1. T4. Enterprise systems analysis and improvement
Fall 2013
Chin-Sheng Chen
Florida International University

2. T4. Enterprise systems analysis and improvement
Classic enterprise operations
The diamond
PDCA
DMAIC
PFMEA
BPR

3. Classic Enterprise Operations
Source
The Wealth of Nations
By Adam Smith
Principles
Division of labor
Economies of scale
Hierarchical control

4. The business system dynamics (diamond)
Values and beliefs
Business processes
Jobs and structures
Management and measurement systems

5. The PDCA Cycle (ISO 9000)
Plan Do
Check
Act

6. TQM/Lean 6 Sigma (DMAIC)
Define
Measure
Analyze
Improve
Control

7. PFMEA
Process Failure Mode and Effects Analysis (PFMEA) for process analysis
A structured methodology to assist engineers in identifying potential failure modes for a new or changed business process, typically applied to study of a manufacturing process.

8. Business process reengineering (BPR)
Reference
Reengineering the Corporation by M Hammer and J Champy, 2009
Definition
Fundamental rethinking and radical redesign of business processes to achieve dramatic improvement in critical, contemporary measures of performance, such as cost, quality, service, and speed.

9. Four key words in enterprise re-engineering
Fundamental
Radical
Dramatic
processes

10. Business processes A business process is a set of organized activities
for a business objective or
That delivers value to a customer.
Enterprise operation is a business process
A process may have sub-processes
Processes are usually invisible, unnamed, and unmanaged
Because like-activities are grouped into functional departments
And processes go through various departments.

11. Typical business process types
Manufacturing
From procurement to shipment
Product development
From concept to prototype
Concept formulation
From need to concept design
Order fulfillment
From order to payment
Service
From inquiry to resolution

12. Business process re-engineering cycle
Identify processes
Review, update, and analyze as-is.
Design to-be
Test and implement to-be

13. An Re-engineering example - Ford Motors (1)
Background
Accounts payable department of 500 workers in 80’s
Set a goal to reduce 20% head counts
It acquired 25% interest in Mazda at the time and found out it had only five workers.

14. An Re-engineering example - Ford Motors (2)
Effort
Re-engineer the process (not an org. unit) of procurement (including the accounts payable)
Eliminate invoice via an on-line database,
so that payment authorization is shifted to the receiving dock
from the account payable, who had to match PO with invoice and receiving documents.

15. An Re-engineering example - Ford Motors (3)
Result
The new process
A buyer in the purchase department issues a PO to a vendor and enters it to an online database.
Vendors send goods to the receiving dock
At the dock, a receiving clerk checks at the computer terminal if the received shipment correspond to an outstanding in the database.
If so, the goods are recorded and the computer will automatically issue and send a check to the vendor at the appropriate time.
It ended up with 125 workers in vendor payment at the end.
Handling only exceptions (Pareto rules)

16. An Re-engineering example - Ford Motors (4)
Lessons learned
Reverse the industrial revolution (division of labor)
Flatten the organization to eliminate fragmentation and bureaucracy
Process orientation
Ambition
Rule-breaking
Creative use of information technology

17. Information Technology – BPR enabler
· Shared database
· Expert systems
· Telecommunication networks
· Decision support tools
· Portable & wireless data communication
·  Interactive videodisk
·  Automatic ID and tracking systems
·  High performance computing

18. Common themes in re-engineered processes
Several jobs are combined into one
Workers make decisions
Processes have multiple versions
Work is performed where it makes the most sense.
Checks and controls are reduced
Reconciliation (consolidating redundant papers) is minimized.
Hybrid centralized/decentralized operations are prevalent.

