4 business process reengineering

Business Process Engineering

Organ

izatio

n Technology

Process

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BPR & The Organization

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What is BPR?

• Reengineering is the fundamental rethinking and redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.

(Hammer & Champy, 1993)

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BPR is Not?• Automation• Downsizing• Outsourcing

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BPR Versus Process Simplification

Process Reengineering

Radical TransformationVision-Led

Change Attitudes & BehaviorsDirector-Led

Limited Number of Initiatives

Process Simplification

Incremental ChangeProcess-Led

Assume Attitudes & BehaviorsManagement-Led

Various Simultaneous Projects

(Source Coulson-Thomas, 1992)

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BPR Versus Continuous Improvement

Process Reengineering

Radical TransformationPeople & Technology Focus

High InvestmentRebuild

Champion Driven

Continuous Improvement

Incremental ChangePeople Focus

Low InvestmentImprove ExistingWork Unit Driven

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What is a Process?• A specific ordering of work activities across

time and space, with a beginning, an end, and clearly identified inputs and outputs: a structure for action.

(Davenport, 1993)

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What is a Business Process?• A group of logically related tasks that use the

firm's resources to provide customer-oriented results in support of the organization's objectives

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Why Reengineer?• Customers

– Demanding– Sophistication– Changing Needs

• Competition– Local– Global

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Why Reengineer?• Change

– Technology– Customer Preferences

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Why Organizations Don’t Reengineer?

• Complacency

• Political Resistance

• New Developments

• Fear of Unknown and Failure

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Performance• BPR seeks improvements of

– Cost– Quality– Service– Speed

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Origins• Scientific Management. FW Taylor (1856-1915). • Frederick Herzberg - Job Enrichment • Deming et al - Total Quality Management and

Kaizen • In Search of Excellence (Peters and Waterman) • Value-Added Analysis (Porter).

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Key Characteristics• Systems Philosophy • Global Perspective on Business Processes • Radical Improvement• Integrated Change• People Centred• Focus on End-Customers• Process-Based

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TransformationInputs Outputs

Feedback

Environment

Systems Perspective

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Process Based• Added Value

– BPR Initiatives must add-value over and above the existing process

• Customer-Led – BPR Initiatives must meet the needs of the

customer

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Radical Improvement• Sustainable

– Process improvements need to become firmly rooted within the organization

• Stepped Approach– Process improvements will not happen over night

they need to be gradually introduced– Also assists the acceptance by staff of the change

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Integrated Change• Viable Solutions

– Process improvements must be viable and practical

• Balanced Improvements– Process improvements must be realistic

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People-Centred• Business Understanding• Empowerment & Participation• Organizational Culture

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Focus on End-Customers• Process improvements must relate to the needs

of the organization and be relevant to the end-customers to which they are designed to serve

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BPR Symbols

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Business Process Flowchart Symbols

An Activity

A Document

A Decision

Data (input as outputs)

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A Predefined Process

The Start of a Process

The End of a Process

Representing a Relation

Start

End

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Continuation of the process at the same page at an equal symbol with the same number. Usedwhen a relation arrow crosses another relation arrow

Off-Page Connector - Process will continue on the next page

Integration Relation - A relation to another module is identified and described

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Data Flowchart Symbols

An Activity

A Document

A Decision

Flat Data File (input as outputs)

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Data Flowchart Symbols

Manual Data Item

A Database File

Representing a Relation

Continuation

Off-Page Connector

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Rules For Data Symbols

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Start

End

Generate Purchase

Order

OK? Yes

No

Symbol used to identify the start of a business process

Activities must be described as a verb

Decisions have only two possibilities (Yes & No)

Crossing lines are not allowed

If one side of the decision has no further processes defined this symbol has to be used

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PurchaseOrder

Posting of Bonus

I

A

Continuation symbol within the same number must be present twice on the same page

Name the document

Off- Page Connector is used to continue a process at the next page or to let the process to flow over at the previous to the next page. If more than one is needed use A, B, C, D …

Name the data

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Sub-ProcessDelivery

BC 4.04

Predefined Processes always have a relation to level and stream by a number in the line below a sub-process description A predefined process must be described in a different flowchart. To make the relation clear between the predefined process and the belonging flowchart a unique alpha numeric number should be assigned to this predefined process.

