Operations Consulting Skills
&
Business Process Re-engineering
Operations consulting
- An expertise and research service to clients, assisting
them to:
 develop
operations strategies e.g. product leadership,
operational excellence, quality, just-in-time, BPR etc.
 improve production & service delivery processes
 Internal
external
(management services, operational research) and
Boom in Operations Consulting
 Market
pressures on clients to reengineer their
core processes and eliminate non-core processes
 Globalization
 Need
to better manage information technology
4
Categorization by Specialty
 Size
 Specialization
 In-house
 External
5
Example Operations Consulting projects

Plant, location and facilities management
–
–

Parts/Supplier Network
–
–

–
Technology evaluation & implementation
Process improvement & reengineering
People
–
–

Make or buy decisions
Vendor selection decisions
Processes
–

Adding & locating new plant
Expanding, contracting, or refocusing facilities
Quality improvement
Setting/revising work standards
Planning and Control Systems
–
–
–
–
–
Supply chain management
Outsourcing
ERP
Work flow control and scheduling
Logistics, warehousing and distribution
Source: Chase and Aquilano
Roles within Consulting Firms
Partners
(Finders)
Service departments
Finance, Marketing, HR
Managers
(Minders)
Consultants
(Grinders)
Source: Chase and Aquilano
Stages in Consulting Process

Feasibility
Decision point

Analysis and Unfreezing
Decision point

Sales & development proposal

Detailed Problem Analysis

New system design and modeling

Develop performance measures

Evaluate options

Present report recommendations

Join team to implement changes

Fine tune and ensure client satisfaction

Review what has been learnt
Decision point
Decision point
Decision point
Decision point
Tools 1: Heuristic Problem solving
Analyse situation
Trend, urgency, size
Actual vs symptoms
Problem definition
Objectives/resources
Generate and
Compare solutions
Options/criteria/costs
Implementation
planning
Review systems
Info systems/visibility
Tools 2: Surveys/Data gathering
Plant observation/audits
Work sampling & analysis
Flow charting
Organisation charts
Method study
Information
systems
analysis
Methods
• Issue trees
• 5 forces competitive
advantage
• Supply chain
• Value-added
• QualServ
• Systems analysis
• Customer &
employee surveys
• Gap analysis
• Prototyping
• Technical vs human
BPR Introduction

Why does so much Tech investment seem not produce corresponding increase
in productivity and performance?
1. Faulty measurements
2. Information Technology
3. Organizational process, structure and design

Hammer & Champy – radically redesign key business processes
“Reengineering The Corporation: A Manifesto for Business Revolution”

Davenport & Short – highlight the relationship between IT and BPR
relationships: “The New Industrial Engineering: Information Technology and
Business Process Redesign”
Business Process Reengineering (BPR)
Making processes
• effective - producing the desired resulted
• efficient - minimising the resources used
• adaptable - to changing customer & business
needs.
BPR Philosophy
Radical, cross functional, dramatic
 Focus on & organise around
outcomes
 Provide direct access to
customers (internal & external)
 Harness technology
 Control through policies,
practices and feedback
 Enable independent and
simultaneous work
 Build in feedback channels
Hammer and Champy,
Re-engineering the Corporation,
Harper Collins, 1993
BPR Focus
 on end-to-end business process that extends all to the way to a customer

(external or internal) who receives some value from the process
on essential processes that deliver outcomes
- moving flow
- cross-functional in scope within enterprise
- cross-enterprises

assumptions about performance improvement thru. reengineering
1. clean-sheet rethinking
2. quantum improvements > incremental improvements
3. use IT to re-engineer process in qualitatively different ways
4. maximum value-added in process, minimise everything else
5. measure value thru. surrogate performance measures
6. Change work environment to fit reengineered process
What is a Process?
Definition:
 A specific ordering of work activities across time
and place, with a beginning, an end, and clearly
identified inputs and outputs: a structure for action
(Davenport, 1993)
 A collection of activities that takes one or more
kinds of input and creates an output that is of value
to a customer (Hammer& Champy, 1993)
What is a business process?
…. a group of logically related tasks using the firm's resources to
provide customer-oriented results to support organisation's
objectives.
…..an operational or admin. system that transforms inputs into
valued outputs - typically a task sequence arranged as a
procedure perhaps involving machines, depts. & people.
•
•
•
•
making sandwiches to order
seeing a sales order through from beginning to end
stock replenishment procedures
aircraft maintenance e.g. in hanger or on tarmac between
flights
…. includes service support processes e.g. engineering change
or payroll process, manufacturing process design.
Kinds of process:






