business process reengineering: principles, methods, tools and implementation minder chen, ph.d....

Business Process Reengineering: Principles, Methods, Tools and Implementation

Minder Chen, Ph.D.MS-5F4

School of Management George Mason University

Fairfax, VA 22030Phone: 703-993-1788

Internet: [email protected]

Org

aniz

atio

n

Technology

Process

BPR - 2 © Minder Chen, 1997

Processes Are Often Cross Functional Areas

M arketing& S ales

P urchase P roduc tion D is tribution A ccounting

C E O

Supplier

Customer/MarketsNeeds

Value-addedProducts/Services toCustomers

"Manage the white space on the organization chart!"

"We cannot improve or measure the performance of a hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it."


Definition of Reengineering

The fundamental rethinking

and radical redesign of

core business processes to

achieve dramatic improvements in critical

performance measures such as quality,

cost, and cycle time.

Source: Adapted from Hammer and Champy, Reengineering the Corporation, 1993


What Business Reengineering Is Not?

• Automating: Paving the cow paths. (Automate poor processes.)

• Downsizing: Doing less with less. Cut costs or reduce payrolls. (Creating new products and services, as well as positive thinking are critical to the success of BPR.)


Reengineering Is ...

• Obliterate what you have now and start from scratch.

• Transform every aspect of your organization.

Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review, July-August, 1990, pp. 104-112.

Extremist's ViewExtremist's View


• 19 steps, 5 departments, 19 persons

• Issuance application processing cycle time: 24 hours minimum; average 22 days

• only 17 minutes in actually processing the application

Department AStep 1

Department AStep 2

Department EStep 19

. . . .

Issuance Application

Issuance Policy

New Life Insurance Policy Application Process at Mutual Benefits Life Before Reengineering*

*Source: Adapted from Rethinking the Corporate Workplace: Case Manager at Mutual Benefit Life, Harvard Business School case 9-492-015, 1991.


The New Life Insurance Policy Application Process Handled by Case Managers

Case Manager

UnderwriterPhysician

Mainframe

LAN Server

PC Workstation

• application processing cycle time: 4 hours minimum; 3.5 days average

• Application handling capacity double

• Cut 100 field office positions


BPR Principles

• Organize around outcomes, not tasks.

• Have those who use the output of the process perform the process.

• Subsume information-processing work into the real work that produces the information.

• Treat geographically dispersed resources as though they were centralized.

• Link parallel activities instead of integrating their results.

• Put decision points where the work is performed and build controls into the process.

• Capture information once and at the source. Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review, July-August, 1990, pp. 104-112.


Business Process Reengineering Life Cycle Define corporate visions and business goals

Identify business processes to be reengineered

Analyze and measure an existing process

Identify enabling IT & generate alternative process redesigns

Evaluate and select a process redesign

Implement the reengineered process

Continuous improvement of the process

VisioningVisioning

IdentifyingIdentifying

AnalyzingAnalyzing

RedesigningRedesigning

EvaluatingEvaluating

ImplementingImplementing

ImprovingImproving

Manage change and stakeholder interests

BPR-LCBPR-LC


Phase 1: Visioning

• Apply to enterprise-wide reengineering effort.• Develop overview of current and future business

strategies, organizational structure, and business processes.

• Develop organizational commitment to reengineering.• Develop and communicate a business case for action. • Create a new corporate vision.• Set stretched goals.• Prioritize objectives.• Assess implementation capabilities and barriers.

Define corporate vision and business goalsDefine corporate vision and business goals


Phase 2: Identifying

• Construct high-level process map

• Develop a process hierarchy

• Build enterprise-wide data models (optional)

• Evaluate the processes

• Select processes to be reengineered

• Prioritize and schedule processes to be reengineered

Identify business processes to be reengineeredIdentify business processes to be reengineered


TI Semiconductor Business Process Map

Manufacturing Capability Development

StrategyDevelopment

ProductDevelopment

CustomerDesign &Support

OrderFulfillment

Concept

Development

Manufacturing

MarketCustomers

Customer CommunicationCustomer Communication

Source: Adapted from Hammer and Champy, 1993, p. 119.


