BPR Lecture 1

Business Process Re-engineering(BPR)

Spectrum of Change

• Automation

• Rationalization

of procedures

• Reengineering

• Paradigm shift

Automation

• refers to computerizing processes to speed up the existing tasks.

• improves efficiency and effectiveness.

Rationalization of Procedures

• refers to streamlining of standard operating procedures, eliminating obvious bottlenecks, so that automation makes operating procedures more efficient.

• improves efficiency and effectiveness.

Business Process Reengineering

• refers to radical redesign of business processes.

• Aims at– eliminating repetitive,

paper-intensive, bureaucratic tasks

– reducing costs significantly

– improving product/service quality.

Paradigm Shift

• refers to a more radical form of change where the nature of business and the nature of the organization is questioned.

• improves strategic standing of the organization.

BPR

“The FUNDAMENTAL rethinking and RADICAL redesign of business PROCESSES to bring about DRAMATIC improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.”

-Hammer, Champy (1993)

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What is Business Process Reengineering or Redesign?

• Reengineering business processes means tossing aside

existing process and starting over.

• Business process re-engineering is also known as business

process redesign, business transformation, or business

process change management.

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This definition contains four key words:

Fundamental

Fundamental implies that everything – every assumption, every reason, every activity – is challenged by asking why it should be continued. Over time, practices that were once required become obsolete and need to be removed.– Why do we do what we do?– Ignore what is and concentrate on what should be.

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This definition contains four key words:

Radical

Do not try to improve the existing situation, invent (create/design) completely new ways of accomplishing(complete/achieve) work. Business reinvention vs. business

improvement

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Dramatic

Do not use business process redesign to obtain marginal (small slight) improvements, aim at order-of-magnitude improvements (ten times). If the marginal gains – 5 to 10 percent – are the goal, then continuous improvement is a more appropriate path than reengineering.

This definition contains four key words:

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Process

Focus on the business processes instead of organizational structures.

This definition contains four key words:

Other definition of Business Process

A business process may be defined as

“a set of logically related tasks performed to achieve a defined business outcome” (Davenport, 1990)

OR

“activities that takes one or more kinds of input and create an output that is of value to customer”

(Hammer and Champy, 1993)

OR

“a set of business events that together enable the creation and delivery of an organization’s products or services to its customers” (Gelinas et. al, 2004)

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Process

• Any operational or administrative system which transforms inputs into valued outputs

• Typically a sequence of tasks arranged into a procedure or set of work arrangements

• Perhaps involving various machines, departments and people

Process

• A fundamental concept of BPR is the business process

• Business processes have outcomes and recipients of these outcomes

• They may comprise many tasks, and these tasks may be performed across various departments or sections within the organization, and even outside the organization, at its trading partners.

Process

• BPR exercises look at these processes, and try to eliminate tasks, which are non-value adding from the point of view of the recipient of the outcome

• BPR exercises require a reshuffle of traditional organizational structures. It is desirable to have cross-functional teams working on an entire process. This cuts down task handoffs, errors, queuing, recapturing of data, checks and controls

Dimensions of Process

• Entities– Processes Take Place Between Organizational

Entities• Objects

– Processes Result in Manipulation of Objects• Activities

– Processes could Involve Two Types of Activities - Managerial & Operational

Types of ProcessesDimensions & Type Examples

Organization Entity• Inter-organizational

• Inter-functional

• Inter-personal

Objects• Physical

• Informational

Activities• Operational

• Managerial

Order from a supplier

Develop a new product

Approve a bank loan

Manufacture a product

Prepare a proposal

Fill a customer order

Develop a budget

BPR

• BPR is not a process of trying to make marginal improvements

• It ignores how work is now done and starts over, from scratch

• Is a revolutionary process that challenges all the old organizational structures, work flows, job descriptions, management procedures, controls, and organizational values and culture

• BPR is a re-invention of business processes rather than an improvement or enhancement

BPR requires:

• Reshuffle traditional organizational structure

• Cross functional teamwork• Empowered workers

BPR

Re-shaping internal procedures and processes

What is NOT BPR

• TQM• ISO9000• Automation• Downsizing• Restructuring• Software Rengineering• Change Management

BPR is Not?

• BPR may sometimes be mistaken for the following five tools:

• 1. Automation is an automatic, as opposed to human, operation or control of a process, equipment or a system; or the techniques and equipment used to achieve this. Automation is most often applied to computer (or at least electronic) control of a manufacturing process.

• 2. Downsizing is the reduction of expenditures in order to become financial stable. Those expenditures could include but are not limited to: the total number of employees at a company, retirements, or spin-off companies.

BPR is Not?

• 3. Outsourcing involves paying another company to provide the services a company might otherwise have employed its own staff to perform. Outsourcing is readily seen in the software development sector.

• 4. Continuous improvement emphasizes small and measurable refinements to an organization's current processes and systems. Continuous improvements’ origins were derived from total quality management (TQM) and Six Sigma.

