BPR in context to strategic cost management
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BPR & in context toBPR & in context to
Strategic Cost ManagementStrategic Cost Management
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Crow storyCrow story Crow story:Crow story: Once there was aOnce there was a KoelKoel sitting on asitting on abranch.branch. She saw a crow running away.She saw a crow running away. She asked him,She asked him,
why are you running?why are you running? Crow said, I am fed up withCrow said, I am fed up withpeople around here, I am going to a new place.people around here, I am going to a new place. SheSheasked Why?asked Why? Crow said, they areCrow said, they are not good, they donot good, they donot allow me to seat at one place, they always shoo menot allow me to seat at one place, they always shoo meaway by throwing stone and all that, and so I am going toaway by throwing stone and all that, and so I am going toa new place.a new place. She asked him, Oh, OK, but did youShe asked him, Oh, OK, but did youchange the old habit of screaming Kachange the old habit of screaming Ka KaKa KaKa andanddisturbing people.disturbing people. He said No.He said No. Then she said. in newThen she said. in newplace also perhaps people will drive you away and youplace also perhaps people will drive you away and you
will not benefit by running away from this place.will not benefit by running away from this place.
Moral of the story:Moral of the story: Change before you automate.Change before you automate. NoNopoint in just changing ERP, try to change users.point in just changing ERP, try to change users.
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What is a Business Process?What is a Business Process?
A business process is a collection ofA business process is a collection of
activities which together produceactivities which together produce
something of value to a customersomething of value to a customer e.g. Customer Order Entrye.g. Customer Order Entry
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What is BPRWhat is BPR
Reengineering involves the fundamentalReengineering involves the fundamental
rethinking and redesign of businessrethinking and redesign of business
processes to achieve dramaticprocesses to achieve dramaticimprovements in critical, contemporaryimprovements in critical, contemporary
measures of performance, such as cost,measures of performance, such as cost,
quality, service and speedquality, service and speed
Also called as Business Process RedesignAlso called as Business Process Redesign
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Key CharacteristicsKey Characteristics
ProcessProcess--BasedBased
Radical ImprovementRadical Improvement
Integrated ChangeIntegrated Change People CentredPeople Centred
Focus on EndFocus on End--CustomersCustomers
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BPR is Not?BPR is Not?
AutomationAutomation
DownsizingDownsizing
OutsourcingOutsourcing
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What it is not?What it is not?
Reengineering is notReengineering is not reorganizing.reorganizing. Modifying how an organization is structured andModifying how an organization is structured and
redesigning an organizations business processes areredesigning an organizations business processes aretwo different things.two different things.
An organizational structure should be designed soAn organizational structure should be designed sothat it best supports redesigned business processes.that it best supports redesigned business processes.
Reengineering is notReengineering is not downsizing either.downsizing either. Downsizing focuses on the reduction of workforce toDownsizing focuses on the reduction of workforce to
achieve shortachieve short--term cost savings.term cost savings.
Reengineering, on the other hand, focuses onReengineering, on the other hand, focuses onrethinking from the ground up, finding more efficientrethinking from the ground up, finding more efficientways of working including eliminating work that isways of working including eliminating work that isunnecessary.unnecessary.
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What prompts BPR?What prompts BPR?
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What prompts BPR?What prompts BPR?
Realization that competitors will haveRealization that competitors will haveadvantage in cost, speed, flexibility, qualityadvantage in cost, speed, flexibility, quality
or service.or service.
New vision or strategy: a need to buildNew vision or strategy: a need to buildoperational capabilities.operational capabilities.
Need to reNeed to re--evaluate strategic options, enterevaluate strategic options, enter
new market or redefine new products ornew market or redefine new products or
service.service.
Core operating processes are bases onCore operating processes are bases on
outdated assumptions/technology.outdated assumptions/technology.
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What prompts BPR?What prompts BPR?
Change in market place in the form ofChange in market place in the form of
1.1. Loss of market shareLoss of market share
2.2. New basis of competition/ newNew basis of competition/ new
competitors.competitors.
