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Teguh I Santoso, Teguh I Santoso, MBAMBA
BUSINESS PROCESS REENGINEERINGBUSINESS PROCESS REENGINEERING
Chapter 1Chapter 1
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BUSINESS
PROCESS
REENGINEERING
“memulai lagi dari awal”
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Today’s RealityToday’s Reality
Organizations in Crisis No company is safe There is no such things as a ‘solid’ or even substantial, lead
over one’s competitors Traditional business relationships and operational models are
evolving or collapsing New opportunities exist for businesses that can use information
technology to create and capitalize on emerging markets Market expectations and pressures are changing Global business opportunity are expanding Information technology is crucial to realizing and managing
these opportunities
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Business PressuresBusiness Pressures
Market Pressures Global economy - strong competition Changing nature of the workforce Powerful customers
Technological Pressures Technological innovation and obsolescence Information overload
Societal Pressures Social responsibility
Government regulations Government deregulation Shrinking budgets and subsidies
Ethical issues
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The Power of 3CThe Power of 3C
Customers (Pelanggan memainkan peran)– Demanding– Sophistication– Changing Needs
Competition (Persaingan semakin ketat)– Local– Global
Change (Perubahan menjadi konstan)– Technology– Customer Preferences
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Traditional Business ConceptsTraditional Business Concepts
Adam Smith (1776, The Wealth of Nations) Use separating work areas to increase productivity
American Railway (1820) Create modern business bureaucracy (control-command
procedures )
Frederick Taylor (1880) Managers could discover the best processes for performing work
and reengineer them to optimize productivity In Taylor's time, technology did not allow large companies to
design processes in a cross- functional or cross-departmental manner
Specialization was the state-of-the-art method to improve efficiency given the technology of the time
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BPR OverviewBPR Overview
Business Process Reengineering (BPR),
a fundamental rethinking and a radical redesign of a business process to achieve dramatic improvementsMichael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution
(New York: Harper Business, 1993)
BPR is a systematic approach or methodology for analyzing business activities or processes with a view to Improving the organization's alignment with strategic goals Its effectiveness, efficiency, competitiveness and so on
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BPR Overview (cont.)BPR Overview (cont.)
The idea is to start from “ground zero”
Then determine what things the company must do
Then seek the best way to do those things
It ignores what is and concentrates on what should be
It’s intended to overcome the shortcoming of seeking incremental improvements
Solving problems at one part of a process instead of replacing the entire process with something better
In reengineering, instead of “patching up” parts of a faulty process, the entire process itself is radically improved
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BPR Four key wordsBPR Four key words
1. Fundamentalmeans business people have to ask themselves with a fundamental question, such as why, what and how we do the business.
2. Radicalmeans, ‘if it did not exist today, how would we create it’ and then destroying the old system to create the new one
3. Dramaticmeans improvement in business result, not of 5%, not of 15% nor 20%, but in term of quantum leaps of 100%, 300%, 500% better result
4. Processmeans a group of distinct tasks that together create a product or service desired by one or more stakeholders
Business Process Reengineering (BPR), a fundamental rethinking and a radical redesign of a business process to achieve dramatic improvements
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Why Company need to implement BPRWhy Company need to implement BPR
BPR has been implemented in various industry
1. Increase skill and knowledge every specialist
2. Reduce time
3. The discovery of new machines makes one job running easily and efficiently
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Process: Where and Who?Process: Where and Who?
NEED
CUSTOMER
PRODUCT/SERVICE
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Reasons for BPRReasons for BPR
Competition Market Share/Profits
Technology Stock Price
More Important Less Important
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Why Company do not ReengineerWhy Company do not Reengineer
Satisfaction
Political Resistance
New Developments
Fear of Unknown and Failure
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Effective Reengineering StepsEffective Reengineering Steps
1. Develop business vision, process objectivesThe BPR method is driven by a business vision which implies specific business objectives such as cost reduction, time reduction, output quality improvement.
