Business Process Reengineering: The Key to Success in a Changing Environment Dursun Delen, Ph.D. Assistant Professor Oklahoma State University.

Business Process ReengineeringBusiness Process Reengineering: The Key to : The Key to Success in a Changing EnvironmentSuccess in a Changing Environment

Dursun Delen, Ph.D.Assistant ProfessorOklahoma State University

Delen MSIS 5653 - Advanced Systems Development 2

OverviewOverview Motivation & Introduction Project Definition:

Business Case Analysis Critical Issue/Critical Process Identification Organization/Process/People/Goal Relationships

Description/Analysis of Existing Processes Disconnect and Root Cause Analysis

Design/Validation of New Processes Metrics Cost/Benefit/Productivity Modeling Performance Validation/Simulation

Implementation Planning


ObjectivesObjectives

What Business Process Reengineering (BPR) Is/Is Not

What the Risks Associated with BPR Can Be

What Methods and Tools to Use for BPR

How Software Can Facilitate BPR

By the end of this class meeting, you should know:

Successful

Practitioner

of

BPR


… idea that business process can be changed / improved

… is the questioning of “why things are done a certain way” and not accepting the answer, “because that’s the way we do it”

BPR – A Strategic InitiativeBPR – A Strategic Initiative


BPR Success StoriesBPR Success Stories Oklahoma City Air Logistics Center / TAFB

Provided training, consulting, and technical support to capture and improve the business processes of the logistics center

Investment: $3.75 Million in total Savings: $2.5 Million per year since 1993 Continuing to use AI0Win, ProSim and WITNESS for

ongoing CPI and BPR efforts

“Just as computer-aided design (CAD) tools have improved the speed and quality of hardware design and manufacture, these computer-aided enterprise engineering tools will enable the quick and precise design, testing, and implementation of business process changes”

- Frank Boydstun, Program Manager

-


BPR Success StoriesBPR Success Stories Johnson Controls, Inc.

A multibillion-dollar service provider (outsourcing agent), needed to redesign their new-hire system.

The previous new-hire process took seven weeks to place a new employee on the job, resulting in long cycle times, poor-quality products, and unhappy customers.

Used AI0Win, ProSim and WITNESS for BPR effort After the redesign of the new-hire process, virtually

eliminating processing errors and reducing system requirements by 90%, the new process took only one day to place a new employee on the job.


BPR Success StoriesBPR Success Stories Los Angeles Air Force Base

Need to improve their Procurement Process. The goal of this project was set to optimize the transfer of

information related to all business transactions by replacing the paper-based system with one that relies on Electronic Data Interchange (EDI).

Used AI0Win/ABC and ProSim/WITNESS for the effort Estimates indicate that for every $1.00 dollar invested with

the new system, $23.00 saved. This project was so successful that it recently won the

“Commander-In-Chief National Award for Project Excellence,” which is awarded to the best project in the Department of Defense.


IBM Credit Corp., Credit Approval ProcessIBM Credit Corp., Credit Approval Process

Credit Approval Requested

Enter to Comp.& Check Credit

Rating

Modify the LoanDocument on

Another Comp.

Enter the infoInto Comp.

Generate Rate

GenerateQuote Letter

SalesPerson

CreditDepartment

BusinessPractices Dept.

Pricer

a piece of paper

a piece of paper

Paper copies of credit report and loan application.

a piece of paper“recommendation”

Deliver to theCustomer

Quoteletter

6 – 14 days

BPR Success StoriesBPR Success Stories


Changes made:– Single loan generalist– Up-to-date software to support the generalist– The trivial loan requests approved via simple table look-up,

more complicated ones forwarded to experts.

Results: – Turnaround time lowered from 6-14 days to 4 hours– Fewer personnel– Order of magnitude increase in number of deals handled

BPR Success StoriesBPR Success Stories


Business Process ReengineeringBusiness Process Reengineering DefinedDefined

— Hammer and ChampyReengineering the Corporation

“[BPR 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.”


Engineer World-Class Processes and Systems

Improved Processes

& Systems

CurrentProcesses &Systems

BPR Methods, Techniques, & Tools

BPR PrinciplesABC / Simulation

BPR Is StructuredBPR Is Structured ImprovementImprovement


Some DefinitionsSome Definitions

Business Process: (1) The logical organization of people, materials, energy, equipment, and procedures into work activities designed to produce a specified work product.