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Reengineering & Continuous Improvement--Similarities

Reengineering Continuous ImprovementSimilaritiesBasis of analysis Process ProcessPerformance measurement Rigorous RigorousOrganizational change Significant SignificantBehavioral change Significant SignificantTime investment Substantial Substantial

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Reengineering & Continuous Improvement--Differences

Reengineering Continuous ImprovementDifferencesLevel of change Radical IncrementalStarting point Clean slate Existing processParticipation Top-down Bottom-upTypical scope Broad, cross-functional Narrow, within functionsRisk High ModeratePrimary enabler Information technology Statistical controlType of change Cultural and structural Cultural

What it is not?

• Reengineering is not reorganizing, delayering or flattening. – Modifying how an organization is structured

and redesigning an organization’s business processes are two different things.

– An organizational structure should be designed so that it best supports redesigned business processes.

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What it is not?

• Reengineering is not downsizing either.– Downsizing focuses on the reduction of

workforce to achieve short-term cost savings. – Reengineering, on the other hand, focuses on

rethinking from the ground up, finding more efficient ways of working including eliminating work that is unnecessary.

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TQM & BPR

• Increased attention to BPR by TQM• BPR & TQM Share Cross-functional

Orientation• BPR & TQM Share Same Objective -

Improvement• TQM - Incremental Improvement Over

Open-ended Period• BPR - Radical Re-design in Bounded Time

Frame

Impact of Information Technology

• Organizational Structure– Flatter Leaner– Networked Organization– Knowledge Worker– Middle Managers/Lower Tiers Disappearing

• Business Processes– IT Key Enabler of BPR– Digital Age Creates VELOCITY– Convert Every Paper Process to Digital Process

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Impact of Information Technology

• To achieve large gains in productivity, technological improvements must be combined with significant changes in management and organizational structure and the reorganization and redefining of work practices

Why BRP?

• Do or Die• Minimize threat from rival firms• Attain sustainable competitive advantage• Leverage on unprecedented opportunity to

take giant leap forward

Traditional Business model

DesignMarketing Manufacturing Assembly

Traditional Business

• Functional focus• Multiple handoffs• Document duplication• Work duplication• Little appreciation for customer

requirements• Not systemic

Process based business

Group Process

Start End

Marketing Design Manufacturing Assembly

Business Processes

Process based business

• Process focussed• Improved communication• Single documentation• Appreciation of customer• Systemic

Reasons for Reengineering

Old Era New Era

EfficiencyControl

High Demand High Competition

InnovationSpeedService &Quality

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Benefits of Reengineering• The rewards of reengineering are many including:

1) empowering employees;

2) eliminating waste, unnecessary management overhead, and obsolete or inefficient processes;

3) producing often significant reductions in cost and cycle times;

4) enabling revolutionary improvements in many business processes as measured by quality and customer service;

5) Break organizational boundaries, bringing customers into the information channels through communication, networking, and computer technologies.

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Some of the BPR Objectives

• Improve Efficiency e.g reduce time to market, provide quicker response to customers

• Increase Effectiveness e.g deliver higher quality• Achieve Cost Saving in the longer run• Provide more Meaningful work for employees• Increase Flexibility and Adaptability to change• Enable new business Growth

Imperatives of BPR

• Evaluate core business activities • Consider business processes

cross-functionally • Re-design radically, don't just tinker • Aim for sharp improvements in

performance levels

Reengineering – survival study

• Introduction:

The number of firms is increased to close – because of

a) Inefficiency

b) too Inward Looking

c) inflexibility

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- continued

Similar changes occurred in developed and developing nations also and still facing a similar challenge.

Example:

Ford Motor Company faced business extinction at one time and found the paths to renewed success and inspires others.

Business Reengineering –

Process thro’ which the continuous success and survival is indicated (by Americans).

Term is invented by Michael Hammer.

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Reengineering Imperative in USA

• The business climate made reengineering necessary in the United States.

• US gave great industrial philosophers like Adam Smith and Henry Ford. But at one time their business was also in trouble.

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-continuedJapanese were too smart, they move small market into world markets with extraordinary quality and manufacturing philosophy. They cut out unnecessary waste such as,1. Safety stock Inventories2. Multiple suppliers3. External Inspection4. High Quality5. Low cost in regular basis

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• US adopted the Japanese paradigm because of :

1. They recognized that economy of scale is not as important as economy of time. So, the entire approach was to be flexible and respond quickly to changing customer needs.

2. They opted for flexibility and multi- skilling techniques in work culture and this created the ability to respond. i.e. discard old and narrow focused to new innovations in work.

3. Customer’s response become the primary objective rather than the growth alone.

JAPANESE PARADIGM

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Reengineering scenario in Europe

• In Europe,- Quiet Transformations are taking place vitally.

For example,(eg1):

- Lubricants division of a large oil company has cut its order delivery time to 40% ( from 6weeks to 19 days).

- Eliminated $200 millions in inventory and doubled its profits.

- It aims in overall reduction in operating expenses to 35%.

For example (eg2:) :In Rover car company,

- aims to fulfill 90% of customer orders. - He used around nine key business processes. - New product introduction - Only European car-maker to reverse the falling output and

sales trends during first five months of 1993. 47

Reengineering Needs in Pakistan ?

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