
the reengineering of processes it deserves a great deal of research when being
implemented into a new design of a process to ensure that the most efficient and
affective operations are chosen for the task at hand.

BPR can be difficult to transfer into different environments according to Gunasekaran

& Sandhu (2010:118) as it is dependent on the conditions and the environment of
where it has to be implemented. The reengineering of companies can take place on
many levels and is not only intended for manufacturing but for many other operations
within a business organization.

4
3. Is BPR as popular as we are supposedly lead to believe?

In the past BPR has received mixed reviews. In the early stages of BPR’s
implementation when businesses were only starting to use computers and the internet,
people did not have the existing support and infrastructure we have today. Thus, in
the early 1990’s there were several companies that ended up with costly failures. As
people became accustomed to the internet and computers telecommunications
improved and became easy to install. So, the success rate of implementing IT within
business redesign improved. Entire industries have changed the way they operate.
Book stores and music stores have almost gone out of business due to the usage of
computers by the public (Vom Brocke & Rosemann, 2010:51). With the right
management and execution of BPR today the chances of success are far greater than
that of the starting years of BPR.

BPR is a good choice for companies that wish to transform their business processes
from a vertical orientated organization to a cross-functional organization. The business
would maximise across the entire set of interdependent activities rather than
maximising the particular individual functions of a process. These novel business
approaches are the new way of coordinating organizational entities and with the help
of information technology it might be the ultimate impact for the required improvements
in the 20th century (Davenport & Short, 1990:3).

When applying BPR within a company it is important to have a clear set of objectives.
The objectives normally set out from redesigning a business is to reduce costs, reduce
time, improve on quality and an improved quality of work life. These improvements are
vital for companies to stay competitive within markets and thus makes BPR a popular
choice for doing so.

There are various cases where companies have implemented process redesign into
their companies and reaped major rewards from doing so. American Express, for
example redesigned their process of credit authorization to improve on cost, time and
quality by introducing a new system. From this redesign, the company saw a reduction
in costs of $7 million annually from credit losses. A reduction of 25% in authorization
time and 30% reduction in improper credit denials (Davenport & Short, 1990:8).

5
As the world entered the information age systems were developed to suit the needs
of companies. These software programs capabilities also grew at a substantial rate
allowing for high precision and very effective work to be done. As almost all companies
make use of some sort of information systems to improve their processes. Enterprise
Resource Planning (ERP) systems are used for various reasons such as planning
forecasting and saving data. Although many companies make use of these systems
they do not maximise what they have to offer. BPR incorporates these already popular
systems within companies into the redesign to maximise the effectiveness of them.

4. Is BPR fundamentally different from old Taylorian approaches

to industrial engineering based on task decomposition and
specialization?

A key Taylorian approach to industrial engineering was the simplification of tasks. This
was done by “rationalising” the process. By doing this the process would get rid of
bottlenecks and improve their efficiencies in certain areas of the business process.
Improvements were made but with no particular vision in mind. “Work simplification“
was an important aspect of Taylorism. Research have suggested that this concept of
rationalization is not the end goal of improving a process and for that reason it cannot
be seen as an BPR end objective. In contrary by simplifying a part of a process without
having the end redesign objective in mind the process can even be worsened
(Davenport & Short, 1990:7).

The businesses of Taylors era faced different circumstances of today’s businesses.

Markets have become much more competitive and we face much more uncertainties.
According to Davenport and Short (1990) There is an urge for companies to improve
on their product development, product delivery, customer service and operational
performance while at the same time improving quality, service and risk management.
In the early years when there was more stability within the business environment focus
was placed on individual task efficiency and the rationalization of the workplace. As
stated before this approach is not one of the end objectives of BPR.

Work and responsibility has been spread out much more when BPR has been applied.
Teams work in conjunction with each other to streamline operations. This makes the
company more flexible and the company is able to handle change better.