—G.A. Pall



Customer: Any organization, person, or entity that receives some work product or service. Customers can be both internal and external.



Methodology: A structured framework which provides a step-by-step roadmap ensuring consistent and correct results. Methodologies are built from capturing strategies, techniques, methods, and tools of successful efforts.



Method: Encapsulating or capturing real-world best practice into a focused structured approach. Methods are described by their syntax (language structure), discipline (how to), and practice (when to apply).



Tool: Software that automates a method or methodology. Tools enable the correct use of a method and aid the user in faster application of the method.


Anticipate the need for and implement change

Respond quickly to changing market trends

Provide variety of products without incurring added costs

Satisfy customers tobuild stable customer base

External FocusExternal Focus


Internal FocusInternal Focus

Model processes to clarify process intent

Use advanced methods for process management

Align process intent with business strategy

Leverage technology to improve the process

Continuous ProcessContinuous ProcessImprovementImprovement


Why Is BPR Necessary?Why Is BPR Necessary? The Information Age has

changed the environment

Market and customers require cheaper, faster, and better—all the time

Information management technologies have enhanced customer service

Enterprises must constantly improve processes to

thrive in a changing environment.


CPIContinuous

Process Improvement

BPISmaller-scoped

Process Improvement

BPRCore Business

Process Reengineering

BPR = Incremental ImprovementBPR = Incremental Improvement

Improve productivity incrementally in sub-processes

3 to 6 months’ duration

Redesign whole process across different functions

6 to 12 months’ duration

Rebuild based on redefined vision and mission, creating changes in products, services, channels, and markets

1 to 3 years’ duration


Customer Needs

Customer Success

Organization

Processes Span FunctionsProcesses Span Functions

Concurrent Engineering ?


BPR As It Relates to . . .BPR As It Relates to . . .

BPR

BPI

CPI/TQM

Incremental Change

Paradigm Shift

Single Process

Span of Focus

Change StrategyCPI/TQM BPI

BPR

Multiple Process


BPR Methods and TechniquesBPR Methods and Techniques

IDEF Family of Methods

Knowledge Capture Techniques

Activity Based Costing (ABC)

Discrete Event Simulation

Performance Benchmarking


The Keys to Successful BPR EffortsThe Keys to Successful BPR Efforts

Strategic Planning to create roadmap for success

Input from process owners/domain experts

Clear goals and measurable results for each stage of the process

Business metrics built into the redesigned processes to quantify continuous improvement

Technology to adequately support change

Ability to assume the process view


Tools for BPR…Tools for BPR…

How Software Tools Can Facilitate BPR

Efficient Knowledge Capture

Graphical Representations

Common Data Repository

Method Enforcement

Increased Informational Integrity

Ability to Export to Other Tools


BPR Tools: Automated Knowledge CaptureBPR Tools: Automated Knowledge Capture

AIØ WIN

PROSIMSMARTCOST

SMARTCLASS SMARTER

ODBC

SQL

Databases

C++Compilers

Computer Aided Software Engineering

(CASE) Tools

MicrosoftExcel

MicrosoftProject

PROJECT LINK

PROSYS

BPR Bridge

WITNESS

TurboBPR

EasyABC Plus

Critical Success Factors for Overall

BPR Process


Critical Factors That Enable BPR SuccessCritical Factors That Enable BPR Success

Link to the strategic issues Ensure involvement of key players

Needs a top-level champion Needs top-level to ground-floor personnel

Secure commitment and understanding of all involved

Use a process view to include all of the critical factors

Understand supplier/customer relationships


Comprehend how changes will impact enterprise Understand the relationship among organization,

people, and processes Plan for implementation throughout the effort Be systematic—Use integrated, robust methods

and tools Make the process of BPR a new and continuous

way of doing business

Critical Factors That Enable BPR SuccessCritical Factors That Enable BPR Success


Cross-functional BPR Team MemberCross-functional BPR Team Member

Detailed knowledge

Big Picture view Open-minded Not anchored in

the past

High energy level Team player Available to

participate Perceives

assignment as a reward

BPR Methodology


Four Drivers of BPRFour Drivers of BPR

Where are we?

How do we get there?

Where do we want to go?

Project Definition

To-Be Design/Validation

Implementation Planning

Questions BPR Phase

What do we want to do?

