Business Process Engineering

Sydenham Institute of Management

Studies
Presented by
MaheshManoharBhanushali
B.E (Mechanical), MMS
 References
•Hammer, Michael andChampy, James,Reengineering the Corporation:
A Manifesto for Business Revolution,New York: HarperCollins
Publishers, Inc., 2001
•Business process benchmarking: Robert C Camp

Process
 Definition of Reengineering

Thefundamental rethinking
andradical redesignof
core business processesto
achievedramatic improvementsin critical
performance measures such asquality, cost,
and cycle time.
 What Business Reengineering Is Not?

•Automating: Paving the cow paths. (Automate

poor processes.)
•Downsizing: Doing less with less. Cut costs or
reduce payrolls.
BPRinvolves innovation: Creating new products and
services, as well as positive thinking are critical to
the success of BPR.
 Definition of Process
•A process is simply a structured, measured set of
activities designed to produce a specific output for a
particular customers or market.
•Characteristics:
–A specific sequencing of work activities across time and place
–A beginning and an end
–Clearly defined inputs and outputs
–Customer-focus
–How the work is done
–Process ownership
–Measurable and meaningful performance
 Case study of Ford Motor

•Ford: Accounts Payable

•We pay when we receive the invoice
•We pay when we receive the goods
•We pay when we use the goods
•For certain items like brakes, We shall have single source
of supply and work very closely with that vendor
 Ford Accounts Payable Process*
Purchasing
Vendor
Purchase order

Receiving Goods

Copy of
purchase
order

Receiving
Accounts document
Payable

Invoice

? ? Payment
PO = Receiving Doc. = Invoice *Source: Adapted from Hammer and Champy,
1993
 Trigger for Ford’s AP Reengineering
•Mazda only uses 1/5 personnel to do the same AP. (Ford:
500; Mazda: 5)
•When goods arrive at the loading dock at Mazda:
–Use bar-code reader is used to read delivery data.
–Inventory data are updated.
–Production schedules may be rescheduled if necessary.
–Send electronic payment to the supplier.
 FordProcurementProcess
Purchasing
Vendor
Purchase order

Receiving Goods

Purchase
order

Goods
received

Accounts
Data base
Payable

Payment
 Ford Accounts Payable
Before
•More than 500 accounts payable clerks matched purchase order,
receiving documents, and invoices and then issued payment.
•It wasslow
•Mismatches were common.

After
•Reengineer “procurement” instead of AP process.
•The new process cuts head count in AP by 75%.
•Invoices are eliminated.
•Matching is computerized.
•Accuracy is improved.
 BPR Principles
•Organize around outcomes, not tasks.
•Have those who use the output of the process perform
the process.
•Treatgeographically 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.
 The Importance Of focusing
Business Processes
•“if you always do what you always did, you’ll
always get what you always got”
•The impatient customer
•Business operations are changing and getting
more complicated
•Managing the move towards enterprise
mobility
•Ability to identify and outsource or buy
business as a service for non core business
processes
 There are three types of business
processes:
•Core processes
–Create product/service
–Market communication
–Optimize value for customer

•Support processes
–Order processing
–IT management
–Ensure profitability and liquidity
–Capacity planning
–Staff training, motivation and retention
 Six stages of Process Management

(1) Defining the process

(2) Establishing measures

(6) Implementation to evaluate the process
of improvements

(3) Analyzing process performance

(5) Planning improvements

(4) Analyzing process stability and setting new

objectives if required
Rethinking/Characteristics Business
processes and Value adding
activities
1) Reconciliation is minimized:
Reducing the number of external contact points
that process has.
Reducing repetitive actions.
Example: Wall Mart working with proctor and
gamble, reengineered the management of its
pampers inventory. Little inventory makes
unhappy customer, More inventory cause high
financing and storage cost.
Earlier process: Wall-Mart maintained pampers
2) Several jobs are combined in to one:
Example: IBM Credit,
Credit checker,pricerwere combined in to single
position “DealStructurer” (Refer the diagram)
Five steps between selling and installing reduced
to single position and single point of contact
3) The steps in the process are performed in a
natural order:
Delinearizing, reducing delay and Parallel jobs
Example: Information, Coding, Convey various
 Old design Methodology