6
Whereas Taylorism was concerned with maximising an individual’s capabilities, BPR
in turn maximises the entire organizations activities in order to obtain performance
objectives and thus creates value for the customer.

5. Is Business Process Reengineering the same as TQM,

restructuring and Quality approaches?

The Quality control tradition can be seen as the continuation of the work simplification
tradition. How businesses perform quality control and process improvement today
comes mostly from the work done by Frederick Taylor in his publication of Principles
of Scientific Management in 1911. From this came a set of key ideas of what he
believed good managers should use to improve their businesses (Vom Brocke &
Rosemann, 2010:38).

When taking IT into account for instance, BPR uses it as a key enabler and it plays a
pivotal role in obtaining the results wanted by management. Comparing it to
approaches such as TQM, restructuring and other quality approaches the role it plays
is very different. In these cases, IT is used to enhance the processes and not to
transform them on a fundamental level. Thus, from this we can see that the end
objectives differ. One of the main changes between BPR and methodologies such as
TQM, restructuring and other quality approaches is the improvement objectives of
them. Where BPR has very dramatic and significant changes towards the process, the
other approaches are usually more incremental towards the end objectives. This then
also means that BPR is normally a once of process whereas TQM is an ongoing
process (Grover & Malhotra, 1997:198). Another big difference is the starting points
for each approach and rates of change between BPR and TQM.

Again, when looking at a concept such as the assumptions questioned by each of

these methods BPR is different in the sense that it questions the fundamentals of a
process rather than one specific goal such as the “customers’ needs” when using TQM
or the “reporting relationships” when only restructuring a process. BPR can improve
multiple objectives on different levels of an organization where other approaches may
only improve singular objectives.

7
6. What is the relationship between process redesign and
organizational structures?

A major type of business process is inter-functional processes. These are processes

that are “internal” to the organization but also crosses different departments within the
organization. These processes achieve major operational objectives such as product
realization, asset management and production scheduling and includes other
important management processes such as planning, budgeting and human resources
management. Many companies found from their quality improvement programs that
producing quality products and services depends largely on these inter-functional
issues. BPR analyses these issues together and takes them into account when
reengineering a process while making full use of IT. Other quality approaches do not
take these issues into account when focusing on their objectives (Davenport & Short,
1990:17).
BPR changes the way a company is organized internally. Many companies are still
structured vertically by focussing their processes on only one specific function and not
integrating the system with the rest of the company’s departments or sectors. Applying
BPR to the process a company would change over to being cross-functional. In a cross
functional organization, the main attention is put on the process. Since doing business
consists out of many processes the logical step would be to manage the business
according the best possible process that reaches the companies objectives.

A key issue is the relationship between the organizational structure and the process
orientation. Implementing BPR causes the management responsibilities to shift as
functions now cut across different functional structures of the organization. The
redesign of the company should build new organizational structures along the new
process lines and would in effect be abandoning functional management of singular
processes. The process based structure would have to be frequently checked as the
manner of how business is done changes over time (Davenport & Short, 1990:22).
As businesses become more mature in managing their processes they start working
on all levels simultaneously. With the cross functional structure companies seek to
align processes with strategies and define process governance and measurement
systems for the entire organization. By being at a process level companies can explore
a wider variety of process analysis and redesign (Vom Brocke & Rosemann, 2010:54).

8
7. Under what conditions will BPR be most effective?
Each company would find different challenges when implementing BPR into their
organisation. The degree of change would depend on the existing structure of the
company and the nature of the business. One of the biggest difficulties faced by
companies when implementing BPR is gaining and keeping management’s
commitment to the changes that the redesign will bring. Some resistance on all levels
of the company can be expected as workers are used to following a certain process.
For effective implementation, support on all levels of the organization is necessary. To
create the needed conditions a cross functional task force is required. This would
include key staff from the affected departments and also human resources and IT staff.
The customer should also be represented in some form on the team as the change
affects the customer to a great extent (Davenport & Short, 1990:22).