3.3. New regulations.New regulations.
4.4. Shorter product life cyclesShorter product life cycles
5.5. New technologies in playNew technologies in play
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Why Reengineer?Why Reengineer?
CustomersCustomers
DemandingDemanding
SophisticationSophistication
Changing NeedsChanging Needs
CompetitionCompetition
LocalLocal
GlobalGlobal
ChangeChangeTechnologyTechnology
CustomerCustomer
PreferencesPreferences
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What to reWhat to re--engineer?engineer?
BPRBPRchanges processeschanges processes, and, andnotnot
functions, departments,functions, departments,
geographies or tasksgeographies or tasks
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Why Organizations Dont Reengineer?Why Organizations Dont Reengineer?
ComplacencyComplacency
Political ResistancePolitical Resistance
New DevelopmentsNew Developments
Fear of Unknown and FailureFear of Unknown and Failure
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BPR Versus Process SimplificationBPR Versus Process Simplification
Process Reengineering
Radical Transformation
Vision-Led
Change Attitudes & Behaviours
Director-LedLimited Number of Initiatives
Process Simplification
Incremental Change
Process-Led
Assume Attitudes & Behaviours
Management-LedVarious Simultaneous Projects
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BPR Versus Continuous
Improvement
Process Reengineering
Radical Transformation
People & Technology Focus
High Investment
RebuildChampion Driven
Continuous Improvement
Incremental Change
People Focus
Low Investment
Improve ExistingWork Unit Driven
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FORD MOTOR COMPANY WAS WONDERINGFORD MOTOR COMPANY WAS WONDERING
WHY THEY NEED 400 CLERKS TO HANDLEWHY THEY NEED 400 CLERKS TO HANDLE
ACCOUNTS PAYABLE, WHEN COMPETITORACCOUNTS PAYABLE, WHEN COMPETITOR
(MAZDA) JUST HAD FIVE.(MAZDA) JUST HAD FIVE.
THAT IS WHEN FORD DID SOME BPR. THETHAT IS WHEN FORD DID SOME BPR. THE
BPR WORK NEEDS TO BE PROPERLYBPR WORK NEEDS TO BE PROPERLY
DOCUMENTED IN THE FORM OF AN S.O.PDOCUMENTED IN THE FORM OF AN S.O.P(STANDARD OPERATING PROCEDURES)(STANDARD OPERATING PROCEDURES)
MANUAL, WHICH WOULD FORM THEMANUAL, WHICH WOULD FORM THE
FOUNDATION OF THE ~NEW BUSINESS.FOUNDATION OF THE ~NEW BUSINESS.
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ExamplesExamples
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AFTER THE BPR DONE AT FORD, THEAFTER THE BPR DONE AT FORD, THE
PROCESS ELIMINATED INVOICES ANDPROCESS ELIMINATED INVOICES AND
MISMATCHED DOCUMENTATION.MISMATCHED DOCUMENTATION.
THE ACCOUNTS PAYABLE DEPARTMENTTHE ACCOUNTS PAYABLE DEPARTMENT
NOW HAS 125 PEOPLE ONE FOURTH OF THENOW HAS 125 PEOPLE ONE FOURTH OF THE
EARLIER 500 PEOPLE.EARLIER 500 PEOPLE.
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Benefits of ReengineeringBenefits of Reengineering
BPR helps inBPR helps in--
Eliminating redundant/outdated processesEliminating redundant/outdated processes
Process improvementProcess improvement
Cost reductionCost reduction
Productivity improvementProductivity improvement
Profit improvementProfit improvement
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Benefits of ReengineeringBenefits of Reengineering
The rewards of reengineering are manyThe rewards of reengineering are many
including:including:
empowering employees;empowering employees;
eliminating waste, unnecessary managementeliminating waste, unnecessary managementoverhead, and obsolete or inefficient processes;overhead, and obsolete or inefficient processes;
producing often significant reductions in cost andproducing often significant reductions in cost and
cycle times;cycle times;
enabling revolutionary improvements in manyenabling revolutionary improvements in manybusiness processes as measured by quality andbusiness processes as measured by quality and
customer servicecustomer service
helping top organizations stay on top and lowhelping top organizations stay on top and low--
achievers to become effective competitors.achievers to become effective competitors.
