Business Process Reengineering

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Business Process Reengineering

• Chao-Hsien Chu, Ph.D.
• School of Information Sciences and Technology
• The Pennsylvania State University
• University Park, PA 16802

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BPR Theory Vs. Practice
BPR
Promise Fundamental change
Reality 75 Failure rate
Misunderstanding - What BPR is. - How to go about
doing it.
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BPR Definition (1)

• 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.
• Hammer and Champy 1993

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BPR Definition (2)

• The fundamental rethinking and redesign of
  operating processes and organizational structure,
  focused on the organizations core competencies,
  to achieve dramatic improvements in
  organizational performance.
• Lowenthal 1994

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BPR Definition (3)

• Reengineering is the rapid and radical redesign
  of strategic, value-added business processes
  and the systems, policies and organizational
  structures that support them to optimize the
  work flows and productivity in an organization.
• Manganelli and Klein 1994

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Processes
A process is an interrelated series of
activities That converts inputs into outputs.
Activity
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Activities

• Value-adding Activities
• Important to the customer
• A customer is willing to pay for them
• Hand-off Activities
• Move work across functional or departmental
  boundaries
• Control Activities
• They control hand-off activities

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Process Flow
CEO
Marketing
Operations
Finance
Customer request
Order fulfillment
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Features of Business Processes

• Greater margin for improvement
• Hands-off and lost control
• Waste and inefficiency are difficult to detect
• Cross-functional problems
• Low percentage of value-adding activities
• Customers are very sensitive to poor business
  processes

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Some Business Processes

• Order Processing
• Billing
• Purchasing
• Shipping
• Receiving
• Auditing
• Business Planning
• Warranty and claims processing

• Budget planning
• Accounts payable
• Accounts receivable
• Performance appraisal
• Proposal development
• Credit approval
• Vendor certification
• New employee processing

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Attributes of a BPR Methodology

• It should develop a clear statement of corporate
  goals.
• It should be process-oriented.
• It should facilitate the classification of
  activities.
• It should lead to fundamental change.
• It should develop a plan to deliver final results
  within a year.

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Reasons for Reengineering

• Your continuous improvement activities have hit a
  dead end.
• The competition has grabbed your customers.
• You are approaching the top of the S Curve.
• Your customers requirements have changed.
• Technological advances expand the possibilities.
• Fundamental shifts in industry.

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Motivation for Redesigning
BPR
Improved Customer Focus
Improved Cycle Time
Improved Process Efficiency
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Building Blocks
Current process review
Design options
Design principles
High-level design
Baseline analysis
Design specifications
Design Phase
Detailed design
Customer requirement analysis
Analysis Phase
Model and validate the new design
Build in CI feedback
Transform the business
Pilot the new design
Implementation Phase
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Process Selection

• Broken Processes Which processes are in the
  deepest trouble?
• Important Processes Which processes have the
  greatest impact on the companys customers?
• Feasible Processes Which processes are at the
  moment most susceptible to successful redesign?

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Broken Processes - Symptom

• Extensive information exchange, data redundancy,
  and rekeying
• Inventory, buffers, and other assets
• High ratio of checking and control to
  value-adding
• Rework and iteration
• Inadequate feedback along chains
• Complexity, exceptions, and special cases

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Important Processes
Company
Market
Customer Issues
Processes
Product Cost On-time Delivery Product Features
Product Design Order Processing Procurement
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Feasible Processes
Process Scope
Project Cost
Reengineering Effort
Team Strength
Owner Commitment
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Common Themes

• Use reengineering to grow the business.
• Service the customer Competing with quality of
  products and services.
• Increase revenue instead of simply cutting back
  through cost reduction and downsizing.

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Reengineering Cast Members
Executive Sponsor
Project Team
Analysis (2-4 months)
Design (3-6 months)

• Operations research teams
• Benchmarking teams
• Voice of the client data collection teams

• Workflow design teams
• Application design teams
• Pilot teams

Implementation (12-24 months)

• Implementation teams
• Transition teams

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Understanding and Rethinking Business Processes
Understand the Customer
Understand the Process
Benchmarking
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Understanding The Customer

• What are the customers real requirements?
• What do they say they want and what do they
  really need?
• What problems do they have?
• What processes do they perform with the output?

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Understanding Processes

• Why does this particular process need to exist
  versus some alternative solution or no process at
  all?
• Why does the process require this much time to
  achieve certain results?
• Why is the process organized this way?
• What aspects of the process are truly important
  to the customer?

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Revisiting Process Activities
Process
No Value Added
Real Value Added
Business Value Added
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Process Evaluation and Analysis
Existing Process
Measures of Performance
The Technology Trap
Activity-Based Costing
Do not automate something that should not have
been done manually.
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Some Characteristics of Reengineered Processes

• Several jobs are combined into one
• Case worker
• Case team
• Workers make decisions
• The steps in the process are performed in a
  natural order
• Processes have multiple versions

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Some Characteristics ofReengineered Processes

• Work is performed where it makes more sense
• Checks and controls are reduced
• Reconciliation is minimized
• A case manager provides a single point of contact
• Hybrid centralized/decentralized operations are
  prevalent

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Ways to Structure the Organization

• Flattening Organizational Structures
• Team Design Baseball, Football, and Tennis
  Doubles
• Job Design Generalists Vs. Specialists
• Compensation Schemes Paying for performance
  and/or business results.

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Primary Roadblocks

• Failure to develop the necessary leadership.
• Not helping people to think in terms of business
  processes.
• Neglecting to align measures and rewards with the
  new business process thinking.

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Most Common Errors (1)

• Trying to fix the process instead of changing it
• Dont focus on business processes
• Ignore everything except process redesign
• Neglect peoples values and beliefs
• Be willing to settle for minor results
• Quit too early

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Most Common Errors (2)

• Assign someone who does not understand
  reengineering to lead the effort.
• Skimp on the resources devoted to reengineering.
• Bury reengineering in the middle of the corporate
  agenda.
• Dissipate energy across a great many
  reengineering projects.

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Most Common Errors (3)

• Attempt to reengineer when the CEO is two years
  from retirement.
• Fail to distinguish reengineering from other
  business improvement programs.
• Concentrate exclusively on design.
• Try to make reengineering happen without making
  anybody unhappy.

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Most Common Errors (4)

• Pull back when people resist making reengineering
  changes.
• Drag the effort out.
• Try to make reengineering happen from the bottom
  up.