big change via business process reengineering daniel f. duran whittier college operations 342
TRANSCRIPT
BIG CHANGEVIA BUSINESS PROCESS
REENGINEERING
Daniel F. DuranWhittier CollegeOperations 342
What BPR Is: Two Parallel Definitions
“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” It is more than automation.
“BPR is a performance improvement philosophy that aims to achieve quantum improvements by primarily rethinking and redesigning the way that business processes are carried out.”
(Omar. A. El Sawy, “Redesigning Enterprise Processes for e-Business”, McGraw-Hill, NY, 2001)
“Fundamental”
Must ask “Why do we do what we do? (steps)
Question the tacit rules and assumptions underlying the organization’s culture.
Begin with logical specification of what a company must do. (Again goals and steps)
Then specify the physical design of how to perform these activities better and simpler
“Radical”
Must examine the “root” of business processes, structures, and policies.
Don’t fiddle with the old; cast it away and begin anew. (rethink rather than only change)
Reengineering is reinvention, not modification or enhancement.
“Dramatic”
Not small, incremental improvements; BPR seeks order of magnitude improve-ments in cost, quality, service, and speed. Use of IT to assist in these.
Redecorating v. demolition and reconstruction!(an analogy)
“Dramatic”: Who Undertakes BPR?
Companies in deep trouble -- need order of magnitude improvements!
Companies who foresee trouble -- “an ounce of prevention ....”
Companies in peak condition who want to further their competitive advantage.
Very similar to reason why Systems Analysis Project Originate
“Processes”
“a collection of activities that takes one or more kinds of inputs and creates an output that is of value to the customer”.
Collection of activities -- the “P” of the IPO; related by common goal.
Inputs -- raw material to be processed. Output -- something that has value to the
customer. Customer -- internal or external. Information Systems Data converted to
Information that is useful to customer
Process Integration: Value Chain
Management & Administrative Services
Human Resources Management
Technology Development
Procurement of Resources
InboundLogistics Operations
OutboundLogistics
Marketing& Sales Service
CompetitiveAdvantage
SupportActivities
PrimaryActivities
Process Integration
Two forms: within a single organization between two or more organizations
Avoids “over-the-wall” thinking and “silo-opia” (Common in Legacy systems or old organizational structures)
What BPR Is NOT
Although BPR may cause or involve aspects of all of the following, it is NOT downsizing NOT restructuring NOT “paving cow paths” NOT reorganizing, delayering, .... NOT TQM ...
BPR Is NOT TQM
Process Improvement(TQM)
Process Innovation(BPR)
Degree of Change Incremental Radical
Starting Point Existing Process Clean Slate
Frequency of Change Continuous One-Time
Time Required Short (weeks-months) Medium to long (dependingon scope of BPR effort)
Inception/Participation Top-Down/Bottom-Up Top-Down
Scope Narrow; Task- or Function-oriented
Broad; Process-oriented
Risk Moderate High
Primary Enabler Statistical Control Information Technology
Type of Change Cultural Cultural and Structural
Source: Adapted from [Davenport 1993]
Why BPR Is Necessary
The Virtual Organization: Three C’s Driving Change Customers take charge.
Mass market v. a “market of one” Backward integration Informed consumers
Competition intensifies. More and different kinds Big is not better Technology changes the nature of
competition.
Competitive Forces Model
Threat of newmarket
entrants
Bargainingpower ofsuppliers
Bargainingpower of
customers
Threat ofsubstitute
products &services
The firmIntra-
industrycompetitors
Why BPR Is Necessary
The Three C’s (continued) Change becomes constant.
reduced product cycles reduced time to develop new products more environment scanning
“Companies created to thrive on mass production, stability, and growth can’t be fixed to succeed in [such] a world.”
Four Revolutions Affecting Business Today
NewCompetitors
New Rules ofCompetition
NewTechnologies
NewWork Force
How the Information Age is Changing Business
Organization: Breaking down old corporate barriers, allowing critical information to be shared instantly.
Operations: Using IT to shrink cycle times, reduce defects, cut waste, streamline ordering and communications.
Staffing: Eliminating management layers and cutting employment levels; creating “virtual” offices.
New Products: Collapsing development cycles. Customer Relations: Tapping into companywide
databases to solve callers’ demands instantly
Info Technology = Enabler
Old Rule Technology New RuleInformation must beprocessedsequentially.
Shared databases& imagingtechnology
Information can beprocessedconcurrently.
Only experts canperform complexwork.
Expert Systems A generalist can dothe work of anexpert.
Business mustchoose a centralizedor decentralizedstructure.
Telecommnetworks
Businesses can reapthe benefits of bothstructures.
Only managers haveaccess toinformation.
Decision supporttools
Decision making ispart of everyone’sjob.
Info Technology = Enabler
Old Rule Technology New Rule
Field personnelneed offices to sendand receiveinformation.
Wireless datacommunications &portable computers
Field personnel cansend and receiveinformation fromanywhere.
The best contact ispersonal contact.
Interactivevideodisc & WWW
The best contact iseffective contact.
You have to findout where thingsare.
Automatic identifi-cation & tracking
technology
Things tell youwhere they are.