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BPR in context to Strategic CostBPR in context to Strategic Cost
ManagementManagement-- SummarySummary
Low cost airline Ryan air revealed in March that it wasLow cost airline Ryan air revealed in March that it wastoto freeze the pay of its senior managementfreeze the pay of its senior management duringduring
2008 as part of a number of cost cutting initiatives to2008 as part of a number of cost cutting initiatives tocombat rising fuel prices.combat rising fuel prices.
Hibernian announced in June that it was moving 580Hibernian announced in June that it was moving 580back office and support positions from Dublin toback office and support positions from Dublin to
Bangalore in India in order to drive sustainableBangalore in India in order to drive sustainableefficiencies within theefficiencies within the organisationorganisation
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There are 6 key areas thatThere are 6 key areas that
should be considered whenshould be considered when
implementing BPRimplementing BPR -- inincontext to Strategic Costcontext to Strategic Cost
ManagementManagement
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1) Customer value proposition1) Customer value proposition
When assessing cost reductionWhen assessing cost reduction
opportunities an organization must beopportunities an organization must be
mindful not to forget the most importantmindful not to forget the most important
element of the equationelement of the equation the customerthe customer It is essential that an organizationIt is essential that an organization
understands its existing client base as wellunderstands its existing client base as well
as other market opportunities and that itas other market opportunities and that it
aligns itself carefully to be able to meetaligns itself carefully to be able to meetcurrent and future demandscurrent and future demands
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2) Business process re2) Business process re--
engineeringengineering
BPR is the key to transforming the wayBPR is the key to transforming the waypeople work and is the main way in whichpeople work and is the main way in whichorganizations become more efficient andorganizations become more efficient and
effective.effective. Successful BPR depends on a number ofSuccessful BPR depends on a number of
factorsfactors--
senior management buysenior management buy--inin
strategic alignmentstrategic alignment supporting business case for change;supporting business case for change;
clear change management planclear change management plan
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3) Simplify the business operating3) Simplify the business operating
modelmodel
ReRe--define its people, processes, organizationaldefine its people, processes, organizational
structure, technology and sales channels.structure, technology and sales channels.
Simplifying the operating model looks toSimplifying the operating model looks to
eliminate unnecessary costs related toeliminate unnecessary costs related tomaintaining valuemaintaining value
TheThe low cost airlineslow cost airlines are an excellent example.are an excellent example.
They have sought to eliminate unnecessaryThey have sought to eliminate unnecessarycosts by streamlining business processes andcosts by streamlining business processes and
pass these efficiencies on to customers in thepass these efficiencies on to customers in the
form of low prices.form of low prices.
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4) Shift fixed to variable costs4) Shift fixed to variable costs
Fixed costs include anything that is a constantFixed costs include anything that is a constantirrespective of sales volumes.irrespective of sales volumes.
The greater the proportion of variable costs toThe greater the proportion of variable costs tofixed costs incurred by an organisation the easierfixed costs incurred by an organisation the easierit is to upscale and downscale costs in responseit is to upscale and downscale costs in responseto economic booms and busts.to economic booms and busts.
A popular initiative for organisations is toA popular initiative for organisations is tooutsource various functions or businessoutsource various functions or businessprocessesprocesses
Eg:Symantec, which provides security, storageEg:Symantec, which provides security, storageand systems management solutions, announcedand systems management solutions, announcedits plan in May to transfer manufacturing andits plan in May to transfer manufacturing anddistribution operations from Dublin to the Czechdistribution operations from Dublin to the CzechRepublic in November.Republic in November.
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5) Focus on the best people in a5) Focus on the best people in a
slower job marketslower job market
In an economic downturn, the firstIn an economic downturn, the first
thing organisations usually look tothing organisations usually look to
remove is headcount.remove is headcount.