Having a strong senior management such as the managing director part of the process
would help with the necessary influences needed throughout the company as he would
be able to integrate across the entire organisation while differences in opinion would
be resolved in favour of the customer and the process according to Davenport and
Short (1990).

With IT playing such a vital role within BPR there needs to be a very good structure in
place to ensure the correct implementation of it. IT personnel with the neccasary
knowledge of the current system and also the new system. Without management
understanding the role IT plays within the new process it would be very difficult for the
new process to operate effectively. Thus, for the change to succeed over the long run
managers need to develop the neccasary skills to operate the new system and also
facilitate and influence staff. Organizations moving towards heavily IT driven
processes would need their staff to undergo programs for skill development to improve
on the new cross functional processes and improve communication and cooperation.
(Davenport & Short, 1990:24)

A willingness to look beyond task and functional process boundaries with only focusing
on specific outcomes is neccasary. It is important for the management to be able to
view and restructure the process into fewer and more powerful processes throughout
the organization.

9
8. Analysis of BPR related to a familiar company

Agrico is the company that will undergo analysis for this report. Agrico has three
factories that produce agricultural pumps, machinery and pipes and one main
warehouse. The company consists of 28 outlets around the country with the main
warehouse and factories being based in Bellville. About 7000 outsourced products are
bought from across the world and the country and is shipped to the main warehouse
together with their own manufactured products. The products get stored until it is
ordered by one of the outlets or other customers. The focus of this report would be on
the main warehouse department of Agrico.

8.1 Are there methods relevant to my organisation for effectively

accomplishing BPR?

The Agrico warehouse is the main point from where the company manages the rest of
their branches. The company’s departments consist out of engineering, sales, finance,
purchasing, human resources, admin, IT, dispatch and receiving departments. The
organizational structure of certain departments has been structured to that of a cross
functional organization as the IT department has worked with management to integrate
the engineering, IT, purchasing, sales, finance and admin departments to improve on
key performances and communication. There are multiple processes happening within
the company on a daily basis. Many of them crossing departments. The way these
processes have been managed differs as each department has been improved
separately except for IT as it has been a common denominator between the
departments. All the neccasary components are present for BPR to be implemented
within Agrico.

The warehouse operations include the receiving of goods, packing away the goods
into allocated bins, then as a sales order is placed the product is picked and taken to
dispatch to be boxed and shipped. The process seems simple but when there are up
to 7000 different products to be packed, picked and kept track of while sale orders
increase daily many problems can arise in the system. When the warehouse is not
functioning well it drags the other departments down with it. The customers would be
affected by this as they would receive the wrong products and may even receive them
late.

10
All other departments would be affected by this and they would have to start solving
unnecessary problems that was caused by the warehouse. A new process would rely
heavily on IT to remove all the inefficiencies and problems that was faced with the old
system. To implement BPR within this process some key steps needs to be followed
to ensure successful implementation. According to Davenport & Short (1990) these
steps are:

1) Developing a business vision and process objectives.

By prioritising the objectives and setting targets: In this case, improving the picking
and packing operations, shortening lead times, accurate stock control, ensuring the
correct items are picked and improved communication between departments.

2) Identifying the processes to be redesigned.

By identifying critical bottleneck processes: With the current system, the access to
accurate information creates confusion and problems within the system. In short, how
product information is updated (manually), stored, picked and shared is the process
that needs to be redesigned.

3) Understand and measure the existing process.

By identifying the current problems: Having to type in each item into a specific bin
takes a long time. Human errors are more regular and items get lost because staff
takes shortcuts due to lengthy processes. Other departments wait long on requests
and information on the system is inaccurate causing bad managerial decisions.

4) Identifying the IT levers.

By brainstorming new process approaches: Implementing a software system that can

scan in, allocate, and scan out items while keeping track of real-time and accurate
information with the use of new IT technology.

