Professional Documents
Culture Documents
Prof. R.S.Mathur
Prof R S Mathur
Agenda
1. 2. 3. 4. 5. 6. 7. What is BPR? Why BPR? Principles & Methodologies of BPR Issues & Challenges in BPR Critical Success/ Failure Factors in BPR An example of BPR Conclusion
Prof R S Mathur
Prof R S Mathur
INTRODUCTION
A management tool popularised by Michael Hammer and James Champy. Business process re-engineering (BPR) is being attempted by many firms that are: either facing extinction because of their inability to face competition in the changed world, or by highly successful companies looking for high gains from the successful redesign of their processes to remain highly competitive. BPR is a high risk, expensive , time consuming activity, with no guarantee of success, and yet many businesses claim to be re-engineering their processes
What is BPR?
Business Process Re-engineering or BPR is the analysis and redesign of workflow and processes within and between Organizations
- Michael Hammer & James Champy, 1993
CHARACTERISTICS OF BPR
Radical redesign of business processes Deployment of information technology as an enabler Major disruption to the organization during the process of reengineering Attempts at achieving organization wide improvements in performance
Key Words
Fundamental
Why do we do what we do? Ignore what is and concentrate on what should be.
Business reinvention vs. business improvement
Radical
Key Words
Dramatic
Companies in deep trouble. Companies that see trouble coming. Companies that are in peak condition.
Business Process
a collection of activities that takes one or more kinds of inputs and creates an output that is of value to a customer.
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Key Words
Cost, quality, service and speed:
are strategic weapons for fighting and winning competition .
Prof R S Mathur
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Quality
Service
Speed
Customer Delight
http://www.open-source-erp-site.com
Why Reengineer
The 3 Cs
Customers Competition Change
Processes and organisations designed in the 19th century could run businesses in the 20th century.
but we need entirely different PROCESSES & ORGANIZATIONS for Governance in the 21st Century
Problem restated
All processes are simple & efficient when originally designed
User-friendly Deploying contemporary tools & techniques
Why Reengineer?
Customers
-Demanding -Sophistication -Changing Need -well informed
Customer Expects US to
know everything make the right decisions do it right now do it with less resources make no mistakes be fully informed
Why Reengineer?
Competition
Local Global
Change
Technology Customer Preferences
WHY ?
Integrate people, technology, & organizational culture To Respond to rapidly changing technical & business environment and customers needs to achieve Big performance gains
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
Goods
Accounts Payable
Receiving document
Invoice
Payment
*Source: Adapted from Hammer and Champy, 1993
Before
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.
After
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.
Purchasing
Goods
Data base
Accounts Payable
Payment
New Life Insurance Policy Application Process at Mutual Benefits Life Before Reengineering*
Department A Step 1 Department A Step 2
....
Issuance Application
Issuance Policy
Department E Step 19
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
*Source: Adapted from Rethinking the Corporate Workplace: Case Manager at Mutual Benefit Life, Harvard Business School case 9-492-015, 1991.
The New Life Insurance Policy Application Process Handled by Case Managers
Mainframe
Underwriter
Physician
Case Manager
LAN Server
PC Workstation
application processing cycle time: 4 hours minimum; 2-5 days average Application handling capacity double Cut 100 field office positions
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.
Continuous Improvement
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Magnitude
Improvement Sought Starting base Top management commitment Role of IT
Low
High
Risk
Low
High
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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: Dont Automate, Obliterate, Harvard Business Review, July-August, 1990, pp. 104-112.
Source: Bashein, B. J., Markus, M. L., Riley, P., "Preconditions for BPR Success," Information Systems Management, Spring 1994, Vol. 11, No. 2, pp. 7-13.
BPR-LC
Identify enabling IT & generate alternative process redesigns Evaluate and select a process redesign
Improving
Phase 1: Visioning
Define corporate vision and business goals Apply to enterprise-wide reengineering effort. Develop overview of current and future business strategies, organizational structure, and business processes. Develop organizational commitment to reengineering. Develop and communicate a business case for action. Create a new corporate vision. Set stretched goals. Prioritize objectives. Assess implementation capabilities and barriers.
