lecture 8. enterprise reengineering

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Lecture 8. Enterprise Reengineering

Lecturer:

Prof. Anatoly Sachenko

Informatics in Logistics Management

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Lecture overview

Enterprise Engineering and Reengineering Definition The scope of Enterprise Reengineering Business Process Reengineering Some BPR Issues BPR Problems IT role in BPR Steps for BPR

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Enterprise Engineering and Reengineering

Enterprise reengineering is regarded as an approach within enterprise engineering

Enterprise engineering is "an life-cycle oriented discipline for identification, design and implementation of enterprises and their continuous evolution" (Kosanke et al, 1999)

Enterprises models are "essential components in enterprise engineering" (IFIP-IFAC taskforce, 1999)

Enterprise engineering encompasses HW, SW communications protocols, info, and architectures, but also social and organizational issues that are relevant for enterprise modeling and improvement

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Definition

Enterprise reengineering focuses primarily on the operations activities, and how they should be modelled and designed

The total transformation process can be decomposed into a large collection of concurrent processes executed by a set of operations entities that contribute to business objectives

Each process consist of a group of operations activities that takes input, adds value to it and provides an output to internal or external customers

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Definition

Enterprise reengineering is essentially a matter of modeling and improving these activities: how they are grouped in operations entities

and processes, how resources are dedicated to the

operations entities, how resources are laid out physically to

create information and material flows, how operations entities activities are

structured in the organization, and, how processes are controlled.

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The scope of Enterprise Reengineering

The idea behind enterprise engineering is that enterprises may be engineered like any other complex systems

The enterprise is a system that must be engineered, implemented, andintegrated in a systematic way very similar

to approaches developed for software engineering

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Enterprise reengineering is an model-based approach that aims to improve operations performance in the overall direction determined by the operations strategy

The main purpose of operations strategy is to make plans for how the enterprise can improve it’s competitiveness

This encompasses numerous strategic decisions that range from human resources strategies to localization of new enterprises, andIt’s directing the work in research fields such as

operations management and enterprise engineering

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However, since these are research fields that cover many design issues,the scope of enterprise reengineering, as

defined in this thesis, is restricted to the modeling and reengineering of operations processes

That is, how operations processes are logically and physically organized, and how they are controlled

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Business Process Reengineering

Enterprise Re-Engineering / Business Process Re-Engineering (BPR) is a form of organizational improvement

It aims to improve a business through restructuring of processes

BPR is given force by the thinking that old ways of organizing work are no longer appropriate for a competitive business environment

The ultimate aim of re-engineering processes to achieve better quality, service and innovativeness

The radical restructuring entailed in BPR is risky and uncertain

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For hundreds of years, commercial activity has been based on the Adam Smith principle of Division of Labor

Division of labor encourages specialization and thereby leads to improved productivity

The classical enterprise also exhibits the concepts of: Hierarchical control: - the classical layers of

management Mass production of largely uniform

goods/services

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An organization based on these principles is successful in a stable market environment, characterized by growing demand for uniform goods/services

In a changed market environment characterized by sever competition, globalization, more demanding customers, smaller profit margins etc, the classical organizational models are less and less appropriate

BPR provides one alternative to the old methods of organizing business processes

The goals of BPR can be started in expanded form as either cost objectives or service objectives

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Hierarchical Design Pyramid

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Cost Objectives

Reducing stocks: New materials or Intermediate goods

Economies of scale in procurement Reduced staff costs (administrative costs) Competitive pricing of goods/services

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Service Objectives

More reliable delivery system Stock availability Good after sales service Quick Response/adaptation to market

changes Reduced product development lifecycle

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The role of enterprise reengineering in operations strategy development

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A strategic framework for enterprise reengineering

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Qualities of BPR

Several jobs are combined into oneThis implies a reversal of the Adam Smith principle

of division of labor and functionWorkers make decisions, actual work and decision

making are integrated Processes are reorganized

so that tasks are done in the most sensible/logical order

Checks and controls are reducedThe checks and controls are reduced to the

minimum acceptable levelThe checks and controls are also deferred(cont-d)

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Qualities of BPR

Reconciliation is minimized. A case manager is appointed to oversee the

re-engineering process. Hybrid processes that combine centralization

and decentralization by use of communication technology are often adopted.