As-Is Description/Analysis


Building the New Business with BPRBuilding the New Business with BPR Analyze and redesign

business processes Identify and insert

appropriate technology

Build performance measures into the new processes

Evolve and reorganize the enterprise to leverage new processes


The Three Perspectives of BPRThe Three Perspectives of BPR

The BPR process must comprise three perspectives to be successful.

Process Process

People People People People

Organization


Mapping the Road to BPR SuccessMapping the Road to BPR Success

Time-phased activities Clear milestones Deliverables for each phase Proven mechanisms and

techniques to achieve the deliverables

There are four consistent elements to each phase of the BPR process:


Phase 1: Project DefinitionPhase 1: Project Definition

Focus: Develop Business Model and Goals for BPR EffortDeliverable: Strategic Plan (roadmap) for Achieving BPR


Focus: Determine As-Is StateDeliverable: AS-IS Processes and Associated Information (e.g., Costs)

Phase 2: As-Is Description and AnalysisPhase 2: As-Is Description and Analysis


Focus: Evolve and Design To-Be Scenarios and Processes

Deliverable: Validated TO-BE Conceptual Design

Phase 3: To-Be Design and ValidationPhase 3: To-Be Design and Validation


Focus: Describe how to implement changes and relate back to Strategic GoalsDeliverable: Implementation Plan

Phase 4: Implementation PlanningPhase 4: Implementation Planning

Phase IProject Definition

Business Case Analysis


Building the Business CaseBuilding the Business Case

Reduces Cycle Time Reduces Cost Improves Quality Improves Asset Utilization Enables Total Customer Success

There are quantifiable benefits of the BPR process. Successful BPR:


Cycle Time and Cost (Existing)Cycle Time and Cost (Existing)

Cycle TimeCost/Step

Total Cycle TimeTotal Process Cost

t1c1

t2c2

t3c3

Existingt1+t2+t3

c1+c2+c3

Step 1

Existing Cycle

Step 2 Step 3


Cycle Time and Cost (New-A)Cycle Time and Cost (New-A)

New Cycle A

Step 1 Step 2 Step 3


New-At1+t3c1+c3


Step 1 Step 3Step 2b

Step 2a Step 3

Cycle Time and Cost (New-B)Cycle Time and Cost (New-B)

New Cycle B


New-Bt1+ f (t2a + t2b) + t3

c1 + f (c2a + c2b) + c3

Where the parallel performance of Steps 2a and 2b yields a lower time and cost expenditures than the original step.


Expected BenefitsExpected Benefits

Cycle Time Cost Utilization Quality Customer Success


Hoshin Planning “Prioritization of goals by identifying key process

drivers” Assists a BPR effort in knowing which process to

tackle first: the one that derives the most others. Methods used:

Brainstorming Knowledge Engineering Functional and Process View Analysis

IDEF0 & AI0Win

Hoshin PlanningHoshin Planning


Interrelationship DigraphInterrelationship Digraph6 1

7 0

2 5

0 7

5 2

3 4

4 3

(2) Define Roles and Responsibilities

(4) Define Elements to Establishan Employee on HR Payroll

and Benefits Systems

(7)Measure Critical

Elements of New Hire Process

(5)Establish IFM StandardEmployee Orientation

Process

(1)Use JCI Quality

Improvement Cycle

(6)Establish and Maintain Data

Integrity

(8)Partner with BusinessDevelopment to Insure

Receipt of CIS Information

(3)Define Benefits

EnrollmentProcess

1 6


Risks in BPR/How They can be Mitigated Risks in BPR/How They can be Mitigated

Risks Mitigation

Most BPR efforts don’t address implementation

Too much dependence on in-house personnel to perform BPR

Cost, time, and resource requirements are not accurately established

Implementation Planning begins with Project Definition

Established throughout effort to derive better cost, time, resource requirements

Build in-house (organic) capability to leverage domain expertise; use external BPR expertise for facilitation, training, and focused consulting


How Is BPR Done?How Is BPR Done?