Phase 2: Identifying
Identify business processes to be reengineered
Construct high-level process map Develop a process hierarchy Build enterprise-wide data models (optional) Evaluate the processes Select processes to be reengineered Prioritize and schedule processes to be reengineered
Concept
Development Manufacturing
Strategy Development
Product Development
Order Fulfillment
Phase 3: Analyzing
Analyze and Measure an Existing Process
Conduct preliminary scoping. Develop a high-level AS-IS baseline process model (work flow model). Avoid analysis paralysis by conducting preliminary analysis at fairly high level. Surface purpose and assumptions of the process (Ask WHY?). Perform activity-based costing: costs can be assigned based on actual activities and productivity. Reveal hidden time and nonvalue-added activities. Measure cycle-time and quality. Measure profitability in terms of task, product, and customer type.
Phase 4: Redesigning
Identify enabling IT & generate alternative process redesigns
Business Vision & Strategy
Business-pulled
How can business strategies be changed business processes be transformed using IT?
Business Reengineering
Technology-driven
Information Technology
Phase 5: Evaluating
Evaluate and select a process redesign
Develop criteria of evaluating alternatives of redesigned processes: Cost, Benefit, and Risk. Evaluate design alternatives Select and recommend a reengineered process
Phase 6: Implementing
Implement the reengineered process
Plan IT implementation Plan organization implementation Conduct a pilot project Develop a prototype system
Technical Design Social Design
Evaluate results from the pilot project and the prototype Prepare large-scale roll out
Phase 7: Improving
Improve the process continuously
Develop performance measurement and reward systems in the reengineered process Monitor process performance constantly Improve the process on a continuous basis
The Euphoria
Dont automate, obliterate Sweep away job definitions Break loose from outmoded thinking Conventional change is like rearranging the deck chairs on the Titanic The solution to bloated, clumsy, rigid, sluggish, non-competitive, uncreative, disdainful of their customers needs, and losing money (Hammer and Champy)
BPR Philosophy
Radical, cross functional, dramatic
Focus on & organise around outcomes Provide direct access to customers (internal & external) Harness technology Control through policies, practices and feedback Enable independent and simultaneous work Build in feedback channels
Features of BPR 1
Re-engineering determines
what an organisation should do how it should do it what the concerns should be ...
NOT what they currently are Radical change NOT gradual change
BPR covers:
Technology Jobs Structure Values Beliefs Management Measurement systems in addition to process redesign
Features of BPR 2
IT is as an important enabler of change - NOT a key driver of change
BPR Projects
Focus on IT Systems
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Operational
Process
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BPR
Business Process Redesign Also known as Reengineering or Process Innovation is offered as an enabler of organizational transformation.
Organization embrace a BPR approach when they believe that a radical improvement can be achieved by marrying business process, organization structure, and IT change. Examples: Taco have embraced BPR to enable the redefinition of their business
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BPR
BPR Objectives:
To dramatically reduce cost Reduce time To dramatically improve customer services or to improve employee quality of life To reinvent the basic rules of the business e.g.
the airline industry taco bell from Mexican food to fast food to feeding people anywhere, anyhow.
Customer satisfaction Organizational learning
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BPR
Change:
To transform an organization, a deep change must occur in the key behavior levels of the organization: jobs, skills, structure, shared values, measurement systems and information technology.
Role of IT
BPR is commonly facilitated by IT e.g. Organizational efficiency Effectiveness Transformation
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BPR
Efficiency
Applications in the efficiency category allow users to work faster and often at measurable lower cost
Effectiveness
Applications in the effectiveness category allow users to work better and often to produce higher quality work.
Requires changes not only in technology, but in skills, job roles, and work flow (deeper).
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BPR
Transformation
Applications in the the transformation category change the basic ways that people and departments work and may even change the very nature of the business enterprise itself. A major change in the organization, including structure, culture, and compensation schemes (deepest).
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BPR
Process
A process is set of logically related tasks performed to achieve a defined business outcome
A collection of activities that, taken together, create value for customer e.g. new product for customer. This tasks are inter-related tasks
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BPR
How can Companies Identify their Business Processes. Examples
Manufacturing: As the procurement-to-shipment process
Product development as the concept-to-prototype process
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BPR
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BPR
Embarking on Re-engineering
Persuade people to embrace or at least not to fight -the prospect of major change by developing the clearest message on: 1: A case for action- Here is where we are as a company and this is why we cant stay here show your balance sheet show competitors balance sheet 2: A vision statement - This is what we as a company need to become
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BPR
Simple Rules
Start with a clean sheet of paper.
BPR
Simple Rules
Listen to customer Enhance those things that bring value to the customer or eliminate those that dont Be ambitious, focus your commitment to radical change on the process
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Interface
Interface Billing
Inventory Mgmt.