New Camera
Design

Camera
Body Parts design
Body design

Level I Camera shutter Shutter parts Level II

Integration design Parts design Integration

Camera Film Capstan

capstan design Parts design

Final Camera
Design

Too Time consuming > 70 wksLoss of Customer

 Camera Design Methodology using CAD/CAM design

Camera
Module
Integration

Design Data Base

Camera Camera Body design

Capstan and Part
Design

Camera Shutter
& Parts Design CameraBodyPart
Design

Design Time frames Cut down to 10weeks with no wasted effort

4) Processes have multiple versions/Paths:
Example 1 : IBM Credit Straightforward cases (which can be
performed entirely by computer), Medium hard cases
(Performed by Dealstructurer), Difficult cases (performed by
dealstructurerwith special advisors)
Example 2: Different quos for Science/commerce/ arts
application forms after 12th
Example 3: Small projects, Medium Projects, Large Projects

5) Work is performed where it makes the most sense:

Tractor Example
Shifting of work across the organizational boundaries.
 Business Process Improvements
•Types
•1.Continuous Process Improvement: In this form
the errors/ failures
•are corrected.
•Root causes are identified and eliminated
•Objectives are: obtaining consistent Product
Quality
•incremental cost reductions, waste reduction,
flexibility,
•improving efficiency and effectiveness
•2.Innovative Process Improvement: In this form
the processes are
•Examined. If they are needed to be performed
at all.
•Technology is a key driver and information flow
and processes
•are automated.
•Total change is attempted as concerning people
and their skills
•And knowledge requirements needed for
 Reasons for Process Improvements
Reason 1 Competition: “Hey everyone else is doing it, so why not us!”
No-one admits it but the persuasive voices of business publications and software vendors
have made process improvement a popular initiative.

Reason-2 Innovation: By using a few sharp tools process improvement can lead to
innovative thinking. Innovative initiatives can take business outside of its operational
core exploit new products and services opportunities.

Reason-3 Customer Centricity:Everyone agrees with the need for customer centricity,
Many find that customer centricity isn’t as easy as it sounds.

Reason 4 Transformation: It can make or break organisations and need huge effort in
terms of process improvement, change management, organisational design, marketing
and technology. There is generally a critical business reason for transformation
projects,
 Reasons for Process Improvements
Reason-5 Disaster:When companies face imminent business death or financial
punishment by regulators you can be sure that a shiny new project will spring to meet
the challenge.

Reason-6 Cost:Cost Savings lead to more profits and more profit equals happy CEO’s and
shareholders. It’s hard to increase revenues and even harder to increase profits – but it’s
often not so hard to save money when process initiatives can clearly highlight how to
do it.
Process Improvement Cycle
A list of Symbols for Flow charting
Types of FlowchartsPlanning a New
Project, Basic Flowchart:
 Documenting a
Process,SwimlaneFlowchart, ERP,
ISO
 Modeling a Business Process, EPC Diagram
(Event Driven Process Change) Covers number
of possible situations
Chemical and Process Engineering
| Process Flow Diagram
Managing Workflow | Workflow
Diagram
Top –Down Flow Chart
 A BPR Framework
Organization Technology
–Job skills –Enabling technologies
–Structures –IS architectures
–Reward –Methods and tools
–Values –IS organizations

Process
–Core business processes
–Value-added
–Customer-focus
–Innovation
 Business Process Reengineering Life Cycle
Define corporate visions
and business goals Visioning BPR-LC 
Identify business Enterprise-wide engineerin
processes to be Identifying
reengineered
Analyze and
measure an existing Analyzing
process Process-specific
Identify enabling IT & engineering
generate alternative Redesigning
process redesigns
Evaluate and select
a process redesign Evaluating

Implement the
reengineered Implementing
process
Continuous
improvement of the Improving
process

