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Business Process Reengineering and Information Technology

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Title: Business Process Reengineering and Information Technology


1
Business Process Reengineeringand Information
Technology
2
Basic Concepts
  • Business process (What/why actions to produce
    outputs from inputs)
  • Value added (Add value to organizational
    customers via values added to products/services)
  • Business Process Reengineering (BPR)
  • Fundamental changes to people and culture,
    organizational structure, policies/procedures,
    and technology
  • Demand chain
  • Pressures to produce products or provide services
  • Supply chain
  • Flow of materials, information, and services from
    raw material suppliers through factories
    warehouses to the end customers (also includes
    organizations and processes that create and
    delivery those products, information, and
    services to the end customers)

3
Basic Concepts
  • Supply chain management
  • Planning, organizing, coordinating all supply
    chain activities to reduce uncertainty and risks
    and positively affect inventory levels, cycle
    time, business processes, and customer service
  • Extended supply chain
  • Combination of the push of the supply chain and
    the pull of the demand chain
  • Networked organization
  • Linking functional components of the organization
    via Intranets, Internet, LAN, and WAN
  • Organizational transformation

4
What is a Business Process???
  • A collection of activities that take one or more
    inputs and turn that into a product that adds
    value to a customer

A Business Process
5
Demand and Supply Chains
  • DEMAND CHAIN--all activities that relate to
    obtaining an order among all participants
  • SUPPLY CHAIN--all activities that occur once you
    get an order
  • EXTENDED SUPPLY CHAIN--both the demand and supply
    chains taken together
  • Corresponds to the value system concept with
    analysis of the values chain components
  • Supply chain analysis seeks to primarily maximize
    values and support activities all along the
    extended value chain
  • it is 5-6 times more difficult to get a new
    customer than it is to retain an existing one

6
The Need for BPR
  • Customers (know what they want and are willing to
    pay for it)
  • Competition (Continuous increase will result in
    changes to price, quality, selective service, and
    delivery)
  • Change (continues to occur in peopleculture,
    organizational structures, policiesprocedures,
    and technology)
  • Techniques lag behind technology (Technologically
    capable, but not functionally operational)
  • Problem of the stovepipe (lack of communication
    between vertical functional areas)
  • Fragmented piecemeal systems (focus on vertical
    functions, with the existence of redundancies of
    effort and actions
  • Integration across departmental and
    organizational boundaries (information and
    operations are needed)

7
Processes in Relation to Departments
Marketing
Engineering
Manufacturing
Field Service
Departmental Stovepipes
Customer
Customer
New Product Introduction
Order Fulfillment
Customer
Figure 3-1. An Illustration of Departmental
Stovepipes
8
The Principles of BPR and The Role of IT
  • Characteristics of BPR (Fundamental change in
    organizations)
  • Methodologies and frameworks for BPR
  • Enabling role of IT

9
Characteristics of Business Process Reengineering
  • Several jobs are combined into one
  • Employees are empowered to make decisions
  • Steps in business process natural order
  • Process may have multiple versions
  • Work is performed where it makes the most sense

10
Characteristics of Business Process Reengineering
  • Controls, checks, other non-value-added work is
    minimized
  • Reconciliation is minimized - minimize external
    contact points
  • Hybrid centralized / decentralized operation is
    used
  • A single point of contact is provided for the
    customer

11
Business Process Reengineering andRestructuring
the Organization
  • Redesign of processes (Fundamental change in
    business processes)
  • From mass production to mass customization (Mass
    production of the same products --- Mass
    production of different products)
  • Cycle time reduction (Change in the time it takes
    to complete a process from start to end time can
    provide competitive advantage
  • Restructuring organizations (May need to
    restructure the entire organization to reap the
    benefits of BPR)

12
Common Benefits of BPR
  • Enterprise integration
  • Departments are consolidated
  • Several jobs are combined into one job
  • Worker empowerment
  • There is both horizontal and vertical
    reorganization
  • Handoffs are eliminated
  • There are fewer rules and less coordination is
    required

13
Common Benefits of BPR, Contd
  • Number of steps in a process are reduced
  • This is simplification
  • Inspections, checks and controls are reduced or
    eliminated
  • The steps are performed in a more natural order

14
Common Benefits of BPR, Contd
  • Like Process Improvement, steps are reassessed
  • Can it be eliminated
  • Can it be taken off line
  • Can it be performed in parallel
  • Can it be combined
  • Is it a bottleneck
  • Can its mean be reduced
  • Can its variance be reduced
  • WHAT IS ITS COST???

15
Common Benefits of BPR, Contd
  • Processes differ by the type of job being
    processed
  • Not just one process but many are employed
    depending on the size of the job
  • Work is performed where it makes the most sense
  • Wal-Mart moves the replenishment function to its
    suppliers

16
Common Benefits of BPR, Contd
  • Reconciliation is minimized
  • A case manager provides a single point of contact
  • Hybrid centralized/decentralized operations are
    prevalent
  • IT enables decisions to operate autonomously

17
Benefits of elimination of handoffs
  • No transits
  • No waiting for another operator
  • No waiting in queues
  • No setups
  • No supervision/coordination required