5) Design and prototype the process.

By implementing organizational and technical aspects: Having software engineers

design and install the necessary equipment and training the staff to use the new
software systems would be key to ensure successful future execution of the new
process.

11
Products get “lost” on a regular basis and some of the same products get stored at
different locations. Pickers struggle to find certain products even when the system
shows there is stock available. There is a system in place that allocates items to certain
bins and keeps track of the stock but with the sheer volume and pace the company
works at, the current system becomes inaccurate over time as mistakes are made by
staff. The company noticed after doing a complete stock take that products worth
together of more than R1 million was “missing”. Thus, it is clear the current process is
not working well. Currently, staff at receiving books-in products manually by typing
codes into the system when it arrives. The system shows a supposed bin code where
the packer must pack it. If there is no space the packer would just use the closest open
space. When a sales order is picked, a picker receives a page with the items and their
bin locations. They would search for the items and take them to dispatch where they
would be manually booked out with their item codes. The warehouse can’t keep track
of who is picking what and when.

By redesigning the current warehouse process using IT the company would make use
of key new technology and software programs. As a shipment arrives at the receiving
bay it would get a sticker with a barcode and it would get scanned into the system and
sent to the bin. All the bins in the warehouse would be allocated with a code and a
barcode to specify the location. Each bin would be allocated with certain items and
every bin would have those specific item barcodes displayed at the bin, similar to how
a supermarket functions.

When a sales order is placed, it would get sent to the warehouse to be picked by the
pickers. They would receive a mobile device with all the items and their locations. Each
picker would have this mobile scanning device with him always. After the picker
removed the item from the bin he would scan the item barcode on the bin and would
specify the amount he has picked. This would reflect immediately on the system and
inventory numbers would be kept up-to-date in real time. The pickers would not make
use of paper when doing an order but instead the sales order would be on the
electronic mobile device and each item would be checked of the list as it is picked.
When the complete order arrives at dispatch after being picked the items would be
scanned again to indicate to the system they have left the warehouse and it’s in
dispatch.

12
8.2 Is there a logic behind reengineering as applied to Agrico?

Looking at the current process, there are obvious problems with the warehouse
system that translates over to all departments within the company. BPR would be a
logical choice for the company to implement to ensure the process is streamlined
strategically over all departments with the key performance objectives in mind. IT has
become a big force within the company on all levels and have been integrated with
many processes but not all. This is where BPR is very effective, by redesigning a
system so that it can be streamlined with other processes within the company that
have already been redesigned.

The benefits of introducing BPR into the warehouse would far out way the costs of
implementing it. Many departments have had some restructuring and improvements
done to them. Causing local improvements within the system only shifts the problem
over to a new area and overall key performances would not actually be affected.

Benefits would be seen on all levels of the company. There would be a more precise
record kept of all information, shorter lead times, less waste better quality and better
measurements meaning less problems and thus more satisfied customers. With
Agrico being a relatively large company they have the required resources to perform
such a big restructuring of a process. All the departments within the company would
be trained to adopt to the new system quickly. To stay competitive with lead times
when compared to other businesses this redesign of the process is very imperative.

8.3 Is Agrico content and productive applying performance

measures such as Quality techniques like Lean, Six Sigma etc.?

Quality techniques such as Lean and Six Sigma have been largely introduced into
some areas of the company and management have tried to implement it into most of
the processes. However, implementing these techniques into the company have not
fully satisfied the key performance objectives of the company. Quality and costs have
improved in certain specific areas but would be brought down by different sectors of
the company, specifically the warehouse process.

13
By only using these techniques on their own have resulted in “pocket improvements”
and not major overall improvements. That is why combining techniques such as JIT,
Lean and Six Sigma into the reengineering of the process is so important. When the
process has the most effective, efficient and streamlined basis to work from the
company would start to see a system maximised toward the strategic goals of the
company. After BPR have been performed on a process quality techniques would
have much greater impact on the overall key objectives.

