Teguh I Santoso, Teguh I Santoso, MBAMBA

BUSINESS PROCESS REENGINEERINGBUSINESS PROCESS REENGINEERING

Chapter 1Chapter 1

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BUSINESS

PROCESS

REENGINEERING

“memulai lagi dari awal”

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Traditional Business ConceptsTraditional Business Concepts

Adam Smith (1776, The Wealth of Nations) Use separating work areas to increase productivity

American Railway (1820) Create modern business bureaucracy (control-command

procedures )

Frederick Taylor (1880) Managers could discover the best processes for performing work

and reengineer them to optimize productivity In Taylor's time, technology did not allow large companies to

design processes in a cross- functional or cross-departmental manner

Specialization was the state-of-the-art method to improve efficiency given the technology of the time

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Today’s RealityToday’s Reality

Organizations in Crisis No company is safe There is no such things as a ‘solid’ or even substantial, lead

over one’s competitors Traditional business relationships and operational models are

evolving or collapsing New opportunities exist for businesses that can use information

technology to create and capitalize on emerging markets Market expectations and pressures are changing Global business opportunity are expanding Information technology is crucial to realizing and managing

these opportunities

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Business PressuresBusiness Pressures

Market Pressures Global economy - strong competition Changing nature of the workforce Powerful customers

Technological Pressures Technological innovation and obsolescence Information overload

Societal Pressures Social responsibility

Government regulations Government deregulation Shrinking budgets and subsidies

Ethical issues

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The Power of 3CThe Power of 3C

Customers (Pelanggan memainkan peran)– Demanding– Sophistication– Changing Needs

Competition (Persaingan semakin ketat)– Local– Global

Change (Perubahan menjadi konstan)– Technology– Customer Preferences

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BPR OverviewBPR Overview

Business Process Reengineering (BPR),

a fundamental rethinking and a radical redesign of a business process to achieve dramatic improvementsMichael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution

(New York: Harper Business, 1993)

BPR is a systematic approach or methodology for analyzing business activities or processes with a view to Improving the organization's alignment with strategic goals Its effectiveness, efficiency, competitiveness and so on

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BPR Overview (cont.)BPR Overview (cont.)

The idea is to start from “ground zero”

Then determine what things the company must do

Then seek the best way to do those things

It ignores what is and concentrates on what should be

It’s intended to overcome the shortcoming of seeking incremental improvements

Solving problems at one part of a process instead of replacing the entire process with something better

In reengineering, instead of “patching up” parts of a faulty process, the entire process itself is radically improved

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BPR Four key wordsBPR Four key words

1. Fundamentalmeans business people have to ask themselves with a fundamental question, such as why, what and how we do the business.

2. Radicalmeans, ‘if it did not exist today, how would we create it’ and then destroying the old system to create the new one

3. Dramaticmeans improvement in business result, not of 5%, not of 15% nor 20%, but in term of quantum leaps of 100%, 300%, 500% better result

4. Processmeans a group of distinct tasks that together create a product or service desired by one or more stakeholders

Business Process Reengineering (BPR), a fundamental rethinking and a radical redesign of a business process to achieve dramatic improvements

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Why Company need to implement BPRWhy Company need to implement BPR

BPR has been implemented in various industry

1. Increase skill and knowledge every specialist

2. Reduce time

3. The discovery of new machines makes one job running easily and efficiently

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Process: Where and Who?Process: Where and Who?

NEED

CUSTOMER

PRODUCT/SERVICE

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Reasons for BPRReasons for BPR

Competition Market Share/Profits

Technology Stock Price

More Important Less Important

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Why Company do not ReengineerWhy Company do not Reengineer

Satisfaction

Political Resistance

New Developments

Fear of Unknown and Failure

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Effective Reengineering StepsEffective Reengineering Steps

1. Develop business vision, process objectivesThe BPR method is driven by a business vision which implies specific business objectives such as cost reduction, time reduction, output quality improvement.

