BIG CHANGE VIA BUSINESS PROCESS REENGINEERING

Daniel F. Duran Whittier College Operations 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 organizations 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. Dont 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 Support Activities Technology Development Procurement of Resources

Competitive Advantage
Primary Activities
Outbound Inbound Logistics Operations Logistics Marketing & Sales

Serv ice

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 NOT NOT NOT NOT

downsizing restructuring paving cow paths reorganizing, delayering, .... TQM ...

BPR Is NOT TQM

Process Improvement (TQM) Incremental Existing Process Continuous Short (weeks-months) Top-Down/Bottom-Up Narrow; Task- or Functionoriented Moderate Statistical Control Cultural Process Innovation (BPR) Radical Clean Slate One-Time Medium to long (depending on scope of BPR effort) Top-Down Broad; Process-oriented High Information Technology Cultural and Structural

Degree of Change Starting Point Frequency of Change Time Required Inception/Participation Scope Risk Primary Enabler Type of Change

Source: Adapted from [Davenport 1993]

Why BPR Is Necessary

The Virtual Organization: Three Cs 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 new market entrants Intraindustry competitors

Threat of substitute products & serv ices

The firm

Bargaining pow er of suppliers

Bargaining pow er of customers

Why BPR Is Necessary

The Three Cs (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 cant be fixed to succeed in [such] a world.

Four Revolutions Affecting Business Today

New Technologies

New Competitors

New Work Force

New Rules of Competition

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 Information must be processed sequentially. Only experts can perform complex work. Business must choose a centralized or decentralized structure. Only managers have access to information. Technology Shared databases & imaging technology Expert Systems New Rule Information can be processed concurrently. A generalist can do the work of an expert. Businesses can reap the benefits of both structures.

Telecomm networks

Decision support Decision making is tools part of everyones job.

Info Technology = Enabler

Old Rule Technology Field personnel Wireless data need offices to send communications & and receive portable computers information. The best contact is Interactive personal contact. videodisc & WWW You have to find out where things are.

New Rule Field personnel can send and receive information from anywhere. The best contact is effective contact.

Automatic identifi- Things tell you cation & tracking where they are. technology

SUPPLY-CHAIN MANAGEMENT & Porters Value Chain

MARKETING & SALES PRODUCTION PLANNING

CUSTOMERS

CUSTOMER SERVICE INTRANET ACCOUNTING & FINANCE

PROCUREMENT

INVENTORY

SHIPPING & DISTRIBUTION

PRODUCTION & MANUFACTURING

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

BPR Objectives

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.

RISKS & REWARDS

High

RISK

Low

Low

RETURN

High

BUSINESS REENGINEERING STEPS:

1. Develop business vision, process objectives 2. Identify process to be redesigned 3. Understand, measure performance of existing processes 4. Identify opportunities for applying information technology 5. Build PROTOTYPE of new process

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.

Characteristics of Reeng. Processes

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

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 dont 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 doesnt add value. Benefits: reduce number of external contact points for each process, thereby reducing the likelihood of inconsistent data. Fords accounts payable process: eliminated vendors invoice. WalMarts 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