Business Process Reengineering (BPR)
Rev: Feb, 2012
Euiho (David) Suh, Ph.D.
POSTECH Strategic Management of Information and Technology Laboratory
(POSMIT: http://posmit.postech.ac.kr)
Dept. of Industrial & Management Engineering
POSTECH
Contents
※
Discussion Questions
1
Business Process Reengineering
2
1)
Background
2)
Interpretations of BPR
3)
Principles and Procedures of BPR
4)
BPR vs. Other Programs
5)
Reengineering Order Management
Case Study
Discussion Questions (1/2)
■ Why BPR ? Explain why Hammer’s ground-breaking paper in 1990 :”Do not automate,
but, obliterate it” woke up the biz circle suddenly.
■ Define Process vs. Function.
■ How BPR differs in comparison with other MITs or business improvement programs ?
■ What is the productivity and how much productivity improvement can be a target of
BPR ?
■ Among the words (Fundamental, Radical, Process, Dramatic) in defining BPR, which
word is , in your opinion, most significant and why ?
■ Among seven principles of BPR, explain one as you pick with an appropriate example.
■ What strategic role can information play in BPR ? What is the role of IT/IS in BPR ?
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Discussion Questions (2/2)
■ Case 2 in textbook (pp. 57~58, Chapter 2)
– In which ways do smartphones help these companies be more profitable? To what extent are
improvements in performance coming from revenue increases or cost reductions? Provide
several examples from the case
– CPS Energy and Lloyd’s Construction used smartphones to make existing processes more
efficient. How could they have used the technology to create new products and services for
their customers? Include at least one recommendation for each organization
■ Discussion Question in textbook (pp. 67, Chapter 2)
– What strategic role can information play in business process reengineering?
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1. Business Process Reengineering
Strategic Uses of IT
1) Background
■ Companies that emphasize strategic business use of IT to gain competitive
differentiation
Products
Services
5
Capabilities
1. Business Process Reengineering
The Role of Information Technology
1) Background
■ IT Plays a major role in reengineering most business processes
– Increases process efficiency
– Improves communication
– Facilitates collaboration
6
1. Business Process Reengineering
Why BPR?
1) Background
Globalization !
Customer
Driven
Innovation
Core
Competence
Customer
Competition
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Change
1. Business Process Reengineering
Reengineering Business Processes
2) Interpretations of BPR
■ Called BRP or Reengineering
– Fundamental rethinking and radical redesign of business processes
– Dramatic improvements in critical contemporary measure of performance, such as cost, quality,
speed, and service
■ Potential payback is high, but so is risk of disruption and failure
■ Organizational redesign approaches are an important enabler of reengineering
– Includes use of IT, process teams, case managers
Fundamental Concept of BRP
Process
Fundamental
Radical
Dramatic
Shift from function based thinking to process based thinking
Fundamental rethinking of the way of conducting business
Disregarding all existing structures and inventing complete new ways
– not improvement or modification
Making quantum leaps in performance rather than incremental
improvement
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1. Business Process Reengineering
Definition of Process
2) Interpretations of BPR
■ A process is a cross-functional interrelated series of activities that convert business
inputs into business outputs
Supplier
Input
Activity
Activity
Activity
Process
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Output
Customer
1. Business Process Reengineering
Seven Principles of BPR (1/5)
3) Principles and procedures of BPR
Organize around outcomes, not task
Have those who use the output of the process
perform the process
Subsume Information processing work
into the real work that produces the Information
BPR
Principles
Treat geographically dispersed resources as though
they were centralized
Link parallel activities
instead of integrating their results
Put the decision point where the work is performed,
and build control into the process
Capture all information at the source
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1. Business Process Reengineering
Seven Principles of BPR (2/5)
3) Principles and procedures of BPR
■ Organize around outcomes, not task
– One person perform all the steps in a process
– Design that person’s job around an objective or outcome instead of a single task
 Example) Electronics company
» Customer service representative of the five steps between sell and install the equipment
■ Have those who use the output of the process perform the process
– Establish specialized department to handle specialized process
• Each department does only one type of work
• BUT it’s slow and bureaucratic
– Now that computer-based data are more readily available, departments, units, individuals can
do more for themselves
• Individuals who need the result of a process can do it themselves
• Greatly reduced the problem of capacity planning
 Example) Electronics equipment manufacturer’s service reengineering
» Customer make simple repairs themselves and only for complex problem is a service technician dispatched
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1. Business Process Reengineering
Seven Principles of BPR (3/5)
3) Principles and procedures of BPR
■ Subsume information-processing work into the real work that produces the
information
– To maintain consistency and to reduce repetitive information process
– In the past, why didn’t an organization that produces information also process it?
