1. Business Process Reengineering Chao-Hsien Chu, Ph.D. School of Information Sciences and Technology The Pennsylvania State University University Park, PA 16802

2. BPR Theory Vs. Practice BPR Promise Fundamental change Reality 75% Failure rate Misunderstanding - What BPR is. - How to go about doing it.

3. BPR Definition (1) Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed. Hammer and Champy 1993

4. BPR Definition (2) The fundamental rethinking and redesign of operating processes and organizational structure, focused on the organization’s core competencies, to achieve dramatic improvements in organizational performance. Lowenthal 1994

5. BPR Definition (3) Reengineering is the rapid and radical redesign of strategic, value-added business processes — and the systems, policies and organizational structures that support them — to optimize the work flows and productivity in an organization. Manganelli and Klein 1994

6. ProcessesProcesses A process is an interrelated series of activities That converts inputs into outputs. Activity

7. ActivitiesActivities   Value-adding Activities Important to the customer A customer is willing to pay for them   Hand-off Activities Move work across functional or departmental boundaries   Control Activities They control hand-off activities

8. Process Flow MarketingOperationsFinance CEO Customer request Order fulfillment

9. Features of Business Processes   Greater margin for improvement   Hands-off and lost control   Waste and inefficiency are difficult to detect   Cross-functional problems   Low percentage of value-adding activities   Customers are very sensitive to poor business processes

10. Some Business Processes   Order Processing   Billing   Purchasing   Shipping   Receiving   Auditing   Business Planning   Warranty and claims processing  Budget planning  Accounts payable  Accounts receivable  Performance appraisal  Proposal development  Credit approval  Vendor certification  New employee processing

11. Attributes of a BPR Methodology   It should develop a clear statement of corporate goals.   It should be process-oriented.   It should facilitate the classification of activities.   It should lead to fundamental change.   It should develop a plan to deliver final results within a year.

12. Reasons for Reengineering   Your continuous improvement activities have hit a dead end.   The competition has grabbed your customers.   You are approaching the top of the “S Curve.”   Your customer’s requirements have changed.   Technological advances expand the possibilities.   Fundamental shifts in industry.

13. Motivation for Redesigning BPR Improved Customer Focus Improved Cycle Time Improved Process Efficiency

14. Building Blocks Currentprocessreview Transform the business Baselineanalysis Customerrequirementanalysis Design specifications Design options High-leveldesign Detailed design Model and validate the new design Build in CI feedback Pilot the new design Design principles AnalysisPhase DesignPhase ImplementationPhase

15. Process Selection  Broken Processes: Which processes are in the deepest trouble?  Important Processes: Which processes have the greatest impact on the company’s customers?  Feasible Processes: Which processes are at the moment most susceptible to successful redesign?

16. Broken Processes - Symptom  Extensive information exchange, data redundancy, and rekeying  Inventory, buffers, and other assets  High ratio of checking and control to value- adding  Rework and iteration  Inadequate feedback along chains  Complexity, exceptions, and special cases

17. Important Processes Customer Issues Product Cost On-time Delivery Product Features Market Processes Product Design Order Processing Procurement Company

18. Feasible Processes Reengineering Effort Process Scope Project Cost Team Strength Owner Commitment

19. Common Themes   Use reengineering to grow the business.   Service the customer: Competing with quality of products and services.   Increase revenue instead of simply cutting back through cost reduction and downsizing.

20. Reengineering Cast Members Operations research teams Operations research teams Benchmarking teams Benchmarking teams Voice of the client data collection teams Voice of the client data collection teams Workflow design teams Workflow design teams Application design teams Application design teams Pilot teams Pilot teams Implementation teams Implementation teams Transition teams Transition teams Executive Sponsor Project Team Design (3-6 months) Analysis (2-4 months) Implementation (12-24 months)

21. Understanding and Rethinking Business Processes Understand the Customer Understand the Process Benchmarking

22. Understanding The Customer   What are the customers’ real requirements?   What do they say they want and what do they really need?   What problems do they have?   What processes do they perform with the output?

23. Understanding Processes   Why does this particular process need to exist versus some alternative solution or no process at all?   Why does the process require this much time to achieve certain results?   Why is the process organized this way?   What aspects of the process are truly important to the customer?

24. Revisiting Process Activities Process Real Value Added Business Value Added No Value Added

25. Process Evaluation and Analysis Existing Process Measures of Performance The Technology Trap Activity-Based Costing “Do not automate something that should not have been done manually.”

26. Some Characteristics of Reengineered Processes   Several jobs are combined into one   Case worker   Case team   Workers make decisions   The steps in the process are performed in a natural order   Processes have multiple versions

27. Some Characteristics of Reengineered Processes   Work is performed where it makes more sense   Checks and controls are reduced   Reconciliation is minimized   A case manager provides a single point of contact   Hybrid centralized/decentralized operations are prevalent

28. Ways to Structure the Organization  Flattening Organizational Structures  Team Design: Baseball, Football, and Tennis Doubles  Job Design: Generalists Vs. Specialists  Compensation Schemes: Paying for performance and/or business results.

29. Primary Roadblocks   Failure to develop the necessary leadership.   Not helping people to think in terms of business processes.   Neglecting to align measures and rewards with the new business process thinking.

30. Most Common Errors (1)  Trying to fix the process instead of changing it  Don’t focus on business processes  Ignore everything except process redesign  Neglect people’s values and beliefs  Be willing to settle for minor results  Quit too early

31. Most Common Errors (2)  Assign someone who does not 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.

32. Most Common Errors (3)  Attempt to reengineer when the CEO is two 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.

33. Most Common Errors (4)  Pull back when people resist making reengineering changes.  Drag the effort out.  Try to make reengineering happen from the bottom up.