الرحيم الرحمن الله الرحيم بسم الرحمن الله بسمKing Fahd University of Petroleum & MineralsKing Fahd University of Petroleum & Minerals

Construction Engineering & Management Dept.Construction Engineering & Management Dept.CEM #515 Term PaperCEM #515 Term Paper

Business Process ReengineeringBusiness Process Reengineering

BPRBPR

Prepared By: Prepared By:

Soughair Al-Shammari Soughair Al-Shammari

Prepared For: Prepared For:

Dr. Abdulaziz A. BubshaitDr. Abdulaziz A. Bubshait

OUTLINEOUTLINE IntroductionIntroduction Relating BPR to theoriesRelating BPR to theories What is Business Process Reengineering (BPR)?What is Business Process Reengineering (BPR)? The concept of reengineeringThe concept of reengineering Methodology Of BPRMethodology Of BPR Tools and Techniques of BPRTools and Techniques of BPR Risks, Problems & Reasons That BPR Projects FailRisks, Problems & Reasons That BPR Projects Fail Reengineering Success FactorsReengineering Success Factors Examples of Companies that apply BPRExamples of Companies that apply BPR Differences between BPR and TQMDifferences between BPR and TQM The Future of BPRThe Future of BPR ConclusionConclusion Reengineering RecommendationsReengineering Recommendations

INTRODUCTIONINTRODUCTION BPR is a method to radically redesign processes and BPR is a method to radically redesign processes and

redirect resources in order to achieve dramatic redirect resources in order to achieve dramatic improvements in service and customer satisfaction. improvements in service and customer satisfaction. This often results in reduced cost, reduced time, or This often results in reduced cost, reduced time, or improved quality. improved quality.

BPR relies upon questioning, challenging, BPR relies upon questioning, challenging, evaluating, and redesigning every element of an evaluating, and redesigning every element of an organization’s operational process. organization’s operational process.

Business Process Reengineering means not only Business Process Reengineering means not only changechange but but dramaticdramatic changechange..

Relating BPR to TheoriesRelating BPR to Theories Business Process Business Process

Reengineering can be Reengineering can be considered as a considered as a combined application of combined application of theories and concepts theories and concepts from mainly three areas: from mainly three areas:

1.1. MarketingMarketing

2.2. Organization theoryOrganization theory

3.3. InformaticsInformatics

Definition of Business Process A business process is a set of linked A business process is a set of linked

activities that create value by transforming activities that create value by transforming an input into a more valuable outputan input into a more valuable output..

There are three types of business processes:There are three types of business processes:

1.1. Management processes Management processes

2.2. Operational processes Operational processes

3.3. Supporting processes Supporting processes

Definition of Business Process ReengineeringDefinition of Business Process Reengineering ““The analysis and design of workflows and processes within and The analysis and design of workflows and processes within and

between organizations" .between organizations" . (Davenport & Short (1990)(Davenport & Short (1990) ) ) " " The fundamental rethinking and radical redesign of business The fundamental rethinking and radical redesign of business

processes to achieve dramatic improvements in critical processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, contemporary measures of performance, such as cost, quality, service, and speed.“service, and speed.“ ((Hammer and Champy (1993) )Hammer and Champy (1993) )

””Encompasses the envisioning of new work strategies, the actual Encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in process design activity, and the implementation of the change in all its complex technological, human, and organizational all its complex technological, human, and organizational dimensions”. dimensions”. (Thomas Davenport (1993) )(Thomas Davenport (1993) )

"Business Process Reengineering, although a close relative, seeks "Business Process Reengineering, although a close relative, seeks radical rather than merely continuous improvement. It escalates radical rather than merely continuous improvement. It escalates the efforts of JIT and TQM to make process orientation a strategic the efforts of JIT and TQM to make process orientation a strategic tool and a core competence of the organization. BPR concentrates tool and a core competence of the organization. BPR concentrates on core business processes, and uses the specific techniques on core business processes, and uses the specific techniques within the JIT and TQM ”toolboxes” as enablers, while broadening within the JIT and TQM ”toolboxes” as enablers, while broadening the process vision.“ the process vision.“ (Johansson et. al. (1993) )(Johansson et. al. (1993) )

"the critical analysis and radical redesign of existing business "the critical analysis and radical redesign of existing business processes to achieve breakthrough improvements in performance processes to achieve breakthrough improvements in performance measures."measures." (Teng et al. (1994) )(Teng et al. (1994) )

The concept of ReengineeringThe concept of Reengineering

BPR changes processes, BPR changes processes, not functions, departments, not functions, departments, geographies or tasks.geographies or tasks.

BPR derives its existence BPR derives its existence from different disciplines, from different disciplines, and four major areas can be and four major areas can be identified as being identified as being subjected to change in subjected to change in BPR. BPR.