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Primary activities
Inbound logistics Operations Outbound logistics Marketing and Sales Service Corporate infrastructure Human resources management Technology Development Procurement Materials receiving, storing, and distribution to manufacturing premises Transforming inputs into finished products. Storing and distributing products Promotions and sales force Service to maintain or enhance product value Support of entire value chain, e.g. general management planning, financing, accounting, legal services, government affairs, and QM Recruiting, hiring, training, and development Improving product and manufacturing process 68 Purchasing input
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Ext Int C u s t o m e r s
Int Ext
Reporting App . Financial App
Central database
Mfg. App
S u p p l i e r s
Service App.
HRM App
Impacts
Company
Increase product by an order of magnitude Examine process Vision Increase Profits
Customers
Benefit from better product Needs are met Tendency to return Loyalty
Employees
Teams Less
Spectrum of Change
Automation
Rationalization of procedures Reengineering
Paradigm shift
Automation
refers to computerizing processes to speed up the existing tasks. improves efficiency and effectiveness.
Rationalization of Procedures
refers to streamlining of standard operating procedures, eliminating obvious bottlenecks, so that automation makes operating procedures more efficient. improves efficiency and effectiveness.
Paradigm Shift
refers to a more radical form of change where the nature of business and the nature of the organization is questioned. improves strategic standing of the organization.
To reengineer a company is to take a journey from the familiar into the unknown. The journey has to begin somewhere and with someone. Where and with whom?
P. 101
Keys
Leaders Staff Empowerment Broader Scope
Knowledge / Skills
Tasks to Process
Redesign of Systems
The 3 Rs
Redesign
Cross-function approach
Retool
Information Tools
Reorchestrate
Organization changes
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.
Reengineering is not .
Automation of existing ineffective processes Sophisticated computerization of obsolete processes Playing with organization structures Downsizing doing less with less
BPR is Not?
BPR may sometimes be mistaken for the following five tools:
1. Automation is an automatic, as opposed to human, operation or control of a process, equipment or a system; or the techniques and equipment used to achieve this. Automation is most often applied to computer (or at least electronic) control of a manufacturing process.
2. Downsizing is the reduction of expenditures in order to become financial stable. Those expenditures could include but are not limited to: the total number of employees at a company, retirements, or spin-off companies.
BPR is Not?
3. Outsourcing involves paying another company to provide the services a company might otherwise have employed its own staff to perform. Outsourcing is readily seen in the software development sector.
4. Continuous improvement emphasizes small and measurable refinements to an organization's current processes and systems. Continuous improvements origins were derived from total quality management (TQM) and Six Sigma.
Effectiveness Vs Automation Automation : use technology to automate the AS IS process to make it happen faster often wrongly perceived as eGovernment.
Effectiveness: To improve service and satisfy customer needs, while lowering costs.
There is nothing more useless than to do efficiently that which shouldn't be done at all.
E.g. Shining Brass when the ship is sinking
Incr. Improv.
Gradual, constant Long-term From few to everybody Low initially, high to sustain People Processes
Continuous Improvement
Incremental Existing process Bottom-up Narrow, within functions Moderate Statistical control Cultural
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GOAL OF REENGINEERING
Reengineering is typically chartered in response to a breakthrough goal for rapid, dramatic improvement in process performance.
Continuous improvement refines the breakthroug Breakthrough Improvement Continuous improvement activities peak; time to reengineer process
BPR Project
An organisational change project with three components : business strategy, business process and information systems BPR must be linked with business strategy and information system
Business Strategy Business Process Information System
2. form a team. Select project leader 3. decide on the objectives of the analysis 4. define customers & suppliers 5. analyse (identify/ chart) the process elements & steps in the process flow 6. describe the existing transformation process
raw materials product (output) design job (sequence, simplification, discretion etc) processing steps used management control information equipment or tools people actors (direct/indirect staff, customers, supply relationships (internal & external)
Activities define process mission, scope and boundaries provide team training develop a process overview define customer/business measurements & expectations for the process identify improvement opportunities errors and re-work high cost poor quality long time delays/backlog Record/chart the process collect cost, time & value data perform walkthroughs on new process resolve the differences (existing/new, ideal/realistic)
PHASE 3: Implementation
Objective:
Activities eliminate bureaucracy and no-value-added activities simplify the process and reduce process time standardise and automate up-grade equipment error proof the process and document it select and train the employees Plan/schedule the changes
Activities develop in-house measurements and targets establish a feedback system audit the process periodically establish a poor-quality cost system
Activities Qualify/certificate the process perform periodic qualification reviews define and eliminate process problems evaluate the change impact on the business and on customers
Who is performing the job? Can the operation be redesigned to use less
skill or less labor? Can operations be combined to enrich jobs? .