Operational (production) – directly achieves operational
objectives
Control – goal to maintain a state relating to another
process
Generic – applicable to any group member (an abstraction
or class, essentials of a process that may be shared)
Customised – adaptation of a generic process to suit
specific objectives and using identified resources
Enactable – defined + executed using process technologies
Meta-process – concerned with another process(es)
System Thinking


Systemic:
“of a bodily system as a whole” (medically oriented
definition)
“ of or concerning a system as a whole”
A framework of thinking, analysis and synthesis

the ability to see the world as a complex system
“these are connected to those and everything else”
“you can’t just do this without those being affected”
BPR - process innovation
Existing, long-in-the-tooth practices (solutions to past problems)
may no longer reflect core business concerns nor what the customer
may actually want.
 Rethink & redesign BPs for sharp improvement (radical change) in
performance, costs, cycle times & quality.
 "If you want to get to Heaven, I wouldn't start from here." Start with
a clean sheet of paper
Imperatives
 evaluate core business activities
 consider BPs cross-functionally
 re-design radically, don't just tinker
 aim for sharp improvements in performance levels

BPR serves





the aspirations of business strategy makers &
implementors.
target better operating ability to satisfy customers radical change may be needed.
a BPR programme is a tactic, a programme to achieve
desired results.
BPR in isolation from strategic plans will not work.
Commitment of strategic managers is essential.
isolated BPR efforts will lack direction and will get lost.
BPR as Neo-Taylorisim?
 The
aims, processes and
outcomes of BPR have roots in
various organisational
efficiency, productivity and
competitiveness movements.
BPR Phases
Organising
for
improvement
Undestanding
the Process
Streamlining
Measurements
and Costs
Continuous
improvement
BPR Project
 An
organisational change project with three components
: business strategy, business process and information
systems
 BPR must be linked with business strategy and
information system
Business Strategy
Business Process
Information System
Steps in process analysis
1. target the process area for change
Business process
Task process
2. form a team. Select project leader
3. decide on the objectives of the analysis
4. define customers & suppliers
5. analyse (identify/ chart) the process elements & steps in the
process flow
6. describe the existing transformation process
7. develop improved process design
8. gain management approval of the improved design
9. implement new process design
PHASE 1: Organising for improvement
Objective: build leadership, understanding & commitment
Activities
 establish Executive Improvement Team (EIT)
 Appoint BPR champion
 provide executive training
 develop an improvement model
 communicate goals to employees
 review business strategy and customer requirements
 select the critical processes
 appoint process owners
 select BPR Team members
PHASE 2: Understanding & redesign
the process
Objective: understand all dimensions of current business process
Activities
 define process mission, scope and boundaries
 provide team training
 develop a process overview
 define customer/business measurements & expectations for the
process
 identify improvement opportunities
errors and re-work
high cost
poor quality
long time delays/backlog
 Record/chart the process
 collect cost, time & value data
 perform walkthroughs on new process
 resolve the differences (existing/new, ideal/realistic)
Process definition and charting
Analyse (identify and chart)
the process elements and
steps in the process flow
PHASE 3: Implementation
Objective: secure efficiency, effectiveness and adaptability
of the business process on implementation
Activities
 eliminate bureaucracy and no-value-added activities
 simplify the process and reduce process time
 standardise and automate
 up-grade equipment
 error proof the process and document it
 select and train the employees
 Plan/schedule the changes
PHASE 4: Measurements and controls
Objective:
develop a process control system for on-going
improvement
Activities
 develop in-house measurements and targets
 establish a feedback system
 audit the process periodically
 establish a poor-quality cost system
PHASE 5: Continuous improvement
Objective:
to implement a continuous improvement process
Activities
 Qualify/certificate 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
Method Study Questions for Process Analysis
 What does the customer need?, operations are necessary? Can some
operations be eliminated, combined, or simplified?….
 Who is performing the job? Can the operation be redesigned to use less skill
or less labor? Can operations be combined to enrich jobs? ….
 Where is each operation conducted? Can layout be improved? ….
 When is each operation performed? Is there excessive delay or storage?
Are some operations creating bottlenecks? …..
 How is the operation done? Can better methods, procedures, or equipment
be used? ….
BPR and Bench-marking

The BPR team may benchmark another company's
process to determine
– process objectives
– innovative practices
– tried and tested methods

Benchmarking partners need not be from the same
industry.
– A photocopying firm on re-engineering its order processing
system compared itself to mail-order firms as well rival
photocopy companies.
BPR Problems















