Business Process Reengineering

Objectives
Explain what business process reengineering is and why it is important Present different options that organizations can use to reengineer processes within their organizations

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.

What is Reengineering?
Business Process Reengineering (BPR) is a management approach aiming at improvements by means of elevating efficiency and effectiveness of the processes that exist within and across organizations. It is a fundamental and radical approach by either modifying or eliminating nonvalue adding activities. (Wikipedia) Reengineering can be accomplished through the implementation of ERP systems..but is this the best approach?

Business Process Reengineering Definition

BPR first introduced in 1990 in a Harvard Business Review article by Michael Hammer: Reengineering Work: Don't Automate, Obliterate. Hammer/Champy Reengineering the Corporation (1993) Provided this definition: 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.

Business Process Reengineering Definition

Fundamental Need to understand why an organization does what it does question all of the rules and assumptions that exist Radical Radical redesign means disregarding all existing structures and procedures, and inventing completely new ways of accomplishing work. Reengineering is about business reinvention, begins with no assumptions and takes nothing for granted.

Business Process Reengineering Definition

Dramatic Not looking for marginal or incremental improvements or modification Goal is dramatic improvements in performance. Processes Focus on the way the organization adds value through cross-functional business processes Move away from function view; task based thinking

Ford Motor Company

Accounts Payable function

500 people
Most work on mistakes between

Purchase Orders Receiving Documents Invoices

Ford (cont)

Ford (cont)

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Reengineering Tenets
Combine multiple tasks and assign a single point of contact for each process. EMPOWERMENT An important feature of BPR is integrating activities and assigning business process responsibility to one individual a generalist.

Allow workers to make decisions. Avoid decision hierarchies that require workers to go through layers of management for decisions about the work they are doing. Perform process steps in their natural order. Rather than following a linear sequential set of tasks, perform process activities as needed, sometimes in parallel.

Reengineering Tenets
Do a cost/benefit on controls and other checks.

Only use those checks and controls that are costeffective.

Use IT to centralize data management. This allows companies to capture and store data only once, yet disperse as needed.

How do you figure out what processes to reengineer?

Whats broken the most?

What process has the greatest impact on the customer?

Which of the processes are most susceptible to successful redesign? (feasibility and scope)

How do you know if its broken (or at least in major trouble?)

Extensive information exchange, data redundancy, and re-keying of data into multiple systems Excessive inventory, buffers, and other assets High ratio of checking and control to value adding Reworking and iteration

Reengineering/Redesign Choices
What are the choices? What are the advantages / disadvantages of each? Who should or does use which?

Reengineering/Redesign Choices
Technology Enabled (Constrained) Reengineering Choices are a direct function of the software Not altering software makes time and cost lower Also called Concurrent Transformation Clean Slate Reengineering Start from scratch with no structures or documents Software must be made to fit the needs of the firm

Costs in terms of time and dollars is generally greater

Blend (along a continuum) is typical

Technology Enabled (Constrained) Reengineering

A particular technology (or portfolio of technologies) is chosen as a tool to facilitate reengineering. Thus, reengineering choices are a function of the technologies chosen.

The technology drives the reengineering.

Technology Enabled (Constrained) Reengineering Advantages

Provides an ideal goal for reengineering Best Practices Provides structure Pre-existing organization and data requirements Provides a reason for reengineering Persuades the reluctant Produces a better quality system

Leverages knowledge-base outside the firm

Provides design boundaries Clear objectives with minimal if any wandering

Technology Enabled (Constrained) Reengineering Advantages

Provides a design that fits the software

Minimizes modification to already existing software

Provides a proven design Takes advantage of lessons learned experience

Provides for a cost-effective implementation

Faster, simpler, more predictable, less risky Avoids engaging Management Consultants No need to think outside the box Michael Hammer = $400/hr

Technology Enabled (Constrained) Reengineering Advantages

ERP provides the tool and structure to facilitate change

ERP bounds the design, limiting overload

Design is feasible and we know it works (its been proven unless beta version used)

Designs likely are cost effective than inhouse development

Designs likely can be implemented in a timely manner

Clean Slate Reengineering

Process design starts with a clean slate Also referred to as starting from scratch or green field. Theoretically, no limits

Advantages of Clean Slate

Provides freedom from tools constraints Avoids tool biases by using a portfolio of tools Not limited by the constraints of a single software package Provides freedom from predefined structures Can develop own unique, leading-edge processes

Not limited to the configuration options within a single software package

Separates BPR and technology implementation

Clearly defines costs as one or the other

Permits immediate use of new technology Dont have to wait for the software company to catch up with an advance

Advantages of Clean Slate (cont)

Competitive advantage:

Allows an organization to develop innovative software that is not available through existing ERP software
May be the only option:

For some firms in niche industries, clean slate reengineering is the only option

Comparison: Clean Slate vs. Technology Enabled Advantages

Clean Slate Not constrained by tool Not limited by best practices as defined by vendor Retain competitive advantages Not subject to vendor changes May be only way to implement advanced technology Technology Enabled Focus on ERP best practices Tools help structure reengineering Tools focus reengineering Process bounded, thus easier Know design is feasible

May have unique features where Greater likelihood that cost, time best practices inappropriate objectives met

Agility

Software available

Which Firm Should Use Which Approach?

Depends on

Firms Size
Available Resources Time Pressure Strategic Gain Uniqueness of solution

Large Firms
Have the resources to do clean slate

Are often industry leaders and thus, generally have time

Are likely to use processes as a competitive advantage Are more likely to need a unique solution

Firms with Deep Pockets

Clean slate requires substantial resources

In some cases, clean slate will lead to many starts and stops before the final design is found

Firms with Time

Clean slate takes longer so only firms that have the time can really do clean slate approaches.

Firms for which Processes are a Strategic Advantage

The more unique a firm is in terms of its industry, processes, customers or other factors, the more likely that they see their specific processes as a competitive advantage and thus use some clean slate approach.

Firms that Seek a Unique Solution

Technology enabled approaches are easily copied and diffused
Clean slate approaches are not as rapidly or as easily copied.

Blend - Somewhere Between the Two

The approach claimed to be used by most firms is Technology Enabled Reengineering, simultaneous with ERP software implementation. In actuality, there are few projects that are purely clean slate or technology enabled

More of a spectrum
Technology Enabled Clean Slate

MOST MOST FIRMS FIRMS

May I help you with any clarifications?

Thank You, Friends