Unfortunately this is not always theUnfortunately this is not always the
best decision in the long term as keybest decision in the long term as key
people and experience can be lost andpeople and experience can be lost and
it is extremely costly to replace laterit is extremely costly to replace laterdown the line.down the line.
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6) Planning disciplines6) Planning disciplines
Planning will ensure that the organisation isPlanning will ensure that the organisation isin a good position to meet strategic objectives,in a good position to meet strategic objectives,despite recessionary pressures.despite recessionary pressures.
highlighting the areas of the business that canhighlighting the areas of the business that canbe rationalised and those that are strategicallybe rationalised and those that are strategicallyimportant to retain.important to retain.
Organisations should then measure theirOrganisations should then measure their
performance against this plan and take anyperformance against this plan and take anynecessary action if they begin to deviate fromnecessary action if they begin to deviate fromit.it.
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BPR CONCLUSION
Proper understanding of BPR is needed before
taken on a project.
BPR is used for radical redesign and improved workprocesses
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CASE STUDYCASE STUDY-- SYNDICATE BANKSYNDICATE BANK
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IntroductionIntroduction
Syndicate Bank was established in 1925 inSyndicate Bank was established in 1925 inUdupiUdupi, the abode of Lord Krishna in coastal, the abode of Lord Krishna in coastal
Karnataka with a capital of just Rs.8000/Karnataka with a capital of just Rs.8000/--..
The bank collected as low as 2The bank collected as low as 2 annasannas daily atdaily at
the doorsteps of the depositors through itsthe doorsteps of the depositors through its
Agents under its Pigmy Deposit Scheme startedAgents under its Pigmy Deposit Scheme started
in 1928. This scheme is the Banks brand equityin 1928. This scheme is the Banks brand equity
today and the Bank collects around Rs. 2today and the Bank collects around Rs. 2 crorecrore
per day under the scheme.per day under the scheme.
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IntroductionIntroduction
ObjectiveObjective -- To extend financial assistance to theTo extend financial assistance to the
local weavers who were crippled by a crisis in thelocal weavers who were crippled by a crisis in the
handloom industry through mobilising smallhandloom industry through mobilising small
savings from the communitysavings from the community
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Impact before the BPRImpact before the BPR
implementationimplementation Before the implementation of BPR banks workedBefore the implementation of BPR banks worked
using computer oriented techniques yet nousing computer oriented techniques yet no
centralized functioning was there. Only Partialcentralized functioning was there. Only Partial
Branch Automation or Total Branch automationBranch Automation or Total Branch automationwas there i.e. one branch cannot be linked towas there i.e. one branch cannot be linked to
other branches or other banks.other branches or other banks.
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BPRBPR--InitiativeInitiative
TheThe BankBank hadhad launchedlaunched anan ambitiousambitioustechnologytechnology planplan calledcalled CentralizedCentralized BankingBanking
SolutionSolution (CBS)(CBS) wherebywhereby 500500 ofof ourour strategicstrategic
branchesbranches withwith their theirA
TMsA
TMs werewere beingbeingnetworkednetworked nationwidenationwide overover aa 44 yearyear periodperiod..
TheThe BankBank waswas wellwell equippedequipped toto meetmeet thethe
challengeschallenges ofof thethe 2121stst centurycentury inin thethe areasareas
ofof informationinformation technology,technology, knowledgeknowledge andand
competitioncompetition..
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Reason for BPR Initiative:Reason for BPR Initiative:
1.1. To adopt centralized banking systemTo adopt centralized banking system
(CBS)(CBS)
2. To improve the productivity of the bank2. To improve the productivity of the bank
and its customers.and its customers.
3. Save money and increase speed of the3. Save money and increase speed of the
work done at brancheswork done at branches
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Scope and Time FrameScope and Time Frame
The bank formed a business council with fiveThe bank formed a business council with fivenonnon--IT members and one IT member.IT members and one IT member.