Starting with a clean sheet
Preoccupation & commitment to existing business processes
Thinking the problem thru. in the light of new methods & technologies
Choice of the target process - too big, too small
The “power and resourcing of the cross functional team”
BPR in isolation from strategic and ops plans will not work.
Top commitment essential. Short-termism of decision makers
Isolated efforts will lack direction and will get lost.
Done at times of stress and anxiety
John Gall,
Keeping the BPR team on target
“Systemantics” If it works, don't
BPR team as action researchers
change it!
Costs of the change
Vaccination against change + another quick fix
Finding the time and energy
We need to keep the old, existing core systems running
BPR for e-Business
 “rethinking/ redesigning business processes at both
enterprise & supply chain level to take advantage
of Internet connectivity & new ways of creating
value”
 Redesign front-office processes that interact with
customers & back-office processes (across entire
supply chains)
 Changing the way the organisation operates,
handling physical & e- business processes and how
people work
Redesigning Business Processes
1.
2.
3.
4.
5.
6.
7.
Customer-facing
provide value to process recipient
outputs used by external or internal customers
Cross-functional, cross-department, cross-enterprise
completed task handed to another do next task in sequence
Altering dynamics of information flows
Knowledge that participants need created around the process (data,
reports, trends, exceptions, FAQ & ideas)
8. Multiple versions of business processes rather than one-size-fits all
9. Degree of structure of a process –highly structured or fluid & not
tightly determined
When are Operations Consultants Needed?
 When
faced with major investment decision(s)
 When
management believes it is not getting the
maximum effectiveness from the organization’s
productive capability.
10
Steps in a Typical Consulting Process
1.
2.
3.
4.
5.
6.
7.
8.
Sales & Development Proposal
Perform Problem Analysis
Design, Develop, and Test Alternative Solutions
Develop Systematic Performance Measures
Present Final Report
Implement Changes
Assure Client Satisfaction
Assemble Learnings from the Study
11
Operations Consulting Tool Kit
PROBLEM DEFINITION
Customer Survey
Gap Analysis
Employee Survey
Five Forces Model
DATA GATHERING
Plant tours/audits
Work Sampling
Flow charts
Org. charts
DATA ANALYSIS AND SOLUTION DEVELOPMENT
Problem analysis
Bottleneck analysis
Simulation
Statistical tools
COST IMPACT AND PAYOFF ANALYSIS
Decision Trees
Balanced scorecard
Stakeholder analysis
IMPLEMENTATION
Responsibility charts
Project management techniques
12
FIG 1: MASTER
FLOWCHART
Master Flowchart
Go to Industry
Expansion
Flowchart
Yes
Is ROI above par?
No
Yes
ROS low?
Investment too high?
Go to Financial
Restructuring
Flowchart
Yes
Yes
Low Revenue
Costs above par
Yes
Market Share Low
Yes
Go to Marketing
Flowchart
Industry Sales low
Yes
Go to industry
Expansion Flowchart
Price too low?
Yes
Go to Industry
Expansion Flowchart
Go to cost
control
Flowchart
FIG 2: COST CONTROL
FLOWCHART
High Fixed Cost ?
High Direct Cost ?
High Supplier Cost ?
Strategy to Reduce
supplier Cost:
1. Just in time ( JIT)
2. Qualify other
Suppliers
3. Qualify programme
for Suppliers Q1
4. Critical Path
Scheduling
High Internal Cost ?
Strategy to Reduce
own direct
Cost:
1. BPR
2. Renegotiate
labour costs to
allow flexibility
3. Material
Resources
Planning
At end of this flowchart
Go to : Marketing
flowchart to check that
cost reduction do not
destroy customer
preference
Flowchart for
Cost Control
High G &
A and
Non
Traceable
cost?
High S & M Cost?
High R & D Cost?
Marketing Efficiency
Strategy:
R & D Efficiency
Strategy:
Overhead Reduction
Strategy:
1. Target Only High
Potential Segments
1. Focus Basic
Research
towards
Development
for target
segments
1. Flatten the
Hierarchy
2. Replace Sales force
with Telemarketing
3. Less Expensive
Channels
4. Activities Based Costing
( ABC)
2. QFD
2. Outsource non core
functions in value
chain
3. Decentralize into
strategic
Business units
FIG 3: MARKETING
FLOWCHART
Flow chart for marketing
Do Loop For Each Segment i
Segment I already
repeat purchasing
brand
Yes
1.
2.
No
Has Segment I tried
brand and liked it
Find new uses
Increase frequency of use for segments
Strategies to increase Repeat Purchase
Yes
No
Does Segment I prefer
your brand to
competitors
Strategies to increase Volume
1.
2.
3.
Improve availability
Channel push programme
Reminder promotions
Strategies to increase Trial
Yes
1.
2.
3.
4.
Samples
Demos
Coupons
Point of purchase displays
No
Strategies to increase knowledge
Does Segment I know
brand’s strong
attributes
No
Yes
Can latent attributes
be found that are
important to segment
I, where brand always
exceeds competition.
No
Product Modification
1.
2.
Flanker product to appeal to segment I
Redesign existing product
1.
2.
3.
4.
5.
Advertising
Public Relations
Sales force training
Channel training
Change Ad agency
Yes
Brand Positioning
FIG 4: INDUSTRY
EXPANSION
FLOWCHART
Flowchart for Industry
Expansion
Star Business Strategy:
1. Develop more New products
2. Invest in Marketing
Yes
Is ROI high?
3. Standardize product more
No
4. Invest in R & D
5. Add Capacity
Why is revenue low
6. Automation
Industry Sales Declining
Price Premium Declining
Is
Market
Share in
top 2?
No
Strategy for declining
Markets
1. Sell Business
2. Buy up competitors
below book value
3. Abandon unprofitable
segments
High Direct Cost
Yes
Yes
Industry Growth Strategy
1. New uses, more frequent
uses
2. New Customers regional
or international
expansion
3. New Products. Expand
product line
4. Avoid unrelated
diversification. “Stick to
your knitting”.
No