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Version Management• For different versions of a business process or

data flow some mandatory information must be on the flowchart. – Name of the business process– Unique number of the business process– Revision number– Date of last change– Author– Page number with total pages

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Implementing a BPR Strategy

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Key Steps

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan

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Select the Process & Appoint Process Team• Two Crucial Tasks

– Select The Process to be Reengineered

– Appoint the Process Team to Lead the Reengineering Initiative

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Select the Process• Review Business Strategy and Customer

Requirements

• Select Core Processes

• Understand Customer Needs

• Don’t Assume Anything

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Select the Process• Select Correct Path for Change

• Remember Assumptions can Hide Failures

• Competition and Choice to Go Elsewhere

• Ask - Questionnaires, Meetings, Focus Groups

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Appoint the Process Team• Appoint BPR Champion

• Identify Process Owners

• Establish Executive Improvement Team

• Provide Training to Executive Team

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Core Skills Required• Capacity to view the organization as a whole

• Ability to focus on end-customers

• Ability to challenge fundamental assumptions

• Courage to deliver and venture into unknown areas

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Core Skills Required• Ability to assume individual and collective

responsibility

• Employ ‘Bridge Builders’

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Use of Consultants• Used to generate internal capacity• Appropriate when a implementation is needed

quickly• Ensure that adequate consultation is sought

from staff so that the initiative is organization-led and not consultant-driven

• Control should never be handed over to the consultant

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Understand the Current Process• Develop a Process Overview• Clearly define the process

– Mission– Scope– Boundaries

• Set business and customer measurements

• Understand customers expectations from the process (staff including process team)

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Understand the Current Process• Clearly Identify Improvement

Opportunities– Quality– Rework

• Document the Process– Cost– Time – Value Data

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Understand the Current Process• Carefully resolve any

inconsistencies– Existing -- New Process– Ideal -- Realistic Process

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Develop & Communicate Vision of Improved Process

• Communicate with all employees so that they are aware of the vision of the future

• Always provide information on the progress of the BPR initiative - good and bad.

• Demonstrate assurance that the BPR initiative is both necessary and properly managed

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Develop & Communicate Vision of Improved Process

• Promote individual development by indicating options that are available

• Indicate actions required and those responsible

• Tackle any actions that need resolution

• Direct communication to reinforce new patterns of desired behavior

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Identify Action Plan• Develop an Improvement Plan

• Appoint Process Owners

• Simplify the Process to Reduce Process Time

• Remove any Bureaucracy that may hinder implementation

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Identify Action Plan• Remove no-value-added activities

• Standardize Process and Automate Where Possible

• Up-grade Equipment

• Plan/schedule the changes

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Identify Action Plan• Construct in-house metrics and targets

• Introduce and firmly establish a feedback system

• Audit, Audit, Audit

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Execute Plan• Qualify/certify the process• Perform periodic qualification reviews• Define and eliminate process problems• Evaluate the change impact on the business

and on customers• Benchmark the process• Provide advanced team training

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Information Technology & BPR

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Benefits From IT• Assists the Implementation of Business

Processes– Enables Product & Service Innovations– Improve Operational Efficiency– Coordinate Vendors & Customers in the Process

Chain

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Computer Aided BPR (CABPR)• Focus

– Business Processes– Process Redesign– Process Implementation

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BPR Challenges

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Common Problems• Process Simplification is Common - True BPR

is Not• Desire to Change Not Strong Enough• Start Point the Existing Process Not a Blank

