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ERP enabled Business Process Re-engineering

Learning Objectives of the unit : Explain the role of Business Process Reengineering (BPR) within the organization Understand the origins and key characteristics of BPR ERP & BPR, Work Flow Management. FIVE STAGE AS IS / TO BE ANALYSIS.

What is BPR ?

Reengineering is 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 & Champy, 1993)

The Need for BPR

Customers (know what they want and are willing to pay for it) Competition (Continuous increase will result in changes to price, quality, selective service, and delivery) Change (continues to occur in people & culture, organizational structures, policies & procedures, and technology)

The Need for BPR

Techniques lag behind technology (Technologically capable, but not functionally operational) Significant gap between the actual and desired results, creating a business Problem. Fragmented piecemeal systems (focus on vertical functions, with the existence of redundancies of effort and actions). Integration across departmental and organizational boundaries (information and operations are needed).

BPR is Not?
Automation Downsizing Outsourcing Process improvement projects / activities Continuous Improvement Activity Reorganizing

BPR Versus Process Simplification

Process Simplification Incremental Change Process-Led Assume Attitudes & Behaviors Management-Led Various Simultaneous Projects

Process Reengineering Radical Transformation Vision-Led Change Attitudes & Behaviors Director-Led Limited Number of Initiatives

(Source Coulson-Thomas, 1992)

BPR Versus Continuous Improvement

Continuous Improvement Incremental Change People Focus Low Investment Improve Existing Work Unit Driven

Process Reengineering Radical Transformation People & Technology Focus High Investment Rebuild Champion Driven

T Q M and Reengineering

Rate of change TQM: continuous improvement Reengineering: dramatic improvement

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TQM versus Reengineering

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What is a Process?
A specific ordering of work activities across time and space, with a beginning, an end, and clearly identified inputs and outputs: a structure for action. (Davenport, 1993)

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What is a Business Process???

A collection of activities that take one or more inputs and turn that into a product that adds value to a customer A group of logically related tasks that use the firm's resources to provide customer-oriented results in support of the organization's objectives

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Why Organizations Dont Reengineer?

Complacency Political Resistance

New Developments
Fear of Unknown and Failure

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Performance
BPR seeks improvements of
Cost Quality Service Speed

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Key Characteristics
Systems Philosophy Global Perspective on Business Processes Radical Improvement Integrated Change People Centred Focus on End-Customers Process-Based

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Key Characteristics
Several jobs are combined into one Employees are empowered to make decisions Steps in business process: natural order Process may have multiple versions Work is performed where it makes the most sense

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Key Characteristics
Controls, checks, other non-value-added work is minimized Reconciliation is minimized - minimize external contact points Hybrid centralized / decentralized operation is used A single point of contact is provided for the customer

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Systems Perspective
Feedback

Inputs

Transformation

Outputs

Environment

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Process Based
Added Value
BPR Initiatives must add-value over and above the existing process

Customer-Led
BPR Initiatives must meet the needs of the customer

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Radical Improvement
Sustainable
Process improvements need to become firmly rooted within the organization

Stepped Approach
Process improvements will not happen over night they need to be gradually introduced Also assists the acceptance by staff of the change

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Integrated Change
Viable Solutions
Process improvements must be viable and practical

Balanced Improvements
Process improvements must be realistic

Enterprise integration
Departments are consolidated Several jobs are combined into one job \

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People-Centred
Business Understanding Empowerment & Participation Organizational Culture Worker empowerment
There is both horizontal and vertical reorganization Handoffs are eliminated There are fewer rules and less coordination is required

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Focus on End-Customers
Process improvements must relate to the needs of the organization and be relevant to the endcustomers to which they are designed to serve

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Re-engineering
Redesign of processes (Fundamental change in business processes) From mass production to mass customization (Mass production of the same products --- Mass production of different products) Cycle time reduction (Change in the time it takes to complete a process from start to end; time can provide competitive advantage Restructuring organizations (May need to restructure the entire organization to reap the benefits of BPR)

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Key Steps To BPR

Initiation - Select The Processes

Documenting the processes Understand The Current Process AS IS
Develop & Communicate Vision Of Improved TO BE Processes

IMPLEMENTATION of ERP enabled BPR

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Initiation - Select the Process

Crucial Tasks
Persuasive Case for Action WHY BPR ? Select the Processes to be Reengineered Sponsorship / budget established Appoint the Project Team to Lead the Reengineering Initiative committed (full time Core team with extended team for support). Develop Project scope, plan and milestones A communication plan information flow