Strategy for countering an
unattractive industry:
Premium Pricing
Strategy:
1. Spin off Businesses
1. Skimming
2. Reduce power of
customers or suppliers
2. Lifecycle analysis
3. Encourage competitors to
exit
4. Target a niche market that
is sheltered
5. Legal intervention to
reduce competition
3. Conjoint Analysis
What's Driving
the Decline?
Gather Information
Analyze Using
Profit Equation
Revenues
Price
Decreasing
Comp. pressure?
Expenses
Volume
Decrease
Increase
- Market Conditions
- Competition
Higher Marg. Costs
- Org. Dysfunction
- Overtime
Product Mix
Fixed Costs
Variable Costs
Unusual Expenses
Selling Less
Profitable Items
- Added Capacity?
- Raw Material Prices
- Writeoffs
- Lawsuits
Revenues
Price
COGS
Unit Volume
Direct Material
Price Sensitivity
- Elasticity
Existing Market
- Promotion
- Place
Scale Economies
/Diseconomies
- Supply Constraints
Competitive Environ.
- Substitutes
New Markets
- Geographic
- Economies of Scope
Inventory Mgmt.
- Carrying Costs
- Shrinkage
SG&A
Direct Labor
Variable O/H
Replace w/machines
- Union?
Cost Acctg.
- Allocation Drivers
- Does pricing
reflect Cost
Can we explore economies of scope with entry into adjacent industry?
Should We Increase Capacity?
Market Demand
Industry Capacity
Competitors Plans
Investment vs. Improvement
Market Trends
Threats
Improve Productivity
Add Capacity
Cyclical / Seasonal
Bottlenecks
Add shifts
Economy
Design for manuf.
Acquire
Global Competition
Consumer tastes
Substitutes
Outsource
What Has Changed in
the Following Environments?
Company
Customer
Competition
Regulatory
Product
Is quality sagging?
Tastes changing?
Are low cost competitors
stealing from us?
Do new tax
incentives exist?
Price
Have sensitivities changed?
Overpriced versus our competition?
Disposable income?
Are diffentiated competitors
stealing from us?
Any new regulations
restricting the use of our
product and favoring substitues?
Place
Is our distribution getting squeezed out?
Are Customers Changing Channels?
Demographics of our target?
Are competitors integrating
into distribution and
shutting us out?
Promotion
Are we spending?
Push vs. pull?
Do new substitutes exist?
Are they offering our customers
special incentives to switch?
(particularly with substitutes)
Has public image changed?
Customer
- What do they want?
- How do they choose?
Values/Tastes
Price Sensitivity
Competitor
- Where are we positioned?
- Where is the competition?
Purchasing Habits
Product
Company
- How do we add value?
Resources to respond?
Business relationships
Place
Susbsitutes
Disposable income
Distribution channel
Demographic changes
Mature market?
Bundled product?
Cost structure
Distributor
Tangible
Vendor
Intangible
Customer
Price
Promotion
New customers?
Normal good?
Finances
• Given the above, is it worth making a competitive response?
• How will the competition react?
• Applying game theory or PARTS analysis may help.
Customer
Does product met a need?
Competition
Is there any?
Yes
Product
Have we done homework?
What does the segment want?
Proliferation of products already?
Price
Have we explored sensitivity?
Can we make a profit at this price?
Many
Is market growing?
Promotion
Push or Pull?
Cost of launch?
Will current promotions help?
Place
Is distribution aligned with customer?
Are we experienced in this channel?
Company
Can we do it?
Can we eat the young?
No
Few
What wil be the strategy?
Low cost or Differentiated?
Are there barriers to entry?
Yes
Can we beat them?
No
Can we erect some?
Finance
Are we able to finance the launch?
Should we buy an existing producer?
Will we be first movers?
Any precious resource
that we own?
(Ricardian rents)
Operations
D0 we have capacity?
Supply network?
Marketing
Will we cannibalize existing products?
Is this a complement / bundled good
Does it build on resources?
Internal
External
Quantitative
Doesit match our growth strategy?
- ROE/ROI
Cultural Differences of Customers
- Tastes / product preferences
- Values / gender roles
Alliance with local firm?
- Joint venture/distributor
Methods of Conducting Business
- Introductions
- Government contacts
Can our resources succeed overseas?
- Flexible enough to adapt?
Educational Differences
Amount
Is organization consistent
with overseas 'autonomy'
Economy & Exchange Rates
Timing
- Startup / disposition
- Operating
Corporate Values
- Bribery
Worker's conditions / child labor
Seasonality
- Weather
Discount Rate
Distribution system
- Transportation infrastructure
- Different channels
Political Climate
- Instability
Local Market
- Size
- Competition
ROI / Hurdle Rate
Cash Flows
Investment Decision
NPV Analysis
Useful Life
Other Factors
Cash Flows
Discount Rate
Timing
- Opportunity Cost
- Risk Free Rate
- Inflation
- Risk Adjust
Size
- Market Potential
- Outflows
- Working Capital
Strategic Fit
Synergies
Environmental
Political
Competitors
- Missing Links
of Value Chain
- Seasonality
- Volatility
- Inflation
Demand Cycle
Stability
Regulation
- Current Supply
Potential Demand
Understand Purpose
Diversification?
Gain Market Share?
Geographic Expansion?
Analyze Opportunity
Internal Factors
External Factors
Strategic Objective
Strengths & Weaknesses
Resources
Acquisition Fit
Industry Attractiveness
Porter's Five Forces
Three C's
Identify Acquisition
Candidates
Soft Issues
- Culture/Fit
- Management
Hard Issues
- Price
- Balance Sheet
Two Options Both
Designed to Raise the
Value of the Company
Self-Help
White Knight
Are We Highly Levered?
(Relative to the Industry)
Classic M&A
Is there a Firm That...
Yes
No
Do We Have Cash?
Issue Debt, Buy Back Stock
Has Financial Strength
Strategic Compatability
Cultural Fit
Yes
Then Buy Back Stock
to Raise Stock Price
No
Can We Release Good News
to Raise Stock Price?
Definition of BPR