Manage change and stakeholder interests

Process Improvement TQM Process Innovation BPR
•Level of Change: Incremental •Radical
•Starting Point: Existing
Process •Clean Slate
•Frequency of Change: One-
time/Continuous •One-time
•Time Required : Short
•Participation : Bottom-Up •Long
•Typical Scope : Narrow, within •Top-Down
functions •Broad, cross-functional
•Risk : Moderate •High
•Type of Change : Cultural •Cultural and structural
 Types of Reengineering
•Type 1 - Process Improvement;
cost-reduction focus
•Type 2 - To achieve parity, or “best-in-class;”
competitive focus
•Type 3 - Searching core business for
breakpoints; rewriting therules
•Type 4- Innovation
39
The Dimensions of Business Process
Reengineering- Andrews &Stalick

•Physical/Technical Layer

–Process structure

–Technical structure

–Organization structure

40
 The Dimensions of Business
ProcessReengineering

•Infrastructure Layer

–Reward structure

–Measurement systems

–Management methods

41
 The Dimensions of Business
ProcessReengineering

•Value Layer

–Organizational culture

–Political power

–Individual belief systems

42
 The role of information
technology
•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
 Enabling IT to Consider
•Client/server technology
•Collaborationtechnologies
•Mobile computing (wirelessLAN,iPhone)
•Data capturing technology (scanner/barcodereader)
•Telephony: Integration of computer and telephonesystems
•Web services and Service-Oriented Architecture (SOA)
•Imaging technology, work flow management systems, Business Process
Management (BPM)
•Decision support systems, Data warehouse, Business intelligence, Data
mining, Digital dashboard
•ERP, CRM, SCM
•Electronic Data Interchange (EDI), ElectronicCommerce, Internet
 BPR team composition
•Once organization-wide commitment has been
secured from all departments involved in the
reengineering effort and at different levels, the
critical step of selecting a BPR team must be
taken. This team will form the nucleus of the
BPR effort, make key decisions and
recommendations, and help communicate the
details and benefits of the BPR program to the
entire organization. The determinants of an
effective BPR team may be summarized as
 Benchmarking
•Benchmarking can be defined as a process for
improving performance by constantly
identifying, understanding and adapting best
practices and processes followed inside and
outside the company and implementing the
results
 Types of benchmarking
•Strategic Benchmarking: Aimed at improving a
company's overall performance by studying the
long-term strategies and approaches that
helped the 'best practice' companies to succeed.
It involves examining the core competencies,
product/service development and innovation
strategies of such companies.
•Competitive Benchmarking or Performance
Benchmarking: Used by companies to compare
their positions with respect to the performance
•Internal Benchmarking: This involves
benchmarking against its own units or branches
for instance, business units of the company
situated at different locations. This allows easy
access to information, even sensitive data, and
also takes less time and resources than other
types of benchmarking.