2. Identify process to be redesignedmost firms use the 'High-Impact' approach which focuses on the most important processes or those that conflict most with the business vision
3. Understand, measure performance of existing processesavoiding the repeating of old mistakes and for providing a baseline for future improvements
4. Identify opportunities for applying information technologyawareness of IT capabilities can and should influence BPR
5. Build prototype of new processthe actual design should not be viewed as the end of the BPR process
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BPR ExpectationBPR Expectation
Identify and quantify process improvement opportunities aligned with the organization's strategic plan
Establish objectives that "stretch" the existing activities
Identify the associated benefits to the organization
Identify the changes necessary, including any changes in associated activities
Formulate projects for their accomplishment
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BPR ObjectivesBPR 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
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Scope of BPRScope of BPR
Intra-functional
Small scope within department, least impact Inter-functional
Horizontal view across departments, more impact Inter-organizational
Broad view including entire supply & delivery chain, most impact
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BPR ImpactsBPR Impacts
Resulting changes may include Organizational structure Roles and responsibilities Supplier relations Customer interfaces, and Other stakeholder relationships
Often, it means a cultural change within the organization Change management should be invoked to deal with
the people aspects The fear among employees that their jobs are
endangered and that years of experience will account for nothing
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BPR PerformanceBPR Performance
BPR seeks improvements of Cost Quality Service Speed
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Obstacle to ReengineeringObstacle to Reengineering
Most Important
Least Important
Organization
Time
Risk
Cost
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Reengineering Vs IncrementalReengineering Vs Incremental
Incrementalimprovement
Time
PerformanceImprovement
Reengineering then continuous improvement
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Reengineering vs. Other MethodsReengineering vs. Other Methods
Dimension Reengineering Rightsizing Restructuring TQM Automation
Assumptions
Questioned
Fundamental Staffing Reporting relationship
Cust. wants and needs
Technology applications
Scope of
Change
Radical Staffing, job responsibilities
Organization Bottom-up Top-down
Orientation Process Functional Functional Process Procedure
Improvement Goals
Dramatic Incremental Incremental Incremental Incremental
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Reengineering - ‘NOT’Reengineering - ‘NOT’
notabdicating leadership and management responsibility to your consultant
nota fancy name for eliminating the redundant positions that should never have
created anyway
notradically redesign functional department or radically redesign people
notexpecting your people to coorporate wholeheartedly while you obviously put
their jobs and lifestyles in jeopardy
notthinking that you will have your new process implemented without problems
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TQM ISO9000 Automation Downsizing Restructuring Change Management
Reengineering - ‘NOT’ (cont.)Reengineering - ‘NOT’ (cont.)
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Some Success FactorsSome Success Factors
Senior Management, Commitment and Sponsorship
Realistic Expectations
Empowered and Collaborative Workers
Strategic Context of Growth and Expansion
Shared Vision
Sound Management Practices
Appropriate People Participating Full-Time
Sufficient Budget
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Some Failure FactorsSome Failure Factors
The wrong sponsor
Cost-cutting focus
Narrow technical focus
Lack of sustained management commitment and leadership
Unrealistic scope and expectations
Resistance to change
The negative preconditions relating to the organization, include: Unsound Financial Condition Too Many Projects Under Way Fear and Lack of Optimism Animosity Toward and By IS and HR Specialists
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Core Business : Financing the computers, software and service that the IBM Corporation sells
Length to Process : 5 steps
1
2
3
4
5
Customer Service
Credit Department
Business Practices Department
Appraisal
Administration
Example Case: IBM CreditExample Case: IBM Credit
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Example Case: IBM CreditExample Case: IBM Credit
1 Request for financing from IBM Corp sales representative, IBM Credit staff log on a piece of paper (14 Staff)