Criteria for Selecting Processes

• Broken

• Bottleneck

• Cross-functional or cross-organizational units

• Core processes that have high impacts

• Front-line and customer serving - the moment of the truth

• Value-adding

• New processes and services

• Feasible


Phase 3: Analyzing

• Conduct preliminary scoping.

• Develop a high-level AS-IS baseline process model (work flow model). Avoid analysis paralysis by conducting preliminary analysis at fairly high level.

• Surface purpose and assumptions of the process (Ask WHY?).

• Perform activity-based costing: costs can be assigned based on actual activities and productivity.

• Reveal hidden time and nonvalue-added activities.

• Measure cycle-time and quality.

• Measure profitability in terms of task, product, and customer type.

Analyze and Measure an Existing ProcessAnalyze and Measure an Existing Process


Phase 4: Redesigning

Information Technology

Information Technology

BusinessReengineering


How can IT support business strategies and business processes?

Technology-driven

Business Vision & Strategy

Business Vision & Strategy

Business-pulled

How can business strategies be changed business processes be transformed using IT?

Identify enabling IT & generate alternative process redesignsIdentify enabling IT & generate alternative process redesigns


Three Steps in Redesigning Processes• Simplification:

– Task: Change business rules or procedures of a specific task

– Workflow: A process chain is simplified by elimination of nonvalue-adding activities

• Integration: – Redesign tasks into a logical and effective process.

– A reengineered process often crosses functional boundaries.

– It offers opportunity for eradicating interdepartmental redundancies and restructuring the organization.

• Automation:– Usually accompanies nontechnical redesign of organization structures and

procedures.

– All reengineering costs and benefits can be projected into a model.

– Reengineering often pays for itself - sources of funding for technology investments are frequently cost savings generated by organizational change.


Phase 5: Evaluating

• Develop criteria of evaluating alternatives of redesigned processes: Cost, Benefit, and Risk.

• Evaluate design alternatives

• Select and recommend a reengineered process

Evaluate and select a process redesign Evaluate and select a process redesign


Phase 6: Implementing

• Plan IT implementation

• Plan organization implementation

• Conduct a pilot project

• Develop a prototype system– Technical Design

– Social Design

• Evaluate results from the pilot project and the prototype

• Prepare large-scale roll out

Implement the reengineered processImplement the reengineered process


Phase 7: Improving

• Develop performance measurement and reward systems in the reengineered process

• Monitor process performance constantly

• Improve the process on a continuous basis

Improve the process continuouslyImprove the process continuously


The Quest of Competitiveness

Downsizing Headcount & Restructuring the Portfolio

Total Quality Management & Continuous Process Improvement

Enterprise-Wide Reengineering & Business Process Reengineering

Reinventing Industries & Regenerating Strategies

Smaller

Better

Much Better

DifferentAdapted from: Gary Hammel and C. K. Prahalad, Competing for the Future, Harvard Business School Press, 1994.

(Kaizen)


Criteria for BPR Projects


FunctionalProcess

Improvement

Business as Usual

ScopeRole of IT

Cross Function/Organization

Function

Task

Improvement GoalsStatus Quo Radical

Incidental

Fundamental

Symbolic Intense

Senior Management Involvement


Dual Roles of Information Technology in BPR

Conduct ReengineeringProject

ExistingBusinessProcess

ReengineeredBusiness Process

• Data base systems• Expert systems• Client/server technology• Groupware• Work flow management systems• EDI• Enterprise-wide networking• Mobile computing

• Data base systems• Expert systems• Client/server technology• Groupware• Work flow management systems• EDI• Enterprise-wide networking• Mobile computing

Supporting Tools IT Enablers• Process modeling tools• Process simulation tools• Group requirement elicitation tools• Activity-based costing tools

• Process modeling tools• Process simulation tools• Group requirement elicitation tools• Activity-based costing tools


