Business Process Reengineering: Definition, Benefits, and Examples

Business Process Unit III MCA I Year BUSINESS PROCESS REENGINEERING 1

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WHATISA BUSINESS PROCESS? A business process is a collection of activities which together produce something of value to a customer e.g. Customer Order Entry 3

DEFINITION 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. 4

WHATTOREENGINEER? BPR changes processes, and not functions, departments, geographies or tasks. 5

WHATITISNOT? Reengineering is not reorganizing. Modifying how an organization is structured and redesigning an organization s business processes are two different things. An organizational structure should be designed so that it best supports redesigned business processes. Reengineering is not downsizing either. Downsizing focuses on the reduction of workforce to achieve short-term cost savings. Reengineering, on the other hand, focuses on rethinking from the ground up, finding more efficient ways of working including eliminating work that is unnecessary. 6

REASONSFOR REENGINEERING New Era Old Era High Competition High Demand Innovation Speed Service &Quality Efficiency Control 7

EXAMPLES 8

EXAMPLES 9

BENEFITSOF REENGINEERING The rewards of reengineering are many including: 1) empowering employees; 2) eliminating waste, unnecessary management overhead, and obsolete or inefficient processes; 3) producing often significant reductions in cost and cycle times; 4) enabling revolutionary improvements in many business processes as measured by quality and customer service; and 5) helping top organizations stay on top and low- achievers to become effective competitors. 10

BUSINESS PROCESS REENGINEERING Imperative for Survival Methodology 11 Steps

REENGINEERINGSURVIVALSTUDY Introduction: The number of firms is increased to close because of a) Inefficiency b) too Inward Looking c) inflexibility 12

- CONTINUED Similar changes occurred in developed and developing nations also and still facing a similar challenge. Example: Ford Motor Company faced business extinction at one time and found the paths to renewed success and inspires others. Business Reengineering Process thro which the continuous success and survival is indicated (by Americans). Term is invented by Michael Hammer. 13

REENGINEERING IMPERATIVEIN USA The business climate made reengineering necessary in the United States. US gave great industrial philosophers like Adam Smith and Henry Ford. But at one time their business was also in trouble. This situation arises because of three main reasons. They are, a) The Assembly line model of production, where customer waited in line for delivery b) Competition within the country is very low. c) Global competition was largely non-existent. To recover from this situation, FORD changed from their Production Supremacy to Supplier primacy, when the Model T Ford released in the market. Henry Ford said I will give the customer any color of car he wants so long as it s black. 14

-CONTINUED Japanese organizations entered into America (after War) Japanese were too smart, they move small market into world markets with extraordinary quality and manufacturing philosophy. They cut out unnecessary waste such as, 1. Safety stock Inventories 2. Multiple suppliers 3. External Inspection 4. High Quality 5. Low cost in regular basis 15

JAPANESE PARADIGM US adopted the Japanese paradigm because of : 1. They recognized that economy of scale is not as important as economy of time. So, the entire approach was to be flexible and respond quickly to changing customer needs. 2. They opted for flexibility and multi- skilling techniques in work culture and this created the ability to respond. i.e. discard old and narrow focused to new innovations in work. 3. Customer s response become the primary objective rather than the growth alone. 16

REENGINEERINGSCENARIOIN EUROPE In Europe, - Quiet Transformations are taking place vitally. For example,(eg1): - Lubricants division of a large oil company has cut its order delivery time to 40% ( from 6weeks to 19 days). - Eliminated $200 millions in inventory and doubled its profits. - It aims in overall reduction in operating expenses to 35%. For example (eg2:) : In Rover car company, - aims to fulfill 90% of customer orders. - He used around nine key business processes. - New product introduction - Only European car-maker to reverse the falling output and sales trends during first five months of 1993. 17

IMPERATIVEIN INDIA The first country realized the value of destruction and destroyer. Quality competitions by ISO 9000 and TQM Computerization of processes Many reasons for lacking: Blaming technology by system professionals Users blame technology and system professionals Top management blames both users and system professionals. Consultants blame all others. 18

Global environment is pulling Indian organizations into - Customer orientation - quick response time - quality imperatives - cost minimization Conclusion: - environmental pull - technology push - Economic liberalization 19

Cant do redefine their mission and objectives clinically reassess the key business processes achieve improvements in process efficiency and effectiveness thro BPR. Examples: - HP, Pepsi abroad, Federal Express 20

INSTANCESOF RE IN INDIAN ORG In year 1997, Major BPR in customer ordering , services functions Manufacturing and marketing Organizing market research once in six months to know customer feedback on their products and general view on market needs Performance levels of 3 major process: - Customer orders - Customer service - Customer feedback Three points of customers: - Sales executive - Installation technician - Market Researcher 21

INSTANCESIN RE IN INDIA Leasing and financing company Manufacturing company News paper publishers 22