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Business ProcessReengineering

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Objectives

Explain what business process reengineering is and why itis important

Present different options that organizations can use to

reengineer processes within their organizations

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Why Reengineer?

Historical reality for organizations:

High level of demand: organizations are order takers

Management (and IT!) focus efficiency and control

of operationsModern reality since 1990s:

Hyper-competiveness

Globalization

Very demanding customers

Management and IT focus: Innovation,responsiveness/speed, quality and service.

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What is Reengineering?

Business Process Reengineering (BPR) is a managementapproach aiming at improvements by means of elevatingefficiency and effectiveness of the processes that existwithin and across organizations. It is a fundamental and

radical approach by either modifying or eliminating non-value adding activities. (Wikipedia)

Reengineering can be accomplished through theimplementation of ERP systems..but is this the best

approach?

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Business Process ReengineeringDefinition

BPR first introduced in 1990 in a Harvard BusinessReview article by Michael Hammer:

Reengineering Work: Don't Automate, Obliterate.

Hammer/Champy

Reengineering the Corporation (1993)

Provided this definition:

Reengineering is the fundamental rethinking andradical redesign of business processes to achievedramatic improvements in critical, contemporarymeasures of performance, such as cost, quality,service, and speed.

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Fundamental

Need to understand why an organization does what itdoes question all of the rules and assumptions thatexist

Radical

Radical redesign means disregarding all existingstructures and procedures, and inventing completely

new ways of accomplishing work. Reengineering isabout business reinvention, begins with noassumptions and takes nothing for granted.


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Dramatic

Not looking for marginal or incrementalimprovements or modification

Goal is dramatic improvements in performance. Processes

Focus on the way the organization adds valuethrough cross-functional business processes

Move away from function view; task based thinking


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Ford Motor Company

Accounts Payable function

500 people

Most work on mistakes between

Purchase

Orders

Receiving

DocumentsInvoices

Purchase

Orders

Receiving

DocumentsInvoices

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Ford (cont)

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Ford (cont)

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Enroll in Course: Current situation (9years ago)

Student Professor Registrar

Select Courses

Reg. Form

Wait in line,

usually in rain.

Line up for professor

Registration open yet?

Need another course?

Y

N

Y

Review request

Determine if prereqs.

met

Determine if

space available in

sections) taught

Can student enroll?

Reg. Form

N

Enroll student,

update form

Reg. Form

Y

N

Bring

completed

form to

registrar table

Review formsfor issues/errors

Reg. Form

Y

N

Key

registrationdata into

computer

Reg. Form

Form OK?

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Enroll in Course: Today

Student BannerSelect Courses(online)

Sit at computer.

Sipcoffee.

Supply

user name

and

password

Registration open yet?

Y

N

Authenticat

e user

Input

requested

courses

Check that

student

has

prereqs

Check

availability

inrequested

sections

Present

student

results of

course

requests

Need more courses?Y

N

Record

results in

database

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Reengineering Tenets

Combine multiple tasks and assign a single point ofcontact for each process. EMPOWERMENT

An important feature of BPR is integrating activitiesand assigning business process responsibility to oneindividuala generalist.

Allow workers to make decisions. Avoid decisionhierarchies that require workers to go through layers ofmanagement for decisions about the work they aredoing.

Perform process steps in their natural order. Rather thanfollowing a linear sequential set of tasks, performprocess activities as needed, sometimes in parallel.

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Reengineering Tenets

Do a cost/benefit on controls and other checks.

Only use those checks and controls that are cost-effective.

Use IT to centralize data management. This allowscompanies to capture and store data only once, yetdisperse as needed.

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How do you figure out whatprocesses to reengineer?

Whats broken the most?

What process has the greatest impact on the customer?

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

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

Extensive information exchange, data redundancy, andre-keying of data into multiple systems

Excessive inventory, buffers, and other assets

High ratio of checking and control to value adding

Reworking and iteration

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What are the choices?

What are the advantages / disadvantages of each?

Who should or does use which?

Reengineering/Redesign Choices

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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 firmCosts in terms of time and dollars is generally greater

Blend (along a continuum) is typical

Reengineering/Redesign Choices

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Technology Enabled (Constrained)Reengineering

A particular technology (or portfolio of technologies) ischosen as a tool to facilitate reengineering.

Thus, reengineering choices are a function of the

technologies chosen.

The technology drives the reengineering.

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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

T h l E bl d (C t i d)

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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


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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

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Clean Slate Reengineering

Process design starts with a clean slate

Also referred to as starting from scratch or green field.

Theoretically, no limits

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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 singlesoftware package

Separates BPR and technology implementationClearly defines costs as one or the other

Permits immediate use of new technology

Dont have to wait for the software company to catch upwith an advance

Advantages of Clean Slate

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Advantages of Clean Slate (cont)

Competitive advantage:

Allows an organization to develop innovative softwarethat is not available through existing ERP software

May be the only option:

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

C i Cl Sl

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Comparison: Clean Slate vs.Technology Enabled Advantages

Clean Slate Technology Enabled

Not constrained by tool Focus on ERP best practices

Not limited by best practicesas defined by vendor

Tools help structurereengineering

Retain competitive advantages Tools focus reengineering

Not subject to vendor changes Process bounded, thus easier

May be only way to implement

advanced technology Know design is feasible

May have unique features wherebest practices inappropriate

Greater likelihood that cost, timeobjectives met

Agility Software available

Which Firm Should Use Which

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Which Firm Should Use WhichApproach?

Depends on

Firms Size

Available Resources Time Pressure

Strategic Gain

Uniqueness of solution

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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 advantageAre more likely to need a unique solution

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Firms with Deep Pockets

Clean slate requires substantial resources

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

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Firms with Time

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

Firms for which Processes are a

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Firms for which Processes are aStrategic Advantage

The more unique a firm is in terms of its industry,processes, customers or other factors, the more likelythat they see their specific processes as acompetitive advantage and thus use some clean slateapproach.

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Firms that Seek a Unique Solution

Technology enabled approaches are easily copied anddiffused

Clean slate approaches are not as rapidly or as easily

copied.

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Blend - Somewhere Between the Two

The approach claimed to be used by most firms isTechnology Enabled Reengineering, simultaneous withERP software implementation.

In actuality, there are few projects that are purelyclean slate or technology enabled

More of a spectrum

TechnologyEnabled

CleanSlate

MOST FIRMSTechnologyEnabled

CleanSlate

MOST FIRMSTechnologyEnabled

CleanSlate

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May I help you with anyclarifications?

Thank You, Friends