Industrial Revolution’s Model of Organization and Production
1
 Complex work is broken down into simple and repetitive
tasks that are performed in sequence by specialists.


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Specialization of labor: Individual jobs become simple
Sequential processes: Coordinating people becomes more complex (The
role of the hierarchy)
Narrow and repetitive jobs: De-skilling the work forces
 Managers’ job is to control the quantity, cost, and quality of
the work performed.


Control as a dominant style
Financial-oriented scoreboard
 Employees are organized by business function.

Hierarchical structure
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R_all_Part_I.ppt
Problems
2
 Functional departments become barriers to change.
 Too much time and money are spent in ineffective
coordination and communication.
 Too little time for doing work that really benefits
customers.
 Overheads are soaring.
 Business processes are evolved over a period of time
and are not designed to handle changing business
environments or to take advantages of emerging
technologies.
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Process Evolution
3
 "We are structured today by historical
accident. As we added products, we added
functional stovepipes."
 "Processes in organizations have never been
designed in the first place."
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Definition of Reengineering
4
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
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What Business Reengineering Is Not?
5
 Automating: Paving the cow paths.
(Automate poor processes.)
 Downsizing: Doing less with less. Cut costs
or reduce payrolls. (Creating new products
and services, as well as positive thinking are
critical to the success of BPR.)
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R_all_Part_I.ppt
Reengineering Is ...
6
Extremist's View
 Obliterate 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.
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Gordian Knot
7
 In a Greek legend, nobody could untie a knot tied by
King Gordius of Phrygia. Many people tried to untie
the knot, but nobody succeeded.
 ... until Alexander the Great found a smart and direct
solution.
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Definition of Process
8
 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
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Dimensions & Types
Type
of Processes
Examples
9
Organization Entity
• Inter-organizational
Order from a supplier
• Inter-functional
Develop a new product
• Inter-personal
Approve a bank loan
Objects
• Physical
Manufacture a product
• Informational
Prepare a proposal
Activities
• Operational
Fill a customer order
• Managerial
Develop a budget
Adapted from: Davenport, T. H. and Short, J. E., "The New Industrial Engineering: Information Technology and Business Process
SumberSloan
Kepustakaan
: Review, Summer 1990, p. 17.
Redesign,"
Management
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Processes Are Often Cross Functional Areas
"Manage the white space on the organization chart!"
10
Customer/
Markets
Needs
CEO
Supplier
Marketing
& Sales
Purchase
Production
Distribution
Accounting
"We cannot improve or measure the performance of a
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."
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Value-added
Products/
Services to
Customers
Process-Orientation




11
Process-orientation is the key to the BPR success
Remove stovepipe functions
Focus on cross-functional core process redesign
“Link activities, functions, and information in new ways to
achieve breakthrough improvements in cost, quality, and
timeliness.” *
* Source: Dichter, Gagnon, and Alexander, “Leading Organizational Transformation,”
The McKinsey, Quarterly, 1993, Number 1.
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BPR and Other Organizational Initiatives
12
 Alias:
 Process Innovation
 Core Process Redesign (CPR)
 Relevant Initiatives in Organizations
 TQM
 Continuous Process Improvement
 Information Strategy Planning and Information Engineering
 IT for Competitive Advantages
 Related Initiatives in Public Sectors
 Reinventing the Government
 Functional Process Improvement (DOD)
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Ford Accounts Payable Process*
Purchasing
Purchase order
Vendor
13
Receiving
Goods
Copy of
purchase
order
Accounts
Payable
Receiving
document
Invoice
?
?
PO = Receiving Doc. = Invoice
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Payment
*Source: Adapted from Hammer and
Champy, 1993
Purchasing
Ford
Procurement Process
Purchase order
Vendor
14
Receiving
Goods
Purchase
order
Goods
received
Data base
Accounts
Payable
Payment
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Ford Accounts Payable
Before
15
 More than 500 accounts payable clerks matched purchase
order, receiving documents, and invoices and then issued
payment.
 It was slow and cumbersome.
 Mismatches were common.
After
• Reengineer “procurement” instead of AP process.
• The new process cuts head count in AP by 75%.
• Invoices are eliminated.
• Matching is computerized.
•Sumber
Accuracy
is improved.
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Reengineered Process
16
Key Concept:
• One queue for multiple
service points
• Multiple services
workstation
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