Slate• Commitment to Existing Processes Too Strong

– REMEMBER - “If it ain’t broke …”• Quick Fix Approach

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Common Problems with BPR• Process under review too big or too small• Reliance on existing process too strong• The Costs of the Change Seem Too Large• BPR Isolated Activity not Aligned to the

Business Objectives• Allocation of Resources• Poor Timing and Planning• Keeping the Team and Organization on Target

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Summary• Reengineering is a fundamental rethinking and

redesign of business processes to achieve dramatic improvements

• BPR has emerged from key management traditions such as scientific management and systems thinking

• Rules and symbols play an integral part of all BPR initiatives

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Summary• Don’t assume anything - remember BPR is

fundamental rethinking of business processes

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BPR

•PART -2

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Definition of Reengineering

The fundamental rethinking and radical redesign of core business processes to achieve dramatic improvements in critical performance measures such as quality, cost, and cycle time.

Source: Adapted from Hammer and Champy, Reengineering the Corporation, 1993

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What Business Reengineering Is Not?

• Automating: Paving the cow paths. (Automate poor processes.)

• Downsizing: Doing less with less. Cut costs or reduce payrolls.

BPR involves innovation: Creating new products and services, as well as positive thinking are critical to the success of BPR.

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A Cow Path?

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Reengineering Is ...

• Obliterate what you have now and start from scratch.

• Transform every aspect of your organization.

Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review, July-August, 1990, pp. 104-112.

Extremist's View

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Definition of Process• A process is simply a structured, measured set

of activities designed to produce a specific output for a particular customers or market.

-- Thomas Davenport• Characteristics:

– A specific sequencing of work activities across time and place

– A beginning and an end – Clearly defined inputs and outputs– Customer-focus– How the work is done– Process ownership – Measurable and meaningful performance

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Processes Are Often Cross Functional Areas

M arke ting& S ales

P urchase P roduc tion D is tr ibu tion A ccounting

C E O

Supplier

Customer/MarketsNeeds

Value-addedProducts/Services toCustomers

"Manage the white space on the organization chart!"

"We cannot improve or measure the performance of a hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it."

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BPR Examples

• Ford: Accounts Payable • Mutual Benefit Life: New Life Insurance Policy

Application• Capital Holding Co.: Customer Service Process• Taco Bell: Company-wide BPR• Others

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Ford Accounts Payable Process*

Accounts Payable

Vendor

GoodsReceiving

Payment

Invoice

Receiving document

PurchasingPurchase order

Copy ofpurchase order

PO = Receiving Doc. = Invoice *Source: Adapted from Hammer and Champy, 1993

? ?

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Trigger for Ford’s AP Reengineering

• Mazda only uses 1/5 personnel to do the same AP. (Ford: 500; Mazda: 5)

• When goods arrive at the loading dock at Mazda: – Use bar-code reader is used to read delivery data.– Inventory data are updated.– Production schedules may be rescheduled if

necessary.– Send electronic payment to the supplier.

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Ford Procurement Process

AccountsPayable

Vendor

GoodsReceiving

Payment

Goods received

PurchasingPurchase order

Purchase order

Data base

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Ford Accounts Payable

Before

After

• More than 500 accounts payable clerks matched purchase order, receiving documents, and invoices and then issued payment.

• It was slow and cumbersome.• Mismatches were common.

• Reengineer “procurement” instead of AP process.• The new process cuts head count in AP by 75%.• Invoices are eliminated. • Matching is computerized. • Accuracy is improved.

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• 30 steps, 5 departments, 19 persons• Issuance application processing cycle time:

24 hours minimum; average 22 days• only 17 minutes in actually processing the application

Department AStep 1

Department AStep 2

Department EStep 19

. . . . Issuance Application

Issuance Policy

New Life Insurance Policy Application Process at Mutual Benefits Life Before Reengineering*

*Source: Adapted from Rethinking the Corporate Workplace: Case Manager at Mutual Benefit Life, Harvard Business School case 9-492-015, 1991.

