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SEN 649: Business

Process Reengineering

Lec 01: Introduction

Faculty: Dr. M. Rokonuzzaman

Zaman.rokon@yahoo.com

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LOOK AT THE PICTURE FOR 2 MINUTES

Form Groups of three. Discuss and note down your comments on thecartoon.

We have recently discovered a concept that illustrates many of the ways mostorganizations really operate

Performance Management Company, 1993 Not forReproduction

SQUAREWHEELS

2

Courtesy: DR.Scot J Simmerman

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What isprocess?

Process or processing typically describes the action of taking something through an

established and usually routine set of procedures or steps to convert it from one form to

another, such as processing paperwork to grant a mortgage loan, processing milk into

cheese, or converting computer data from one form to another. A process involves steps

and decisions in the way work is accomplished, and may involve a sequence of events.

The process that one follows is as important as the results that are produced by the

process. Without understanding the underlying process, it is difficult to know how a certain

set of results were achieved, or why they were good or bad. So, if results are viewed as the

"destination", then process can be viewed as the "vehicle" that gets you there (and ideally,

you should be able to use the same "vehicle" for many trips...with a few modifications based

on the desired destination!)

http://en.wikipedia.org/wiki/Action_theory_(philosophy)http://en.wikipedia.org/wiki/Convention_(norm)http://en.wikipedia.org/wiki/Set_(mathematics)http://en.wikipedia.org/wiki/Procedurehttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Mortgage_loanhttp://en.wikipedia.org/wiki/Milkhttp://en.wikipedia.org/wiki/Cheesehttp://en.wikipedia.org/wiki/Data_(computing)http://en.wikipedia.org/wiki/Decision_theoryhttp://en.wikipedia.org/wiki/Work_(project_management)http://en.wikipedia.org/wiki/Sequence_of_eventshttp://en.wikipedia.org/wiki/Resulthttp://en.wikipedia.org/wiki/Understandinghttp://en.wikipedia.org/wiki/Errorhttp://en.wikipedia.org/wiki/Desirehttp://en.wikipedia.org/wiki/Desirehttp://en.wikipedia.org/wiki/Errorhttp://en.wikipedia.org/wiki/Understandinghttp://en.wikipedia.org/wiki/Resulthttp://en.wikipedia.org/wiki/Sequence_of_eventshttp://en.wikipedia.org/wiki/Work_(project_management)http://en.wikipedia.org/wiki/Decision_theoryhttp://en.wikipedia.org/wiki/Data_(computing)http://en.wikipedia.org/wiki/Cheesehttp://en.wikipedia.org/wiki/Milkhttp://en.wikipedia.org/wiki/Mortgage_loanhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Procedurehttp://en.wikipedia.org/wiki/Set_(mathematics)http://en.wikipedia.org/wiki/Convention_(norm)http://en.wikipedia.org/wiki/Action_theory_(philosophy)

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What is business process?

A business process or business method is a

collection of related, structured activities or tasks

that produce a specific service or product (serve aparticular goal) for a particular customer or

customers. It often can be visualized with a

flowchart as a sequence of activities.

http://en.wikipedia.org/wiki/Task_(project_management)http://en.wikipedia.org/wiki/Flowcharthttp://en.wikipedia.org/wiki/Flowcharthttp://en.wikipedia.org/wiki/Task_(project_management)

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LETSBEGINWITHANEXERCISE

Articulate the work process with clear boundary having clearly definedinputs, outputs and interfaces with other processes.

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There are three types of business processes:

Management processes, the processes that govern the operation of a system.

Typical management processes include "Corporate Governance" and "Strategic

Management".

Operational processes, processes that constitute the core business and create the

primary value stream. Typical operational processes are Purchasing,

Manufacturing, Advertising and Marketing, and Sales.

Supporting processes, which support the core processes. Examples include

Accounting, Recruitment, Call center, Technical support.

