1. 07. Business Process Reengineering (BPR)
Rev: Mar, 2014
Euiho (David) Suh, Ph.D.
POSTECH Strategic Management of Information and Technology Laboratory
(POSMIT:
Dept. of Industrial & Management Engineering POSTECH

2. Contents 1 Business Process Reengineering 2 Case Study 1) Background2)
Interpretations of BPR 3)
Principles and Procedures of BPR 4)
BPR vs. Other Programs 5)
Reengineering Order Management 2
Case Study

3. Products Services Capabilities
1. Business Process Reengineering
1) Background
Strategic Uses of IT
Companies that emphasize strategic business use of IT to gain competitive differentiation
Products
Services
Capabilities

4. The Role of Information Technology
1. Business Process Reengineering
1) Background
The Role of Information Technology
IT Plays a major role in reengineering most business processes
Increases process efficiency
Improves communication
Facilitates collaboration

5. Globalization ! Why BPR? Customer Innovation Driven Core Competence
1. Business Process Reengineering
1) Background
Why BPR?
Innovation
Customer
Driven
Core
Competence
Globalization !
Change
Competition

6. Reengineering Business Processes
1. Business Process Reengineering
2) Interpretations of BPR
Reengineering Business Processes
Called BRP or Reengineering
Fundamental rethinking and radical redesign of business processes
Dramatic improvements in critical contemporary measure of performance, such as cost, quality, speed, and service
Potential payback is high, but so is risk of disruption and failure
Organizational redesign approaches are an important enabler of reengineering
Includes use of IT, process teams, case managers
Fundamental Concept of BRP
Process
Fundamental
Radical
Dramatic
Shift from function based thinking to process based thinking
Fundamental rethinking of the way of conducting business
Disregarding all existing structures and inventing complete new ways – not improvement or modification
Making quantum leaps in performance rather than incremental improvement

7. 1. Business Process Reengineering
2) Interpretations of BPR
Definition of Process
A process is a cross-functional interrelated series of activities that convert business inputs into business outputs
Supplier
Customer
Input
Output
Activity
Activity
Activity
Process

8. Seven Principles of BPR (1/8)
1. Business Process Reengineering
3) Principles and procedures of BPR
Seven Principles of BPR (1/8)
Organize around outcomes, not task
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 the decision point where the work is performed, and build control into the process
Capture all information at the source
BPR Principles

9. Seven Principles of BPR (2/8)
1. Business Process Reengineering
3) Principles and procedures of BPR
Seven Principles of BPR (2/8)
1. Organize around outcomes, not task
One person perform all the steps in a process
Design that person’s job around an objective or outcome instead of a single task
Example) Electronics company
Customer service representative of the five steps between sell and install the equipment
Task 1
Task 2
Task 3
Task 4
Task 5
Product / Service
Task 5
Task 2
Task 1
Task 4
Task 3
Product / Service
Reengineer

10. Seven Principles of BPR (3/8)
1. Business Process Reengineering
3) Principles and procedures of BPR
Seven Principles of BPR (3/8)
2. Have those who use the output of the process perform the process
Establish specialized department to handle specialized process
Each department does only one type of work
BUT it’s slow and bureaucratic
Now that computer-based data are more readily available, departments, units, individuals can do more for themselves
Individuals who need the result of a process can do it themselves
Greatly reduced the problem of capacity planning
Example) Electronics equipment manufacturer’s service reengineering
Customer make simple repairs themselves and only for complex problem is a service technician dispatched
End performer
End performer
Reengineer
Database

11. Seven Principles of BPR (4/8)
1. Business Process Reengineering
3) Principles and procedures of BPR
Seven Principles of BPR (4/8)
3. Subsume information-processing work into the real work that produces the information
To maintain consistency and to reduce repetitive information process
In the past, why didn’t an organization that produces information also process it?
Not enough time to process the information
Low trust to do both produce and process the information
Belief that people at lower organizational levels are incapable
Example) Ford’s redesigned accounts payable process
Receiving department, receiving and processing the received information from vendor instead of sending it to accounts payable

12. Seven Principles of BPR (5/8)
1. Business Process Reengineering
3) Principles and procedures of BPR
Seven Principles of BPR (5/8)
4. Treat geographically dispersed resources as though they were centralized
Centralization vs. Decentralization
Decentralizing a resource gives better service to those who use it
BUT at the cost redundancy, bureaucracy, and missed economies of scale
Using database, telecommunications networks, and standardized processing systems to get the benefit of scale and coordination while maintaining the benefits of flexibility and service
Example) Hewlett-Packard- 50 manufacturing unit’s separated purchasing department
Provided excellent responsiveness and service but prevented realizing the benefits of its scale
So each unit has access to a shared database on vendor and own purchase orders
Separated department centralized by using database
150% improvement on-time delivery, 50% reduction in lead time, 75% reduction in failure rates
Manufacturing units #1
Purchasing department #1
Centralized
Manufacturing units #2
Purchasing department #2
Reengineer
Database
Purchasing department #3
Manufacturing units #3
Purchasing department #4
Manufacturing units #4

