BIG CHANGE VIA BUSINESS PROCESS REENGINEERING

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BIG CHANGEVIA BUSINESS PROCESS REENGINEERING

• Daniel F. Duran
• Whittier College
• Operations 342

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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)
  

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Fundamental

• Must ask Why do we do what we do? (steps)
• Question the tacit rules and assumptions
  underlying the organizations 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

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Radical

• Must examine the root of business processes,
  structures, and policies.
• Dont fiddle with the old cast it away and begin
  anew. (rethink rather than only change)
• Reengineering is reinvention, not modification or
  enhancement.

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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)

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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

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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

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Process Integration Value Chain
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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)

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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 ...

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BPR Is NOT TQM
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Why BPR Is Necessary

• The Virtual Organization Three Cs 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.

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Competitive Forces Model
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Why BPR Is Necessary

• The Three Cs (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 cant be fixed to succeed
  in such a world.

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Four Revolutions Affecting Business Today
New Technologies
New Competitors
New Work Force
New Rules of Competition
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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

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Info Technology Enabler
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Info Technology Enabler
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SUPPLY-CHAIN MANAGEMENT Porters Value Chain
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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

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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

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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

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BPR Objectives

• 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.

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RISKS REWARDS
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BUSINESS REENGINEERING STEPS

• 1. Develop business vision, process objectives
• 2. Identify process to be redesigned
• 3. Understand, measure performance of existing
  processes
• 4. Identify opportunities for applying
  information technology
• 5. Build PROTOTYPE of new process

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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

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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.

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Characteristics of Reeng. Processes

• 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.

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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.

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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.

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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.

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Characteristics of Reeng. Processes

• Checks and controls are reduced. (Tricky)
• Checks and controls dont 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.

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Characteristics of Reeng. Processes

• Reconciliation is minimized. (Carefully)
• Reconciliation doesnt add value.
• Benefits reduce number of external contact
  points for each process, thereby reducing the
  likelihood of inconsistent data.
• Fords accounts payable process eliminated
  vendors invoice.
• WalMarts PO-less purchasing system.

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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.

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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.

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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

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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.

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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