Business Process Reengineering

and 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

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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

4-5
 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 people&culture, organizational
structures, policies&procedures, 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

4-7
 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

4-8
 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
and
Restructuring 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
Common Benefits of BPR, Cont’d
• 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
Common Benefits of BPR, Cont’d
• 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???
Common Benefits of BPR, Cont’d
• 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
Common Benefits of BPR, Cont’d
• Reconciliation is minimized
• A case manager provides a single point of
contact
• Hybrid centralized/decentralized
operations are prevalent
– IT enables decisions to operate autonomously
 Benefits of elimination of
handoffs
• No transits
• No waiting for another operator
• No waiting in queues
• No setups
• No supervision/coordination required
Cost and Quality in relation to
cycle time

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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

4-21
 Total Quality Management
and Reengineering
• Rate of change
• TQM: continuous improvement
• Reengineering: dramatic improvement

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TQM versus Reengineering

4-23
 Implementing Reengineering
• Redesign (Readiness for change)

• Retool (Transitioning to the change)

• Re-orchestrate (Institutionalizing the change)

4-24
 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
 TASKS of the Re-engineering
team, Cont’d
• 6) design re-invented process
• 7) simulate re-invented process
• 8) prepare report with recommendations
• 9) install re-invented process
• 10) measure improvements
 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

4-34
 Re-orchestrate:
Organizational Change
• Communication
• Ambiguity
• Obstacles to change
• Celebrate success

4-35
 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

4-37
 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

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