Methodologies of BPRMethodologies of BPR

Consolidated MethodologyConsolidated Methodology

A consolidated A consolidated methodology has methodology has been developed been developed from the five from the five methodologies methodologies previously previously presented and a presented and a model was model was developed to developed to provide a structured provide a structured approach and to approach and to facilitate facilitate understanding understanding (Muthu, Whitman (Muthu, Whitman and Cheraghi and Cheraghi 1999).1999).

Continue…. Continue…. Process Reengineering Life Cycle (PRLC)Process Reengineering Life Cycle (PRLC) developed by Guha et.al.developed by Guha et.al.

Tools and Techniques of BPRTools and Techniques of BPR

Flowcharting Flowcharting Waste analysis Waste analysis Ownership Analysis Ownership Analysis Benchmarking Benchmarking Resource Domination Resource Domination

Analysis Analysis Product life cycle Product life cycle

analysis analysis Force field analysis Force field analysis Pareto Analysis Pareto Analysis SegmentationSegmentation

Input / Process / Output Input / Process / Output diagrams diagrams

Control Systems Design Control Systems Design Measures of Performance Measures of Performance

Design Design Culture Development Culture Development Supplier development Supplier development Postponement and Mass Postponement and Mass

CustomizationCustomization Impact / Ease Analysis Impact / Ease Analysis Risk analysis Risk analysis SimulationSimulation

Risks, Problems & Reasons that BPR Risks, Problems & Reasons that BPR Projects FailProjects Fail

1.1. Design risks Design risks

2.2. Implementation risks Implementation risks

3.3. Operational risks Operational risks

Risks, Problems & Reasons that BPR Risks, Problems & Reasons that BPR Projects FailProjects Fail

1.1. Design risks include the following:Design risks include the following: Sponsorship issuesSponsorship issues

Insufficient top management commitmentInsufficient top management commitment Wrong members on the design teamWrong members on the design team Inappropriate use of outside consultants and contractorsInappropriate use of outside consultants and contractors Poor communicationPoor communication

Scope issuesScope issues Scope too narrowScope too narrow Unrelated to strategic visionUnrelated to strategic vision Skill issuesSkill issues

Skill issuesSkill issues Inadequate consideration of human resource issuesInadequate consideration of human resource issues Insufficient exploration of new ideas Insufficient exploration of new ideas

Political issuesPolitical issues No legacy system under controlNo legacy system under control Fear of changeFear of change

Continue….Risks, Problems & Reasons Continue….Risks, Problems & Reasons that BPR Projects Failthat BPR Projects Fail

2.2. Implementation risks include the following:Implementation risks include the following: Leadership issuesLeadership issues

Inadequate resourcesInadequate resources Technical issuesTechnical issues

Delayed software implementationDelayed software implementation Functional and design requirement problemsFunctional and design requirement problems

Scope issuesScope issues Slower than expected resultsSlower than expected results Inadequate planningInadequate planning

Transition issuesTransition issues Loss of key personnel from design phaseLoss of key personnel from design phase

Continue….Risks, Problems & Reasons Continue….Risks, Problems & Reasons that BPR Projects Failthat BPR Projects Fail

3.3. Operational risks include the following:Operational risks include the following: Cultural/human resource issuesCultural/human resource issues

Old technologies in training programs with inadequate, Old technologies in training programs with inadequate, insufficient or unsuccessfulinsufficient or unsuccessful

Management issuesManagement issues Unsuccessful implementation of new management skillsUnsuccessful implementation of new management skills

Technical issuesTechnical issues Support late Support late Operational problems with systemsOperational problems with systems Systems do not meet user needs/expectationsSystems do not meet user needs/expectations Inadequate testingInadequate testing

Reengineering Success FactorsReengineering Success Factors

1.1. Top Management Sponsorship (strong and consistent Top Management Sponsorship (strong and consistent involvement) involvement)

2.2. Strategic Alignment (with company strategic direction) Strategic Alignment (with company strategic direction) 3.3. Compelling Business Case for Change (with Compelling Business Case for Change (with

measurable objectives) measurable objectives) 4.4. Proven Methodology (that includes a vision process) Proven Methodology (that includes a vision process) 5.5. Effective Change Management (address cultural Effective Change Management (address cultural

transformation) transformation) 6.6. Line Ownership (pair ownership with accountability) Line Ownership (pair ownership with accountability) 7.7. Reengineering Team Composition (in both breadth and Reengineering Team Composition (in both breadth and

knowledge) knowledge)

Examples of Companies that Apply BPRExamples of Companies that Apply BPR

Company Company NameName

Benefits after applying BPRBenefits after applying BPR

General General MotorsMotors

Saved : 10% to 25% on support costs, Saved : 10% to 25% on support costs,

3% to 5% on hardware, 3% to 5% on hardware,

40% to 60% on software licensing fees40% to 60% on software licensing fees

Southwest Southwest Airlines Airlines × × American American AirlinesAirlines

It had a revenue of $1.7 billion…… after-tax profit of $91 It had a revenue of $1.7 billion…… after-tax profit of $91 million million

×× It had revenue of $14.4 billion dollars…(don’t apply BPR) It had revenue of $14.4 billion dollars…(don’t apply BPR)….. Lost $475 million and has not made a profit since 1989.….. Lost $475 million and has not made a profit since 1989.