Processes have multiple versions (polymorphic) – the process is re-designed to include capabilities to deal with custom orders.

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Some BPR Issues

Candidates for BPR: In theory, any business process can be

subject to BPR; but in practice, certain processes can benefit

more from BPR than others Such processes have the following qualities

Dysfunction: The process is visibly out of order, it is problematicDysfunction in a process occurs when the

process is slow (frustratingly slow), occasional complaints, generates errors(cont-d)

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Some BPR Issues

Importance: Important processes that have a prominent place in the value chainThey contribute directly to the delivery of

goods and services to the end consumer. Feasible: From the managers stand point

the BPR project is technically, economically and socially feasible/viableProcesses that require high capital input,

or enjoy limited management support are less feasible for BPR.

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BPR Problems

What causes BPR projects to fail?: Inadequate funding Insufficient management

commitment/support Poor project leaders Inadequate feasibility evaluation Resistance to process change Failure to focus on most process re-design

and dwelling on improving the existing process.

Quitting too early or declaring victory too soon.

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BPR Problems

Re-engineering or Re-developing? Systems targeted for re-engineering have 2 qualities They are heavily/regularly used They are currently being maintained a lot

Re-engineering usually has two main merits over re-developing. These are: Lower costs: re-engineering costs about ? of

redeveloping Reduced risk: lower likelihood of making

mistakes.

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IT role in BPR

IT enables processes to be re-engineered It supports the re-engineered process Leading edge technology products can be

particularly useful in process innovationThey can even lead the innovation process.

IT also facilitates process integration. It has been argued that the most effective

contribution of IT in business redesign is to enable an enterprise to do things that it was not doing before – extending the capabilities of the enterprise.

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IT role in BPR

BPR computer system: at a minimum it comprises of an ordered collection of HW/SW and data resources

Computer systems are the basis for automated information system. Re-engineering computer systems means

examining, rethinking and re-implementing such systems in a new form.

The process is usually carried out on legacy options, re-implementing them in a more modern form.

Re-engineering computer systems can be seen as a management response to the challenge of keeping old systems alive within a changing environment.

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IT role in BPR

Merits The useful life of a system is increased The business value of such a system also

increases Future maintenance costs are reduced The morale of maintenance staff may

improve; because they know they are working in a modern system i.e. the systems become more maintainable.

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IT role in BPR

Approaches to re-engineering computer systems: When a system is re-engineered any of the following changes may occur: It may be placed in a distributed platform. It will usually be re-documented The data may be migrated to a new

database platform The code may be restricted The code may be written in a different

language

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Automated Program Restructuring

When code is maintained over an extended period, its structure and hence its efficiency, deteriorate

Indeed, the more a software product has been maintained, the more it costs to maintain it in futureWhen the program is re-structured:

irreconcilable code is detected and removed

complex control structures are simplified program modularity is enhanced

Use of software tools may not be fully effective. Manual rewriting of code may still be applied.

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Automated Program Restructuring

Automated program and Data Restructuring: When the existing data structures are re-structured then even the programs that process the data have to be reviewed

When data is restructured: The overall model may be re-organized into

one database. Data in a relational model may be modified

to suit the needs of a different relational DBMS.