•External Benchmarking: Used by companies to

seek the help of organizations that succeeded
•Process Benchmarking: Used by companies to
improve specific key processes and operations
with the help of best practice organizations
involved in performing similar work or offering
similar services.
•Functional Benchmarking or Generic
Benchmarking: Used by companies to improve
their processes or activities by benchmarking
with other companies from different business
sectors or areas of activity but involved in similar
•The Xerox Case
•The company invented the photocopier in 1959
and maintained a virtual monopoly for many
years thereafter. “Xerox” became a generic
name for all photocopiers. By 1981, however,
the companies market shrunk to 35% as IBM
and Kodak developed high-end machines and
Canon,RichoandSavindominated the low-end
segment of market.
•Xerox collected data on key processes of best
practice companies. These critical processes
were then analyzed to identify and define
improvement opportunities. For instance, Xerox
identified ten key factors that were related to
marketing. These were customer marketing,
customer engagement, order fulfillment,
product maintenance, billing and collection,
financial management, asset management,
business management, human resource
•The company then adopted functional
benchmarking, which involved a study of the
best practices followed by a variety of
companies regardless of the industry they
belonged to. Xerox initiated functional
benchmarking with the study of the
warehousing and inventory management system
of L.L. Bean (Bean), a mail-order supplier of
sporting goods and outdoor clothing.
•Bean had developed a computer program that
made order filling very efficient. The program
arranged orders in a specific sequence that
allowed stock pickers to travel the shortest
possible distance in collecting goods at the
warehouse. This considerably reduced the
inconvenience of filling an individual order that
involved gathering relatively less number of
goods from the warehouse. The increased speed
and accuracy of order filling achieved by Bean
•Xerox found that all the Japanese copier
companies put together had only 1,000
suppliers, while Xerox alone had 5,000. To keep
the number of suppliers low, Japanese
companies standardized many parts. Often, half
the components of similar machines were
identical. To ensure part standardization,
Japanese companies worked closely with their
suppliers. They frequently trained vendor's
employees in quality control, manufacturing
•The stocking policy followed by Xerox branch
managers was to hold fully finished, fully
configured products near to the customer.
Because of this policy, they carried vast amounts
of inventory, some of which was not even sold
during a given period. The company changed
the above setup by asking branch managers to
match the stocking policy to the customer's
installation orders, which considerably reduced
the inventory holding time. As a result, working
 Limitations of Benchmarking
•Sometimes companies may not give correct
information due to their constraints; hence it
may lead to a failure
•Leaking important information which may
cause damage to the firm
•The original company which invested hugely on
research and development to developproduct
will undergo losses
Re-Engineering-Focus Phase
 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
•In this phase, the “as-is” environment is
analyzed
•A danger frequently encountered by project
teams is a tendency to spend too much time
analyzing the current process, organization, and
the financial and technology components under
review.
•Figure 1: Hypothesis Driven Approach of the
Focus Phase Hypothesis-based problem solving
is effective in defining objectives and solving
•The process of determining business context
described above assumes that businesses
compete in three major ways – cost, value or
competence
•Take each process and analyze the necessity of
having the process
•Through a series of management and staff
interviews, BPR determines how each of these
components is viewed from the business
perspective.
•What the reengineering team seeks to learn is:
•How customers see us.
•Willingness to pay for value-added services.
•What they want us to change.
•How our processes link with theirs.
•What our competitors do better than we do
 Phase2:Redesigning
Identify enabling IT & generate
alternative process redesigns
How can business
processes be transformed Business
using IT?
Reengineering

Business-pulled Technology-driven

Information
Technology How can IT support business
processes?

Source: Thomas H. Davenport and James E. Short, “The New Industrial Engineering: Information technology and Business Process
Redesign,” Sloan Management Review, Summer 1990, pp. 11-26.
 Process Data
•Basic Overall process data:
–Customers and customer requirements
–Suppliers and suppliers qualifications
–Breakthrough goals
–Performance characteristics: Cost, cycle time, reliability, and
defect rate.
–Systems constraints: Budgetary, business, legal, social,
environmental, and safety issues and constraints.
•Measure critical process metrics
–Cycle time
–Cost
–Input quality
–Output quality
–Frequency and distribution of inputs
 Re-Engineering-Implementation
Phase
•State theBPR objectives
–Improved operational performance (by closing
performance gaps (business management))
–Reduced costs and manpower savings (by
application of management analysis tools and
techniques)
–Improved competencies (by closing skill and
competency gaps (human capital))
–Others
•Identify affected activities, employees,
 Implement the reengineered process