Mutual Benefits Life Before Reengineering*

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The New Life Insurance Policy Application Process Handled by Case Managers

Case Manager

UnderwriterPhysician

Mainframe

LAN Server

PC Workstation

• application processing cycle time: 4 hours minimum; 2-5 days average

• Application handling capacity double • Cut 100 field office positions

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Capital Holding Co. - Direct Response Group*

• A direct marketer of insurance-life, health, property, and casualty-via television, telephone, and direct mail.

• In 1988, DRG president Norm Phelps and other senior executives decided that for our company, the days of mass marketing were over.

• Need to strengthen DRG's relationships with existing customers and target our marketing to those potential customers whose profiles matched specific company strategies.

• A new vision for DRG: The company needed to be exactly what most people didn't expect it to be an insurance company that cares about its customers and wants to give them the best possible value for their premium dollar. *Source: Adapted from Capital Holding Corporation-Reengineering the

Direct Response Group, Harvard Business School case 192-001, 1992.

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Capital Holding Co.: Vision

Caring, Listening, Satisfying... one by one

Each of us is devoted to satisfying the financial concerns of every member of our customer family by:

• Deeply caring about and understanding each member’s unique financial concerns.

• Providing value through products and services that meet each member’s financial concerns.

• Responding with the clear information, personal attention and respect to which each member is entitled.

• Nurturing an enduring relationship that earns each member’s loyalty and recommendation.

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New Business Model: A Conceptual Breakthrough

Target & Segmentof Aggregate Market

Use IndividualInformation

Use GroupInformation

Prospects

CustomersSell & Renew

Capture IndividualInformation

&

PersonalizedService

“I Think I Know.”

“I Know for Sure.”

Market Management

Customer Management

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A High-Level Service Process Model Today

CSR Life A&H Micro- Data Letter- System Customer Corres. Policy film Entry shop

Change

What’s yourpolicy #’s?

Challis 3

Life 70 Micro-film Request

ActionRequest

Day 1

Micro-filmResponse Day 5

• Increase my A&H coverage• Give me information about my Life Policy beneficiaries

ActionRequest

Day 2

InputRequestedChange

Day 5

A&H change confirmation letter mailed to customer

SystemUpdate

Life Policy beneficiaries letter mailed to customer

Day 6

Day 6(Batch)

Day 8Customerreceivestwo separateresponses

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Customer Management Team (CMT): A Flavor of How DRG Service Process Will Change

ImmediateResponse to

Customer

Day 1Answers

Day 3-4

Day 1-2

Day 1

Send writtenacknowledgment

• Increase my A&H coverage• Give me information about my

Life Policy beneficiaries

Customer

CMT: Teleservice Representative

System: Client-server architecture

Outbound Paper

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Taco Bell*

• “We were going backwards - fast ... If something was simple, we made it complex. If it was hard, we figured out a way to make it impossible.” - Taco Bell CEO, John E. Martin

• Customer buy for $1 are worth about 25 cents. 75 cents goes into marketing, advertising, and overhead.

• Reengineering from the customer’s point of view. “Are customer willing to pay for these ‘value-added’ activities?”

*Source: Adapted from Hammer and Champy, 1993

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Taco Bell

• Corporate Vision: “We want to be number one in share of stomach.”

• Slashed kitchen: Kitchens : Seating capacity

70% : 30% ð 30% : 70% • Eliminate district managers. Restaurant managers are

given profit-and-loss responsibility. • Moving cooking of meat and bean outside. • Boost peak serving capacity at average restaurant from

$400 an hour to $1,500 a hour. • $500 millions regional company in 1982 to $3 billion

national company in 1992.

