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Informatics in Logistics
Management
Lecture 8. Enterprise
Reengineering
Lecturer:
Prof. Anatoly Sachenko
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Lecture overview
Enterprise Engineering and Reengineering
 Definition
 The scope of Enterprise Reengineering
 Business Process Reengineering
 Some BPR Issues
 BPR Problems
 IT role in BPR
 Steps for BPR

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Enterprise Engineering and Reengineering
Enterprise reengineering is regarded as an approach
within enterprise engineering
 Enterprise engineering is "an life-cycle oriented
discipline for identification, design and implementation
of enterprises and their continuous evolution"
(Kosanke et al, 1999)
 Enterprises models are "essential components in
enterprise engineering" (IFIP-IFAC taskforce, 1999)
 Enterprise engineering encompasses HW, SW
communications protocols, info, and architectures,
but also social and organizational issues that are
relevant for enterprise modeling and improvement
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Definition
Enterprise reengineering focuses primarily on
the operations activities, and how they should be
modelled and designed
The total transformation process can be
decomposed into a large collection of concurrent
processes executed by a set of operations entities
that contribute to business objectives
Each process consist of a group of operations
activities that takes input, adds value to it and
provides an output to internal or external
customers
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Definition
Enterprise reengineering is essentially a
matter of modeling and improving these
activities:
 how they are grouped in operations entities
and processes,
 how resources are dedicated to the
operations entities,
 how resources are laid out physically to
create information and material flows,
 how operations entities activities are
structured in the organization, and,
 how processes are controlled.
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The scope of Enterprise Reengineering
The idea behind enterprise engineering is that
enterprises may be engineered like any other
complex systems
The enterprise is a system that must be
engineered, implemented, and
integrated in a systematic way very similar
to approaches developed for software
engineering
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The scope of Enterprise Reengineering
Enterprise reengineering is an model-based
approach that aims to improve operations
performance in the overall direction determined by
the operations strategy
 The main purpose of operations strategy is to make
plans for how the enterprise can improve it’s
competitiveness
 This encompasses numerous strategic decisions that
range from human resources strategies to localization
of new enterprises, and
 It’s directing the work in research fields such as
operations management and enterprise engineering
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The scope of Enterprise Reengineering
However, since these are research fields that
cover many design issues,
the scope of enterprise reengineering, as
defined in this thesis, is restricted to the
modeling and reengineering of operations
processes
That is, how operations processes are
logically and physically organized, and how
they are controlled
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The scope of Enterprise Reengineering
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Business Process Reengineering
Enterprise Re-Engineering / Business Process
Re-Engineering (BPR) is a form of organizational
improvement
It aims to improve a business through
restructuring of processes
BPR is given force by the thinking that old ways
of organizing work are no longer appropriate for
a competitive business environment
The ultimate aim of re-engineering processes to
achieve better quality, service and innovativeness
The radical restructuring entailed in BPR is risky
and uncertain
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Business Process Reengineering
For hundreds of years, commercial activity
has been based on the Adam Smith principle
of Division of Labor
Division of labor encourages specialization and
thereby leads to improved productivity
 The classical enterprise also exhibits the
concepts of:
 Hierarchical control: - the classical layers of
management
 Mass production of largely uniform
goods/services
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Business Process Reengineering
An organization based on these principles is
successful in a stable market environment,
characterized by growing demand for uniform
goods/services
In a changed market environment characterized
by sever competition, globalization, more
demanding customers, smaller profit margins etc,
the classical organizational models are less and
less appropriate
BPR provides one alternative to the old methods
of organizing business processes
The goals of BPR can be started in expanded
form as either cost objectives or service objectives
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Hierarchical Design Pyramid
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Cost Objectives
Reducing
stocks: New materials or
Intermediate goods
 Economies of scale in procurement
 Reduced staff costs (administrative costs)
 Competitive pricing of goods/services
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Service Objectives
More reliable delivery system
 Stock availability
 Good after sales service
 Quick Response/adaptation to market
changes
 Reduced product development lifecycle
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The role of enterprise reengineering in
operations strategy development
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A strategic framework for enterprise
reengineering
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Qualities of BPR
Several jobs are combined into one
 This implies a reversal of the Adam Smith principle
of division of labor and function
 Workers make decisions, actual work and decision
making are integrated
 Processes are reorganized
 so that tasks are done in the most sensible/logical
order
 Checks and controls are reduced
 The checks and controls are reduced to the
minimum acceptable level
 The checks and controls are also deferred(cont-d)
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Qualities of BPR
Reconciliation is minimized.
