Chapter 5&6

Business Process ReengineeringBusiness Process Analysis and

Selection:Tan, A. (2007). Business Process Reengineering in

Asia: A Practical Approach, Pearson Education, Singapore.

Objectives

To understand overview of BPR To understand the methodology that could be

used in performing BPR. To understand each of steps involved in

performing BPR.

What is BPR

The radical redesign of business processes to achieve dramatic improvements in productivity and performance. Radical redesign means getting rid of existing

processes and procedures and inventing new ways.

Dramatic improvement means a quantum leap in performance.

What Is BPR?

BPR means starting all over, from scratch i.e.“If I were recreating this company today given what I know & given current technology, whatwould it look like?”. BPR is about rethinking how work is done. Design of work must be based not on

- M.H. & J.Chierarchical management and thespecialization of labour but on end-to-endprocesses and the creation of value for thecustomer.

What is BPR

BPR radically changes the work environment. Individual processes are combined to gain

efficiencies and productivity. Workers are allowed to make decisions on

the spot to eliminate process roadblocks. Reengineering focuses on cross-functional

processes fundamental to the business.

What is BPR

Reengineering focuses on cross-functional processes fundamental to the business. For example: product or service development customer order processing and product delivery inventory optimization and distribution channel

management “just-in-time” purchasing, product manufacturing,

shipping and cash management

What is BPR

Customer inquiry processing and resolution Global business and financial planning Human resources acquisition, development and

optimization

• Cycle time reduction• Cost reduction• Quality improvement• Customer satisfaction

Expected Process Improvement Expected Process Improvement ResultsResults

Business Process

es

People and Organizatio

n

Information and

Technology

Components of Process Engineering

Traditional• Nominal improvement• Internal orientation• Focus on particular“problems”• Task/ functional optimization• Analysis by “experts”• Redesign by ‘outsiders”

BPR• Commitment to significantchange• Customer needs driven• Focus on key processes• Redesign entire processacross functional• Analysis by participants• Redesign by participants• Customer-based processmeasures

BPR Methodology Vs. Traditional

Why Companies Reengineer?

• To reverse declines in market share/profits• To build closer relationships with customers/suppliers• To get products/services to market faster• To fight increasing competition

•PRODUCTION•DISTRIBUTION/ LOGISTICS•CUSTOMER ORDERS•PROCUREMENT / MATERIAL MANAGEMENT•FINANICAL MANAGEMENT•MARKETING AND SALES•HUMAN RESOURCES•OTHER

Which Processes are being Reengineered ?(high to low percentages order)

•FINANCIAL MANAGEMENT•MARKETING AND SALES•CUSTOMER ORDERS•DISTRIBUTION/LOGISTICS•PRODUCTION•PROCUREMENT/MATERIALS MANAGEMENT•OTHER•HUMAN RESOURCES

Services CompaniesIndustrial Companies

PURCHASE DEPT.

RECEIPTDEPT.

ACCOUNTSPAYABLEVENDOR

P.O.

P.O.

INVOICE

PAYMENT

G.R.N.

G.R.N – goods received note• 500 Head Count

• Accounts Payable To Match 14 ItemsBetween P.O., G.R.N. & Invoice

BPR Example – FORD MOTOR COMPANY – Before BPR

DATABASE

User

Stores/User

Finance

VENDOR

P.O.

GOODS

PAYMENT

• Automatic matching of 3 items (part no.,Unit of measure, supplier code) between P.O. & G.R.N;

• Faster, simpler, more accurate & efficient process;• 75% reduction in head count• Invoice less processing

BPR Example – FORD MOTOR COMPANY – After BPR

BPR Example– Ford Motor Company – Rules1. We pay when we issue GRN2. We pay when we receive goods3. We pay when we use goods

• Critical Assessment of Processes• Select processes for Reengineering

What to Reengineer ?

• Team Members – Represent entire scope of process, knowledgeable about it, willing to challenge, Team players, IT Participation• Team Leader – Take team members along, ensure project moves forward, resolve conflicting issues• Sponsor – Responsible for successfulimplementation of the project• Facilitator

Reengineering Study - Roles

• Process has a definite start and end point

• E.g. From Prepare Purchase Requisition to Receive item or store the item or issue item or pay bills

• Should be neither too short or too long• Guideline – Include planning,

Supplier & Customer

Process ScopeProcess Scope

Introduction

Process mapping

Process implementation

Detailed design

Processredesign

ProcessAnalysis & Selection

Change management

Information Technology Enablers

Figure 2.1: Business Process Analysis and Redesign

Introduction

Process Mapping Each key process is mapped to understand it’s

role, relationship to other process and it’s dependency.

Process Analysis & Selection Each process is analyzed to understand the

strength and limitation. Any opportunity for improvement will be identified.

The selection is based on resource constraints.

Customers 1. Request for loan

9. Enjoy facility

Branch 7. Open acct

8. Disburse loan

Loan mgt 6. Approve loan

Doc depart 3. Credit admin support

Loans dept 2. Assess customer’s financial need

4. Evaluate loan app5. Package banking prod

Process chart-loan app

Introduction

Process Implementation Transform the organization from its present state

to the new process design.

