Unit 1 - Intro and History of BPR

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Published on March 7, 2014

Author: sreebaridula

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Introduction and History of BPR: Introduction and History of BPR History of Quality Management: History of Quality Management Before Industrial Revolution, skilled craftsmen served both as manufacturers and inspectors, building quality into their products through their considerable pride in their workmanship . Industrial Revolution changed this basic concept to interchangeable parts . Likes of Thomas Jefferson and F. W. Taylor (“Scientific Management” fame) emphasized on production efficiency and decomposed jobs into smaller work tasks. Holistic nature of manufacturing rejected! History of Quality Management: History of Quality Management Statistical approaches to quality control started at Western Electric with the separation of inspection division. Pioneers like Walter Shewhart , George Edwards, W. Edwards Deming and Joseph M. Juran were all employees of Western Electric. After World War II, under General MacArthur's Japan rebuilding plan, Deming and Juran went to Japan. Deming and Juran introduced statistical quality control theory to Japanese industry. The difference between approaches to quality in USA and Japan: Deming and Juran were able to convince the top managers the importance of quality . History of Quality Management: History of Quality Management Next 20 odd years, when top managers in USA focused on marketing, production quantity and financial performance, Japanese managers improved quality at an unprecedented rate. Market started preferring Japanese products and American companies suffered immensely. America woke up to the quality revolution in early 1980s. Ford Motor Company consulted Dr. Deming to help transform its operations. (By then, 80-year-old Deming was virtually unknown in USA. Whereas Japanese government had instituted The Deming Prize for Quality in 1950.) History of Quality Management: History of Quality Management Managers started to realize that “quality of management” is more important than “management of quality.” Birth of the term Total Quality Management (TQM) . TQM – Integration of quality principles into organization’s management systems . Early 1990s: Quality management principles started finding their way in service industry . FedEx, The Ritz-Carton Hotel Company were the quality leaders. PowerPoint Presentation: History of BPR The business world has been evolving: in the ‘60s industry concentrated on how to produce more (quantity), in the ‘70s how to produce it cheaper (cost) in the ‘80s how to produce it better (quality) in the ‘90s how to produce it quicker (lead time) in the 21st century how to offer more (service) Change Management Philosophies: Change Management Philosophies PowerPoint Presentation: History of BPR Most agree that Michael Hammer laid the foundation to the reengineering approach… …But many factors influenced the birth and hype around BPR The origins can be traced back to a number of successful projects undertaken by management consulting firms like McKinsey in the 80’s TQM had brought the notion of process improvement onto the management agenda The recession and globalization in late 1980’s and early 1990’s stimulated companies to seek new ways to improve business performance Programs often aimed at increasing flexibility and responsiveness Middle management under particular pressure PowerPoint Presentation: History of BPR Articles and books by Hammer, Davenport, Short, Champy etc. legitimized and defined the reengineering approach Early success stories were heavily published in the popular press Many consultants/vendors launched their own versions of BPR All types of change programs were labeled reengineering Gave BPR a bad name …But many factors influenced the birth and hype around BPR The Productivity Paradox (Stephen Roach) Despite powerful market and service innovations related to IT and increased computer power in the 1980’s there was little evidence that IT investments improved overall productivity Organizations were not able to utilize the capabilities of the new technology – Automating inefficient processes has limited impact on productivity PowerPoint Presentation: 10 Introduction to Reengineering Michael Hammer, a former MIT professor in computer science published an article in the Harvard Business Review, emphasizing the need for fundamental organizational change and for the first time using the term Business Process Reengineering Business Process Reengineering (BPR) The a nalysis and design of workflow and processes within and between organizations.” Davenport and Short 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 The use of information technology to radically redesign the business processes in order to achieve dramatic improvements in their performance.” Hammer PowerPoint Presentation: 11 Introduction to Reengineering Key Words Dramatic Improvement : Quantum leap in performance, achieving breakthroughs. Radical: Means going to the roots. Starting with a clean slate approach and reinventing. Process : A group of related