BIG CHANGEVIA BUSINESS PROCESS

REENGINEERING

Daniel F. DuranWhittier CollegeOperations 342

What BPR Is: Two Parallel Definitions

“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” It is more than automation.

“BPR is a performance improvement philosophy that aims to achieve quantum improvements by primarily rethinking and redesigning the way that business processes are carried out.”

(Omar. A. El Sawy, “Redesigning Enterprise Processes for e-Business”, McGraw-Hill, NY, 2001)

“Fundamental”

Must ask “Why do we do what we do? (steps)

Question the tacit rules and assumptions underlying the organization’s culture.

Begin with logical specification of what a company must do. (Again goals and steps)

Then specify the physical design of how to perform these activities better and simpler

“Radical”

Must examine the “root” of business processes, structures, and policies.

Don’t fiddle with the old; cast it away and begin anew. (rethink rather than only change)

Reengineering is reinvention, not modification or enhancement.

“Dramatic”

Not small, incremental improvements; BPR seeks order of magnitude improve-ments in cost, quality, service, and speed. Use of IT to assist in these.

Redecorating v. demolition and reconstruction!(an analogy)

“Dramatic”: Who Undertakes BPR?

Companies in deep trouble -- need order of magnitude improvements!

Companies who foresee trouble -- “an ounce of prevention ....”

Companies in peak condition who want to further their competitive advantage.

Very similar to reason why Systems Analysis Project Originate

“Processes”

“a collection of activities that takes one or more kinds of inputs and creates an output that is of value to the customer”.

Collection of activities -- the “P” of the IPO; related by common goal.

Inputs -- raw material to be processed. Output -- something that has value to the

customer. Customer -- internal or external. Information Systems Data converted to

Information that is useful to customer

Process Integration: Value Chain

Management & Administrative Services

Human Resources Management

Technology Development

Procurement of Resources

InboundLogistics Operations

OutboundLogistics

Marketing& Sales Service

CompetitiveAdvantage

SupportActivities

PrimaryActivities

Process Integration

Two forms: within a single organization between two or more organizations

Avoids “over-the-wall” thinking and “silo-opia” (Common in Legacy systems or old organizational structures)

What BPR Is NOT

Although BPR may cause or involve aspects of all of the following, it is NOT downsizing NOT restructuring NOT “paving cow paths” NOT reorganizing, delayering, .... NOT TQM ...

BPR Is NOT TQM

Process Improvement(TQM)

Process Innovation(BPR)

Degree of Change Incremental Radical

Starting Point Existing Process Clean Slate

Frequency of Change Continuous One-Time

Time Required Short (weeks-months) Medium to long (dependingon scope of BPR effort)

Inception/Participation Top-Down/Bottom-Up Top-Down

Scope Narrow; Task- or Function-oriented

Broad; Process-oriented

Risk Moderate High

Primary Enabler Statistical Control Information Technology

Type of Change Cultural Cultural and Structural

Source: Adapted from [Davenport 1993]

Why BPR Is Necessary

The Virtual Organization: Three C’s Driving Change Customers take charge.

Mass market v. a “market of one” Backward integration Informed consumers

Competition intensifies. More and different kinds Big is not better Technology changes the nature of

competition.

Competitive Forces Model

Threat of newmarket

entrants

Bargainingpower ofsuppliers

Bargainingpower of

customers

Threat ofsubstitute

products &services

The firmIntra-

industrycompetitors

Why BPR Is Necessary

The Three C’s (continued) Change becomes constant.

reduced product cycles reduced time to develop new products more environment scanning

“Companies created to thrive on mass production, stability, and growth can’t be fixed to succeed in [such] a world.”

Four Revolutions Affecting Business Today

NewCompetitors

New Rules ofCompetition

NewTechnologies

NewWork Force

How the Information Age is Changing Business

Organization: Breaking down old corporate barriers, allowing critical information to be shared instantly.

Operations: Using IT to shrink cycle times, reduce defects, cut waste, streamline ordering and communications.

Staffing: Eliminating management layers and cutting employment levels; creating “virtual” offices.

New Products: Collapsing development cycles. Customer Relations: Tapping into companywide

databases to solve callers’ demands instantly

Info Technology = Enabler

Old Rule Technology New RuleInformation must beprocessedsequentially.

Shared databases& imagingtechnology

Information can beprocessedconcurrently.

Only experts canperform complexwork.

Expert Systems A generalist can dothe work of anexpert.

Business mustchoose a centralizedor decentralizedstructure.

Telecommnetworks

Businesses can reapthe benefits of bothstructures.

Only managers haveaccess toinformation.

Decision supporttools

Decision making ispart of everyone’sjob.

Info Technology = Enabler

Old Rule Technology New Rule

Field personnelneed offices to sendand receiveinformation.

Wireless datacommunications &portable computers

Field personnel cansend and receiveinformation fromanywhere.

The best contact ispersonal contact.

Interactivevideodisc & WWW

The best contact iseffective contact.

You have to findout where thingsare.

Automatic identifi-cation & tracking

technology

Things tell youwhere they are.