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Reengineered Process

Key Concept: • One queue for multiple

service points• Multiple services

workstation

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BPR Principles• Organize around outcomes, not tasks. • Have those who use the output of the process

perform the process. • Subsume information-processing work into the

real work that produces the information. • Treat geographically dispersed resources as

though they were centralized. • Link parallel activities instead of integrating

their results. • Put decision points where the work is

performed and build controls into the process. • Capture information once and at the source.

Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review, July-August, 1990, pp. 104-112.

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A BPR FrameworkOrganization

– Job skills– Structures– Reward– Values

Technology– Enabling technologies– IS architectures– Methods and tools – IS organizations

Process– Core business processes– Value-added– Customer-focus– Innovation

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Business Process Reengineering Life Cycle Define corporate visions and business goals

Identify business processes to be reengineered

Analyze and measure an existing process

Identify enabling IT & generate alternative process redesigns

Evaluate and select a process redesign

Implement the reengineered process

Continuous improvement of the process

Visioning

Identifying

Analyzing

Redesigning

Evaluating

Implementing

Improving

Manage change and stakeholder interests

BPR-LC ©

Enterprise-wide engineering

Process-specific engineering

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TI Semiconductor Business Process Map

Manufacturing Capability Development

StrategyDevelopment

ProductDevelopment

CustomerDesign &Support

OrderFulfillment

Concept

Development

Manufacturing

MarketCustomers

Customer Communication

Source: Adapted from Hammer and Champy, 1993, p. 119.

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Using Value Chain to Identify High-Level Processes

AddedValue

Corporate Infrastructure

InboundLogistic Operation Outbound

LogisticServiceSales

andMarketing

PrimaryActivity

SupportingActivity

Human Resource Management

Procurement

Technology Deployment

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Criteria for Selecting Processes

• Broken • Bottleneck • Cross-functional or cross-organizational units• Core processes that have high impacts • Front-line and customer serving - the moment

of the truth• Value-adding• New processes and services • Feasible

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Process Data

• Basic Overall process data: – Customers and customer requirements– Suppliers and suppliers qualifications– Breakthrough goals– Performance characteristics: Cost, cycle time,

reliability, and defect rate. – Systems constraints: Budgetary, business, legal,

social, environmental, and safety issues and constraints.

• Measure critical process metrics – Cycle time– Cost– Input quality – Output quality– Frequency and distribution of inputs

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Phase 4: Redesigning

Identify enabling IT & generate alternative process redesigns

Information Technology

BusinessReengineering

How can IT support business processes?

How can business processes be transformed using IT?

Source: Thomas H. Davenport and James E. Short, “The New Industrial Engineering: Information technology and Business Process Redesign,” Sloan Management Review, Summer 1990, pp. 11-26.

Technology-drivenBusiness-pulled

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Evaluation Criteria• Costs

– Design and implementing the business process– Hire and train employee– Develop supporting IS – Purchase of other equipment and facilities

• Benefits– Customer requirements– Breakthrough goals– Performance criteria– Constraints

• Risk– Technology availability and maturity– Time required for design and implementation – Learning curve– Cost and schedule overrun

- 91 -© Minder Chen, 1993-2011

Enabling IT to Consider• Client/server technology• Groupware and collaboration technologies• Mobile computing (wireless LAN, pen-based computing,

GPS, iPhone)• Data capturing technology (scanner/barcode reader/RFID)• Telephony: Integration of computer and telephone systems;

VoIP; Unified communications• Web services and Service-Oriented Architecture (SOA)• Imaging technology, work flow management systems,

Business Process Management (BPM)• Decision support systems, Data warehouse, Business

intelligence, Data mining, Digital dashboard• ERP, CRM, SCM• Electronic Data Interchange (EDI), Electronic Commerce,

WWW, and Internet• Web 2.0 ….

