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Business Process ReengineeringBusiness Process Reengineering

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Ford Motor CompanyFord Motor Company

Accounts Payable functionAccounts Payable function 500 people500 people Most work on mistakes betweenMost work on mistakes between

PurchaseOrders

ReceivingDocuments Invoices

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Ford (cont)Ford (cont)

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Ford (cont)Ford (cont)

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Texas Instruments, 1990sTexas Instruments, 1990s

Long cycle times, declining salesLong cycle times, declining sales Applied BPR to create cross-functional teams supported Applied BPR to create cross-functional teams supported

by functional units for product developmentby functional units for product development Cross-functional teams control all aspects of product Cross-functional teams control all aspects of product

development design – production - marketingdevelopment design – production - marketing First pilot teams failedFirst pilot teams failed

Sabotaged by existing organization…. Sabotaged by existing organization…. Why?Why? TI Reorganized around teamsTI Reorganized around teams

Cut launching time by one-halfCut launching time by one-half more profitmore profit 4 times the ROI4 times the ROI

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Risks in BPRRisks in BPR

Advocates report failure rates of 50% to 70%Advocates report failure rates of 50% to 70% Sutcliffe [1999] reviewed difficultiesSutcliffe [1999] reviewed difficulties

Employee resistance to changeEmployee resistance to change Inadequate attention to employee concernsInadequate attention to employee concerns Inappropriate staffingInappropriate staffing Inadequate technologiesInadequate technologies Mismatch of strategies used and goalsMismatch of strategies used and goals Lack of oversightLack of oversight Failure of leadership commitmentFailure of leadership commitment

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BPR best practicesBPR best practices Combine multiple tasks and assign a single point of Combine multiple tasks and assign a single point of

contact for each process. EMPOWERMENTcontact for each process. EMPOWERMENT An important feature of BPR is integrating activities and An important feature of BPR is integrating activities and

assigning business process responsibility to one individual – assigning business process responsibility to one individual – a ‘generalist’.a ‘generalist’.

Allow workers to make decisions. Avoid decision Allow workers to make decisions. Avoid decision hierarchies that require workers to go through layers of hierarchies that require workers to go through layers of management for decisions about the work they are management for decisions about the work they are doing.doing.

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

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Reengineering TenetsReengineering Tenets

Do a cost/benefit on controls and other checks. Do a cost/benefit on controls and other checks. Only use those checks and controls that are cost-effective.Only use those checks and controls that are cost-effective.

Business process (physical flow) and Information Business process (physical flow) and Information Systems development (information and document Systems development (information and document flow) done at the same time (concurrently)flow) done at the same time (concurrently)

Centralize data “one version of the truth”. This Centralize data “one version of the truth”. This allows companies to capture and store data only allows companies to capture and store data only once, yet disperse as needed. once, yet disperse as needed.

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How do you figure out what processes to How do you figure out what processes to reengineer?reengineer?

What’s broken the most?What’s broken the most? What process has the greatest impact on the What process has the greatest impact on the

customer?customer? Which of the processes are most susceptible to Which of the processes are most susceptible to

successful redesign? (feasibility and scope)successful redesign? (feasibility and scope)

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How do you know if it’s broken (or at least in How do you know if it’s broken (or at least in major trouble?)major trouble?) Extensive information exchange, data redundancy, Extensive information exchange, data redundancy,

and re-keying of data into multiple systemsand re-keying of data into multiple systems Excessive inventory, buffers, and other assetsExcessive inventory, buffers, and other assets High ratio of checking and control to value addingHigh ratio of checking and control to value adding Reworking and iterationReworking and iteration

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IBM CreditIBM Credit

What were the fundamental issues with the What were the fundamental issues with the IBM Credit process?IBM Credit process?

How did IBM figure out what the right solution How did IBM figure out what the right solution was for the credit process?was for the credit process?

What was the assumption about the process What was the assumption about the process that proved to be false?that proved to be false?

What was the key feature of the reengineered What was the key feature of the reengineered process?process?

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What are the choices?What are the choices?

What are the advantages / disadvantages of each?What are the advantages / disadvantages of each?

Who should or does use which? Who should or does use which?

Reengineering/Redesign ChoicesReengineering/Redesign Choices

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Need for BPRNeed for BPR

O’Leary [2000] survey of SAP R/3 usersO’Leary [2000] survey of SAP R/3 users Technology enabled strategy dominatedTechnology enabled strategy dominated Prior to ERP implementation, 16% thought BPR Prior to ERP implementation, 16% thought BPR

needed prior to SAP implementationneeded prior to SAP implementation> 33% thought BPR unnecessaary33% thought BPR unnecessaary

After ERP implementation, 35% thought BPR needed After ERP implementation, 35% thought BPR needed prior to SAP implementationprior to SAP implementation

> 10% thought BPR unnecessary10% thought BPR unnecessary

So BPR seems to be a useful exerciseSo BPR seems to be a useful exercise