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Business Process Reengineering: Principles, Methods, Tools and Implementation Minder Chen, Ph.D. MS-5F4 School of Management George Mason University Fairfax,

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Presentation on theme: "Business Process Reengineering: Principles, Methods, Tools and Implementation Minder Chen, Ph.D. MS-5F4 School of Management George Mason University Fairfax,"— Presentation transcript:

1 Business Process Reengineering: Principles, Methods, Tools and Implementation Minder Chen, Ph.D. MS-5F4 School of Management George Mason University Fairfax, VA Phone: Internet: Organization Technology Process

2 BPR - 2 © Minder Chen, 1997 Processes Are Often Cross Functional Areas Supplier Customer/ Markets Needs Value-added Products/ Services to Customers "Manage the white space on the organization chart!" "We cannot improve or measure the performance of a hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it."

3 BPR - 3 © Minder Chen, 1997 Definition of Reengineering The fundamental rethinking and radical redesign of core business processes to achieve dramatic improvements in critical performance measures such as quality, cost, and cycle time. Source: Adapted from Hammer and Champy, Reengineering the Corporation, 1993

4 BPR - 4 © Minder Chen, 1997 What Business Reengineering Is Not? Automating: Paving the cow paths. (Automate poor processes.) Downsizing: Doing less with less. Cut costs or reduce payrolls. (Creating new products and services, as well as positive thinking are critical to the success of BPR.)

5 BPR - 5 © Minder Chen, 1997 Reengineering Is... Obliterate what you have now and start from scratch. Transform every aspect of your organization. Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review, July-August, 1990, pp Extremist's View

6 BPR - 6 © Minder Chen, steps, 5 departments, 19 persons Issuance application processing cycle time: 24 hours minimum; average 22 days only 17 minutes in actually processing the application Department A Step 1 Department A Step 2 Department E Step 19.. Issuance Application Issuance Policy New Life Insurance Policy Application Process at Mutual Benefits Life Before Reengineering* *Source: Adapted from Rethinking the Corporate Workplace: Case Manager at Mutual Benefit Life, Harvard Business School case , 1991.

7 BPR - 7 © Minder Chen, 1997 The New Life Insurance Policy Application Process Handled by Case Managers Case Manager Underwriter Physician Mainframe LAN Server PC Workstation application processing cycle time: 4 hours minimum; 3.5 days average Application handling capacity double Cut 100 field office positions

8 BPR - 8 © Minder Chen, 1997 BPR Principles Organize around outcomes, not tasks. Have those who use the output of the process perform the process. Subsume information-processing work into the real work that produces the information. Treat geographically dispersed resources as though they were centralized. Link parallel activities instead of integrating their results. Put decision points where the work is performed and build controls into the process. Capture information once and at the source. Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review, July-August, 1990, pp

9 BPR - 9 © Minder Chen, 1997 Business Process Reengineering Life Cycle Define corporate visions and business goals Identify business processes to be reengineered Analyze and measure an existing process Identify enabling IT & generate alternative process redesigns Evaluate and select a process redesign Implement the reengineered process Continuous improvement of the process Visioning Identifying Analyzing Redesigning Evaluating Implementing Improving Manage change and stakeholder interests BPR-LC  

10 BPR - 10 © Minder Chen, 1997 Phase 1: Visioning Apply to enterprise-wide reengineering effort. Develop overview of current and future business strategies, organizational structure, and business processes. Develop organizational commitment to reengineering. Develop and communicate a business case for action. Create a new corporate vision. Set stretched goals. Prioritize objectives. Assess implementation capabilities and barriers. Define corporate vision and business goals

11 BPR - 11 © Minder Chen, 1997 Phase 2: Identifying Construct high-level process map Develop a process hierarchy Build enterprise-wide data models (optional) Evaluate the processes Select processes to be reengineered Prioritize and schedule processes to be reengineered Identify business processes to be reengineered

12 BPR - 12 © Minder Chen, 1997 TI Semiconductor Business Process Map Manufacturing Capability Development Strategy Development Product Development Customer Design & Support Order Fulfillment Concept Development Manufacturing Market Customers Customer Communication Source: Adapted from Hammer and Champy, 1993, p. 119.