Historically

Slash and burn Outmoded business models Focus on software tools, not on

methodology Reengineer organization, then fit processes Downsizing


Arriving at the BPR SolutionArriving at the BPR Solution

Critical Business Issue

Validated Changes

How to Implement

How to Measure

Return onInvestment

Implementation PlanningStrategic Planning As-Is Analysis

TO-BE PROCESS

AS-ISPROCESSESPROSIM

STRATEGIC PLAN& BUSINESSMODELAI0 WIN

PERFORMANCEANALYSIS ANDVALIDATIONABC / WITNESS

PROJECT VIEW

PROSIM

PROJECT PLANPROJECTLINK &MSPROJECT

PROCESS &PROJECT METRICSSMARTCOST/EXCEL

COST/BENEFITANALYSIS/LIFECYCLE COSTSMARTCOST/EXCEL

BUSINESS CASEJUSTIFICATION

To-Be Design

I.II. III. IV.


Generic Process Improvement

A0

Organizational Initiatives Implementation and Management Plan

Steering Committee

KBSI Facilitation

PI Teams

Policies and Procedures

Stds and Regs

Funding

Methodology

IDEFØ Model of Process ImprovementIDEFØ Model of Process Improvement


IDEF3 Model of Process ImprovementIDEF3 Model of Process Improvement

Identify Organization/Process/

People Goal Relationships


GoalsGoals

Are the Organization’s goals clearly stated and understood?

Do the business processes have clearly stated goals and are they aligned with the organization’s goals?

Are the functional and people goals clearly stated and consistent the above?

Phase IIAs-Is Process

Description and Analysis


Where Are We?Where Are We?

Describe and Analyze the Current Situation As-Is system mapping Disconnect and root cause analysis Cycle time

Methods/Tools IDEFØ, IDEF3 AIØ WIN, PROSIM/WITNESS


IDEF3/PIDEF3/PROROSSIMIM/WITNESS/WITNESS

Process Sequence and Timing Description and Flow Decision Logic

Cycle Time Analysis Organization and People Roles


System DisconnectsSystem Disconnects

Inputs/Outputs Missing Late Sub-standard Non Value-add

Flow (Logic Flaws) Missing Redundant Unneeded Bottlenecks Illogical Sequence

Execution (Failure to effectively carry out steps in the process)


IDEFØ Model of AS-Is IssuesIDEFØ Model of AS-Is Issues

Phase IIITo-Be

Process Designand Validation


GoalGoal

How can we achieve breakthrough performance in our business processes?


Where Do I Want to Go?Where Do I Want to Go?

Setting Goals for… Organization, Process, and People

Designing the To-Be System Methods/Tools

IDEF3, Object State Transition Network PROSIM, WITNESS


Basic Principles of Process DesignBasic Principles of Process Design

1. Process design is a design endeavor

2. It requires a set of skilled people

3. Object design plays a central role

4. Consistency in decomposition and allocation

5. Maintenance of input/output contiguity

6. There will always be failure that must be addressed

7. Processes produce other than just the desired product

8. Design of processes for coordination and management (e.g., resource management)


Principles of Process RedesignPrinciples of Process Redesign

Product Perspective: Begin by identifying the product to be produced Use a product-centered view to understand

product development from the inside-out Create processes that efficiently produce the

products Establish metrics to quantify the process


IDEFØ: New Process DevelopmentIDEFØ: New Process Development


IDEF3: Example OSTN DiagramIDEF3: Example OSTN Diagram


IDEF3: Example Diagram with SwimlanesIDEF3: Example Diagram with Swimlanes

Metrics


How Do I Know If I Have Arrived?How Do I Know If I Have Arrived?

Measuring ProgressOverall Process EffectivenessOverall External (Customer) measuresOverall Internal (Enterprise) measuresCritical Inter-organizational measures

Methods/Tools IDEFØ SMARTCOST


Model Your PerformanceModel Your Performance


Why Measure?Why Measure?

To Improve the system performance Communicate expectations Identify performance gaps Support effective decision making Feedback and self monitoring


Effective Measures . . .Effective Measures . . .

Include Organization, Process, Function and Job measures linked together and supportive

Are driven by customer requirements Are quantifiable and unambiguous Must be understandable to, and within

control of performers Are traceable to goals


Some Critical DimensionsSome Critical Dimensions

Quantity– Rate– Timeliness– Volume

Quality– Accuracy– Completeness

Cost– Labor– Materials– Management

Utilization– Productive Time– Changeover

Time

Phase IVImplementation

Planning


How Do I Get There?How Do I Get There?