A business process begins with a mission objective and ends with

achievement of the business objective.

http://en.wikipedia.org/wiki/Management_processhttp://en.wikipedia.org/wiki/Corporate_Governancehttp://en.wikipedia.org/wiki/Strategic_Managementhttp://en.wikipedia.org/wiki/Strategic_Managementhttp://en.wikipedia.org/w/index.php?title=Operational_process&action=edit&redlink=1http://en.wikipedia.org/wiki/Core_businesshttp://en.wikipedia.org/wiki/Purchasinghttp://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/w/index.php?title=Supporting_process&action=edit&redlink=1http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Recruitmenthttp://en.wikipedia.org/wiki/Call_centerhttp://en.wikipedia.org/wiki/Technical_supporthttp://en.wikipedia.org/wiki/Technical_supporthttp://en.wikipedia.org/wiki/Call_centerhttp://en.wikipedia.org/wiki/Recruitmenthttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/w/index.php?title=Supporting_process&action=edit&redlink=1http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Purchasinghttp://en.wikipedia.org/wiki/Core_businesshttp://en.wikipedia.org/w/index.php?title=Operational_process&action=edit&redlink=1http://en.wikipedia.org/wiki/Strategic_Managementhttp://en.wikipedia.org/wiki/Strategic_Managementhttp://en.wikipedia.org/wiki/Corporate_Governancehttp://en.wikipedia.org/wiki/Management_process

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A business process can be decomposed into several sub-processes[1], which have

their own attributes, but also contribute to achieving the goal of the super-process.

The analysis of business processes typically includes the mapping of processes and

sub-processes down to activity level.

Business Processes are designed to add value for the customer and should not

include unnecessary activities. The outcome of a well designed business process is

increased effectiveness (value for the customer) and increased efficiency (less costs

for the company).

Business Processes can be modeled through a large number of methods and

techniques. For instance, the Business Process Modeling Notation is a Business

Process Modeling technique that can be used for drawing business processes in aworkflow.

http://en.wikipedia.org/wiki/Business_Process_Modeling_Notationhttp://en.wikipedia.org/wiki/Business_Process_Modelinghttp://en.wikipedia.org/wiki/Business_Process_Modelinghttp://en.wikipedia.org/wiki/Workflowhttp://en.wikipedia.org/wiki/Workflowhttp://en.wikipedia.org/wiki/Business_Process_Modelinghttp://en.wikipedia.org/wiki/Business_Process_Modelinghttp://en.wikipedia.org/wiki/Business_Process_Modeling_Notation

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ORIGIN?

Adam Smith

One of the first people to describe processes was Adam Smith in his famous (1776) example of a pin factory.

Inspired by an article in Diderot'sEncyclopdie, Smith described the production of a pin in the following way:

One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for

receiving the head: to make the head requires two or three distinct operations: to put it on is a particular

business, to whiten the pins is another ... and the important business of making a pin is, in this manner,

divided into about eighteen distinct operations, which in some manufactories are all performed by distinct

hands, though in others the same man will sometime perform two or three of them.

Smith also first recognized how the output could be increased through the use of labor division. Previously, in

a society where production was dominated by handcrafted goods, one man would perform all the activitiesrequired during the production process, while Smith described how the work was divided into a set of simple

tasks, which would be performed by specialized workers. The result of labor division in Smiths example

resulted in productivity increasing by 24,000 percent (sic), i.e. that the same number of workers made 240

times as many pins as they had been producing before the introduction of labor division.

http://en.wikipedia.org/wiki/Adam_Smithhttp://en.wikipedia.org/wiki/Pin_(device)http://en.wikipedia.org/wiki/Diderothttp://en.wikipedia.org/wiki/Encyclop%C3%A9diehttp://en.wikipedia.org/wiki/Division_of_labourhttp://en.wikipedia.org/wiki/Artisanhttp://en.wikipedia.org/wiki/Artisanhttp://en.wikipedia.org/wiki/Division_of_labourhttp://en.wikipedia.org/wiki/Encyclop%C3%A9diehttp://en.wikipedia.org/wiki/Diderothttp://en.wikipedia.org/wiki/Pin_(device)http://en.wikipedia.org/wiki/Adam_Smith

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IMPORTANCEOFTHE PROCESS CHAIN

Business processes comprise a set of sequential sub-processes or tasks, with alternative paths

depending on certain conditions as applicable, performed to achieve a given objective or produce given

outputs. Each process has one or more needed inputs. The inputs and outputs may be received from, or

sent to other business processes, other organizational units, or internal or external stakeholders.

Business processes are designed to be operated by one or more business functional units, andemphasize the importance of the process chain rather than the individual units.