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Select the Process

Review Business Strategy and Customer Requirements Select Core Processes Understand Customer Needs Dont Assume Anything

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Appoint the Process Team

Appoint BPR Champion Identify Process Owners

Establish Executive Improvement Team

Provide Training to Executive Team

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Core Skills Required

Capacity to view the organization as a whole Ability to focus on end-customers Ability to assume individual and collective responsibility Ability to challenge fundamental assumptions Courage to deliver and venture into unknown areas

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Documenting the Current Processes

Document a Process using Michael Porters Value Chain

Michael E. Porter

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The Porters Value Chain

Support activities

Primary activities
Inbound logistics Operations Outbound logistics Marketing and Sales Service Corporate infrastructure Human resources management Technology Development Procurement Materials receiving, storing, and distribution to manufacturing premises Transforming inputs into finished products. Storing and distributing products Promotions and sales force Service to maintain or enhance product value Support of entire value chain, e.g. general management planning, financing, accounting, legal services, government affairs, and QM Recruiting, hiring, training, and development Improving product and manufacturing process Purchasing input

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Porters Value Chain

Administrative Coordination and Support Services SIS: Collaborative Work Systems

Support Processes

Human Resources Management SIS: Employee Skills Database Systems Technology Development SIS: Computer-Aided Engineering and Design
Procurement of Resources SIS: Electronic Data Interchange with Suppliers Marketing and Sales SIS: Interactive Targeted Marketing

Competitive Advantage Customer Service SIS: Help Desk Expert System

Inbound Logistics

Operations SIS: ComputerAided Flexible Manufacturing

Outbound Logistics SIS: Online Point-ofSale and Order Processing

Primary Business Processes

SIS: Automated Just-in-Time Warehousin g

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Porters Value Chain

Primary Activities:

Inbound Logistics: Inbound activities to receive, store and distribute inputs to the product, such as material handling, inventory control, warehousing and contact with suppliers. Operations: Production activities to create the product such as machining, packaging, printing and testing. Outbound Logistics: Outbound activities to store and distribute the product to customers, including warehousing, order processing and vehicle scheduling. Marketing and Sales: Activities associated with providing a means by which buyers can purchase the product and be included to do so (advertising, selling, pricing, merchandising and promotion). Service: Activities for providing service or maintaining product value, including installation and training.

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Porters Value Chain

Support Activities:

Procurement: Purchasing input. Technology Development: Not just machines and processes but also Human Resource Management: Activities involved in recruiting, training Infrastructure: General management, finance, planning and quality
assurance. Infrastructure supports the whole value chain.
and staff development.

expertise, procedures and systems.

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Porters Value System

SUPPLIER VALUE CHAINS

FIRM VALUE CHAIN

CHANNEL VALUE CHAINS

BUYER VALUE CHAINS

In the value system supplier, firm, distributor, and buyer value chains overlap. The suppliers outbound logistics is the firms inbound logistics. The Distributors inbound logistics is the firms outbound logistics, etc.

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IT managers care about these models The models provide a map to help managers Find where they are Find where they should go

You are here

The road to competitive advantage

Goal

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Stage 3 Focus on AS IS Processes

Develop a Process Overview Clearly define the process Mission Scope Boundaries Set business and customer measurements Understand customers expectations from the process (staff including process team)
Carefully resolve any inconsistencies Existing -- New Process Ideal -- Realistic Process

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Stage 3 Focus on AS IS Processes

Clearly Identify Improvement Opportunities

Quality Rework

Document the Process (PROCESS MAPS)

Cost Time Value Data

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Stage 3 Focus on AS IS Processes

PROCESS ASSESSMENT
LOOK FOR ELIMINATING REDUNDANCY, BUREAUCRACY, NON-VALUE ADDING ACTIVITIES, ERRORS / DEFECTS, REDUCE CYCLE TIME,

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Develop & Communicate Vision of Improved Process

Communicate with all employees so that they are aware of the vision of the future Always provide information on the progress of the BPR initiative - good and bad. Demonstrate assurance that the BPR initiative is both necessary and properly managed

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Develop & Communicate Vision of Improved Process

Promote individual development by indicating options that are available Indicate actions required and those responsible Tackle any actions that need resolution Direct communication to reinforce new patterns of desired behavior

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Identify Action Plan

Develop an Action Plan Appoint Process Owners

Simplify the Process to Reduce Process Time

Remove any Bureaucracy that may hinder implementation

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Identify Action Plan

Remove no-value-added activities Standardize Process and Automate Where Possible Up-grade Equipment Plan/schedule the changes Construct in-house metrics and targets Introduce and firmly establish a feedback system Audit, Audit, Audit

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IMPLEMENT Plan
Qualify/certify the process Perform periodic qualification reviews Define and eliminate process problems Evaluate the change impact on the business and on customers Benchmark the process Provide advanced team training

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ERP & BPR

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Benefits From ERP

Assists the Implementation of Business Processes
Access to Global Best Practices for various processes which are proven and standardized. Provides integrated approach enhancing the focus on customer requirements / fulfillment Improve Operational Efficiency Coordinate with Vendors & Customers in the Process Chain ERP & BPR go hand in hand. ERP to be used to Innovate.

