Business Process Reengineering Aylin Şahin15.04.2013 Marmara University- Engineering ManagementProf. Dr. Özalp Vayvay

Contents• Business Process Management• The core elements of Business Process

Management  • Mayor Factors for BPM• BPM- Quality Management• Innovation Point: BPR• Business Process Reengineering Cycle• Phases of BPR• Examples - BPR methodologies from

contemporary literature• Advantages and Disadvantages of BPR

About Business Process Management

Business Process Management combines the best of effective quality tools with the principles of Lean Management to create a quick analysis of key business processes in order to immediately increase their effectiveness and efficiency.

What are the companies searching for: • To make quick improvements • To move quickly• To avoid from expensive and long trainings • Quick analysis of key business processes• To increase the effectiveness and efficiency

BPM helps organizations to remain competitive, innovative, and profitable by identifying a reduction in their cost and cycle-time while increasing customer satisfaction levels and delivering standardized high quality

What are the companies searching for:

BPM helps organizations to remain competitive, innovative, and profitable by identifying a reduction in their cost and cycle-time while increasing customer satisfaction levels and delivering standardized high quality

The core elements of Business Process Management 

• Identifying Key Business Processes

Select only key business processes. That is, those process that have a direct impact on the organization and its customers. Develop the benchmark against which success will be measured.

The core elements of Business Process Management 

• Identifying the Voice of the Customer

Collect this data through your internal and external feedback mechanisms. This will include surveys and interviews.

Recognize that customers of each key business process will likely include both internal and external customers.

The core elements of Business Process Management 

• Develop the Current Value Stream Map

Use all of the subject matter experts to ensure that you are able to identify everything that is included in completing each portion of the key business process. Create a detailed flowchart of this information. This will identify what is being done and why.

The core elements of Business Process Management 

• Measure the Process

Identify the direct costs, people costs, overhead costs and opportunity costs associated with this business process.

The core elements of Business Process Management 

• Completing a Root Cause Analysis of the key business process

Identify all of the blockages and barriers preventing the business process from immediately reaching its defined "improvement" requirements.

The core elements of Business Process Management 

• Developing the Ideal Value Stream

Put aside what you know to be true of the current process and identify the blockages and barriers to reaching your defined success measures. Create the "ideal" process map that will address the root causes of all identified issues, concerns, problems and challenges in the current process.

The core elements of Business Process Management 

• Developing Solutions

Generate a list of possible options and solutions that can be implemented. Select the best possible options and solutions, ensuring that these will overcome the root causes.

The core elements of Business Process Management 

• Developing the Implementation Plan

Develop a detailed implementation strategy to ensure that the solutions are successfully realized. Include who needs to do what, when and with what resources.

Mayor Factors for BPM

1. Productivity increase 2. Cost Reduction 3. Quality Increase 4. Risk Reduction

1. Productivity Increase

• WHY? / WHEN?• A shift in the industry• Improved products or services• A new pricing strategy• New product introduction• Or a favorable change in the competitive landscape

• According to various studies, companies have been able to reduce process cycle times by 16 percent and increase worker productivity by 30 percent.

2. Cost Reduction• WHAT? / WHY?• Maturing or commoditized products• Aggressive pricing by competitors• Idle or overcapacity/excess inventory• Increased regulatory requirements• Functional overlaps, for example, resulting from mergers and

acquisitions

• Studies from leading research groups have revealed that companies were able to achieve an average of 18 percent year-on-year reduction in costs by focusing on their business processes.

3. Quality Increase

• WHAT?/ WHY? • Product recalls• High rework costs or customer complaints• Risk of losing key customers due to poor service• Flat or dropping customer satisfaction • Missed service-level agreements (SLAs)

Studies show elimination of unclear, incorrect, or missing data andup to 50 percent reduction of errors

4. Risk Reduction

• WHAT?/ WHY? • Restoration of service (meantime to repair)• New or tightened compliance rules• Escalation procedures

• According to some surveys, some 68 percent of respondents indicate reduced risk and cost associated with compliance.

http://en.q-bpm.org/mediawiki/index.php/Seven_QC_Tools

BPM- Quality Management• Does BPM improvement has effects for better

Quality?

