Published on September 26, 2014
The Role of BPR in the implementation of ERP system Concept and Cases
Business Process Re-engineering Business process reengineering (BPR) is the analysis and redesign of workflows within and between enterprises. The main aim is to optimize end-to-end processes and automate non-value-added tasks. The concept of BPR was first introduced in the late Michael Hammer's 1990 Harvard Business Review article. It received an increased attention a few years later, when Hammer and James Champy published their best-selling book, Reengineering the Corporation. ERP in BPR Slide : 2
ERP ERP is short for enterprise resource planning. Enterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications This is used to manage the business and automate many back office functions related to technology, services and human resources. ERP software integrates all facets of an operation, including product planning, development, manufacturing, sales and marketing. ERP in BPR Slide : 3
BPR and ERP A complete understanding of the traditional business method in conjunction with the ERP method of business processing will help in opting for the right method to achieve success. An ERP implementation can help to speed up the business process in which it involves in channeling power and resources through various departments involved in the business like accounting, finance, inventory management, etc. This ensures that the main focus is on the business process and not on the functional departments, like the traditional business process. ERP implementation can be used not just to streamlining the business process but also to enhance and optimize the existing business process. ERP in BPR Slide : 4
Gap Analysis Even a custom tailored ERP system meets only 80 percent of the company’s functional requirements. This gap which exists between company’s requirements and the proposed ERP system needs to be analyzed and is termed as gap analysis. Most painful solution is to reengineer the business process to suit ERP package. Though this has the advantage of not undergoing for costly software change process, the same is not possible to be implemented without antagonizing the workers. ERP in BPR Slide : 5
Survey by Forrester A survey conducted by Forrester research states the following Choose the application that fits the business and customize little (37 percent) Customize applications to fit the business (5 percent) Reengineer business to fit the application (41 percent) No existing policy (17 percent). Re- Engineering 41% no existing Policies 17% Little Customization 37% Dynamics of ERP Customization 5% ERP in BPR Slide : 6
Small r and Big R Small r Software guided the processes Big R Humans guided the software EPR in BPR Slide : 7
Microsoft Small r Microsoft implemented SAP R/3 making as little change as possible to software. In organizational processes also very little changes took place. This confirms small-r re-engineering. Usually, small-or medium-size firms that do not have enough resources to make the changes in the ERP software implement it in this way. Small-r is also followed by big firms like Microsoft that has wasted lost on previous projects on ERP implementation and lack patience to make the required changes also has resulted in the following method of implementation ERP in BPR Slide : 8
Small r Advantages of small-r re-engineering are: Disadvantages of small-r re-engineering are: It is faster and cheaper as it does not require major changes in software or organizational processes As processes are not changing, number of employees are also not changing. Generic processes in this approach are maintained as such and is an ideal option for financial and many back office processes for which the value addition in such processes may not be visible from outside. Small-r might miss a window of chance for opportunity by not choosing ERP software which demands process changes. SAP R/3 recommends not making changes in the software for small- or medium-sized companies. Advanced business application programs work bench is an integral part of R/3 system for customizing application. ERP in BPR Slide : 9
Big R at Boeing Boeing is an example for big-R re-engineering while implementing Baan [Busse, 1998; O’ Leary, 2000] This re-engineering approach is ideal for cutting edge firms with good market power (O’Leary, 2000). ERP vendors share some risk as they take part in the research and comes out with products which are unique in the ERP solutions market. There are around 18,000 users across four geographical regions and 19 plants with the role of BPR in ERP systems 663 scalability provision to accommodate 50,000 users in the company. Re-engineering was carried out at Boeing in 1998. Materials requirement planning took only 37 minutes instead of days prior to ERP implementation. ERP in BPR Slide : 10
Advantages & Disadvantages Advantages of big-R re-engineering To make the required changes also has resulted in the following method of implementation. The firm is the first one to enjoy the benefits of the new ERP system generated through big-R ERP partner shares some of the costs and some part of the risk. Disadvantages of big-R re-engineering Changing software is an expensive proposition Upgrade is affected which is difficult to implement because of software change. ERP in BPR Slide : 11
Indonesia State Electrical Utilities In Indonesia, the electrical utilities is run by a state-owned integrated electricity company to serve million customers households, industry, business and others. In this condition they need to use information technology not only to reduce costs and streamline business processes, but also to build competitive advantage and customer satisfaction. This why Accenture suggest to implement an ERP system to this state owned integrity electricity company. ERP in BPR Slide : 12
Problems This company as analyzed by Accenture has been operating throughout the country with non-integrated systems and non standardized business processes. The business processes are not standardized and consolidated financial reports were not produced on a timely basis, lacking important decision-making information. Another issue related to the business process in this company is they are lack of integrated knowledge and control of inventories and assets led to underutilization of assets The company only concentrated on basic record keeping making it difficult to introduce training plans, career management, succession plans, transparent performance evaluation, and other requirements ERP in BPR Slide : 13
Accenture came to Rescue Accenture implemented an integrated Enterprise Resource Planning (ERP) that covers Financial Management, Material Management and Human Resource Management areas. Considering the large scale of ERP Implementation and considering the company's first experience with an integrated system, Accenture decided that major change management effort is required. To minimize implementation risk, Accenture selected a multiple phase approach. ERP in BPR Slide : 14
A total of over 500 training classes were held and a total of over 10,000 training days were consumed by users to learn the ERP system. Appropriate management sponsorship was maintained throughout the implementation, including training which resulted in over 95% training attendance rate. Throughout the implementation journey, Accenture managed to help the company build ERP template that consists of standard policies, business process, chart of accounts and reports to be used at other company's business units. ERP in BPR Slide : 15
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