SUPPLY-CHAIN MANAGEMENT & Porter’s Value Chain
INTRANETINTRANET
PRODUCTIONPLANNING
PROCUREMENT
INVENTORY
PRODUCTION &MANUFACTURING
CUSTOMERSERVICE
ACCOUNTING &FINANCE
MARKETING& SALES
SHIPPING &DISTRIBUTION
CU
ST
OM
ER
S
BPR and E-Business
E-Business is a facilitator and an enabler.
EC is more than just automating existing processes.
EC creates new business models e.g. Dell Computers
PARADIGM SHIFT
PARADIGM IS A COMPLETE MENTAL MODEL OF HOW A COMPLEX SYSTEM FUNCTIONS
A PARADIGM SHIFT INVOLVES RETHINKING THE NATURE OF THE BUSINESS, THE ORGANIZATION; A COMPLETE RECONCEPTION OF HOW THE SYSTEM SHOULD FUNCTION
BPR Objectives
Streamline – remove waste, consolidate Lose Wait – squeeze out delays Orchestrate – let the most able enterprise
execute, outsource Mass Customize – any time, any place,
any way Synchronize – both the physical and
virtual parts of the process, real time processing of data
Digitize and Propagate – capture information digitally at the source and propagate it through the process
Vitrify – provide glass like visibility of the process
Sensitize – fit the process with sensors and feedback loops for prompt action
Analyze and Synthesize – generate added value by enhancing the process, constant improvement and iteration.
BPR Objectives
RISKS & REWARDS
RISKRISK
RETURNRETURN
LowLow
LowLow HighHigh
HighHigh
1. Develop business vision, process objectives
2. Identify process to be redesigned3. Understand, measure performance of
existing processes4. Identify opportunities for applying
information technology5. Build PROTOTYPE of new process
BUSINESS REENGINEERING STEPS:
FEASIBILITY
TECHNICAL: Assess hardware, software, technical resources
ECONOMIC: Will benefits outweigh costs? OPERATIONAL: Is solution desirable within
existing conditions? INFORMATION REQUIREMENTS: Detailed
statement of new system needs
Characteristics of Reeng. Processes
Several jobs are combined into one. Compress the organization horizontally
and vertically. Replace several task specialists with one
‘case worker.’ Group task specialists into case teams. Benefits: improves efficiency, reduces
errors and administrative overhead, and increases accountability.
Workers make decisions. Compress organization vertically to
reduce chain of command. Tie decision making to getting the work
done: Those who do the work make the decisions.
Benefits: reduces delays, lowers overhead, provides better customer response, empowers workers.
Characteristics of Reeng. Processes
The process steps are performed in a natural order.
Eliminate process linearity and sequence where possible. Perform tasks concurrently to reduce
process cycle time.
Characteristics of Reeng. Processes
Characteristics of Reeng. Processes
Processes have multiple versions. Standardization is dead: One size does
NOT fit all. Create multiple versions of the same
process, each tuned to meet the needs of different inputs, situations, or markets.
Benefits: eliminates complexity and exceptions that must be incorporated in a standardized process.
Characteristics of Reeng. Processes
Work is performed where it makes the most sense. (Manufacturing Example) $100 in internal costs to purchase $3
worth of batteries or supplies!!! Accountants buy their own pencils;
customers repair their own equipment; spare parts are stored at the customer site.
Benefits: eliminates administrative costs, reduces process cycle time, improves customer service.
Characteristics of Reeng. Processes
Checks and controls are reduced. (Tricky) Checks and controls don’t add value;
use them only when they make economic sense.
Tolerate limited, modest abuse to reduce costs of prevention.
Provide effective systems for detecting abuse, e.g., audits.
Characteristics of Reeng. Processes
Reconciliation is minimized. (Carefully) Reconciliation doesn’t add value. Benefits: reduce number of external
contact points for each process, thereby reducing the likelihood of inconsistent data.
Ford’s accounts payable process: eliminated vendor’s invoice.
WalMart’s PO-less purchasing system.
Characteristics of Reeng. Processes
A case manager provides a single point of contact. (Loans or other service) Acts as a buffer between a complex,
multistep/multiperson process and the customer.
Accepts responsibility as though s/he were performing the whole process.
Requires access to process-related data and effective communication with process workers.
Characteristics of Reeng. Processes
Hybrid centralized/decentralized operations are prevalent. Reap the advantages of both operating
modes! Operate as though units were autonomous
(decentralized), yet enjoy the economies of scale that centralization creates.
Notebook equipped sales force; software imposes controls to prevent unreasonable quotes or promised delivery dates.
People Issues
Fear of change Emphasis on Team work Viewing “Big Picture” rather than a
job or step in a process IS designers to act as facilitators
Technology Issues
Careful use of unproved technologies Quick deployment of cost effective
technologies Resistance to Change from Old
technology; Why change when “NOT” Broke
Dealing with legacy systems Changes in Information Systems
Architectures.
Organizational Issues
Top Management Champion High visibility and High Expectations Structural and cultural changes
Problems Moving Decision Making and Control
points; may lead to replacement of organizational units