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Business Process Reengineering

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Ford Motor Company

Accounts Payable function 500 people Most work on mistakes between

Purchase Orders Receiving Documents Invoices

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Ford (cont)

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Ford (cont)

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Texas Instruments, 1990s

Long cycle times, declining sales Applied BPR to create cross-functional teams supported by functional units for product development

Cross-functional teams control all aspects of product development design production - marketing Sabotaged by existing organization. Why? Cut launching time by one-half more profit 4 times the ROI

First pilot teams failed

TI Reorganized around teams

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Risks in BPR
Advocates report failure rates of 50% to 70% Sutcliffe [1999] reviewed difficulties

Employee resistance to change Inadequate attention to employee concerns Inappropriate staffing Inadequate technologies Mismatch of strategies used and goals Lack of oversight Failure of leadership commitment

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BPR best practices

Combine multiple tasks and assign a single point of contact for each process. EMPOWERMENT

An important feature of BPR is integrating activities and assigning business process responsibility to one individual a generalist.

Allow workers to make decisions. Avoid decision hierarchies that require workers to go through layers of management for decisions about the work they are doing. Perform process steps in their natural order. Rather than following a linear sequential set of tasks, perform process activities as needed, sometimes in parallel.

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Reengineering Tenets
Do a cost/benefit on controls and other checks.

Only use those checks and controls that are cost-effective.

Business process (physical flow) and Information Systems development (information and document flow) done at the same time (concurrently) Centralize data one version of the truth. This allows companies to capture and store data only once, yet disperse as needed.

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How do you figure out what processes to reengineer?

Whats broken the most? What process has the greatest impact on the customer? Which of the processes are most susceptible to successful redesign? (feasibility and scope)

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How do you know if its broken (or at least in major trouble?)

Extensive information exchange, data redundancy, and re-keying of data into multiple systems Excessive inventory, buffers, and other assets High ratio of checking and control to value adding Reworking and iteration

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IBM Credit What were the fundamental issues with the IBM Credit process? How did IBM figure out what the right solution was for the credit process? What was the assumption about the process that proved to be false? What was the key feature of the reengineered process?

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Reengineering/Redesign Choices
What are the choices?
What are the advantages / disadvantages of each? Who should or does use which?

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Need for BPR

OLeary [2000] survey of SAP R/3 users

Technology enabled strategy dominated Prior to ERP implementation, 16% thought BPR needed prior to SAP implementation
> 33% thought BPR unnecessaary

After ERP implementation, 35% thought BPR needed prior to SAP implementation
> 10% thought BPR unnecessary

So BPR seems to be a useful exercise

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