Field operations are on their own

High bandwidth networks, remote access, wireless network

Simultaneous centralization and decentralization

Breakthrough Thinking

Old Assumption Enabling Technology Breakthrough Thinking

Only specialists can perform complex work

Knowledge base

systems, expert systemsCase managers handle a case with no hands-off

Managerial hierarchy is required for control& supervision

Accessible data & analytic tools, exception monitoring

Self-managed teams

Product development is a sequential activity

Common CAD/CAM

systemsConcurrent engineering

IS developed should be driven by IS personnel

I-CASE and JAD Rapid application development


A Framework of Integrating Methods & Tools for BPR

Elicit semi-formal

process and data models

Construct/revise

static business process models

Analyze the dynamics of the process

Analyze the activity costs of

the process

information of a process

semi-formalprocess model

cost and performance data compared to the baseline

performance data

activity cost data

Target information system generated

finalized process model

GDSS(GroupSystems V)

ABC Tools(IDEFCost, Easy ABC)

Simulation Tools(SIMPROCESS)

CASE, C/S Tools, DBMS, Work Flow Software, & other Enabling Technologies

Construct/revise

business data models

Data Modeling Tools(ERwin, BDF)

Construct formal IS models & generate

information systems

semi-formaldata model

Process Modeling Tools(Design/IDEF, IDEFine, BDF)


ICOM in IDEF0

The ICOM of a function represents certain system principles: Inputs are transformed into outputs, controls constrain or dictate under what conditions transformations occur, and mechanisms describe how the function is accomplished.

"Inputs are transformed by the function

into outputs according to controls, using mechanisms."

An IDEF box and its ICOM can be described as:

I

C

O

M


An Example of an IDEF0 Diagram

O1

Shipped Product

M1

Staff

M2

Database

Enter Order

A1

Process Order

A2

Ship Product

A3

Completed Order Form

Shipping Order

Salesperson ShipperAccountant

I1

Customer Order


IDEF0 Model Structure

A0

A4

A-0

A42

1

2

3

4

1

2

3

1

2

3

GENERAL

DETAILED

The diagram A0 is the "parent" of the diagram A4.

I1I2

C1

O1

Abstraction

Refinement

I1

I2

O1

C1


Attributes of Processes

• Basic – Name

– Description

– Author

– Audit trails

• Performance data– Importance: Core, Critical

– Value Added: Business, Customer, None

– Cycle time: Mean, Variance, and Distribution

– Cost/Unit


Standard Flowchart Symbols

Activity

Movement/Transportation

Decision Point

Paper document

Delay

Storage

Connector

Begin/End

Annotation

Direction of process flow

Transmission


Functional Flowchart (Process Mapping)

CustomerService

CreditChecking

Inventory Shipping

Begin EnterOrder

CheckCredit

Yes

Order Processing Update

Inventory

Ship orderEnd

PROCESS

CYCLE

1 2

1 1 12 0.1 43 0.2 14 ... ......

ACTIVITY

Wait for

shipping

No

Customer


TeamFlow from CMF at www.teamflow.com


The Reengineering Diamond

Business Processes

& Functions

Business Processes

& Functions

Management & Measurement

Systems

Management & Measurement

Systems

Jobs , Skills, & Organizational

Structures

Jobs , Skills, & Organizational

Structures

Values andBeliefs

Values andBeliefs

Enlighten

Entail Demand

Foster

Culture

Customers&

Info. Tech.

Competitors

Markets

Customers &Suppliers


Positive Preconditions for Reengineering

• Senior management commitment and sponsorship

• Realistic expectations

• Empowered and collaborative workers

• Strategic context of growth and expansion

• Shared vision

• Sound management process

• Appropriate people participating full-time

• Sufficient budget

Source: Bashein, B. J., Markus, M. L., Riley, P., "Preconditions for BPR Success," Information Systems Management, Spring 1994, Vol. 11, No. 2, pp. 7-13.

business process reengineering: principles, methods, tools and implementation minder chen, ph.d....

Documents

business reengineering

reengineering work

implementation minder

bpr principles

success of bpr

application department

business goals

business processes t