Three were general managers and two wereThree were general managers and two were
from functional departments.from functional departments. The bank came up with a business modelThe bank came up with a business model
and processesand processes to deliver anywhere, anytimeto deliver anywhere, anytime
banking and an MIS that would provide bothbanking and an MIS that would provide bothtactical and strategic information.tactical and strategic information.
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The bank had two alternatives:The bank had two alternatives:
1. Implementing core banking by carving out1. Implementing core banking by carving out
a small area in existing branches, whilea small area in existing branches, while
keeping the existing branch automationkeeping the existing branch automation
system intact so that only new customerssystem intact so that only new customers
would get into the core banking setwould get into the core banking set--up.up.
2. To go in for a wholly2. To go in for a wholly--centralized system.centralized system.
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Decision MakingDecision Making
The decision was taken to go in for aThe decision was taken to go in for a corecore
banking systembanking system where the bank would totallywhere the bank would totally
migrate to the new system as it was felt thatmigrate to the new system as it was felt that
splitting into two systems would pose too manysplitting into two systems would pose too manyaccounting issues.accounting issues.
The bank viewed it as an opportunity to reinventThe bank viewed it as an opportunity to reinvent
itself.itself.
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Initial StageInitial Stage
The project began in August 2001.The project began in August 2001.
The first branch went live on December 15,The first branch went live on December 15,
2001.2001.
The first was in Mumbai, Delhi accounted forThe first was in Mumbai, Delhi accounted for
another two, whileanother two, while
Bangalore andBangalore and ManipalManipal had one each.had one each.
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Initial StageInitial Stage
After this came the launches of new deliveryAfter this came the launches of new delivery
channels. ATMs were launched in Februarychannels. ATMs were launched in February
2002 and today Syndicate Bank has 1119 ATMs2002 and today Syndicate Bank has 1119 ATMs
(as on 25.06.2009). For customers, the big boost(as on 25.06.2009). For customers, the big boosthas been the introduction ofATMshas been the introduction ofATMs
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TeamTeam Involved in reengineeringInvolved in reengineering
Syndicate Bank has joined Bank of India, UnionSyndicate Bank has joined Bank of India, Union
Bank of India, Indian Bank and United Bank ofBank of India, Indian Bank and United Bank of
India in creating a branded ATM network calledIndia in creating a branded ATM network called
CashTreeCashTree..
TheThe telebankingtelebanking launch (IVR) went live in Julylaunch (IVR) went live in July
2002, followed by Internet banking in2002, followed by Internet banking in
January/February 2003.January/February 2003.
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TeamTeam Involved in reengineeringInvolved in reengineering
The data centre is based at RelianceThe data centre is based at Reliance lnfocommlnfocommin Mumbai.in Mumbai.
Disaster recovery is being set up in Bangalore.Disaster recovery is being set up in Bangalore.
WiproWipro InfotechInfotech is doing the network managementis doing the network management
part. Bandwidth has been purchased from BSNLpart. Bandwidth has been purchased from BSNL
and MTNL.and MTNL.
Infosys later introducedInfosys later introduced FinacleFinacle as the coreas the core
banking solution for all public sector banks.banking solution for all public sector banks.
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ProjectProject DesignDesign
The bank had multiple systems. The data fromThe bank had multiple systems. The data from
these had to be moved into the centralizedthese had to be moved into the centralized
system being deployedsystem being deployed..
There was a project director from the banks side.There was a project director from the banks side.
The steering committee included seniorThe steering committee included senior
executives from IBM andexecutives from IBM and ii--flex.flex.
The bank has spent Rs 35 to Rs 40The bank has spent Rs 35 to Rs 40 crorescrores onon
deploying its CBS.deploying its CBS.
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ProjectProject DesignDesign
Beyond the IT component, Syndicate BankBeyond the IT component, Syndicate Bank
brought much more to the table in terms of:brought much more to the table in terms of:
BrandingBranding
Real singleReal single--windowwindow
UniformsUniforms
Data enrichmentData enrichment
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Project Design (Rural)Project Design (Rural)
Bank had 645 rural branches where thereBank had 645 rural branches where there
was no regular supply of power.was no regular supply of power.
