Business Process Reengineering and Information Technology

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Business Process Reengineeringand Information
Technology
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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)

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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

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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
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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

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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)

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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
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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

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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

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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

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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)

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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

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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

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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???

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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

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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

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Benefits of elimination of handoffs

• No transits
• No waiting for another operator
• No waiting in queues
• No setups
• No supervision/coordination required

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Cost and Quality in relation to cycle time
Cost
Time
Quality
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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

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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

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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

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Total Quality Managementand Reengineering

• Rate of change
• TQM continuous improvement
• Reengineering dramatic improvement

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TQM versus Reengineering
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Implementing Reengineering

• Redesign (Readiness for change)
• Retool (Transitioning to the change)
• Re-orchestrate (Institutionalizing the change)

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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)

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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

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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

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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

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HOW IS PROCESS REENGINEERING THE SAME OR SIMILAR
TO CONTINUOUS IMPROVEMENT?

• Both focus on cultural change
• Operational performance
• Measurement of results
• Empowerment of employees

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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

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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

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Implementation Issues

• Improvement comes out of TQM
• Continuous evaluation
• Eliminating jobs

Costs
Time
Quality
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Implementation Strategy

• Redesign
• Retool
• Re-orchestrate

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Re-orchestrate Organizational Change

• Leadership
• Corporate values
• Cultural change
• Incentives
• Accountability
• Zeal

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Re-orchestrate Organizational Change

• Communication
• Ambiguity
• Obstacles to change
• Celebrate success

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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?

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When to Use BPR?

• Failure rate as high as 75-85
• Improperly aligned BPR and IT
• Expensive
• Organizational resistance

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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