2. The Development of Business Process Reengineering (BPR) Pertemuan 4 Matakuliah: M0734-Business Process Reenginering Tahun: 2010

3. What is BPR? The fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed One approach for redesigning the way work is done to better support the organization’s mission and reduce cost 3

4. Reengineering starts with a high-level assessment of the organization’s mission, strategic goals, and customer needs BPR began as a private sectortechnique to help organizations fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world- class competitors A key stimulus for reengineering has been the continuing development and deployment of sophisticated information systems and networks Leading organizations are becoming bolder in using this technology to support innovative business processes, rather than refining current ways of doing work 4

5. Reengineering Guidance & Relationship of Mission to Information Technology 5 Mission Work Processes Decisions Information Technology Defines Execute Consider Employs Accomplish Guide Supports Processes

6. To understand reengineering, it is important to understand the concept of the value chain The value chain consists of the primary and secondary activities of the firm Reengineering strives for the efficient redesign of the company’s value chain The primary activities of the firm include inbound logistics, operations, outbound logistics, marketing, and service These activities are essential to creating, producing, marketing, selling, and supporting a product or service An information system supports each of these primary activities This information system can cut the cost of performing a value activity, or it can be used to provide a “value-added” feature to the product or service For example, the value activity, called outbound logistics, deals with processing orders to customers. An online order entry system which enables customers to order electronically can cut the time and cost of this value activity. The value activity, called service, can be supported by remote machine diagnostics, which “adds value” by providing online diagnostic support 6

7. The Value Chain Primary Activities 7 Primary Activities Inbound Logistics OperationsOutbound Logistics Marketing and Sales Service FunctionsMaterials handling; delivery Manufacturing; parts assembly Order processing; shipping Advertising; promotion Service; repair Information systems supporting primary activities Automated warehousing systems Manufacturing control systems Online order entry systems Marketing analysis systems Remote machine diagnostics

8. The Value Chain Secondary Activities 8 Support ActivitiesInformation Systems Organization Electronic mail (facilitates communications throughout the organization) Human resourcesSkill databases TechnologyComputer-aided design and manufacturing PurchasingOnline links to suppliers’ databases

9. Motivation for Business Reengineering 9 Driving ForcesExternal ResponsesInternal Changes DeregulationCustomer focusReengineering work ConsolidationQuality emphasisCorporate cultural change Changing valuesResponsivenessTeams Customer sophisticationStrategic relationshipsEmpower workers Technological advancesDownsizingQuality management

10. In today’s economy, some of the major motivations for streamlining and reenginering business processes are customer sophistication, deregulation, and increasing competition on a global level These driving forces provide a rationale for re-thinking existing business practices and using technology to create new forms of work 10

11. Work Environment with Fragmented Business Processes 11

12. Reengineering Example : Ford Motor Accounts Payable 12

13. Elements for Business Reengineering 13 ElementsActivities Business Processes Do not automate existing business processes; break away from outdated rules IntegrationIntegrate business processes TechnologyUse technology to redesign business processes Cross-functional coordinationRedesign business processes from a cross-functional view TimingImprove processes continuously Objective Implement market-driven strategies designed to provide a competitive edge

14. Reengineering Case Studies 14 Before ReengineeringAfter ReengineeringBusiness Impact Ford Motor Company Accounts Payable Independent databases maintained by purchasing, receiving, and accounts payable An integrated database supporting multiple functions (e.g., purchasing, receiving, accounts payable) Fewer inconsistencies; reduction in clerical overhead; better responsiveness to customers IBM Credit Authorization Multi-step credit authorization process involving multiple departments and multiple individuals (e.g., a pricer, checker) A “deal structurer” makes the credit authorization decision, using multiple databases Timely decision making; more effective customer service; elimination of redundant tasks and bottlenecks Xerox Product Development Sequential product development process, which meant that workers had to wait until prior steps were completed Concurrent engineering, using a common integrated database and a computer-assisted design system Elimination of bottlenecks and delays; faster product development; responsiveness to market needs Wal-Mart Inventory Management Wal-Mart ordered its own stock of merchandise from vendors; deal with excess inventory or insufficient inventory Wal-Mart let its vendor, Proctor and Gamble, replenish its inventory according to market trends Better inventory management; more effective inventory replenishment Hewlett-Packard’s Purchasing Process Decentralized purchasing led to a loss of corporate-wide discounts Central negotiation of corporate volume discounts and use a shared database of negotiated prices Cost savings through the use of centrally negotiated discounts

15. Reengineering Example : Xerox 15 Befor e

16. Reengineering Example : Xerox 16 After

17. Restructuring Business Process Means Restructuring Jobs 17 OrganizationTraditionalReengineered Job designNarrowBroad StructureHierarchicalFlat Career movesVerticalHorizontal Work rulesProceduresJudgment ManagementSupervisionLeadership People skills neededStructuredAdaptive

18. Process Modeling In order to depict the changes in data and processes associated with business reengineering, a commonly used tool in systems analysis is the process model The process model consists of five objects : –The business process : the process depicts the business activities which are accomplished (e.g., check credit, mail invoice) –The data store : the store depicts data that are needed by the business processes –The data flow : the flow depicts data being transferred from a process to another process or between a process and a data store –The organizational unit : the organizational unit depicts the units of the organization in which these processes take place (e.g., Accounts Receivable, Sales) –The event, including triggers and outcomes : a trigger is an event which “triggers” a process, and an outcome is an event which results from a process 18

19. Making Reengineering Work 19 Company Redesigned Processes BeforeAfter BAI (Banca di America e di Italia) Branch customer service 64 activities, 9 forms, 14 accounts 25 activities, 2 forms, 2 accounts AT&TPBX sales12 project handoffs3 handoffs Siemen NixdorfField service 30 support centers; 1800 headcount 5 support centers; 800 headcount