In general, the various tasks of a business process can be performed in one of two ways 1) manually

and 2) by means of business data processing systems such as ERP systems. Typically, some process

tasks will be manual, while some will be computer-based, and these tasks may be sequenced in many

ways. In other words, the data and information that are being handled through the process may passthrough manual or computer tasks in any given order.

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THE FOUR MAJOR PROCESS IMPROVEMENTAREAS

The point to note here is that, irrespective of the class of the task -

whether manual or computer assisted - it is important that each task -

and hence the process as a whole is designed and periodically

reviewed, improved, or substituted by another task, with a view to

continuous improvement in four major areas:

Effectiveness

Efficiency

Internal control

Compliance to various statutes and policies

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EFFECTIVENESS

The overall effectiveness of a process is the extent to which the outputs

expected from the process are being obtained at all, and is therefore a

first measure of the basic adequacy of the process and its capability to

fulfill the logical and reasonable expectations of process uses and

operators.

For example, consider the material procurement process. One of its

important tasks is the sub-process for supplier follow-up to ensure timely

deliveries of materials. Such a task is considerably less effective if it doesnot provide accurate and timely purchase order status reports for use of

the purchase department staff responsible for follow-up

http://en.wikipedia.org/wiki/Effectivenesshttp://en.wikipedia.org/wiki/Effectiveness

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EFFICIENCY

Supposing it has been observed that the average time taken to

prepare and send out a purchase order after receipt of a properly

prepared intent from the end-user is unacceptably high, leading

to delayed customer deliveries and consequent customer

complaints.

The process of converting the end-users intent to a purchase

order is effective because a purchase order is being somehow

generated, but its efficiency is very low since it takes an

inordinate amount of time and costs considerably more in terms

of the cost to the company of the salaries of staff members

involved.

http://en.wikipedia.org/wiki/Efficiencyhttp://en.wikipedia.org/wiki/Efficiency

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INTERNAL CONTROL

In a scenario where quantities of major raw materials are regularly ordered and consumed, rates are fixed

with selected, reliable, approved vendors for an extended period commonly a year. Moreover, let us say

that the rate contract does not contain a price escalation clause. This safeguards the organisation from

unanticipated price escalation during the period. The rate contract data are stored in the ERP systems

database. Whenever materials are to be ordered (with or without a delivery schedule), purchase orders

are generated mentioning the rate finalised in the rate contract. An internal control exists to keep the

purchase rate constant throughout the year.

Suppose, however, it is found that the rate on a purchase order based on a current rate contract is

changed to a different value, and the purchase order then sent out to the supplier. This is a serious lapse

in internal control, since a change to a higher rate exposes the company to a higher financial liability.

Moreover, the editability of the rate in such a purchase order completely nullifies the internal controls

provided by having a rate contract in the first place and including a no-escalation clause in it. There would

be a further breach of internal control if it were found that such a PO amendment is actually authorised

before sending the purchase order to the supplier.

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COMPLIANCETOVARIOUSSTATUTESANDPOLICIES

There are certain situations where payments made to consultants or

service contractors must be statutorily made after deducting tax at

source (T.D.S.), and such T.D.S. amounts must be deposited in

government treasury accounts with banks on or before a specified date

in the month following the month in which the payments are made.

In such cases, if a business process does not provide for deduction of

T.D.S. and/or fails to ensure deposition into government accounts by the

specified date, then this is a statutory compliance issue that makes the

concerned executives liable to civil / criminal legal action.

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BPR?

Business Process Re-engineering (BPR) is basically the fundamental re-thinking

and radical re-design, made to an organization's existing resources. It is more than

just business improvising.

Business process re-engineering (BPR) began as a private sector technique to

help organizations fundamentally rethink how they do their work in order to

dramatically improve customer service, cut operational costs, and become world-

class competitors. A key stimulus for re-engineering has been the continuing

development and deployment of sophisticated information systems and networks.