2. Identify process to be redesignedmost firms use the 'High-Impact' approach which focuses on the most important processes or those that conflict most with the business vision

3. Understand, measure performance of existing processesavoiding the repeating of old mistakes and for providing a baseline for future improvements

4. Identify opportunities for applying information technologyawareness of IT capabilities can and should influence BPR

5. Build prototype of new processthe actual design should not be viewed as the end of the BPR process

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BPR ExpectationBPR Expectation

Identify and quantify process improvement opportunities aligned with the organization's strategic plan

Establish objectives that "stretch" the existing activities

Identify the associated benefits to the organization

Identify the changes necessary, including any changes in associated activities

Formulate projects for their accomplishment

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BPR ObjectivesBPR Objectives

Improve Efficiency e.g reduce time to market, provide quicker response to customers

Increase Effectiveness e.g deliver higher quality Achieve Cost Saving in the longer run Provide more Meaningful work for employees Increase Flexibility and Adaptability to change Enable new business Growth

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Scope of BPRScope of BPR

Intra-functional

Small scope within department, least impact Inter-functional

Horizontal view across departments, more impact Inter-organizational

Broad view including entire supply & delivery chain, most impact

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BPR ImpactsBPR Impacts

Resulting changes may include Organizational structure Roles and responsibilities Supplier relations Customer interfaces, and Other stakeholder relationships

Often, it means a cultural change within the organization Change management should be invoked to deal with

the people aspects The fear among employees that their jobs are

endangered and that years of experience will account for nothing

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BPR PerformanceBPR Performance

BPR seeks improvements of Cost Quality Service Speed

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Obstacle to ReengineeringObstacle to Reengineering

Most Important

Least Important

Organization

Time

Risk

Cost

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Reengineering Vs IncrementalReengineering Vs Incremental

Incrementalimprovement

Time

PerformanceImprovement

Reengineering then continuous improvement

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Reengineering vs. Other MethodsReengineering vs. Other Methods

Dimension Reengineering Rightsizing Restructuring TQM Automation

Assumptions

Questioned

Fundamental Staffing Reporting relationship

Cust. wants and needs

Technology applications

Scope of

Change

Radical Staffing, job responsibilities

Organization Bottom-up Top-down

Orientation Process Functional Functional Process Procedure

Improvement Goals

Dramatic Incremental Incremental Incremental Incremental

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Reengineering - ‘NOT’Reengineering - ‘NOT’

notabdicating leadership and management responsibility to your consultant

nota fancy name for eliminating the redundant positions that should never have

created anyway

notradically redesign functional department or radically redesign people

notexpecting your people to coorporate wholeheartedly while you obviously put

their jobs and lifestyles in jeopardy

notthinking that you will have your new process implemented without problems

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TQM ISO9000 Automation Downsizing Restructuring Change Management

Reengineering - ‘NOT’ (cont.)Reengineering - ‘NOT’ (cont.)

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Some Success FactorsSome Success Factors

Senior Management, Commitment and Sponsorship

Realistic Expectations

Empowered and Collaborative Workers

Strategic Context of Growth and Expansion

Shared Vision

Sound Management Practices

Appropriate People Participating Full-Time

Sufficient Budget

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Some Failure FactorsSome Failure Factors

The wrong sponsor

Cost-cutting focus

Narrow technical focus

Lack of sustained management commitment and leadership

Unrealistic scope and expectations

Resistance to change

The negative preconditions relating to the organization, include: Unsound Financial Condition Too Many Projects Under Way Fear and Lack of Optimism Animosity Toward and By IS and HR Specialists

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Core Business : Financing the computers, software and service that the IBM Corporation sells

Length to Process : 5 steps

1

2

3

4

5

Customer Service

Credit Department

Business Practices Department

Appraisal

Administration

Example Case: IBM CreditExample Case: IBM Credit

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Example Case: IBM CreditExample Case: IBM Credit

1 Request for financing from IBM Corp sales representative, IBM Credit staff log on a piece of paper (14 Staff)

2 Someone carted that paper to the credit department, where the specialist entered the information into a computer system and checked the potential borrower’s creditworthiness