18
Cost and Quality in relation to cycle time
Cost
Time
Quality
19
The Networked Organization
  • Structure of networked organizations
  • Informal, less structured, delegate/lead,
    ownership/participant, empower employee asset,
    shared ownership of information,
    flatter/manageable organizations, risk
    management, team contributions
  • Empowerment
  • Vesting employees with traditionally held
    managerial authority for decision making or
    approval authority
  • Empowerment may require training regarding
    new/existing skills
  • Companies are also empowering customers,
    suppliers, and other business partners (Extranets
    support external empowerment)
  • IT / empowerment relationship
  • IT important contribution is providing the
    correct information at the appropriate time with
    the correct quality and appropriate costs
  • IT can provide information that enhances the
    creativity and productivity of employees, as well
    as the quality of their work
  • Teams
  • Self-managed teams are performing many
    organizational functions
  • Permanent work group teams
  • Problem solving teams
  • Quality circles
  • Management teams
  • Virtual teams

20
Virtual Corporations
  • A virtual corporation is an organization
    composed of several business partners sharing
    costs and resources for the purpose of producing
    a product or service.
  • Can be a Temporary or permanent virtual
    corporation
  • Composed of several components at different
    locations that have different ownership of
    resources at those different locations

21
Major Attributes of Virtual Corporations
  • Excellence (Different partners have different
    competencies)
  • Utilization (Resources put to better use)
  • Opportunism (Organized to meet market
    opportunities or meet market threats)
  • Lack of borders (Indeterminable border of VC)
  • Trust (Much more reliance between business
    partners in VC)
  • Adaptability to change (Quicker adaptation to
    change)
  • Technology
  • Networked IT is central to VC
  • Inter-organizational systems (IOS) is often
    present between business partners
  • IT facilitates communication and collaboration
    among dispersed business partners

22
Total Quality Managementand Reengineering
  • Rate of change
  • TQM continuous improvement
  • Reengineering dramatic improvement

23
TQM versus Reengineering
24
Implementing Reengineering
  • Redesign (Readiness for change)
  • Retool (Transitioning to the change)
  • Re-orchestrate (Institutionalizing the change)

25
Tools for BPR
  • Simulation (Simulate organizational activities
    and scenarios)
  • Flow diagrams (Modeling of the flows of things
    through the organization)
  • Work analysis (Analysis of the existing process
    and proposed solutions)
  • Application development (Create application to
    support/institutionalize the change)
  • Workflow software (System controls into the hands
    of end-user help automate business processes
    and provide a quality interface between business
    systems)

26
TASKS of the Re-engineering team
  • 1) determine measures of performance
  • 2) install measures of performance
  • 3) delineate entire existing process in all its
    gory detail
  • 4) perform process value analysis and
    activity-based costing
  • 5) benchmark processes by comparison with other
    processes

27
TASKS of the Re-engineering team, Contd
  • 6) design re-invented process
  • 7) simulate re-invented process
  • 8) prepare report with recommendations
  • 9) install re-invented process
  • 10) measure improvements

28
HOW IS PROCESS REENGINEERING DIFFERENT FROM
CONTINUOUS IMPROVEMENT?
  • Process innovation endeavors to create
    catastrophic improvement in a single sweep
    whereas continuous improvement is incremental
    improvement over a period of time?
  • Process innovation is top-down, whereas
    continuous improvement is bottom up
  • Process improvement implies use of specific
    change tools, specifically information technology

29
HOW IS PROCESS REENGINEERING THE SAME OR SIMILAR
TO CONTINUOUS IMPROVEMENT?
  • Both focus on cultural change
  • Operational performance
  • Measurement of results
  • Empowerment of employees

30
PROCESS REENGINEERING VS PROCESS IMPROVEMENT
  • IMPROVEMENT REENGINEERING
  • Level of change Incremental Radical
  • Starting point Existing process Clean slate
  • Frequency of change Continuous One-time
  • Time required short-term long-term
  • Participation bottom-up top-down
  • Typical scope Narrow Broad
  • Risk Moderate High
  • Primary enabler Statistical control IT
  • Type of change cultural cultural/structural

31
PROCESS REENGINEERING INVOLVES
  • Use of enabling technologies
  • INFORMATION TECHNOLOGY
  • Human and organizational development
  • PROCESS OWNERSHIP
  • EMPLOYEE EMPOWERMENT
  • AUTONOMOUS TEAMS
  • FLATTENED ORGANIZATIONAL STRUCTURES
  • FUNCTIONAL AND COMPARTMENTAL COMMUNICATION

32
Implementation Issues
  • Improvement comes out of TQM
  • Continuous evaluation
  • Eliminating jobs

Costs
Time
Quality
33
Implementation Strategy
  • Redesign
  • Retool
  • Re-orchestrate

34
Re-orchestrate Organizational Change
  • Leadership
  • Corporate values
  • Cultural change
  • Incentives
  • Accountability
  • Zeal

35
Re-orchestrate Organizational Change
  • Communication
  • Ambiguity
  • Obstacles to change
  • Celebrate success

36
Continuous Evaluation
  • Is reengineering truly transformational?
  • Will reengineering improve customer relations?
  • Has reengineering cut across the organization?
  • Is information technology playing an integral
    role in the reengineering solution?
  • Does it hurt?

37
When to Use BPR?
  • Failure rate as high as 75-85
  • Improperly aligned BPR and IT
  • Expensive
  • Organizational resistance

38
Managerial Issues
  • Ethical issues (SCM or BPR projects may lead to
    the need to lay-off, retrain, or transfer
    employees)
  • BPR implementation (Few organization-wide BPR
    effort)
  • Incremental improvement programs
  • BPR tools (Often uses existing tools rather than
    creation of new tools)
  • Role of IT (IT should be a supportive, not lead
    role in SCM and BPR projects)
  • Failures (Big projects tend to increase failure
    rates)
  • TQM and BPR
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