- 92 -© Minder Chen, 1993-2011

IT Enabling EffectsDimensions & Type Examples IT Enabling Effects

Order from a supplier

Develop a new product

Approve a bank loan

Manufacture a product

Prepare a proposal

Fill a customer order

Develop a budget

Lower transaction costsEliminate intermediaries

Work across geographyGreater concurrency

Integrate role and task

Increase outcome flexibilityControl process

Routinize complex decision

Reduce time and costsIncrease output quality

Improve analysisIncrease participationAdapted from: Davenport, T. H. and Short, J. E., "The New Industrial Engineering: Information Technology and Business Process

Redesign," Sloan Management Review, Summer 1990, p. 17.

Organization Entity• Interorganizational

• Interfunctional

• Interpersonal

Objects• Physical

• Informational

Activities• Operational

• Managerial

- 93 -© Minder Chen, 1993-2011

End-to-End Processes

Customer

Manufacturing Inventory Mgmt.

Shipping

Marketing/Sales

Account Receivable

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Order Management Cycle1. Order Planning2. Order Generation3. Cost estimation and pricing4. Order receipt and entry5. Order selection and prioritization6. Scheduling7. Fulfillment

– Procurement– Manufacturing– Assembling– Testing– Shipping– Installation

8. Billing9. Returns and Claims10. Postsales Services

- 95 -© Minder Chen, 1993-2011

Empowered Customer-Focus Processes

Values and Quality delivered to

Customers timely

Empowered Font-line worker

Customer-facing Process

Manager as Coach

Teamwork

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Think from the Customer Back

The Customer

Management

Organization

Functions/Processes

Activities/Tasks

DefineOutcomes

RedesignOutputs

DetermineActivities

DefineJob Responsibilities

DevelopOrganization Structure

* Adapted from The Price Waterhouse Change Integration Team, Better Change, Irwin, 1995, p. 163.

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The Business Context of Business Networking

Company Customer Customer's Customer

Suppliers/ Partner

N C N C N C N C

N: Needs and Perceived NeedsC: Capabilities

Source: Adapted from Charles M. Savage, "The Dawn of the Knowledge Era," OR/MS Today, pp. 18-23.

Virtual Enterprising

Competitor

Share: • Costs• Skills• Market access• Technology

- 98 -© Minder Chen, 1993-2011

Standard Flowchart Symbols

Activity

Movement/Transportation

Decision Point

Paper document

Delay

Storage

Connector

Begin/End

Annotation

Direction of process flow

Transmission

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Functional Flowchart (Process Mapping)

CustomerService

CreditChecking Inventory Shipping

Begin EnterOrder Check

Credit

Yes

Order Processing Update

Inventory

Ship orderEnd

PROCESS

·

CYCLE

·1 2 1 1 1

2 0.1 43 0.2 14 ... ......

ACTIVITY

Wait forshipping

No

Customer

- 100 -© Minder Chen, 1993-2011

Process order

Allocate inventory

Ship order Billing

Receivepayment

Actual flow of information (i.e., data flow) Logical flow of operational data (i.e., workflow)Flow of physical objects

Money flow

Legend:

Warehouse

Customer

OLTPDatabase

Workflows, Data Flows, and Physical Flows

Account Receivable

- 101 -© Minder Chen, 1993-2011

Islands of Automation & Fragmented Processes

Order processing

Inventory management

Shipping & distribution

Accounts Receivable

IBM/MVSDB2

UNIXInformix

Windows/NTSQL Server

NetwareOracle

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Flow of Problem Tracing vs. Data Flow

Order processing



Accounts Receivable

Flow of Problem

Tracing

Data Flow

- 103 -© Minder Chen, 1993-2011

Front-End Integration

Order processing



Accounts Receivable

Process Owner Front-line Worker

Front-end integration: A single-system view of the process and the customer

- 104 -© Minder Chen, 1993-2011

The Reengineering Diamond

Business Processes

& Functions

Management & Measurement

Systems

Jobs , Skills, & Organizational

Structures

Values andBeliefs

Enlighten

Entail Demand

Foster

Culture

Customers&

Info. Tech.

Competitors

Markets

Customers &Suppliers