Process Mapping

Components: Process objective Process owner Starting/ending activity within a process Inputs Outputs Process measurements

Process Mapping

Oval Ovals indicate the starting and ending point

Box Represent an activity in the process

Diamond A decision point

Circle A particular step is connected to another part of the process

Triangle In-process measurement occurs

Types of business processes

Transactional process The organized chain of activities by which an initial input of

resources is converted into a pre-specified output. Example, product, service or processed information

Key objective: To impose standardization Standardization is important for transaction-oriented processes

as it helps to maintain the quality and consistency of the output. This process can be easily modeled and represented in an

agreed formalism as: A linked set of data structures Functions Workflows

Example: credit rating process

Types of Business Processes

Analytical process A process where a desired output can be defined but a

precise method for achieving it is difficult to specify for the whole of the process

May view as ‘black box’ which are supported by information feeds from more formalized processes.

Example: making decision about acquiring a company. The business decision will be supported by information derived from due diligence activities and market analysis. It may involve the intellectual assessment by senior manager.

Types of Business Processes

Business processes can be defined in three categories: Core process

Example: fulfilling customer orders, manufacturing, insurance processing and etc.

Support process Managing finances, purchasing and data processing

Management process Planning, organizing and overseeing the enterprise

Process Analysis

The key process must be analyzed to determined the performance gap and opportunities for improvements.

Value-added analysis Involves identifying different types of activities within the

processes An activity adds value if it satisfy all three of the following

requirements:1. The customer is willing to pay for the activity2. The activity physically changes the product or service3. The activity is performed correctly the first time it is

undertaken

Process Analysis

Control activities Required for risk control but not necessarily for

customer. Example: auditing, approving and reviewing

Non-value added activities Activities that do not add value to the final output. Examples: storing, moving and filing document.

Process Analysis

In business, any additional activities will incur extra cost.

It is important to eliminate non-value added activities and control activities whenever possible.

This is to improve the process performance.

Process Analysis

Value Time and Elapsed Time Analysis To examine the overall time spent (elapsed time) vs the

time that is value adding from the customer’s perspective (value time)

Value Time (VT) – time required for actual work effort Elapsed Time (ET) – total time to complete process

including waiting time Compute the ration of VT/ET – indicate the process

efficiency The lower the ratio-the higher potential for reengineering

Process Analysis

Example: A patient visiting a clinic and she will most likely spend

about 10 minutes with the doctor while the rest of the time (let say 3 hours) were spent queuing up, medical test and etc.

The ratio: VT/ET = 10 min/ (3 x60)min

= 0.05 (very low) Conclusion???

Process Analysis

Quality Analysis Involves understanding how the processes are

satisfying the customers Some of the questions:

Does process meet conformance standard? What is the reliability of process? What is the competence of staff? How does customer response to the service

provided?

Process Analysis

Customer requirements1. Determine who is the customer and the segment

Customer needs may differ: Emphasis on different elements of services/products Requirements or preferences of the services/products Degree of flexibility, customization and responsiveness Acceptable minimum quality standard Time of completion / delivery of the products and services The quantity of products required The location of services to be performed or delivery of the

products

Process Analysis The differences have caused:

Staff with different skills and knowledge The familiarity of staff with specific customers and their

needs and, the initiative required of staff The ability to handle variable of work loads, load balancing

and resource scheduling. Performing certain tasks or measures Selecting different quality vs productivity for different

customer segment. Contribution for each segment to total profitability should

be determined. This will help to determine the resources needed.

Process Analysis

Highly Profitable customers

Marginally ProfitableCustomers

Non Profitable Customers

Process Personalize

Electronic

Figure 2.2: Segmenting customers for different processes and experience

Process Analysis

2. Understand the importance of customer needs for each segment

Methods that can be used to elicit customer’s needs: Questionnaires and surveys Customer complaint analysis Focus group interviews Individual interviews

Face-to-face Telephone Contextual inquiry

Process Selection

A few criteria to consider: Importance

Does process have strategic relevance? Performance

Does process have the following performance deficiencies? Extensive information exchange Data redundancies Customer complaints Extensive hand-offs Long queuing time Extensive checking and control Rework and iteration Complexity, exception and special cases

Process Selection

3. Feasibility Is the process feasible for change?

Scope and scale manageable Affordable Enabler technologies Support from management Cultural Politically doable

Process Selection

4. Potential for new technology Can new technology be introduced to improve the process?

Shared database Expert system Telecommunication network Wireless data communication and portable computers Etc

The scope of reengineering project should based on organization’s capability and resources.

This includes costs, people and skills and time.

Organize the Team

After the process has been selected and the boundaries has been established, the next step is to organized the BPR team.

The team should consist of a good representation of people who work inside the boundaries and have knowledge about it.

Team size of 5-7 people should be effectively

Organize the Team

Among the responsibilities of the team leader: Planning and scheduling Have common understanding with the

management Arrange for the resources and fund Communication Problem solving

Summary 3 main types of processes:

Management process Primary process Supporting process

Process analysis can be performed via the techniques below: Value added analysis Value time and elapsed time Quality analysis Customer requirement

After selecting the process, the core team will be organized Select team leader Select team member from multiple functional department Involve the customer or supplier.