19. Changes in re-engineered business processes
Work units changes – from functional departments to process teams
Jobs change – from simple to multi-dimensional work
People’s role change – from controlled to empowered
Job preparation changes – from training to education
Focus of performance measures and compensation shifts – from activity to results
Advancement criteria change – from performance to ability
Values change – from protective to productive
Managers change – from supervisors to coaches
organizational structures change – from hierarchical to flat
Executives change – from score keepers to leaders

20. What re-engineering is NOT:
Automation
More efficient way of doing wrong things
Software re-engineering
Use more sophisticated computer system)
Downsizing
Reduce capacity to meet lower demand
Other re-s
Restructuring
re-organizing
Flattening
De-layering
Quality improvement (TQM)
Kaizen: continuous incremental improvement

21. Who re-engineer leader steering committee reengineering czar
reengineering team
process owner

22. Three criteria to identify re-engineering opportunities
Dysfunction
the processes that are in deepest trouble
Importance
the processes with the greatest impact on the company’s customers
Feasibility
the processes most susceptible to successful redesign

23. Broken processes (1) Observation Problem Solution
extensive information exchange, data redundancy, and re-keying
Problem
arbitrary fragmentation of a natural process
Solution
consolidate fragmented tasks, when feasible

24. Broken processes (2) Observation Problem Solution
inventory, buffers, and other assets
Problem
system slack to cope with uncertainty
Solution
structure processes such that suppliers and customers plan and schedule their respective work together.

25. Broken processes (3) Observation Problem Solution
High ratio of checking and control to value adding
Problem
Fragmentation
Solution
Eliminate managers’ mistrust and incompetence that come from fragmentation

26. Broken processes (4) Observation Problem Solution rework and iteration
inadequate feedback along chains
Solution
eliminate mistakes

27. Broken processes (5) Observation Problem Solution
complexity, exceptions, and special cases
Problem
growth onto a simple base (simple process grows complex).
Solution
develop simple processes with decision points

28. Important business processes
From customer’s point of view
product quality and features
product cost
on-time delivery
Customer service
Product life cycle

29. Factors for choosing feasible processes for re-engineering
Likelihood of success
Commitment of the process owner
Strength of the re-engineering team
Cost
Lead time

30. The re-engineering process
identify a process to reengineer
understand the current process
what and why including input & output, but not how
understand how the customer uses the output of the process
by watching how it does
Redesign
try to avoid benchmarking, as it may limit the team’s innovation

31. BPR Principles Work is best organized around outcomes, not tasks
As few people as possible should be involved in the performance of a process
Identify and destroy assumptions
Look for opportunities for creative application of information technology

32. Additional BPR principles as role players
You don’t need to be an expert to redesign a process
Being an outsider helps
Your have to discard preconceived notions
It’s important to see things through the customer’s eyes.
Redesign is best done in teams.
Your don’t need to know much about the current process
It’s not hard to have great ideas
Redesign can be fun.

33. Avoidance in BPR (1) Try to fix a process instead of changing it
Don’t focus on business processes
Ignore everything except process redesign (as it affects others).
Neglect people’s values and beliefs
Be willing to settle for minor results
Quit too early
Place prior constraints on the definition of the problem and the scope of the reengineering effort
Allow existing corporate cultures and management attitudes to prevent reengineering from getting started.
Try to make reengineering happen from the bottom up.

34. Avoidance in BPR (2)
Assign someone who doesn’t understand reengineering to lead the effort
Skimp on the resources devoted to reengineering
Bury reengineering in the middle of the corporate agenda
Dissipate energy across a great many reengineering projects
Attempt to reengineer when the CEO is 2 years from retirement
Fail to distinguish reengineering from other business improvement programs
Concentrate exclusively on design
Try to make reengineering happen without making anybody unhappy
Pull back when people resist making re-engineering’s changes
Drag the effort out (should not longer than 12 months)

35. Nature of the business environment
Knowledge intensive product/service
Innovation
Consumer’s market
Individuality
Mass customization
Very dynamic and short product lifecycle
Concurrent engineering/operations
Highly mobile labor market
Agile manufacturing
Free product or service

36. Enterprise characteristics
Innovation
First in the market (market pre-emption)
Mass customization
Quick response
No inventory
Virtual resources (collaborative via SCM)
Scalability
Agility
Process & knowledge management

37. Business process & intelligence
Business knowledge
Product & mfg. process
Production
Business process
Business process knowledge mgt.
Knowledge warehouse (& ISO) vs.
Process embedded with knowledge