The specialist write the result of the credit check on the piece of paper and dispatch it to the business practices department

3The business practices department modify the standard loan agreement in response to customer request

When done, a person in that department would attach the special terms to the request form

4 Appraiser write the rate on a piece of paper, enter the data into a PC spreadsheet and give the paper to a clerical group

5 An administrator turn all this information into a quote letter that could be delivered to the IBM sales representative by Federal Express

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Result:

1. The entire process consumed six days on average

2. From the sales reps’ point of view, this turnaround too long Customer could find another source of financing Customer simply to call the whole deal off

3. Difficult to control

Example Case: IBM CreditExample Case: IBM Credit

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False Assumption: Every bid request was unique and difficult to process, thereby requiringthe intervention of four highly trained specialist

Fact:

Most requests were simple and straightforward

Solution: BPR

- IBM Credit senior manager found that most of their job was little more than clerical

- IBM Credit develop a new computer system to support the deal structurer

- In really tough situations, he/she can get help from a specialist expert in credit checking, pricing and so on

Example Case: IBM CreditExample Case: IBM Credit

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Result:

- The performance improvement achieved dramatically

- IBM Credit slashed its six days turnaround to four hours

- The number of deals has increased a hundredfold

- 90 percent reduction in cycle time and hundredfold improvement productivity

- The company achieved a dramatic performance by making a radical change to the process as a whole

Example Case: IBM CreditExample Case: IBM Credit

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A five-step approval process Duration — from six days to two weeks Actual processing time — 90 minutes Why so many steps? Engineered for the most difficult

cases Five experts replaced with one “deal structurer” Support of I/T essential Results

- Six days to four hours - Slight work force reduction - 100% work load increase

Example Case: IBM CreditExample Case: IBM Credit

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In 1987 Kodak’s arch-rival, Fuji came up with a new 35mm

single-use camera Kodak has no competitive offering

Kodak’s Traditional Product Development Process Slow: would take 70 weeks to produce a rival to

Fuji’s camera! Product development process was partly sequential

and partly parallel

Example Case: KodakExample Case: Kodak

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Reaction to competition from Fuji Kodak reengineered its product development process

through the innovative use of CAD/CAM-Computer Aided Design/Computer Aided Manufacturing

The technology that has enabled Kodak to reengineer its process is an integrated product design database

Result: the new process, “Concurrent Engineering” Reduce turnaround time to 38 weeks Priority to release product on time

Example Case: KodakExample Case: Kodak

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Key Redesign Strategy Apply innovative use of CAD/CAM + integrated

product design database Allow engineer to design at computer workstations Database collect each engineer’s work and

combines into overall design Each morning, problems are resolved immediately Manufacturing can begin tooling design just 10

weeks into product design instead of 28 weeks in the past

Example Case: KodakExample Case: Kodak

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Example Case: Ford MotorExample Case: Ford Motor

FORD MOTOR COMPANY’S ACCOUNTS PAYABLE DEPARTMENT 500 employees 20% saving anticipated — a reduction of 100 people But… Mazda’s Payables Department has five people!

Old process: matching purchase orders, invoices, and receiving documents to issue payment authorizations

New Process: purchase orders go to suppliers and on-line database. Upon receipt, receiving clerk verifies shipment. If okay, payment is made; if not, it is returned

Results

- No invoices

- No receiving reports

- 75% staff reduction — 375 people reassigned

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Beberapa pekerjaan digabungkan menjadi satu Para Pekerja membuat keputusan Tahap-tahap di dalam proses dilakukan menurut

kebiasaan Proses-proses mempunyai banyak versi Pekerjaan dilakukan pada tempat yang paling berarti Pemeriksaan dan kontrol berkurang Rujukan minimum Manajer kasus membuat satu titik kontak Operasi-operasi gabungan sentralisasi/desentralisasi

merata

BPR CharacteristicBPR Characteristic

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Thank You