13 BPR - 13 © Minder Chen, 1997 Criteria for Selecting Processes Broken Bottleneck Cross-functional or cross-organizational units Core processes that have high impacts Front-line and customer serving - the moment of the truth Value-adding New processes and services Feasible

14 BPR - 14 © Minder Chen, 1997 Phase 3: Analyzing Conduct preliminary scoping. Develop a high-level AS-IS baseline process model (work flow model). Avoid analysis paralysis by conducting preliminary analysis at fairly high level. Surface purpose and assumptions of the process (Ask WHY?). Perform activity-based costing: costs can be assigned based on actual activities and productivity. Reveal hidden time and nonvalue-added activities. Measure cycle-time and quality. Measure profitability in terms of task, product, and customer type. Analyze and Measure an Existing Process

15 BPR - 15 © Minder Chen, 1997 Phase 4: Redesigning Information Technology Information Technology Business Reengineering Business Reengineering How can IT support business strategies and business processes? Technology-driven Business Vision & Strategy Business-pulled How can business strategies be changed business processes be transformed using IT? Identify enabling IT & generate alternative process redesigns Identify enabling IT & generate alternative process redesigns

16 BPR - 16 © Minder Chen, 1997 Three Steps in Redesigning Processes Simplification: –Task: Change business rules or procedures of a specific task –Workflow: A process chain is simplified by elimination of nonvalue-adding activities Integration: –Redesign tasks into a logical and effective process. –A reengineered process often crosses functional boundaries. –It offers opportunity for eradicating interdepartmental redundancies and restructuring the organization. Automation: –Usually accompanies nontechnical redesign of organization structures and procedures. –All reengineering costs and benefits can be projected into a model. –Reengineering often pays for itself - sources of funding for technology investments are frequently cost savings generated by organizational change.

17 BPR - 17 © Minder Chen, 1997 Phase 5: Evaluating Develop criteria of evaluating alternatives of redesigned processes: Cost, Benefit, and Risk. Evaluate design alternatives Select and recommend a reengineered process Evaluate and select a process redesign

18 BPR - 18 © Minder Chen, 1997 Phase 6: Implementing Plan IT implementation Plan organization implementation Conduct a pilot project Develop a prototype system –Technical Design –Social Design Evaluate results from the pilot project and the prototype Prepare large-scale roll out Implement the reengineered process

19 BPR - 19 © Minder Chen, 1997 Phase 7: Improving Develop performance measurement and reward systems in the reengineered process Monitor process performance constantly Improve the process on a continuous basis Improve the process continuously

20 BPR - 20 © Minder Chen, 1997 The Quest of Competitiveness Downsizing Headcount & Restructuring the Portfolio Total Quality Management & Continuous Process Improvement Enterprise-Wide Reengineering & Business Process Reengineering Reinventing Industries & Regenerating Strategies Smaller Better Much Better Different Adapted from: Gary Hammel and C. K. Prahalad, Competing for the Future, Harvard Business School Press, (Kaizen)

21 BPR - 21 © Minder Chen, 1997 Criteria for BPR Projects Business Reengineering Functional Process Improvement Business as Usual Scope Role of IT Cross Function/ Organization Function Task Improvement Goals Status QuoRadical Incidental Fundamental Symbolic Intense Senior Management Involvement

22 BPR - 22 © Minder Chen, 1997 Dual Roles of Information Technology in BPR Conduct Reengineering Project Existing Business Process Reengineered Business Process Data base systems Expert systems Client/server technology Groupware Work flow management systems EDI Enterprise-wide networking Mobile computing Data base systems Expert systems Client/server technology Groupware Work flow management systems EDI Enterprise-wide networking Mobile computing Supporting Tools IT Enablers Process modeling tools Process simulation tools Group requirement elicitation tools Activity-based costing tools Process modeling tools Process simulation tools Group requirement elicitation tools Activity-based costing tools