•Plan IT implementation
•Plan organization implementation
•Conduct a pilot project
•Develop a prototype system
–Technical Design
•Evaluateresults from the pilot project and the
prototype
•Prepare large-scale roll out
 Rules for Process Redesign
a) The Golden Rule: Always redesign from the customer's
point of view not your own.
b) The Silver Rule: Always redesign processes before
designing or procuring your IT.
c) The Bronze Rule: Always redesign your processes before
redesigning your organisational structure.
 BPR Team
•Size: up to 8 members in the core team
augmented by subject-matter experts when
needed.
•Commitment: half- to full-time.
•Skills: team skills, process engineering, quality,
information systems, benchmarking,
organizational and job design, and change
management.
•Composition: Employees, customers, suppliers,
and external consultants.
 Facilitated BPR Meetings
•Centered around a workshop: It is an organized, controlled, and
structured process
•Participated by users, managers, and IS personnel (if necessary)
–User orientation
–Management direction
–IS technical assistance
•Facilitated by a BPR facilitator to ensure thorough analysis
•Employ a BPR analysis and design methodology to ensure usable
requirements or specifications
•Focused on a consensus-based decision making process
•Use multi-media audio-visual equipment or BPR tools to bridge
knowledge gap among participants
 Qualifications of a BPR Facilitator
•Is skillful in team building and leading
•Manages group process and dynamics
•Has energetic and outgoing personality
•Summarizes discussion
•Is a good communicator (listening and speaking)
•Has project management ability
•Has mastered facilitation skills
•Understands BPR methods
 Obtaining Top Management
Commitment
•Seriousness
•Information Input and to convince
•Commitment
•Resistance to change
•Management can see the efforts as a
insignificant
•Carries risk
•Affected people may feel that it is injustice to
their dedication
•Sometimes results takes more than estimated
 Reasons for BPR Failures
lLack of support from senior management
lPoor understanding of the organization and the infrastructure
lInability to deliver necessary technology
lLack of guidance, motivation and focus
lFixinga process instead ofchangingit
lNeglecting people’s values and beliefs
lWillingness to settle for marginal results
lQuitting too early
lAllowing existing corporate cultures and mgmt attitudes to prevent redesign
lNot assigning enough resources
lWorking on too many projects at the same time
lTrying to change processes without making anyone unhappy
lPulling back when people resist change
Etc…

74
 Reengineering and its Relationships to
Other Improvement Programs (II)

RightsizingRestructuringAutomationTQMReengineering

AssumptionsStaffingReportingTechnologyCustomerFundamental
questionedrelationshipsapplicationsneeds

Focus ofStaffing, jobOrganizationSystemsBottom-upRadical

changeresponsibilitiesimprovementschanges

OrientationFunctionalFunctionalProceduresProcessesProcesses

Role of ITOften blamedOccasionallyTo speed upIncidentalKey

emphasizedexisting systems

ImprovementUsuallyUsuallyIncrementalIncrementalDramatic and
goalsincrementalincrementalsignificant

FrequencyUsually oneUsuallyPeriodicContinuousUsually one

timeone timetime

75
 Relationship between Discontinuous
(Radical) and Continuous Improvement

Theoretical
Improvement

Capability

Statistical
Process
Incremental Radical Control
Improvement Improvement

Time

76
 Dysfunctional or Broken Processes
Symptoms and diseases of broken processes
SymptomDisease

1Extensive informationArbitrary fragmentation

exchange, data redundancyof a natural process
and re-keying

2Inventory, buffers andSystem slack to cope with

other assetsuncertainty

3High ratio of checking andFragmentation

control to value-adding

4Rework and (re)iterationInadequate feedback along

chains

5Complexity, exceptionsAccretion onto a simple base

and special cases 77
 IT Enabling Effects
Dimensions & Type Examples IT Enabling Effects

Organization Entity
•Interorganizational Order from a supplier Lower transaction costs
Eliminate intermediaries

•Interfunctional Develop a new product Work across geography

Greater concurrency

•Interpersonal Approve a bank loan Integrate role and task

Objects Manufacture a product

•Physical Increase outcome flexibility
Control process

•Informational Prepare a proposal

Routinize complex decision

Activities Fill a customer order

•Operational
Reduce time and costs
Develop a budget Increase output quality
•Managerial
Improve analysis
Increase
Adapted from: Davenport, T. H. and Short, J. E., "The New Industrial Engineering: Information Technology and participation
Business Process Redesign,"Sloan Management
Review, Summer 1990, p. 17.
 Order Management Cycle
1.Order Planning
2.Order Generation
3.Cost estimation and pricing
4.Order receipt and entry
5.Order selection and prioritization
6.Scheduling
7.Fulfillment
–Procurement
–Manufacturing
–Assembling
–Testing
–Shipping
–Installation
8.Billing
9.Returns and Claims
10.Postsales Services
 Empowered Customer-Focus Processes

Manager as Coach

Teamwork Customer-facing Process

Empowered
Font-line
worker
Values and Quality
delivered to
Customers timely