 A case manager is appointed to oversee the reengineering process.
 Hybrid processes that combine centralization
and decentralization by use of communication
technology are often adopted.
 Processes have multiple versions
(polymorphic) – the process is re-designed to
include capabilities to deal with custom orders.
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Some BPR Issues
Candidates for BPR:
In theory, any business process can be
subject to BPR;
but in practice, certain processes can benefit
more from BPR than others
 Such processes have the following qualities
Dysfunction: The process is visibly out of
order, it is problematic
Dysfunction in a process occurs when the
process is slow (frustratingly slow),
occasional complaints, generates
errors(cont-d)
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Some BPR Issues
Importance: Important processes that have
a prominent place in the value chain
They contribute directly to the delivery of
goods and services to the end consumer.
 Feasible: From the managers stand point
the BPR project is technically, economically
and socially feasible/viable
Processes that require high capital input,
or enjoy limited management support are
less feasible for BPR.
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BPR Problems

What causes BPR projects to fail?:
 Inadequate funding
 Insufficient management
commitment/support
 Poor project leaders
 Inadequate feasibility evaluation
 Resistance to process change
 Failure to focus on most process re-design
and dwelling on improving the existing
process.
 Quitting too early or declaring victory too
soon.
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BPR Problems
Re-engineering or Re-developing? Systems
targeted for re-engineering have 2 qualities
 They are heavily/regularly used
 They are currently being maintained a lot
 Re-engineering usually has two main merits
over re-developing. These are:
 Lower costs: re-engineering costs about ? of
redeveloping
 Reduced risk: lower likelihood of making
mistakes.
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IT role in BPR
IT enables processes to be re-engineered
 It supports the re-engineered process
 Leading edge technology products can be
particularly useful in process innovation
They can even lead the innovation process.
 IT also facilitates process integration.
 It has been argued that the most effective
contribution of IT in business redesign is to
enable an enterprise to do things that it was
not doing before – extending the capabilities of
the enterprise.
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IT role in BPR
BPR computer system: at a minimum it comprises of
an ordered collection of HW/SW and data resources
 Computer systems are the basis for automated
information system.
 Re-engineering computer systems means
examining, rethinking and re-implementing such
systems in a new form.
 The process is usually carried out on legacy
options, re-implementing them in a more modern
form.
 Re-engineering computer systems can be seen as a
management response to the challenge of keeping
old systems alive within a changing environment.
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IT role in BPR
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Merits
 The useful life of a system is increased
 The business value of such a system also
increases
 Future maintenance costs are reduced
 The morale of maintenance staff may
improve; because they know they are
working in a modern system i.e. the systems
become more maintainable.
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IT role in BPR
Approaches to re-engineering computer
systems: When a system is re-engineered any
of the following changes may occur:
 It may be placed in a distributed platform.
 It will usually be re-documented
 The data may be migrated to a new
database platform
 The code may be restricted
 The code may be written in a different
language
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Automated Program Restructuring
When code is maintained over an extended
period, its structure and hence its efficiency,
deteriorate
Indeed, the more a software product has been
maintained, the more it costs to maintain it in
future
When the program is re-structured:
 irreconcilable code is detected and
removed
 complex control structures are simplified
 program modularity is enhanced
Use of software tools may not be fully effective.
Manual rewriting of code may still be applied.
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Automated Program Restructuring
Automated program and Data Restructuring:
When the existing data structures are restructured then even the programs that
process the data have to be reviewed
When data is restructured:
 The overall model may be re-organized into
one database.
 Data in a relational model may be modified
to suit the needs of a different relational
DBMS.