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The enterprise reengineering methodology

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Steps for BPR

Identify process for innovations Manage business Manage people and work Identify change levels ( technology etc) Develop process vision – what you want to

process must fit with the strategic direction of the organization (IS)

Understand existing processes – study current process and understand necessary changes

Design and prototype new process/create design of new process(cont-d)

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Steps for BPR

When deciding whether to re-engineer or to redevelop you may consider such issues as: budget provisions or costs constraints current state of the old system;

the old system may be so old and messy that it may not be susceptible to re-engineering

Time limitations: re-engineering is likely to be quicker than to redevelop(cont-d)

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Steps for BPR

Scope i.e. system scope; if the scope of the existing system is to be excluded substantially then it may be more practical to redesign and re-implement the system instead of re-engineering it.

Perceived risk level; Risk arises from the combined effect of many factorsIf the perceived project risk is high then it

might be safer to re-engineer the system than to redevelop it.

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Steps for BPR

Link between reengineering of computer systems and BPR: Computer systems are usually embodied

within business processes/systems such as accounts receivable, production planning, marketing and distribution, human resources etcWhen such process/systems are re-

engineered, then the supporting technology infrastructure also needs to be reviewed(cont-d)

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Steps for BPR

The overall aim of reengineering a computer system should be to re-align it with the existing business goalsThe goals of a BPR project require an

altered IT infrastructure then the existing infrastructure should be reengineered or re-developed (cont-d)

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Steps for BPR

The enterprise reengineering methodology supports manufacturing enterprises in efforts to improve operations performance.

The objective is to achieve fit between operations capabilities and market requirements through a reengineering of operations processes.

The methodology is model-based and applies an enterprise modelling architecture to represent different views of enterprise operations.

Reengineering efforts are typically carried out when some problem makes it difficult for operations to achieve their performance objective (cont-d)

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Steps for BPR

The enterprise reengineering process includes: Mapping and evaluating the current operations

strategy, i.e. the strategic decisions regarding operations (such as the implementation of a best practice method) and the affected decisions areas and performance objectives.

Mapping the AS-IS operations model, and representing the enterprise graphically from a resource-, material-, info-, process- organization-,

and control view (termed control model) should represents a synthesis of the other views and show a picture how operation processes are organized and controlled (cont-d)

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Steps for BPR

Analyzing the current operations model on operation capabilities (operations processes, control methods, layout etc,) and their ability to meet the demand situation

Analyzing operations capabilities in an audit sheet in order to rate the performance in broad areas of strengths and weaknesses

Based on this analysis, improvement areas are identified and problems to be solved are formulated(cont-d)

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Steps for BPR

Designing a revised operations strategy that targets the improvement areas identified in the mapping and analysis.

Designing a TO-BE operations model that represents the new solution for operations. The design efforts can be supported by best practice methods such as flow manufacturing.

Implementing the operations model.

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References

Bruce Caldwell "Missteps, Miscues: Business reengineering failures have cost corporations billions" InformationWEEK June 20, 1994, pp. 50-60.

Elliot Chikofski and James H. Cross II "Reverse Engineering and Design Recovery: A Taxonomy" IEEE Software January 1990 7(1):13-17.

Michael Hammer & James Champy Reengineering the Corporation: A manifesto for business revolution Harper Business, 1993.

Stephanie King "How to Fail" NAPM Insights February 1995 pp. 50-52.

Kosanke, K., Vernadat, F., Zelm, M. (1999) CIMOSA: enterprise engineering and integration. In Computers in industry 40, pp.83-97.

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References

Leatt, P., Baker, G.R., Halverson P.K and Aird C. Downsizing, Reengineering and Restructuring: Long-Term Implications for Economical Organisations // Strategic Management Journal, 2004, vol.13, No(4), pp. 578-599.

Erlend Alfnes. Enterprise Reengineering. VDM Verlag, 2008. – 320 p.

Vernadat, F.B. (1996) Enterprise Modelling and Integration: principles and applications. Chapman & Hall.

IFIP–IFAC Task Force on Architectures for Enterprise Integration (1999) Generalised Enterprise Reference Architecture and Methodology, Version 1.6.3 (March 1999).

lecture 8. enterprise reengineering

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