13. Links, communication networks
1. Business Process Reengineering
3) Principles and procedures of BPR
Seven Principles of BPR (6/8)
5. Link parallel activities instead of integrating their results
Forge links coordinate parallel functions during the process-not after it’s completed
Communication networks, shared database can bring independent group together
Usually, used in the product development
Having people do development work simultaneously save time
Example) Development of photo copier
develop each subsystem(optics, paper handling, power and etc.) in a separated unit
Easy to fail to work together
Success!
R&D department for optics
Integrated result
Reengineer
R&D department for paper handling
Failure!
Links, communication networks
R&D department for power
Database

14. Seven Principles of BPR (7/8)
1. Business Process Reengineering
3) Principles and procedures of BPR
Seven Principles of BPR (7/8)
6. Put the decision point where the work is performed, and build control into the process
Suggests that the people who do the work should make the decisions and can have built-in controls
Self-managing, self-controlling, disappearing hierarchy through IT or Expert system
Example) MBL (Mutual benefit Life)
Case manager provides end-to-end management of the process, reducing the need for traditional manager
Reengi-neer
Case Manager

15. Seven Principles of BPR (8/8)
1. Business Process Reengineering
3) Principles and procedures of BPR
Seven Principles of BPR (8/8)
7. Capture information once and at the source
In the past, information was difficult to transmit
It made sense to collect information repeatedly
Today, company store it in on-line database for all who need it
Bar coding(POS: Point Of Sale), relational database, electronic data interchange(EDI)
Example) Insurance company
‘Stovepipe’ computer system support and integrate, connect the different function.
As a result, company was able to eliminate redundant data entry

16. Common procedures when performing BPR
1. Business Process Reengineering
3) Principles and procedures of BPR
Common procedures when performing BPR
1. Selection of project
2. Analysis of initial capability
3. Selection of process and project scope
4. Work analysis
5. Redesign of alternative process
6. Cost/benefit analysis for each alternative process
7. Selection of alternative process
8. Implementation of process
9. Change of process information

17. BPR vs. Other Programs (1/3)
1. Business Process Reengineering
4) BPR vs. Other Programs
BPR vs. Other Programs (1/3)
Taylorism vs. BPR
Taylorism
BPR (Hammerism)
Orientation
Task, Function
Process
Tool
Stopwatch IT
Domain
Production Management
Entire organization
Goal
Mass production
Customer satisfaction
Age
Industrial revolution
Information revolution

18. BPR vs. Other Programs (2/3)
1. Business Process Reengineering
4) BPR vs. Other Programs
BPR vs. Other Programs (2/3)
BPR vs. Business Improvement
Business Improvement
Business Process Reengineering
Level of Change
Incremental
Radical
Process Change
Improved new version of process
Brand-new process
Starting Point
Existing processes
Clean slate
Frequency of Change
One-time or continuous
Periodic one-time change
Time Required
Short
Long
Typical Scope
Narrow, within functions
Broad, cross functional
Horizon
Past and present
Future
Participation
Bottom-up
Top-down
Path to Execution
Cultural
Cultural, structural
Primary Enabler
Statistical control
Information technology
Risk
Moderate
High

19. BPR vs. Other Programs (3/3)
1. Business Process Reengineering
4) BPR vs. Other Programs
BPR vs. Other Programs (3/3)
Reengineering
Rightsizing
Restructuring
TQM
Automation
Assumptions Questioned
Fundamental
Staffing
Reporting Relationships
Customer Wants and Needs
Technology Applications
Scope of change
Radical
Staffing, Job Responsibilities
Organizations
Bottom-up
Systems
Orientation
Processes
Functional
Procedures
Improvement Goals
Dramatic
Incremental

20. Reengineering Order Management
1. Business Process Reengineering
5) Reengineering Order Management
Reengineering Order Management
IT that supports the reengineering process…
CRM systems using corporate intranets and the Internet
Supplier-managed inventory systems using the Internet and extranets
Cross-functional ERP software to integrate manufacturing, distribution, finance, HR processes
Customer-accessible e-commerce websites for order entry,
status checking, payment, and service
Customer, product, and order status databases accessed via intranets and extranets

21. Reference
Euiho Suh, “BPR/ERP(PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)
O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 2