Leading organizations are becoming bolder in using this technology to support

innovative business processes, rather than refining current ways of doing work. [1]

http://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Customer_servicehttp://en.wikipedia.org/w/index.php?title=Operational_cost&action=edit&redlink=1http://en.wikipedia.org/wiki/Competitorhttp://en.wikipedia.org/wiki/Information_systemhttp://en.wikipedia.org/wiki/Computer_networkhttp://en.wikipedia.org/wiki/Computer_networkhttp://en.wikipedia.org/wiki/Information_systemhttp://en.wikipedia.org/wiki/Competitorhttp://en.wikipedia.org/w/index.php?title=Operational_cost&action=edit&redlink=1http://en.wikipedia.org/wiki/Customer_servicehttp://en.wikipedia.org/wiki/Organization

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Within the framework of this basic assessment of mission and goals, re-

engineering focuses on the organization's business processesthe

steps and procedures that govern how resources are used to create

products and services that meet the needs of particular customers ormarkets. As a structured ordering of work steps across time and place, a

business process can be decomposed into specific activities, measured,

modeled, and improved. It can also be completely redesigned or

eliminated altogether. Re-engineering identifies, analyzes, and re-

designs an organization's core business processes with the aim of

achieving dramatic improvements in critical performance measures,

such as cost, quality, service, and speed.[1]

http://en.wikipedia.org/wiki/Conceptual_frameworkhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Conceptual_framework

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Re-engineering recognizes that an organization's business processes are usually

fragmented into subprocesses and tasks that are carried out by several

specialized functional areas within the organization. Often, no one is responsible

for the overall performance of the entire process. Re-engineering maintains that

optimizing the performance of subprocesses can result in some benefits, but

cannot yield dramatic improvements if the process itself is fundamentally

inefficient and outmoded. For that reason, re-engineering focuses on re-

designing the process as a whole in order to achieve the greatest possible

benefits to the organization and their customers. This drive for realizing dramatic

improvements by fundamentally re-thinking how the organization's work should

be done distinguishes re-engineering from process improvement efforts that

focus on functional or incremental improvement.[1]

http://en.wikipedia.org/wiki/Business_processhttp://en.wikipedia.org/wiki/Business_process

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BASIC THEME:

Whereare

we

now?

How will we

integrate

technological &

organisational

change?

Wheredo we

want

to go?

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HOWDOES IT FITINTO BPR?

In 1990, Michael Hammer, a former professor of computer science at

the Massachusetts Institute of Technology (MIT), published an article

in the Harvard Business Review, in which he claimed that the major

challenge for managers is to obliterate non-value adding work, rather

than using technology for automating it.[2] This statement implicitly

accused managers of having focused on the wrong issues, namely

that technology in general, and more specifically information

technology, has been used primarily for automating existing

processes rather than using it as an enabler for making non-value

adding work obsolete.

http://en.wikipedia.org/wiki/Michael_Hammerhttp://en.wikipedia.org/wiki/Massachusetts_Institute_of_Technologyhttp://en.wikipedia.org/wiki/Harvard_Business_Reviewhttp://en.wikipedia.org/wiki/Harvard_Business_Reviewhttp://en.wikipedia.org/wiki/Massachusetts_Institute_of_Technologyhttp://en.wikipedia.org/wiki/Michael_Hammer

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Hammer's claim was simple: Most of the work being done

does not add any value for customers, and this work should be

removed, not accelerated through automation. Instead,

companies should reconsider their processes in order to

maximize customer value, while minimizing the consumption

of resources required for delivering their product or service. A

similar idea was advocated by Thomas H. Davenport and J.Short in 1990,[3] at that time a member of the Ernst & Young

research center, in a paper published in the Sloan

Management Review

http://en.wikipedia.org/wiki/Thomas_H._Davenporthttp://en.wikipedia.org/wiki/Ernst_&_Younghttp://en.wikipedia.org/wiki/Sloan_Management_Reviewhttp://en.wikipedia.org/wiki/Sloan_Management_Reviewhttp://en.wikipedia.org/wiki/Sloan_Management_Reviewhttp://en.wikipedia.org/wiki/Sloan_Management_Reviewhttp://en.wikipedia.org/wiki/Ernst_&_Younghttp://en.wikipedia.org/wiki/Thomas_H._Davenport

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STRUCTUREOF WORK PROCESS

Software/IT is a tool to improve workprocesses and/or engineering artifacts.

Basic structure of work processes

Man/Woman Machine/Tool

Software Database

Hardware Computing Non-Computing

Communication network

Policy

Procedure

Standard

ProcessPerformanc

e

Goal

Purpose tobe met

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BASIC PERFORMANCE INDICATORS?