SUPPLY-CHAIN MANAGEMENT & Porter’s Value Chain

INTRANETINTRANET

PRODUCTIONPLANNING

PROCUREMENT

INVENTORY

PRODUCTION &MANUFACTURING

CUSTOMERSERVICE

ACCOUNTING &FINANCE

MARKETING& SALES

SHIPPING &DISTRIBUTION

CU

ST

OM

ER

S

BPR and E-Business

E-Business is a facilitator and an enabler.

EC is more than just automating existing processes.

EC creates new business models e.g. Dell Computers

PARADIGM SHIFT

PARADIGM IS A COMPLETE MENTAL MODEL OF HOW A COMPLEX SYSTEM FUNCTIONS

A PARADIGM SHIFT INVOLVES RETHINKING THE NATURE OF THE BUSINESS, THE ORGANIZATION; A COMPLETE RECONCEPTION OF HOW THE SYSTEM SHOULD FUNCTION

BPR Objectives

Streamline – remove waste, consolidate Lose Wait – squeeze out delays Orchestrate – let the most able enterprise

execute, outsource Mass Customize – any time, any place,

any way Synchronize – both the physical and

virtual parts of the process, real time processing of data

Digitize and Propagate – capture information digitally at the source and propagate it through the process

Vitrify – provide glass like visibility of the process

Sensitize – fit the process with sensors and feedback loops for prompt action

Analyze and Synthesize – generate added value by enhancing the process, constant improvement and iteration.

BPR Objectives

RISKS & REWARDS

RISKRISK

RETURNRETURN

LowLow

LowLow HighHigh

HighHigh

1. Develop business vision, process objectives

2. Identify process to be redesigned3. Understand, measure performance of

existing processes4. Identify opportunities for applying

information technology5. Build PROTOTYPE of new process

BUSINESS REENGINEERING STEPS:

FEASIBILITY

TECHNICAL: Assess hardware, software, technical resources

ECONOMIC: Will benefits outweigh costs? OPERATIONAL: Is solution desirable within

existing conditions? INFORMATION REQUIREMENTS: Detailed

statement of new system needs

Characteristics of Reeng. Processes

Several jobs are combined into one. Compress the organization horizontally

and vertically. Replace several task specialists with one

‘case worker.’ Group task specialists into case teams. Benefits: improves efficiency, reduces

errors and administrative overhead, and increases accountability.

Workers make decisions. Compress organization vertically to

reduce chain of command. Tie decision making to getting the work

done: Those who do the work make the decisions.

Benefits: reduces delays, lowers overhead, provides better customer response, empowers workers.

Characteristics of Reeng. Processes

The process steps are performed in a natural order.

Eliminate process linearity and sequence where possible. Perform tasks concurrently to reduce

process cycle time.

Characteristics of Reeng. Processes

Characteristics of Reeng. Processes

Processes have multiple versions. Standardization is dead: One size does

NOT fit all. Create multiple versions of the same

process, each tuned to meet the needs of different inputs, situations, or markets.

Benefits: eliminates complexity and exceptions that must be incorporated in a standardized process.

Characteristics of Reeng. Processes

Work is performed where it makes the most sense. (Manufacturing Example) $100 in internal costs to purchase $3

worth of batteries or supplies!!! Accountants buy their own pencils;

customers repair their own equipment; spare parts are stored at the customer site.

Benefits: eliminates administrative costs, reduces process cycle time, improves customer service.

Characteristics of Reeng. Processes

Checks and controls are reduced. (Tricky) Checks and controls don’t add value;

use them only when they make economic sense.

Tolerate limited, modest abuse to reduce costs of prevention.

Provide effective systems for detecting abuse, e.g., audits.

Characteristics of Reeng. Processes

Reconciliation is minimized. (Carefully) Reconciliation doesn’t add value. Benefits: reduce number of external

contact points for each process, thereby reducing the likelihood of inconsistent data.

Ford’s accounts payable process: eliminated vendor’s invoice.

WalMart’s PO-less purchasing system.

Characteristics of Reeng. Processes

A case manager provides a single point of contact. (Loans or other service) Acts as a buffer between a complex,

multistep/multiperson process and the customer.

Accepts responsibility as though s/he were performing the whole process.

Requires access to process-related data and effective communication with process workers.

Characteristics of Reeng. Processes

Hybrid centralized/decentralized operations are prevalent. Reap the advantages of both operating

modes! Operate as though units were autonomous

(decentralized), yet enjoy the economies of scale that centralization creates.

Notebook equipped sales force; software imposes controls to prevent unreasonable quotes or promised delivery dates.

People Issues

Fear of change Emphasis on Team work Viewing “Big Picture” rather than a

job or step in a process IS designers to act as facilitators

Technology Issues

Careful use of unproved technologies Quick deployment of cost effective

technologies Resistance to Change from Old

technology; Why change when “NOT” Broke

Dealing with legacy systems Changes in Information Systems

Architectures.

Organizational Issues

Top Management Champion High visibility and High Expectations Structural and cultural changes

Problems Moving Decision Making and Control

points; may lead to replacement of organizational units