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The enterprise reengineering methodology
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Steps for BPR
Identify process for innovations
 Manage business
 Manage people and work
 Identify change levels ( technology etc)
 Develop process vision – what you want to
process must fit with the strategic direction of
the organization (IS)
 Understand existing processes – study current
process and understand necessary changes
 Design and prototype new process/create
design of new process(cont-d)
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Steps for BPR
When deciding whether to re-engineer or to
redevelop you may consider such issues as:
 budget provisions or costs constraints
 current state of the old system;
the old system may be so old and messy
that it may not be susceptible to reengineering
 Time limitations: re-engineering is likely to
be quicker than to redevelop(cont-d)
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Steps for BPR
Scope i.e. system scope; if the scope of the
existing system is to be excluded
substantially then it may be more practical
to redesign and re-implement the system
instead of re-engineering it.
 Perceived risk level; Risk arises from the
combined effect of many factors
If the perceived project risk is high then it
might be safer to re-engineer the system
than to redevelop it.
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Steps for BPR
Link between reengineering of computer
systems and BPR:
 Computer systems are usually embodied
within business processes/systems such as
accounts receivable, production planning,
marketing and distribution, human
resources etc
When such process/systems are reengineered, then the supporting
technology infrastructure also needs to be
reviewed(cont-d)
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Steps for BPR
The overall aim of reengineering a
computer system should be to re-align it with
the existing business goals
The goals of a BPR project require an
altered IT infrastructure then the existing
infrastructure should be reengineered or
re-developed (cont-d)
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Steps for BPR
The enterprise reengineering methodology supports
manufacturing enterprises in efforts to improve
operations performance.
 The objective is to achieve fit between operations
capabilities and market requirements through a
reengineering of operations processes.
 The methodology is model-based and applies an
enterprise modelling architecture to represent
different views of enterprise operations.
 Reengineering efforts are typically carried out when
some problem makes it difficult for operations to
achieve their performance objective (cont-d)
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Steps for BPR
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The enterprise reengineering process includes:
 Mapping and evaluating the current operations
strategy, i.e. the strategic decisions regarding
operations (such as the implementation of a best
practice method) and the affected decisions areas
and performance objectives.
 Mapping the AS-IS operations model, and
representing the enterprise graphically from a
resource-, material-, info-, process- organization-,
 and control view (termed control model) should
represents a synthesis of the other views and show
a picture how operation processes are organized
and controlled (cont-d)
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Steps for BPR
Analyzing
the current operations model on
operation capabilities (operations processes,
control methods, layout etc,) and their ability to
meet the demand situation
Analyzing operations capabilities in an audit
sheet in order to rate the performance in broad
areas of strengths and weaknesses
Based on this analysis, improvement areas are
identified and problems to be solved are
formulated(cont-d)
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Steps for BPR
Designing a revised operations strategy that
targets the improvement areas identified in the
mapping and analysis.
 Designing a TO-BE operations model that
represents the new solution for operations. The
design efforts can be supported by best practice
methods such as flow manufacturing.
 Implementing the operations model.
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References
 Bruce
Caldwell "Missteps, Miscues: Business
reengineering failures have cost corporations billions"
InformationWEEK June 20, 1994, pp. 50-60.
 Elliot Chikofski and James H. Cross II "Reverse
Engineering and Design Recovery: A Taxonomy" IEEE
Software January 1990 7(1):13-17.
 Michael Hammer & James Champy Reengineering the
Corporation: A manifesto for business revolution Harper
Business, 1993.
 Stephanie King "How to Fail" NAPM Insights February
1995 pp. 50-52.
 Kosanke, K., Vernadat, F., Zelm, M. (1999) CIMOSA:
enterprise engineering and integration. In Computers in
industry 40, pp.83-97.
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References
 Leatt,
P., Baker, G.R., Halverson P.K and Aird C.
Downsizing, Reengineering and Restructuring: LongTerm Implications for Economical Organisations //
Strategic Management Journal, 2004, vol.13, No(4), pp.
578-599.
 Erlend Alfnes. Enterprise Reengineering. VDM Verlag,
2008. – 320 p.
 Vernadat, F.B. (1996) Enterprise Modelling and
Integration: principles and applications. Chapman &
Hall.
 IFIP–IFAC Task Force on Architectures for Enterprise
Integration (1999) Generalised Enterprise Reference
Architecture and Methodology, Version 1.6.3 (March
1999).