23 BPR - 23 © Minder Chen, 1997 Field operations are on their own High bandwidth networks, remote access, wireless network Simultaneous centralization and decentralization Breakthrough Thinking Old Assumption Enabling Technology Breakthrough Thinking Only specialists can perform complex work Knowledge base systems, expert systems Case managers handle a case with no hands-off Managerial hierarchy is required for control & supervision Accessible data & analytic tools, exception monitoring Self-managed teams Product development is a sequential activity Common CAD/CAM systems Concurrent engineering IS developed should be driven by IS personnel I-CASE and JAD Rapid application development

24 BPR - 24 © Minder Chen, 1997 A Framework of Integrating Methods & Tools for BPR Elicit semi-formal process and data models Construct/ revise static business process models Analyze the dynamics of the process Analyze the activity costs of the process information of a process semi-formal process model cost and performance data compared to the baseline performance data activity cost data Target information system generated finalized process model GDSS (GroupSystems V) ABC Tools (IDEFCost, Easy ABC) Simulation Tools (SIMPROCESS) CASE, C/S Tools, DBMS, Work Flow Software, & other Enabling Technologies Construct/ revise business data models Data Modeling Tools (ERwin, BDF) Construct formal IS models & generate information systems semi-formal data model Process Modeling Tools (Design/IDEF, IDEFine, BDF)

25 BPR - 25 © Minder Chen, 1997 ICOM in IDEF0 The ICOM of a function represents certain system principles: Inputs are transformed into outputs, controls constrain or dictate under what conditions transformations occur, and mechanisms describe how the function is accomplished. "Inputs are transformed by the function into outputs according to controls, using mechanisms." An IDEF box and its ICOM can be described as: I C O M

26 BPR - 26 © Minder Chen, 1997 An Example of an IDEF0 Diagram

27 BPR - 27 © Minder Chen, 1997 IDEF0 Model Structure A0 A4 A-0 A GENERAL DETAILED The diagram A0 is the "parent" of the diagram A4. I1 I2 C1 O1 Abstraction Refinement I1 I2 O1 C1

28 BPR - 28 © Minder Chen, 1997 Attributes of Processes Basic –Name –Description –Author –Audit trails Performance data –Importance: Core, Critical –Value Added: Business, Customer, None –Cycle time: Mean, Variance, and Distribution –Cost/Unit

29 BPR - 29 © Minder Chen, 1997 Standard Flowchart Symbols Activity Movement/ Transportation Decision Point Paper document Delay Storage Connector Begin/End Annotation Direction of process flow Transmission

30 BPR - 30 © Minder Chen, 1997 Functional Flowchart (Process Mapping) Customer Service Credit Checking Inventory Shipping Begin Enter Order Check Credit Yes Order Processing Update Inventory Ship order End PROCESSPROCESS  CYCLECYCLE  ACTIVITYACTIVITY Wait for shipping No Customer

31 BPR - 31 © Minder Chen, 1997 TeamFlow from CMF at

32 BPR - 32 © Minder Chen, 1997 The Reengineering Diamond Business Processes & Functions Business Processes & Functions Management & Measurement Systems Management & Measurement Systems Jobs, Skills, & Organizational Structures Values and Beliefs Values and Beliefs Enlighten Entail Demand Foster Culture Customers & Info. Tech. Competitors Markets Customers & Suppliers

33 BPR - 33 © Minder Chen, 1997 Positive Preconditions for Reengineering Senior management commitment and sponsorship Realistic expectations Empowered and collaborative workers Strategic context of growth and expansion Shared vision Sound management process Appropriate people participating full-time Sufficient budget Source: Bashein, B. J., Markus, M. L., Riley, P., "Preconditions for BPR Success," Information Systems Management, Spring 1994, Vol. 11, No. 2, pp


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