Business Process

Engineering

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Process
 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
 Reengineering is ...
Extremist's View

 Eliminate 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. 104-112.
Definition of Process
 A process is simply a structured, measured set of
activities designed to produce a specific output for a
particular customers or market.
-- Thomas Davenport
 Characteristics:
 A specific sequencing of work activities across time and
place
 A beginning and an end
 Clearly defined inputs and outputs
 Customer-focus
 How the work is done
 Process ownership
 Measurable and meaningful performance
 Processes Are Often Cross
Functional Areas
CE O
Customer/
Markets
Supplier
Needs
M arketing P urchase P roduction Distribution A ccounting
& S ales

Value-added
Products/
Services to
"We cannot improve or measure the performance of a Customers
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."
 Accounts Payable Process
Purchasing
Vendor
Purchase order

Receiving Goods

Copy of
purchase
order

Receiving
Accounts document
Payable

Invoice

? ? Payment

PO = Receiving Doc. = Invoice *Source: Adapted from Hammer and

Champy, 1993
 Procurement Process
Purchasing
Vendor
Purchase order

Receiving Goods

Purchase
order

Goods
received

Accounts
Data base
Payable

Payment
Reengineering Example
Cash Lane
No more than
10 items

Which line is
shorter and
faster?
Reengineered Process

Key Concept:
• One queue for
multiple service
points
• Multiple services
workstation
BPR Principles
 Organize around outcomes, not tasks.
 Have those who knows or use the output of
the process perform the process.
 Treat geographically dispersed resources as
though they were centralized.
 Put decision points where the work is
performed and build controls into the process.
 Link parallel activities instead of integrating
their results.

Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,”

Harvard Business Review, July-August, 1990, pp. 104-112.
 BPR Framework
Organization Technology
 Job skills – Enabling
technologies
 Structures
– IS architectures
 Reward – Methods and
 Values tools
– IS organizations

Process
(Core business processes, Value-added,
Customer-focus, Innovation)
 BPR Life Cycle
Define corporate visions
and business goals Visioning BPR-LC
Identify business Enterprise-wide engineering
processes to be Identifying
reengineered
Analyze and measure
an existing process Analyzing
Process-specific
Identify enabling IT & engineering
generate alternative Redesigning
process redesigns
Evaluate and select
a process redesign Evaluating

Implement the
reengineered Implementing
process
Continuous
improvement of the Improving
process

Manage change and stakeholder interests

 Using Value Chain to Identify High-Level
Processes
Corporate Infrastructure

Human Resource Management

Supporting
Activity
Technology Deployment

Procurement
Added
Value

Inbound Outbound Sales Service

Logistic Operation
Primary Logistic and
Activity Marketing
Criteria for Selecting Processes

for Reengineering
 Bottleneck
 Cross-functional or cross-organizational units
 Core processes that have high impacts
(quality, cost, cycle-time)
 Front-line and customer serving - the moment
of the truth
 Value-adding
 New processes and services
 Business Process Data
 Basic data:
 Customers and customer requirements
 Suppliers and suppliers qualifications
 Breakthrough goals
 Performance characteristics: cost, cycle time,
reliability and defect rate.
 Systems constraints: budgetary, business, legal,
social, environmental and safety issues and
constraints.
Business Process Data
 Process metrics
 Cycle time (process)
 Cost
 Input quality
 Output quality
 Frequency and distribution of inputs (supply
chain)
BPR Implementation & Evaluation
Criteria
 Costs
 Design and implementation of the business
process
 Hire and train employee
 Develop supporting systems
 Purchase of other equipment and facilities
 Benefits
 Responsive to customer requirements
 Achievement of breakthrough goals
 Relevant performance criteria
 Better management of constraints
BPR Evaluation Criteria
 Risk
 Technology availability and maturity
 Time required for design and implementation
 Learning curve
 Cost and schedule overrun
Order Management Cycle
1. Order Planning
2. Order Generation
3. Cost estimation and pricing
4. Order receipt and entry
5. Order selection and prioritization
6. Scheduling
Order Management Cycle
7. Fulfillment
 Procurement
 Manufacturing
 Assembling
 Testing
 Shipping
 Installation

8. Billing
9. Returns and Claims
10. Post-sales Services
 Activity - Diagram
Customer
Account
Receivable

Marketing/
Sales

Shipping

Manufacturing Inventory Mgmt.

Activity – Flow Chart

Order processing

Inventory
management

Shipping &
distribution

Accounts
Receivable
Standard Flowchart Symbols
Annotation
Activity Delay

Direction of
process flow
Movement/ Storage
Transportation

Connector Transmission
Decision Point

Begin/End
Paper
document
 Front-End Integration
Front-end integration:
A single-system view of Order processing
the process and the
customer
Inventory
management

Shipping &
distribution
 Process Owner
 Front-line Worker
Accounts
Receivable
THE END