The plan was to continue manual systemThe plan was to continue manual system
from 10 am to 2 pm.from 10 am to 2 pm.
Employees will key in transactions inEmployees will key in transactions in
afternoon and will send to the regionalafternoon and will send to the regional
office.office.
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ProjectProject DesignDesign
The bank has signed up withThe bank has signed up with BillpayBillpay..
It has also tied up with Bajaj Alliance forIt has also tied up with Bajaj Alliance forcollecting insurance premiums. The CBScollecting insurance premiums. The CBS
lets the bank pass on the premium on thelets the bank pass on the premium on the
same day. Similarly, it can transfer taxsame day. Similarly, it can transfer tax
collections on the same day.collections on the same day.
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Benefits from the BPRBenefits from the BPR
ImplementationImplementation The benefits accruing from this step were:The benefits accruing from this step were:
1) The bank was in a position to offer a single1) The bank was in a position to offer a single--
window facility to its customers.window facility to its customers.
2) In Mumbai, where real estate is at a premium,2) In Mumbai, where real estate is at a premium,
the bank has savedthe bank has saved crorescrores of rupees as a directof rupees as a direct
result of the greater efficiencyresult of the greater efficiency..3)3)GandhinagarGandhinagar and Bangalore branch thatand Bangalore branch that
used to occupy 13000 square feet nowused to occupy 13000 square feet now
takes up 4000 square feet of space.takes up 4000 square feet of space.
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Benefits from the BPRBenefits from the BPR
ImplementationImplementation4) The staffing requirement went down by as much4) The staffing requirement went down by as much
as 40 percent, driving down space requirements.as 40 percent, driving down space requirements.
5) By undertaking BPR and deploying the CBS5) By undertaking BPR and deploying the CBS(Centralized Banking System), three branches of(Centralized Banking System), three branches of
Syndicate BankSyndicate Bank nownow fit into the three floors thatfit into the three floors that
were earlier occupied by a single one.were earlier occupied by a single one.
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Impact after the BPRImpact after the BPR
implementationimplementation After the implementation of CBS now SyndicateAfter the implementation of CBS now Syndicate
Bank can manage different branches fromBank can manage different branches from
headquarters using theheadquarters using the FinacleFinacle softwaresoftware
provided by Infosys. Now, syndicate bank isprovided by Infosys. Now, syndicate bank israising huge turnovers and savings huge costs.raising huge turnovers and savings huge costs.
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SUMMARYSUMMARY
The success of Syndicate BanksThe success of Syndicate Banks
deployment of IT can be linked to itsdeployment of IT can be linked to its
commitment to reengineering its businesscommitment to reengineering its business
processes sideprocesses side--byby--side with its IT initiatives.side with its IT initiatives.It has also proved that public sectorbanksIt has also proved that public sectorbanks
can match, if not outdo private players whilecan match, if not outdo private players while
deploying IT.deploying IT.
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Conclusions:Conclusions:
Syndicate Bank being a public sector facedSyndicate Bank being a public sector faced
tough competition from private banks thustough competition from private banks thus
implemented BPR to come at par with privateimplemented BPR to come at par with private
sector banks. Certain changes in bankingsector banks. Certain changes in bankingsystem and due to regulations of RBI also it wassystem and due to regulations of RBI also it was
very necessary to implement BPR. Being avery necessary to implement BPR. Being a
commercial bank good profits of the bank arecommercial bank good profits of the bank are
necessary.necessary.
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Recommendations:Recommendations:
Bank is still suffering competition from otherBank is still suffering competition from other
banks not only private but public sector banks.banks not only private but public sector banks.
Therefore, it should try to improve its services.Therefore, it should try to improve its services.
Bank needs to more visible in market by properBank needs to more visible in market by proper
marketing and advertising.marketing and advertising.
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