BPM- Quality Management• Conclusion

It is imperative that organizations start to analyze their key business processes, using Business Process Management, to ensure that performance and employee morale is increased.

It is likely that staff is still feeling stressed from the recession of past years of work and ready to embrace the positive change that engagement in BPM will ensure.

Innovation Point: BPR

“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"

Dr Michael Hammer.

Business Process Reengineering Cycle

Phases of BPR

1. Begin organizational change.2. Building the reengineering organization3. Identifying BPR opportunities.4. Understanding the existing process.5. Reengineering the process.6. Blueprint the new business system.7. Perform the transformation.

Phase 1: Begin Organizational Change• Asses the current state of organization.• Explain the need for change.• Illustrate the desired state.• Create the communications campaign for change.

Phase 2: Building the Reengineering Organization

• Establish a BPR organizational structure• Establish the rules for performing BPR• Choose the personnel who will reengineer.

Phase 3: Identify BPR opportunities

• Identify the core/high level processes.• Recognize potential change-enablers• Gather performance metrics within the industry.• Gather performance metrics outside the industry.• Select processes that should be reengineered.• Prioritize selected processes.

Phase 4-1 : Understand the existing process.

• Understand why the current steps are being performed.

• Model the current process.• Understand how technology is currently

used.• Understand how information is currently

used.• Understand the current organizational

structure• Compare current process with the new

objectives.

Phase 4-2 : Understanding the existing process.

• Evaluate pre-existing business strategies.• Consult with customers to know their desires.• Determine customer‘s actual needs.• Formulate new process performance objectives.• Establish key process characteristics.• Identify potential barriers to implementation.

Phase 5: Reengineer the Process• Ensure the diversity of the reengineering team.• Question current operating assumptions.• Brainstorm using change levers.• Brainstorm using BPR principles.• Evaluate the impact of new technologies.• Consider the perspectives of stakeholders.• Use customer value as the focal point.

Phase 6: Blueprint the New Business System.

• Define the new flow of work.• Model the new process steps.• Model the new information requirements.• Document the new organizational

structure.• Describe the new technology

specifications.• Record the new personnel management

systems.• Describe the new values and culture

required.

Phase 7-1: Perform the Transformation.• Develop a migration strategy.• Create a migration action plan.• Develop metrics for measuring performance

during implementation.• Involve the impacted staff.• Implement in an iterative fashion.• Establish the new organizational structures.

Phase 7-2: Perform the Transformation.• Assess current skills and capabilities of workforce.• Map new tasks and skill requirements to staff• Re-allocate workforce.• Develop a training curriculum.• Educate the staff about the new process.• Educate the staff about the new technology used.• Educate the management on facilitation skills.• Decide how the new technologies will be

introduced.• Transition to the new technologies.• Incorporate process improvement mechanisms

Examples - BPR methodologies from contemporary literature

Advantages of BPR• Performance improvement• Increase in profits• Increase in productivity• Better business practices• Enormous cost reduction• Speed up business processes• Improvement in employee satisfaction• Improvement in quality• Improvement in customer service• Profitability

Disadvantages of BPR• BPR has bad reputation for major layoffs.• It never change management thinking.• Lack of management support for the initiative and

thus poor acceptance in organization.• Exaggerated expectations regarding the benefits

of BPR• Underestimation of resistance to change within

organization.• Implementation of generic best practices that do

not fit specific company needs.• Over-trust in technology solutions.

BPR’s main objective:

is to break away from old ways of working, and effect radical (not incremental) redesign of processes to achieve dramatic improvements in critical areas (such as cost, quality, service, and response time) through the in-depth use of information technology. Also called business process redesign.