Where is each operation conducted? Can layout be improved? . When is each operation performed? Is there excessive delay or storage?
Are some operations creating bottlenecks? ..
BPR Problems
Starting with a clean sheet Preoccupation & commitment to existing business processes Thinking the problem thru. in the light of new methods & technologies Choice of the target process - too big, too small The power and resourcing of the cross functional team BPR in isolation from strategic and ops plans will not work. Top commitment essential. Short-termism of decision makers Isolated efforts will lack direction and will get lost. John Gall, Done at times of stress and anxiety Systemantics Keeping the BPR team on target If it works, don't change it! BPR team as action researchers Costs of the change Vaccination against change + another quick fix Finding the time and energy We need to keep the old, existing core systems running
Low investment
People-practices focus
High investment
People & technology focus
Improvement on existing
Work-unit driven
IT in BPR
A corporation that does not understand the inductive power of Information Technology cannot succeed in BPR (Hammer and Champy, 1993)
Outcome is in Suspense
OK or NOT OK !
Gatekeepers at every turn Poor Quality of Service Service is a Mercy - not a Right Too many Intermediaries, Shortcuts
Legislative Intent
Process Problems
Delivery Problems
3 Goals of BPR
1. Customer Friendliness
Meeting customer requirements closely Providing convenience Outcome-based approach Gaining loyalty of customers Image and branding
2. Effectiveness
3. Efficiency
Cost Time Effort
6. 7. 8. 9.
Transforming Channels
Multiple Channels 24x7 Access Common Service Centres Mobile Self-Service Licensed Intermediaries Transforming People Training Change Management CRM skills Consultation Empowerment Education Awareness
Transformation
Using Technology
Enterprise Architecture Standards Unified Databases Unified Networks SOA Portals
4 Steps in BPR
1. Understanding the Current Processes
AS IS study mapping current processes Analysis of Root Causes for Inefficiencies Identifications of Problems, Issues
Business Processes
Organisationl Form
Change one variable & adjust others e.g. new IT & business processes need to be changed. New skills & organisational form to match the IT?
BPR
How can Companies Identify their Business Processes. Examples
Manufacturing: As the procurement-to-shipment process
Product development as the concept-to-prototype process
BPR Methodology
Core Processes Without Issues
Continuous Improvement
Phase 0
Strategy
Process Reengineering - Breakthrough Improve Core Processes ment Phase 2 Phase 3 With Issues Phase1 Process Planning Implementa
Project Def. Analysis & design tion
Improved Process
Improvement Plan
Implementation Plan
The Cs related to
The 3Cs of organization Reengineering: - Customers
- Competition
- Change
- Cooperation - Communication
- Contribution
Key Steps
Select The Process & Appoint Process Team
Understand The Current Process Develop & Communicate Vision Of Improved Process Identify Action Plan Execute Plan
1.
Evolution of BPR
Degree of enabling IT
Webenabled ebusiness
Knowledge Management
2nd-wave BPR
BPR
Embarking on Re-engineering
Persuade people to embrace or at least not to fight -the prospect of major change by developing the clearest message on: 1: A case for action- Here is where we are as a company and this is why we cant stay here show your balance sheet show competitors balance sheet 2: A vision statement - This is what we as a company need to become
BPR
Simple Rules
Start with a clean sheet of paper.
BPR
Simple Rules
Listen to customer Enhance those things that bring value to the customer or eliminate those that dont Be ambitious, focus your commitment to radical change on the process
BPR
Process Improvement and redesign Process
Magnitude
Improvement Sought Starting base Top management commitment Role of IT Improvement Increment 30-50% Innovation/Reengineering Radical 10x-100x
Low
High
Risk
Low
High
Magnitude of Change
2. Change Planning
inform stakeholders and organize re-generation team prepare project schedule and set performance goals
3. Process Pathology
document existing process uncover process pathologies
Jobs change
5.
6. 7. 8. 9.
Conclusion
BPR is about Radical Redesign of business processes BPR brings Efficiency, Effectiveness & Customer-friendliness BPR needs adoption of a structured methodology Top management commitment & Change Management are critical to success
Shared Databases
Only experts can perform Complex work We should choose between Centralization & Decentralization Managers make ALL the decisions
Expert Systems
A generalist can do the work of an expert We can get the benefits of Centralization & Decentralization simultaneously Decision-making is a part of everyones job
Networks
Interactive Video
RFID