1. Efficiency (degree of utilization of inputs)2. Effectiveness (conformance to purpose)3. Wastage4. Pilferage5. Accuracy

6. Time7. Cost8. Ease of use9. Predictability10. Availability

11. Reliability12. Security13. Safety etc

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Our strategy is to

reassign roles ofsystem elementsfor significantly

improving systemperformance.

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WHATDOESPERFORMANCE

IMPROVEMENTMEAN?

1. Improve value of delivery

2. Reduce cost of delivery

3. Shorten time of delivery4. Increase predictability of delivery

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How can software or ICT help?

Model/redefinebusinessprocess

Define, measure,and compare

KPIs

Target for improved

values of KPIs

Analyze existingroles of system

elements at each

activity, sub-process and

Redefine roles of systemelements at each step withfocus of giving more roles

to software.

Perform

cost/benefitanalysis andoptimize roleallocations to

system elements.Implementredefinedprocess

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BASIC ELEMENTSOF WORK PROCESS?PROCESS ELEMENTS:

1. Production purpose(s)

1.1. Performance goals

1.2. Key performance indicators or parameters (KPIs) and high level breakdown of it into measurable data.

1.3 Currentperformance level (i.e., base line)

2. Policies to follow to achieve performance goals in meeting purpose(s)

3. Practices and the Procedure of their execution, along with terminal and intermediary inputs/outputs

4. Terminal as well as intermediary inputs and outputs and their standards

5. Knowledge and skill required to perform activities in compliance with policies in meeting performance goals

6. Tools, machines along with software applications to perform activities in producing outputs

7. Environment and resources for doing the job

8. Breakdown of KPIs into measurable data developing measurement framework; defining and taking

Measurement for monitoring progress of producing outputs and assessing performance levels

9. Control for ensuring planned outputs and targeted performance goals

10. Improvement for meeting enhanced performance goals and additional purposes

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EXAMPLESOF USAGESOF IT IN BPR? Information technology (IT) has historically played an important role in the reengineering concept[9]. It is considered by some

as a major enabler for new forms of working and collaborating within an organization and across organizational borders[citationneeded].

Early BPR literature [10] identified several so called disruptive technologiesthat were supposed to challenge traditional wisdomabout how work should be performed.

Shared databases, making information available at many places

Expert systems, allowing generalists to perform specialist tasks

Telecommunication networks, allowing organizations to be centralized and decentralized at the same time

Decision-support tools, allowing decision-making to be a part of everybody's job

Wireless data communication and portable computers, allowing field personnel to work office independent

Interactive videodisk, to get in immediate contact with potential buyers

Automatic identification and tracking, allowing things to tell where they are, instead of requiring to be found

High performance computing, allowing on-the-fly planning and revisioning

In the mid 1990s, especially workflow management systems were considered as a significant contributor to improved processefficiency. Also ERP (Enterprise Resource Planning) vendors, such as SAP, JD Edwards, Oracle, PeopleSoft, positioned theirsolutions as vehicles for business process redesign and improvement.

http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wireless_data_communicationhttp://en.wikipedia.org/wiki/Portable_computerhttp://en.wikipedia.org/wiki/Enterprise_Resource_Planninghttp://en.wikipedia.org/wiki/SAP_AGhttp://en.wikipedia.org/wiki/SAP_AGhttp://en.wikipedia.org/wiki/Enterprise_Resource_Planninghttp://en.wikipedia.org/wiki/Portable_computerhttp://en.wikipedia.org/wiki/Wireless_data_communicationhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_needed

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Basic Steps of BPR?

1. Business process modeling

2. Define key performance indicators (KPIs)

3. Measure and benchmark KPIs

4. Assess current roles of system elements

5. Assess contribution of System elements roles to existing values of KPIs

6. Target improved values of KPIs by redefining roles to system elements

7. Redefine business process, policy, procedures and standards

8. Manage the development and deployment of improved roles of system elements

9. Change management

10. Risk and Business continuity management

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More

Time

Performance

Less

hype

technological

potential

actualperformance

reality gap

Innovate to Close the Gap:

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Productivity duringchanges of BPR Exercise

32

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Begin with the end in mind.-- Stephen R. Covey from The Seven Habits of Highly Effective People.

and, measure your progress

accordingly

33

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Do not forget

34

Everyone thinks of changing

the world, but no one thinksof changing himself.

- Leo Tolstoy