tasks that together create value for a customer. Ex: Order Fulfillment Redesign : How work is done? – A well designed process. Goals of BPR: Goals of BPR Increase service level Reduce total process cycle time Increase throughput Reduce waiting time Reduce activity cost Reduce inventory costs PowerPoint Presentation: ELEMENTS OF BPR Organization Related Elements Organization Structure Role Assignment Regulation and Culture Incentive Education/Training Process Related Elements Business Procedure Simplification Business Process Standardization Work Flow Technology Related Elements IT Business Technology Project Management Technology Four Revolutions Affecting Business Today: Four Revolutions Affecting Business Today New Competitors New Rules of Competition New Technologies New Work Force PowerPoint Presentation: Three forces are driving companies towards redesign (The three C’s, Hammer & Champy, 1993) Customers are becoming increasingly more demanding Competition has intensified and is harder to predict Change in technology constant pressure to improve; design new products faster flexibility and ability to change fast are requirements for survival When Should a Process be Reengineered? (I) PowerPoint Presentation: Useful questions to ask (Cross et al. (1994)) Are customers demanding more for less? Are your competitors providing more for less? Can you hand-carry a job through the process much faster than the normal cycle time (ex five times faster)? Have your incremental improvement efforts been stalled? Have technology investments been a disappointment? Are you planning to introduce radically new products/services or to serve new markets? Are you in danger of becoming unprofitable? Have cost-cutting programs failed to turn the ship around? Are operations being merged or consolidated? Are the core business processes fragmented? When Should a Process be Reengineered? (II) PowerPoint Presentation: Processes (not organizations) are redesigned and reengineered. Confusion arises because organizational units are well defined, processes are often not. Two types of Processes – Formal (guided by written policies and procedures) processes are prime candidates for reengineering because Typically involve several departments and many employees. More likely rigid and therefore more likely to be based on invalid assumptions . Informal (Not Written) Processes are contained within an unit of organizational structure ( eg . A department or division). Therefore the issues of ownership, control and information sharing tend to be minimal. What Should be Reengineered? (I) PowerPoint Presentation: Screening criteria Dysfunction Which processes are in deepest trouble (most broken or inefficient)? 2. Importance Which processes have the greatest impact on the company’s customers? 3. Feasibility Which processes are currently most likely to be successfully reengineered? What Should be Reengineered? (II) PowerPoint Presentation: Symptoms and diseases of broken processes Dysfunctional or Broken Processes Symptom Disease 1 Extensive information Arbitrary fragmentation exchange, data redundancy of a natural process and re-keying 2 Inventory, buffers and System slack to cope with other assets uncertainty 3 High ratio of checking and Fragmentation control to value-adding 4 Rework and (re)iteration Inadequate feedback along chains 5 Complexity, exceptions Accretion onto a simple base and special cases PowerPoint Presentation: Assessed by determining issues the customers feel strongly about and identifying which processes most influence these issues Importance Customer Issues Product Cost On-time Delivery Product Features After-sales service Market Processes Product Design Order Processing Procurement CRM Company PowerPoint Presentation: Determined by: Process Scope, Project Cost, Owner Commitment and the Strength of the Redesign Team Larger projects offer potentially higher payoffs but lesser likelihood of success Feasibility Process Feasibility Process Scope Project Cost Team Strength Owner/Corp. Commitment Process Feasibility Process Scope Project Cost Team Strength BPR Objectives: BPR Objectives Streamline/Compression – remove waste, consolidate and cutting major tasks of cost and capital through out the value chain Lose Wait/Speed – squeeze out delays Orchestrate – let the most able enterprise execute, outsource Mass Customize – any time, any place, any way- Synchronize – both the physical and virtual parts of the process, real time processing of data BPR Objectives: Digitize and Propagate – capture information digitally at the source and propagate it through the process Vitrify – provide glass like visibility of the process Sensitize – fit the process with sensors and feedback loops for prompt action Analyze and Synthesize – generate added value by enhancing the process, constant improvement and iteration . BPR Objectives BPR Objectives: Customer Focus – Eliminate Customer Complaints. Flexibility - adaptive processes and structures to changing conditions and competition Quality- superior service and value to the customers. Innovation : Leadership through imaginative change for competitive advantage. Productivity : Improve drastically effectiveness and efficiency. BPR Objectives Business Process Reengineering: Business Process Reengineering Principles of Reengineering PowerPoint Presentation: DIMENSIONS OF BPR PowerPoint Presentation: FIVE KEY PRINCIPLES OF BPR PowerPoint Presentation: Principles of Reengineering Seven rules of doing work proposed by Hammer relating to who does the work, where and when it is done and information gathering and integration. Rule Principle 1 Organize around outcomes, not tasks 2 Have those who use the output of the process perform the process 3 Merge information processing work into the real work that produces the information - 4 Treat geographically dispersed resources as though they work centralized 5 Link parallel activities instead of integrating their results 6 Put the decision point where the work is performed and build control into the process 7 Capture information once - at the source BPR is used for: BPR is used for Eliminate multiple reviews & approval Combining duplicate activities Put processes in parallel Implement demand pull Outsource inefficient activities Eliminate movement of work Organize multifunctional teams - BENEFITS OF REENGINEERING: BENEFITS OF REENGINEERING 30 - 35 % REDUCTION IN COST OF SALES 65 - 70 % REDUCTION IN COST OF QUALITY 75 - 80 % REDUCTION IN DELIVERY TIME 35 - 40 % REDUCTION IN MANPOWER 60 - 80 % REDUCTION IN INVENTORY AN UNPREDICTABLE, BUT SUBSTANTIAL INCREASE IN MARKET SHARE PowerPoint Presentation: 31 BPR Success Stories and Failures Success Stories Ford cuts payable headcount by 75% Mutual Benefit Life improves underwriting efficiency by 40% Xerox redesigns its order fulfillment process and improves service levels by 75-97% and cycle times by 70% with inventory savings of $500 million Detroit Edison reduces payment cycles for work orders by 80% Failures An estimated 50-70% of all reengineering projects have failed Those that succeed take a long time to implement and realize PowerPoint Presentation: Lack of support from senior management Poor understanding of the organization and the infrastructure Inability to deliver necessary technology Lack of guidance, motivation and focus Fixing a process instead of changing it Neglecting people’s values and beliefs Willingness to settle for marginal results Quitting too early Allowing existing corporate cultures and management attitudes to prevent redesign Not assigning enough resources Working on too many projects at the same time Trying to change processes without making anyone unhappy Pulling back when people resist change Etc… Reasons for BPR Failures BPR – What Happened?: BPR – What Happened? Started as real people with real problems Ford Motor Co., Mutual Benefit Life, HP Synthesis of 3 concepts Technology Business processes Clean-sheet-of-paper approach Companies did stuff, academics and consultants started to “model make” Davenport, Hammer and Champy wrote “bible” articles and books The Feeding Frenzy: The Feeding Frenzy Top managers + big-time consultants+IT vendors = $$$ Early successes were trumpeted Projects labeled “BPR” People always looking for “magic solution” Consultants started packaging BPR services Big $$$ contracts Executives needed to justify $$$ spent Layoffs quickest way to realize savings IT firms selling hardware, software and reengineering consulting The Fad That Forgot People , Davenport, T.H., Fast Company, November 1995. Reality Bites: Reality Bites Massive layoffs labeled “reengineering” Alienation of good employees Treated as interchangeable cogs in corp. machine 25 yr old MBA’s making $80K as BPR “experts” Major project failures Consultants start repositioning for next wave And sell BPR to “rest of the world” The Fad That Forgot People , Davenport, T.H., Fast Company, November 1995. The Good Stuff: The Good Stuff Focus on business processes IT only useful if it helps people do work A Lesson: The bigger the hype, the greater the chances of failure. Techniques and tools of BPR can still be useful The Fad That Forgot People , Davenport, T.H., Fast Company, November 1995. BPR Is NOT TQM: BPR Is NOT TQM BPR is Not?: BPR is Not? BPR may sometimes be mistaken for the following four tools: 1. Automation is an automatic, as opposed to human, operation or control of a process, equipment or a system; or the techniques and equipment used to achieve this. Automation is most often applied to computer (or at least electronic) control of a manufacturing process. 2. Downsizing is the reduction of expenditures in order to become financial stable. Those expenditures could include but are not limited to: the total number of employees at a company, retirements, or spin-off companies. BPR is Not?: BPR is Not? 3. Outsourcing involves paying another company to provide the services a company might otherwise have employed its own staff to perform. Outsourcing is readily seen in the software development sector. 4. Continuous improvement emphasizes small and measurable refinements to an organization's current processes and systems. Continuous improvements’ origins were derived from total quality management (TQM) and Six Sigma.

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