8.4 How do we best plan, organize and control BPR efforts, if we

were to apply it at Agrico?

For planning, organizing and controlling BPR effectively within a company such as
Agrico a task team is needed. This team would consist of managers related to the
process under inspection, engineers, IT personnel and headed by a senior executive.
To start the BPR process, management needs to have a clear strategic objective into
which the redesign of the process fits. Agrico has a vision of creating a warehouse
where the process of receiving, storing, picking and dispatching their products to their
clients is much more - reliable, faster, accurate and organized while at the same time
reducing man made errors. After these objectives are reached the company would see
improvements in delivery times, costs and quality.

It is clear that Agrico would be making use of IT to a great extent to reengineer there
processes within the warehouse. Each process within the warehouse needs to be
analysed and observed closely by the managers and engineers responsible for each
area, together with the company’s IT specialist. The engineers and managers would
be tasked with identifying the processes that needs to be reengineered to reach the
objectives specified at the beginning of the process. After finding the processes the
problems within them would be identified and measured. By following the staff while
executing their tasks a clear understanding of where the problems arise would be seen
and so they would not be repeated after process redesigning has taken place.

After all the problems and errors have been identified and laid out by the task team
they can start to work on a complete new system that would resolve the problems
identified earlier. By working with the IT department, the task team can identify IT
levers that could be implemented to resolve some of the problems faced. The

14
managers and engineers would find a possible solution and the IT specialist would be
able to say if there is IT software or hardware available to be incorporated into this
redesigned process. Thus, the cooperation between engineers and the IT department
would be of great importance when it comes to finding and designing the best possible
solution for the process.

In the past, even the most sophisticated industrial engineering approaches only
considered the IT capabilities after the processes where designed. Thus, generally the
processes where not using the maximum IT capabilities available to the system. Agrico
has much more technological resources at their disposal and must fully utilise them
within the redesign of the new system.

The design and implementation of the process would take place systematically and
not over a short period of time as there would be many obstacles faced. An important
point according to Davenport & Short (1990) is that the actual design of redesign
process is not an end of the whole process and that it should rather be seen as a
prototype and that an ongoing iteration of design should be expected as the process
is implemented and faults are worked out systematically with new designs.

In order to minimise resistance from affected staff it would be necessary to make it

clear throughout the warehouse departments that a redesign is necessary. It would be
a big advantage to management if all staff within the affected process would be
accepting to the new redesigned process.

9. Conclusion

From this report, it is clear that BPR as a whole has a big future within companies that
wants to transform their processes for the better. As IT capabilities grow continuously
so will the implications of BPR as processes would always have to be redesigned to
keep up to date with the capabilities available. As the popularity of BPR and
competitiveness between organizations grows more and more companies would seek
to implement process redesign into their companies regardless of the type of business.

By managing a more customer driven process that crosses organizational boundaries

businesses would be able to maximise and improve their key performance objectives.
Thus, companies would be well equipped for the future when making use of BPR.

15
10. Bibliography

- Gunasekaran, A. Sandhu, M. 2010. HANDBOOK ON BUSINESS INFORMATION

SYSTEMS. 1st ed. Singapore: World Scientific Publishing Co.

- Vom Brocke, J. Rosemann, M. 2010. Handbook on Business Process Management

1 Introduction, Methods, and Information Systems. Berlin Heidelberg. Springer
Science & Business Media

- Davenport, TH. Short, JE. 1990. THE NEW INDUSTRIAL ENGINEERING:

INFORMATION TECHNOLOGY AND BUSINESS PROCESS REDESIGN.
Massachusetts Institute of Technology. Sloan Management Review

Peter Carter. 2005. teamtechnology. [ONLINE] Available at:

http://www.teamtechnology.co.uk/business-process-reengineering. [Accessed 7 April
2017].

16