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ERP IN MODELLING BUSINESS PROCESSES

Focus
Business Processes Process Redesign Process Implementation Integration of all functions / across divisions Information flow accurate & on-time MIS reports for facilitating decision making/actions Used to automate transactional and laborious business processes.

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WORK FLOW MANAGEMENT SYSTEM IN ERP

Work Flow (Routing) system in ERP is an automated organizational process facilitating communication of work content, coordination between departments / people and control of processes. WFM integrates : Technology Organization / divisions Methodology (processes) Collaboration of Business processes. Communication within / outside using SCM / CRM etc., Human interaction reqd. to meet customer requirements.

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TASKS of the Re-engineering team

1) determine measures of performance 2) install measures of performance 3) delineate entire existing process in all its gory detail 4) perform process value analysis and activity-based costing 5) benchmark processes by comparison with other processes

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Contd
6) design re-invented process 7) simulate re-invented process 8) prepare report with recommendations 9) install re-invented process 10) measure improvements

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BPR Challenges

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Continuous Evaluation

Is reengineering truly transformational? Will reengineering improve customer relations? Has reengineering cut across the organization? Is information technology playing an integral role in the reengineering solution? Does it hurt?

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Common Problems
Process Simplification is Common - True BPR is Not Desire to Change Not Strong Enough Starting Point is the Existing Process & Not a Blank Slate Commitment to Existing Processes Too Strong Quick Fix Approach

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Common Problems with BPR

Process under review too big or too small Reliance on existing process too strong The Costs of the Change Seem Too Large BPR Isolated Activity not Aligned to the Business Objectives Allocation of Resources Poor Timing and Planning Keeping the Team and Organization on Target

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Managerial Issues
Ethical issues (BPR projects may lead to the need to lay-off, retrain, or transfer employees) BPR implementation (Few organization-wide BPR effort) Incremental improvement programs BPR tools (Often uses existing tools rather than creation of new tools) Role of IT (IT should be a supportive, not lead role in BPR projects) Failures (Big projects tend to increase failure rates)

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BPR Symbols

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Business Process Flowchart Symbols

An Activity A Document

A Decision

Data (input as outputs)

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Business Process Flowchart Symbols

A Predefined Process Start The Start of a Process The End of a Process Representing a Relation

End

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Business Process Flowchart Symbols

Continuation of the process at the same page at an equal symbol with the same number. Used when a relation arrow crosses another relation arrow Off-Page Connector - Process will continue on the next page

Integration Relation - A relation to another module is identified and described

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Data Flowchart Symbols

Manual Data Item A Database File Representing a Relation Continuation Off-Page Connector

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Rules For Data Symbols

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Rules For Data Symbols

Start
Generate Purchase Order

Symbol used to identify the start of a business process Activities must be described as a verb Decisions have only two possibilities (Yes & No)

OK?

Yes

No Crossing lines are not allowed If one side of the decision has no further processes defined this symbol has to be used

End

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Rules For Data Symbols

I Continuation symbol within the same number must be present twice on the same page Name the document Off- Page Connector is used to continue a process at the next page or to let the process to flow over at the previous to the next page. If more than one is needed use A, B, C, D Name the data

Purchase Order

Posting of Bonus

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Rules For Data Symbols

Predefined Processes always have a relation to level and stream by a number in the line below a sub-process description A predefined process must be described in a different flowchart. To make the relation clear between the predefined process and the belonging flowchart a unique alpha numeric number should be assigned to this predefined process.

Sub-Process Delivery
BC 4.04

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Version Management
For different versions of a business process or data flow some mandatory information must be on the flowchart.
Name of the business process Unique number of the business process Revision number Date of last change Author Page number with total pages

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Summary
Reengineering is a fundamental rethinking and redesign of business processes to achieve dramatic improvements BPR has emerged from key management traditions such as scientific management and systems thinking

Rules and symbols play an integral part of all BPR initiatives