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Business Process Reengineering

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Title: Business Process Reengineering


1
Business Process Reengineering
  • Chao-Hsien Chu, Ph.D.
  • School of Information Sciences and Technology
  • The Pennsylvania State University
  • University Park, PA 16802

2
BPR Theory Vs. Practice
BPR
Promise Fundamental change
Reality 75 Failure rate
Misunderstanding - What BPR is. - How to go about
doing it.
3
BPR Definition (1)
  • Reengineering is the fundamental rethinking and
    radical redesign of business processes to achieve
    dramatic improvements in critical, contemporary
    measures of performance, such as cost, quality,
    service, and speed.
  • Hammer and Champy 1993

4
BPR Definition (2)
  • The fundamental rethinking and redesign of
    operating processes and organizational structure,
    focused on the organizations core competencies,
    to achieve dramatic improvements in
    organizational performance.
  • Lowenthal 1994

5
BPR Definition (3)
  • Reengineering is the rapid and radical redesign
    of strategic, value-added business processes
    and the systems, policies and organizational
    structures that support them to optimize the
    work flows and productivity in an organization.
  • Manganelli and Klein 1994

6
Processes
A process is an interrelated series of
activities That converts inputs into outputs.
Activity
7
Activities
  • Value-adding Activities
  • Important to the customer
  • A customer is willing to pay for them
  • Hand-off Activities
  • Move work across functional or departmental
    boundaries
  • Control Activities
  • They control hand-off activities

8
Process Flow
CEO
Marketing
Operations
Finance
Customer request
Order fulfillment
9
Features of Business Processes
  • Greater margin for improvement
  • Hands-off and lost control
  • Waste and inefficiency are difficult to detect
  • Cross-functional problems
  • Low percentage of value-adding activities
  • Customers are very sensitive to poor business
    processes

10
Some Business Processes
  • Order Processing
  • Billing
  • Purchasing
  • Shipping
  • Receiving
  • Auditing
  • Business Planning
  • Warranty and claims processing
  • Budget planning
  • Accounts payable
  • Accounts receivable
  • Performance appraisal
  • Proposal development
  • Credit approval
  • Vendor certification
  • New employee processing

11
Attributes of a BPR Methodology
  • It should develop a clear statement of corporate
    goals.
  • It should be process-oriented.
  • It should facilitate the classification of
    activities.
  • It should lead to fundamental change.
  • It should develop a plan to deliver final results
    within a year.

12
Reasons for Reengineering
  • Your continuous improvement activities have hit a
    dead end.
  • The competition has grabbed your customers.
  • You are approaching the top of the S Curve.
  • Your customers requirements have changed.
  • Technological advances expand the possibilities.
  • Fundamental shifts in industry.

13
Motivation for Redesigning
BPR
Improved Customer Focus
Improved Cycle Time
Improved Process Efficiency
14
Building Blocks
Current process review
Design options
Design principles
High-level design
Baseline analysis
Design specifications
Design Phase
Detailed design
Customer requirement analysis
Analysis Phase
Model and validate the new design
Build in CI feedback
Transform the business
Pilot the new design
Implementation Phase
15
Process Selection
  • Broken Processes Which processes are in the
    deepest trouble?
  • Important Processes Which processes have the
    greatest impact on the companys customers?
  • Feasible Processes Which processes are at the
    moment most susceptible to successful redesign?

16
Broken Processes - Symptom
  • Extensive information exchange, data redundancy,
    and rekeying
  • Inventory, buffers, and other assets
  • High ratio of checking and control to
    value-adding
  • Rework and iteration
  • Inadequate feedback along chains
  • Complexity, exceptions, and special cases

17
Important Processes
Company
Market
Customer Issues
Processes
Product Cost On-time Delivery Product Features
Product Design Order Processing Procurement
18
Feasible Processes
Process Scope
Project Cost
Reengineering Effort
Team Strength
Owner Commitment
19
Common Themes
  • Use reengineering to grow the business.
  • Service the customer Competing with quality of
    products and services.
  • Increase revenue instead of simply cutting back
    through cost reduction and downsizing.

20
Reengineering Cast Members
Executive Sponsor
Project Team
Analysis (2-4 months)
Design (3-6 months)
  • Operations research teams
  • Benchmarking teams
  • Voice of the client data collection teams
  • Workflow design teams
  • Application design teams
  • Pilot teams

Implementation (12-24 months)
  • Implementation teams
  • Transition teams

21
Understanding and Rethinking Business Processes
Understand the Customer
Understand the Process
Benchmarking
22
Understanding The Customer
  • What are the customers real requirements?
  • What do they say they want and what do they
    really need?
  • What problems do they have?
  • What processes do they perform with the output?

23
Understanding Processes
  • Why does this particular process need to exist
    versus some alternative solution or no process at
    all?
  • Why does the process require this much time to
    achieve certain results?
  • Why is the process organized this way?
  • What aspects of the process are truly important
    to the customer?

24
Revisiting Process Activities
Process
No Value Added
Real Value Added
Business Value Added
25
Process Evaluation and Analysis
Existing Process
Measures of Performance
The Technology Trap
Activity-Based Costing
Do not automate something that should not have
been done manually.
26
Some Characteristics of Reengineered Processes
  • Several jobs are combined into one
  • Case worker
  • Case team
  • Workers make decisions
  • The steps in the process are performed in a
    natural order
  • Processes have multiple versions

27
Some Characteristics ofReengineered Processes
  • Work is performed where it makes more sense
  • Checks and controls are reduced
  • Reconciliation is minimized
  • A case manager provides a single point of contact
  • Hybrid centralized/decentralized operations are
    prevalent

28
Ways to Structure the Organization
  • Flattening Organizational Structures
  • Team Design Baseball, Football, and Tennis
    Doubles
  • Job Design Generalists Vs. Specialists
  • Compensation Schemes Paying for performance
    and/or business results.

29
Primary Roadblocks
  • Failure to develop the necessary leadership.
  • Not helping people to think in terms of business
    processes.
  • Neglecting to align measures and rewards with the
    new business process thinking.

30
Most Common Errors (1)
  • Trying to fix the process instead of changing it
  • Dont focus on business processes
  • Ignore everything except process redesign
  • Neglect peoples values and beliefs
  • Be willing to settle for minor results
  • Quit too early

31
Most Common Errors (2)
  • Assign someone who does not understand
    reengineering to lead the effort.
  • Skimp on the resources devoted to reengineering.
  • Bury reengineering in the middle of the corporate
    agenda.
  • Dissipate energy across a great many
    reengineering projects.

32
Most Common Errors (3)
  • Attempt to reengineer when the CEO is two years
    from retirement.
  • Fail to distinguish reengineering from other
    business improvement programs.
  • Concentrate exclusively on design.
  • Try to make reengineering happen without making
    anybody unhappy.

33
Most Common Errors (4)
  • Pull back when people resist making reengineering
    changes.
  • Drag the effort out.
  • Try to make reengineering happen from the bottom
    up.
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