DELL DELL IncorporatedIncorporated

Dell’s website is noted for bringing in nearly “$10 million Dell’s website is noted for bringing in nearly “$10 million each day in sales”. each day in sales”. Dell’s stocks have been ranked as the top stock for the decade Dell’s stocks have been ranked as the top stock for the decade of the 1990s, when it had a return of 57,282%.of the 1990s, when it had a return of 57,282%.

FordFord save millions on recalls and warranty repairssave millions on recalls and warranty repairs

Continue….Examples of Companies That Continue….Examples of Companies That Apply BPRApply BPR

Company Company NameName

Benefits after applying BPRBenefits after applying BPR

Procter and Procter and GambleGamble

Grow to $5.1 billion by the fiscal year of 2004.Grow to $5.1 billion by the fiscal year of 2004.Raise the volume by 17%, the organic volume by 10%, sales Raise the volume by 17%, the organic volume by 10%, sales are at $51.4 billion up by 19%, with organic sales up 8%, are at $51.4 billion up by 19%, with organic sales up 8%, earnings are at $6.5 billion up 25% and share earnings up earnings are at $6.5 billion up 25% and share earnings up 25%.25%.Procter and Gamble also has a free cash flow of $7.3 billion Procter and Gamble also has a free cash flow of $7.3 billion or 113% of earnings, dividends up 13% annually with a total or 113% of earnings, dividends up 13% annually with a total shareholder return of 24%shareholder return of 24%

IBM IBM EEliminate a nearly two month delay that formerly occurred liminate a nearly two month delay that formerly occurred when pricing. when pricing.

Wal-Mart Wal-Mart Reduces restocking time from six weeks to thirty-six hours Reduces restocking time from six weeks to thirty-six hours

Taco Bell Taco Bell Sales soars from $500 million to $3 billionSales soars from $500 million to $3 billion

Differences Between BPR and TQMDifferences Between BPR and TQM

The Future of BPRThe Future of BPR

Six Sigma and Total Quality Management Six Sigma and Total Quality Management (TQM) are terms often confused with BPR, (TQM) are terms often confused with BPR, and are not its replacements. All are change and are not its replacements. All are change initiatives, with the main difference being BPR initiatives, with the main difference being BPR is focused on radical, "big bang" change, and is focused on radical, "big bang" change, and Six Sigma and TQM both focused on Six Sigma and TQM both focused on continuous, incremental improvement.continuous, incremental improvement.

ConclusionConclusion

BPR doesn’t offer a miracle cure on a platter. BPR doesn’t offer a miracle cure on a platter. Nor does it provide a painless quick fix. Nor does it provide a painless quick fix.

Failure in expecting big results doesn’t mean Failure in expecting big results doesn’t mean that reengineering stops forever. “It usually that reengineering stops forever. “It usually stalls and then restarts as the company gets stalls and then restarts as the company gets itself refocused and remobilized. itself refocused and remobilized.

Reengineering RecommendationsReengineering Recommendations BPR must be accompanied by strategic planning, which addresses BPR must be accompanied by strategic planning, which addresses

leveraging IT as a competitive tool. leveraging IT as a competitive tool. Place the customer at the center of the reengineering effort -- concentrate Place the customer at the center of the reengineering effort -- concentrate

on reengineering fragmented processes that lead to delays or other on reengineering fragmented processes that lead to delays or other negative impacts on customer service.negative impacts on customer service.

BPR must be "owned" throughout the organization, not driven by a group BPR must be "owned" throughout the organization, not driven by a group of outside consultants. of outside consultants.

Case teams must be comprised of both managers as well as those will Case teams must be comprised of both managers as well as those will actually do the work.actually do the work.

The IT group should be an integral part of the reengineering team from The IT group should be an integral part of the reengineering team from the start.the start.

BPR must be sponsored by top executives, who are not about to leave or BPR must be sponsored by top executives, who are not about to leave or retire. retire.

BPR projects must have a timetable, ideally between three to six months, BPR projects must have a timetable, ideally between three to six months, so that the organization is not in a state of "limbo". so that the organization is not in a state of "limbo".

BPR must not ignore corporate culture and must emphasize constant BPR must not ignore corporate culture and must emphasize constant communication and feedback. communication and feedback.