2 Someone carted that paper to the credit department, where the specialist entered the information into a computer system and checked the potential borrower’s creditworthiness
The specialist write the result of the credit check on the piece of paper and dispatch it to the business practices department
3The business practices department modify the standard loan agreement in response to customer request
When done, a person in that department would attach the special terms to the request form
4 Appraiser write the rate on a piece of paper, enter the data into a PC spreadsheet and give the paper to a clerical group
5 An administrator turn all this information into a quote letter that could be delivered to the IBM sales representative by Federal Express
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Result:
1. The entire process consumed six days on average
2. From the sales reps’ point of view, this turnaround too long Customer could find another source of financing Customer simply to call the whole deal off
3. Difficult to control
Example Case: IBM CreditExample Case: IBM Credit
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False Assumption: Every bid request was unique and difficult to process, thereby requiringthe intervention of four highly trained specialist
Fact:
Most requests were simple and straightforward
Solution: BPR
- IBM Credit senior manager found that most of their job was little more than clerical
- IBM Credit develop a new computer system to support the deal structurer
- In really tough situations, he/she can get help from a specialist expert in credit checking, pricing and so on
Example Case: IBM CreditExample Case: IBM Credit
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Result:
- The performance improvement achieved dramatically
- IBM Credit slashed its six days turnaround to four hours
- The number of deals has increased a hundredfold
- 90 percent reduction in cycle time and hundredfold improvement productivity
- The company achieved a dramatic performance by making a radical change to the process as a whole
Example Case: IBM CreditExample Case: IBM Credit
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A five-step approval process Duration — from six days to two weeks Actual processing time — 90 minutes Why so many steps? Engineered for the most difficult
cases Five experts replaced with one “deal structurer” Support of I/T essential Results
- Six days to four hours - Slight work force reduction - 100% work load increase
Example Case: IBM CreditExample Case: IBM Credit
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In 1987 Kodak’s arch-rival, Fuji came up with a new 35mm
single-use camera Kodak has no competitive offering
Kodak’s Traditional Product Development Process Slow: would take 70 weeks to produce a rival to
Fuji’s camera! Product development process was partly sequential
and partly parallel
Example Case: KodakExample Case: Kodak
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Reaction to competition from Fuji Kodak reengineered its product development process
through the innovative use of CAD/CAM-Computer Aided Design/Computer Aided Manufacturing
The technology that has enabled Kodak to reengineer its process is an integrated product design database
Result: the new process, “Concurrent Engineering” Reduce turnaround time to 38 weeks Priority to release product on time
Example Case: KodakExample Case: Kodak
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Key Redesign Strategy Apply innovative use of CAD/CAM + integrated
product design database Allow engineer to design at computer workstations Database collect each engineer’s work and
combines into overall design Each morning, problems are resolved immediately Manufacturing can begin tooling design just 10
weeks into product design instead of 28 weeks in the past
Example Case: KodakExample Case: Kodak
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Example Case: Ford MotorExample Case: Ford Motor
FORD MOTOR COMPANY’S ACCOUNTS PAYABLE DEPARTMENT 500 employees 20% saving anticipated — a reduction of 100 people But… Mazda’s Payables Department has five people!
Old process: matching purchase orders, invoices, and receiving documents to issue payment authorizations
New Process: purchase orders go to suppliers and on-line database. Upon receipt, receiving clerk verifies shipment. If okay, payment is made; if not, it is returned
Results
- No invoices
- No receiving reports
- 75% staff reduction — 375 people reassigned
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Beberapa pekerjaan digabungkan menjadi satu Para Pekerja membuat keputusan Tahap-tahap di dalam proses dilakukan menurut
kebiasaan Proses-proses mempunyai banyak versi Pekerjaan dilakukan pada tempat yang paling berarti Pemeriksaan dan kontrol berkurang Rujukan minimum Manajer kasus membuat satu titik kontak Operasi-operasi gabungan sentralisasi/desentralisasi
merata
BPR CharacteristicBPR Characteristic
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Thank You