Manage the change within the organization Plan for the implementation

Automatic Generation of the Project Plan

Methods/Tools IDEFØ, IDEF3 AIØ WIN, PROSIM, PROJECTLINK, MS Project


PPROJECTROJECTLLINKINK

The Integrated Environment bridging Process Modeling and Project Management

From Brainstorming to Implementation

Two!

PROJECTLINK

BridgePROSIM™ Microsoft® Project

Activity Based Costing


Why Cost Management?Why Cost Management? Process Improvement Pricing Resource Allocation Personnel Evaluation

Have you heard?

“A purchase order costs $35”“We can’t meet competitor’s prices”“That product is covering our fixed costs”


Cost Management Problem?Cost Management Problem?

How do you determine the TRUE COSTS

of Goods or Services?


Total Cost Direct Cost

Historical Cost


Total Cost Direct Cost

Current Cost


Motivations for ABCMotivations for ABC

Overhead Costs20% >>> 80%

Direct Costs80% >>> 20%

19th and early 20th Century Late 20th and early 21st Century

Basis for overhead allocation:• Traditional costing based on direct hours• ABC based on consumption of activities by products

and services

Direct

Overhead


Cost Centers Products

Traditional Allocation Traditional Allocation


Cost Pools Activity Pools Product Pools

ABC Allocation ABC Allocation


Multi-Stage ABC Allocation ProcessMulti-Stage ABC Allocation Process

GeneralLedger(ExpensePools)

ResourcePools

Product& ServicePools

Mappings based on Cost DriversActivities CONSUME Resources

Products and Services CONSUME Activities

ActivityPools

Simulation Modeling


A method for conducting numerical experiments on a computer, based on mathematical and logical representations of a system, in order to evaluate the structure and behavior of the system over extended periods of time.

What is Simulation?What is Simulation?


System

– facility or process of interest

Model

– an idealization of reality

– developed for a specific purpose

Simulation

– a technique for experimenting with the model over time

– to conduct what-if scenarios without distracting the reality

Simulation ConceptsSimulation Concepts


Discrete Event Simulation– The state of the system changes when an event occurs

(at discrete points in time)

Continuous Simulation– The state of the system changes continuously with

respect to time (differential equations provide the relationships for the rates of change)

Discrete vs. Continuous SimulationDiscrete vs. Continuous Simulation


Experiment with the real system

Physical

Analytical

Continuous

Simulation

Mathematical

Experiment with a model of the system

SYSTEM

Discrete

Simulation - A Controlled ExperimentSimulation - A Controlled Experiment


Significant randomness in the system – need a mechanism to understand the impact of variability

No confidence in meeting the assumptions underlying formal analytical methods

Contention for shared resources [heavy use of priorities and interruptions]

Significant system complexityDesign of new systems with little data

When is Simulation Appropriate?When is Simulation Appropriate?


What is Simulation Used For?What is Simulation Used For?

Understanding the behavior of complex systems

Designing new systemsDiagnosing problems in existing systemsEvaluating the effect of decision

alternatives on a system Support real-time decision making


ExperimentDesignObject

ModelDesignObject

ExecutionControl

Measurement& Analysis Resource

EntityQueue

Process

LogicalDesignObject

EventController

ActivityController

Generator Summarizer

Collector CreateDestroy Batch

UnbatchAssemble

Disassemble

Variable

Function

Procedure

SimulationObject

Partial Taxonomy of Simulation ConceptsPartial Taxonomy of Simulation Concepts


Arrivals Queue Server Departures

time

Arrivals

Departures

a1 a3 a4

d1 d2 d3

a2

Example: Discrete Event SimulationExample: Discrete Event Simulation


Real world systems are too complex for current analytical techniques

Estimate performance of existing systems

Experiment with proposed designs

Complete control over experimental conditions

Time compression

It’s a sampling experimentRequires data collection

and distribution determination

Tough to validateInterpretation can be

difficultOften creates a tendency to

place greater confidence in the results than is justified

Advantages and Disadvantages of SimulationAdvantages and Disadvantages of Simulation


Next WeekNext Week

No homework…

Project proposals are due List the team members (4 people)

Description of the subject domain (what company/organization, initial contact person, problem description, and anticipated solution)

Will start covering the book Read chapter 1 and 2

Business Process Reengineering: The Key to Success in a Changing Environment Dursun Delen, Ph.D. Assistant Professor Oklahoma State University.

Documents

new system

procurement process

new employee

bpr effortsjust

business transactions

business processes

project excellence

best project