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What is a business process?

Hammer and Champy: a collection of activitiesthat takes one or more kinds of input andcreates an output that is of value to thecustomer

Davenport and Short: a set of logically relatedtasks performed to achieve a defined businessoutcome.

Example: Order fulfilment is a business process.It takes an order as its input and results in thedelivery of goods to a customer. The delivery ofgoods into a customers hands is the value thatthis process creates.

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BPR Characteristics

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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, andincreases accountability.

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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.

Characteristics of Reeng.Processes

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The process steps are performed in anatural order.

Eliminate process linearity and sequence

where possible. Perform tasks concurrently to reduce process

cycle time.


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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 needsof different inputs, situations, ormarkets.

Benefits: eliminates complexity andexceptions that must be incorporated in

a standardized process.

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Work is performed where it makes themost 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, improvescustomer service.

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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 reducecosts of prevention.

Provide effective systems for detecting abuse,e.g., audits.

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Reconciliation is minimized. (Carefully) Reconciliation doesnt add value.

Benefits: reduce number of external contact

points for each process, thereby reducing thelikelihood of inconsistent data.

Fords accounts payable process: eliminatedvendors invoice.

WalMarts PO-less purchasing system.

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A case manager provides a single point ofcontact. (Loans or other service)

Acts as a buffer between a complex,

multistep/multiperson process and thecustomer.

Accepts responsibility as though s/he wereperforming the whole process.

Requires access to process-related data andeffective communication with process workers.

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Hybrid centralized/decentralizedoperations are prevalent.

Reap the advantages of both operating

modes! Operate as though units were autonomous

(decentralized), yet enjoy the economies of scalethat centralization creates.

Notebook equipped sales force; software imposescontrols to prevent unreasonable quotes orpromised delivery dates.

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Changes that occur in Business under BPR

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A BPR Framework

Organization Job skills

Structures

Reward

Values

Technology

Enabling technologies IS architectures

Methods and tools

IS organizations

Process Core business processes Value-added

Customer-focus Innovation

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Case 1: Fords accounts payable

Hammer (1990) describes an accounts payable process atthe Ford Motor Company that was re-engineered. Theaccounts payable department employed 500 people. Acompetitor's accounts payable department had 5 people.Ford set out to reduce workforce by hundreds.Old system

Purchasing department wrote an order, sent a copy toaccounts payable. Later, when materials control departmentreceived goods, it sent a copy of the receiving document toaccounts payable. Meanwhile the vendor sent an invoice toaccounts payable. The accounts payable department wereinvolved in matching fourteen data items between the receiptorder, the purchase order and the invoice before it couldissue payment to the vendor. In fact, the department spentmost of its time trying to sort out mismatches between thesethree documents.

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Case 2: IBM credit

Problem - Entire process consumed six days onaverage; customers lost in the interveningperiod.

New organisation - replaced specialists with

generalists. One person called a deal structurer deals with one

straightforward order.

Computer system developed to support the deal

structurer. Slashed turnaround time from six days to 4

hours. (Hammer and Champy, 1993)

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Case 3: Kodak

Even before business process reengineering (BPR) was

described in 1990, Eastman Kodak Company was

achieving significant improvements:

in cost, cycle time and quality.

However, the improvements were simply not dramatic

an approach was needed to bring about these dramatic

improvements in a systematic, repeatable manner

BPR methodology is selected

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One of reengineering projects called Customer Interfaceand Order Management in the Large CommercialGraphics Market (CI&OM LCGM) is selected to deliverthe concepts.

Customer Inquiry

Establish Terms

Send Bill

Provide Product

Receive Payment

Verify Customer SatisfactionTake Order

Interface and Order Management Process

Case 3: Kodak

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customer requirements must be processed completely

with a single contact,

customers will have immediate access to product and

service information and

sales representatives will be able to spend their time

growing the business, rather than resolving CI&OM issues.

Case 3: Kodak

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Case 4: Chrysler

When Chrysler designed a new car, they had differentteams designing the body, the interior, the engine, thetransmission. and other elements. When they began

assembling the cars, they often found that thecomponents did not fit together properly and had to beredesigned.

The product development process was reengineered,

and Chrysler organized its teams differently. A new teamwas created for each new car and people from eachdesign area were placed on the team. Chrysler not onlyreduced the number of costly redesigns but was alsoable to reduce its product development time significantly.(concept to market 31 months, down from 60 months)

Integrate parallel activities.

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Case 5: Mutual Benefit Life

Mutual Benefit Life reengineered a thirty-step insurance approvalprocess performed by 19 people in five different departments.

Approvals took from five to 25 days. A case manager now has thepower to grant approval and performs the entire approval process.

MBL eliminated several layers of supervision and control, and thesupervisors who remain are responsible for facilitating the work ofcase managers.

Case managers are also supported by an expert system and byspecialists who help them with particularly difficult applications.

Turnaround time improved dramatically since there is no need topass applications from one person to another. Turnaround timereduced to an average of 3.5 days (for some cases: < 4 hours).There are fewer errors, and costs decreased substantially. Casemanagers handle twice the volume of new applications, allowing the

company to eliminate one hundred field positions.

Empower Workers

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Case 6: Phoenix Designs Inc.

Before reengineering, Phoenix Designs Inc. had its salespersonscall on customers to determine what they desired in the way offurniture. The salesmen submitted the ideas to a team that produceda design that the salesperson took back to the customer. Customers

made changes and the salesperson took the changes back to thedesigners. When the salesman took the new design back to thecustomers, they would again evaluate the design and request morechanges. It took up to six weeks to satisfy customers and presentthem with a final design.

Phoenix replaced the old system with one in which salespersons,using a PC and a special software package, designed the furniturethemselves in less than a week. This system was later improved sothat a salesperson could use a portable computer to design thefurniture right in the customer's office. The system, which costPhoenix $1 million, has increased dealer sales by up to 1,000

percent and has boosted after-tax income by 27 percent.

Output Users Perform the Process

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Case 7: Sun Micro Systems

A few years ago management at Sun Micro systems becamealarmed that its information systems could not easilycommunicate with each other. Some data had to be entered asmany as ten times into different incompatible systems. Thesystem was reengineered, and now data that is entered intoany system anywhere in the world is entered only once and

becomes available to whoever needs it.

Capture data Once, at its source

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Case 8:HP

Centralize and disperse data

Each of Hewlett-Packard's 50 manufacturing units had its owndecentralized purchasing system. Although the systems served the needsof the individual units very well, HP was unable to negotiate quantity

discounts based on its purchasing power. As part of its reengineeringefforts, HP organized a corporate purchasing department that created adatabase of approved vendors. HP now has the best elements ofcentralization and decentralization: each plant meets its needs bypurchasing from the approved vendors, and the corporate office tracks

purchases and negotiates quantity discounts; wins other concessions fromvendors; and resolves problems with vendors. The result was a 75 percentreduction in failure rates, a 150 percent improvement in on time deliveries,a significantly lower cost of goods purchased, and a 50 percent reduction inlead times.

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