Chapter [7]

ReachingStrategic Edge

ReachingStrategic Edge

Business Process Re-engineering

Business processes are set of activities that transform a set of inputs into a set of outputs for another person.

For e.g. – Order processing, Forecasting, Budgeting, Accounting etc.

Business process often surpass departmental or functional boundaries.

Some BP turn out to be extremely critical for the success and survival of enterprise. These are Core Business Processes of the company.

BPR focuses on such core processes and attempt to change them with best practice.

The factors which calls for changes in the business processes are Technology, Customer & the newly adopted Strategy.

According to “Hammer and Champhy” –– Business Process Re-engineering is the

fundamental rethinking and radical re-designing of processes to achieve dramatic improvement in critical and contemporary measures of performance such as cost, quality, service and speed.

• Fundamental Re-thinking ~– Why do we do what we do?– Why do we do it the way we do?

• Radical Re-designing ~– Re-creating or re-inventing the business.

• Dramatic Improvement ~– 80% to 90% improvement in performance.

• Example ~– The existing transportation system takes 6

hrs. to deliver goods in the city, then any change that can reduce the time spent to 45 mts. is BPR.

BPR Implementation

Determining Objectives

Identify Customer & their need

Study the existing process

Formulate a re-design plan

Implement the redesign

Role of IT in BPR

• The impact of IT system~– Compression of time– Overcoming restriction of geographic

distance– Re-structuring of relationship (SCM, CRM)

• IT improves ~– Efficiency : improved I/O ratio– Effectiveness : improved cost management– Innovation : improved way of doing business

Comparison between BPR and other re-structuring activities

BPR does not have any scope of partial improvement.

BPR recognizes the potential of IT for the redesigning of work.

BPR focuses on a multi-dimensional approach and disregard departmental boundaries.

BPR performs radical re-designing i.e. not just the process but a whole lot of changes in other area too.

Problems in BPR

It disturbs established functional structure and creates resistance among work force.

It takes time and expenditure at least in short term.

There can be loss of revenue during the transition period.

Setting target is difficult; and if not set properly BPR turn out to be failure.

Benchmarking Benchmark can be defined as a

standard or a point of reference against which things may be compared.

Benchmarking is a process of comparing actual performance with industrial standard.

It helps organization get ahead of competitors.

• It involves • regularly comparing aspects of performance with

the best practice.• Identifying the gap and• Finding out the way to reduce the gap.

• Benchmarking is used to achieve improvement in –

• Product development• Product distribution• HR management• Maintenance operations• Customer service

Benchmarking Process

Identifying the need ~ Objective, type

Understanding existing process

Identify best process

Comparing performance

Reporting & Bridging the gap

Evaluation

Total Quality Management (TQM)

• The concept of QC was emerged in US in 1920s and it was intended to merely sorting good from bad.

• The definition of TQM was given in 1992 by CEOs of 9 major corporations and deans of business department as ~– TQM is a people focused management

system that aims at continual increase in customer satisfaction at continually lower real cost.”

• In support to TQM Stewart, Deming and Juran suggested that sorting good from bad is not the efficient way to assure quality. Focus should be on action to prevent a defective product from ever being created.

• Deming believed quality management should be pervasive and responsibility should be shared by everyone. He is regarded as “FATHER of TQM”

Principles of TQM A sustained management commitment to

quality Focusing on Customer Preventing rather then detecting defects Universal quality responsibility Quality measurement Continuous Improvement & Learning Root cause correction action Employee involvement & empowerment

Synergy of Team Thinking Statistically Inventory reduction Value improvement Supplier teaming Training

TQM v/s Traditional Practices

TQM makes quality planning as strategic planning.

TQM changes relationship with customer & suppliers.

TQM views organization as system of interdependent processes.

TQM believes in team workingTQM managers provide leadership to

motivate people to make meaningful contribution.

Six Sigma

• Motorola invented the concept of six sigma to take systemic and integrated efforts towards improving quality and reducing cost.

• Six sigma efforts target 3 main area ~– Improving customer satisfaction– Reducing cycle time– Reducing defects

Characteristics It is customer focused. It produce major ROI. It change how management operates. It provides customers what they want,

when they want. It help people/process in delivering

defect-free product. It puts more accountability for results

into the hands of people who work directly with customers.

Six Themes

Genuine focus on customerTheme One :

Data & fact driven managementTheme Two :

Process are where Action isTheme Three :

Proactive ManagementTheme Four :

Boundary less collaborationsTheme Five :

Drive for perfection : Tolerate failureTheme Six :

DMAIC

Define : Goals &

objectives

Measure :Existing process

Analyze :Cause –

effectrelationship

Improve :Make detailed

plan to improve

Control : test the plan &

transit to production

DMADV

Define : Goals &

objectives

Measure :Factors critical

To quality

Analyze :Develop & evaluate

alternatives

Design :Develop

detailOf plan

Verify : Verify

design thrusimulation

Strategy shaping characteristic of E-com environment

The internet makes it feasible for companies every where to compete in global market. (Meet the diversified demand)

Competition in an industry is greatly intensified by the new e-com strategic initiative of new and existing rivals. (High competition)

Entry barriers into the e-com world are relatively low. (Business can be out sourced)

Online buyers have far few obstacles in comparing products and prices. (Customer’s bargaining power is high)

Companies can reach beyond their borders to find the best suppliers.

Internet and PC technologies are advancing rapidly. (Lot of business potential)

The internet results in much faster diffusion of new technology and new ideas across the world. (Increased technology awareness)

The e-com environment demands that companies move swiftly. (Strategic life will be less then 5 years)

E-com technology offers opportunities for re-configuring industry. (Increases flexibility, customization of product and use of ERP s/w)

Internet can be economical means of delivering customer services.

Capital for funding potentially profitable e-com business is readily available.

The needed E-com resource in short supply is human talent.

Strategic Management in Non-profit and Govt. organization

SM in NGO and Govt. Org.

EducationInstitution

Hospitals

Govt. agency

And Dept.

Education Institution

Attract best students. Joining hands with industry A-V Lecture delivery On-line Examination

Hospitals

Path Labs Ambulatory services Day-treatment facilities Pharmaceuticals facility On-line opinion

Govt. Agencies & Deptt.

Using tax payer’s money in the most effective manner.

Restriction on diversification

Less freedom in altering the

organization’s mission.