Business Process Re-engineering (BPR)

Definition :Mitchael Hammer defines re-engineering as the fundamental rethinking and radical redesign of business process to achieve dramatic improvements in the critical contemporary measures of performance such as cost, quality, service and speed.

The above definition deals with a number of important concepts as mentioned below: 1. Fundamental Rethinking calls for questioning everything that is being followed, practiced and found acceptable for years. The fundamental rethinking calls for starting all over again rejecting the past. It requires a vision, an innovation and an imagination. 2. Radical redesign is the second important concept used in the definition of re-engineering. For example, the business is conducted in a certain manner, i.e., you buy raw material, process it, pack the finished goods, sell and distribute the goods to the customers. These are the standard procedures or designs for these activities. The radical redesign calls for trimming and chopping of these activities so that the cost is reduced, service is improved and the customer gets higher value at the higher speed. The redesign calls for a change in the technology, tools and techniques.
The radical redesign calls for the off-loading the activity outside the business organization if it contributes to the cost reduction. It begins with the objective of activity elimination , then improvisation and finally outsource.

Fundamental rethinking and radical redesign

Is that exercise which produces dramatic improvements. Any re-engineering exercise, if it produces only marginal improvements is then not a result of fundamental rethinking and a radical redesign. The new benchmark may replace the cost, quality, service and speed at which it delivers. When the re-engineering exercise is complete, the organization will have fewer people, less space, a product or service of excellence and highest customer satisfaction.

What is required by re-engineering?

Instead of orders, order processing cycle time is important. Procuring the right material of the right quality is important but how soon can the material be produced is vital . The procurement cycle from the requisition of material to physical arrival of the material is important. The shorter the cycle time, lesser the stocks and lesser the cost of procurement.

Cont.
Another would be measure in the performance of business in term of customer satisfaction. Customer satisfaction would be highest if the price paid by the customer is convincingly appropriate for the value the product or service offers and there is no better option elsewhere. Customer satisfaction would be measure now not by the no. of complaints, which an any case should be few, but quickly the customer problem is solved and his service expectations fulfilled. Fast response whether it is order delivery or complaint handling is what the customer is looking for and is what the organisation should provide.

Business Process
The business process is defined as a set of activities performed across the organization creating an output of value to the customer. Every process has a customer who may be internal or external to the organization. The scope of process runs across the departments and functions and ends up in substantial value addition which can be measured against the value expectation of a customer. For example, the order processing scope in the Marketing department. But when it comes to re-engineering, the scope expands to manufacturing, storing and delivering. Likewise, the scope of the bill payment is not limited to the accounts & finance department but it covers ordering the vendors, receipt and acceptance of goods and paying the bill amount. The basic element of the processes is motivation to perform certain activities. In the process execution, the data is gathered, processed and stored. The data is used in the process to generate the information which would be checked, validated and used for decision making. The decision is then communicated. The process is executed through the basic steps such as receiving the input, measuring the input, analyzing the document, performing, recording, accessing data, producing the results and communicating them.

Basic Elements of Business Process

Motivation to perform Data gathering, processing and storing Information processing Checking, validating and control Decision making Communication

These steps are performed a number of times across the execution process. When the process is performed, it consumes resources and time. The re-engineering approach attempts to eliminate or shorten the steps so that resource consumption is reduced and time of process execution is shorten. It eliminates redundancy by eliminating the steps which do not contribute to the value customer is looking for.
Every process is made of a series of activities. In each activity some work is done which produces some result for processing into the next activity. The people who manage the business are engaged in series of such work modules distributed across the organization. When such work are viewed together as a single entity, it is a business process. In such process, participating people are considered as a team working with the sole objective of achieving the customer expectation on value.

Process Model of the Organisation The re-engineering initiative begins with viewing the organisation through the processes and not by the tasks or functions. A process may begin in one department and run across other departments producing a business result of some value. The process is handled by a number of people having different status in the organisation. The classical organisation model is recast on the basis of processes ignoring the people hierarchy. The stimulus to activate the process could be external or internal and it flows across the departments where the data is gathered, analysed, processed, the decisions are taken and the intermediate results are passed to the next stage for further processing. The process model of the organisation for BPR considers only those processes where the end of each process produces a result whereby the customer concern, interest, expectation and perception are affected. It considers only those processes which produce value for the customer.

Value Stream Model of the Organisation

The organisation is established to fulfill customer needs, having associated customer value. The value is a measure, an intangible measure, which is difficult to count in clear terms or specifications as different customers have different value priorities, value mix and buying decision criteria. However, if the value expectations are fulfilled, the customer satisfaction is automatic. The business organisation, however has to decide which customer segment it will like to serve and then evolve various business strategies. The organisation is required to design such processes which will fulfill the basic needs of the customer by producing a product which will satisfy the value perceptions of the customer. The process model, therefore, can be seen a value stream model, relevant to the organisation. Every organisation must, therefore, identify value streams in the process model, consistent with the business, the goods manufactured and the nature of business and its objectives. All organisations have some processes which are critical from value viewpoints. For example, order processing, procurement processing, manufacturing, delivery, customer relations and product development and design are value streams in any process model.

Processes like invoicing, recovery, bill payment, supplier relations, communication processes, etc. are the secondary processes which support value delivery to the customer. All these processes deal with some aspect of business which affect the cost, the quality, the service and the speed. How to build process organisation ? Motivation Free Data/Information from ownership Provide access unlimited Empower person(s) through support Recast business operations into process(client and servant) Designate process manager Segregate processes where customer is internal, from external Take the process beyond organisation Think in terms of business partners/associates and not as buyers and sellers Retain only those processes which contribute to value to the customer and sub-contract others.

Re-Engineering Opportunities
Identify process and map them across the organisation Classify them by following norms -Cycle time -Capital intensive -Information intensive -Risk intensive -Overheads -Manpower intensive -Decision intensive Rank them by the value to the customer -cost price -product value -Quantity -Delivery Classify process by customer -Internal(users of the process) -External(buyers) Select processes for re-engineering -Organisation needs -Market needs -Business Strategy