• Not enough time to process the information
• Low trust to do both produce and process the information
• Belief that people at lower organizational levels are incapable
 Example) Ford’s redesigned accounts payable process
» Receiving department, receiving and processing the received information from vendor instead of sending it to
accounts payable
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1. Business Process Reengineering
Seven Principles of BPR (4/5)
3) Principles and procedures of BPR
■ Treat geographically dispersed resources as though they were centralized
– Centralization vs. Decentralization
– Decentralizing a resource gives better service to those who use it
• BUT at the cost redundancy, bureaucracy, and missed economies of scale
– Using database, telecommunications networks, and standardized processing systems to get the
benefit of scale and coordination while maintaining the benefits of flexibility and service
 Example) Hewlett-Packard- 50 manufacturing unit’s separated purchasing department
» Provided excellent responsiveness and service but prevented realizing the benefits of its scale
» So each unit has access to a shared database on vendor and own purchase orders
» Separated department centralized by use database
» 150% improvement on-time delivery, 50% reduction in lead time, 75% reduction in failure rates
■ Link parallel activities instead of integrating their results
– Forge links coordinate parallel functions during the process-not after it’s completed
– Communication networks, shared database can bring independent group together
– Usually, used in the product development
• Having people do development work simultaneously save time
 Example) Development of photo copier
» Line production: develop each subsystem(optics, paper handling, power and etc.) in a separated unit
→ Cell production: develop a complete product in one group
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1. Business Process Reengineering
Seven Principles of BPR (5/5)
3) Principles and procedures of BPR
■ Put the decision point where the work is performed, and build control into the
process
– Suggests that the people who do the work should make the decisions and can have built-in
controls
– Self-managing, self-controlling, disappearing hierarchy through IT or Expert system
 Example) MBL
» Case manager provides end-to-end management and works performed and controlling of process
Department A
Step 1
Department A
Step 2
....
Issuance
Application
Case Manager
Issuance Policy
Department E
Step 30
■ Capture information once and at the source
– In the past, information was difficult to transmit and to collect repeatedly
– Today, company store it in on-line database for all who need it
• Bar coding(POS: Point Of Sale), relational database, electronic data interchange(EDI)
 Example) Insurance company
» ‘Stovepipe’ computer system support and integrate , connect the different function.
» As a result, company was able to eliminate redundant data entry
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Common procedures when performing BPR
1. Selection of project
2. Analysis of initial capability
3. Selection of process and project scope
4. Work analysis
5. Redesign of alternative process
6. Cost/benefit analysis for each alternative process
7. Selection of alternative process
8. Implementation of process
9. Change of process information
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1. Business Process Reengineering
3) Principles and procedures of BPR
1. Business Process Reengineering
BPR vs. Other Programs (1/3)
4) BPR vs. Other Programs
■ Taylorism vs. BPR
Taylorism
BPR(Hammerism)
Orientation
Task, Function
Process
Tool
Stopwatch
IT
Domain
Production Management
Entire organization
Goal
Mass production
Customer satisfaction
Age
Industrial revolution
Information revolution
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1. Business Process Reengineering
BPR vs. Other Programs (2/3)
4) BPR vs. Other Programs
■ BPR vs. Business Improvement
Business Improvement
Business Process Reengineering
Level of Change
Incremental
Radical
Process Change
Improved new version of process
Brand-new process
Starting Point
Existing processes
Clean slate
Frequency of Change
One-time or continuous
Periodic one-time change
Time Required
Short
Long
Typical Scope
Narrow, within functions
Broad, cross functional
Horizon
Past and present
Future
Participation
Bottom-up
Top-down
Path to Execution
Cultural
Cultural, structural
Primary Enabler
Statistical control
Information technology
Risk
Moderate
High
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1. Business Process Reengineering
BPR vs. Other Programs (3/3)
Reengineering
4) BPR vs. Other Programs
Rightsizing
Restructuring
TQM
Automation
Customer
Wants and
Needs
Technology
Applications
Assumptions
Questioned
Fundamental
Staffing
Reporting
Relationships
Scope of
change
Radical
Staffing, Job
Responsibilities
Organizations
Bottom-up
Systems
Orientation
Processes
Functional
Functional
Processes
Procedures
Improvement
Goals
Dramatic
Incremental
Incremental
Incremental
Incremental
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1. Business Process Reengineering
Reengineering Order Management
5) Reengineering Order Management
IT that supports the reengineering process…
CRM systems using corporate intranets and the Internet
Supplier-managed inventory systems using the Internet and extranets
Cross-functional ERP software to integrate manufacturing, distribution,
finance, HR processes
Customer-accessible e-commerce websites for order entry,
status checking, payment, and service
Customer, product, and order status databases accessed via intranets and
extranets
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Case Study
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Reference
■ Euiho Suh, “BPR/ERP(PPT Slide)”, POSMIT Lab.
(POSTECH Strategic Management of Information and Technology Laboratory)
■ Euiho Suh, “e-Business Systems(PPT Slide)”, POSMIT Lab.
(POSTECH Strategic Management of Information and Technology Laboratory)
■ O’Brien & Marakas, “Introduction to Information Systems – Fifteenth Edition”,
McGraw – Hill, Chapter 2, pp. 56~63
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