Four Elements of Reengineering
 Radical or at least significant changes
 Business process as opposed to departments or functional areas
 Achieving major goals or dramatic performance improvements
 IT as a critical enabler

Different Terms
 Business process improvement (Harrington, 1991)
 Core process redesign (Kaplan and Murdoch, 1991)
 Process innovation (Davenport and Short, 1990)
 Business process transformation (Burke and Peppard, 1993)
 Breakpoint business process redesign (Johanssen et al., 1993)
 Organisational reengineering (Lowenthal, 1994)
 Business process management (Duffy, 1994)
 Business scope redefinition (Venkatraman, 1994)
 Organisational change ecology (Earl et al., 1995)
 Structured analysis and improvement (Zairi, 1997)
BPR Project Problems
70% of the
BPR projects
fail
Biggest obstacles that reengineering faces are
(i) Lack of sustained management commitment and
leadership
(ii) Unrealistic scope and expectations
(iii) Resistance to Change.
Other problems:







the danger of another inefficient system
ignoring the embedded system knowledge accumulation over many years
hidden agendas of top management and discontinues in the leadership
poor choice of metaphors in the organizational language
lack of communication
selecting wrong IT vendors
lack of awareness of the lead times associated with IT
 BPR
must be seen as a strategic, cross-functional
activity that needs to be integrated with other aspects
of management
 The key requirement is that managers understand in
detail the current business processes before
embarking on a BPR project.
 The application of Tech can provide major
improvements in the performance of business systems,
and while considered a major part of the reengineering
activity, must be integrated with the needs of all
stakeholders in mind.
Tools to reach your goals
• Recognize and leverage
Organizational Silos
•“Make customer satisfaction the
universal language
• Business Process Redesign (BPR)
Change Management
Tools
• Change Leadership Principles
Finance
Sales
Logistics
Manufacturing
Marketing
Silo-Busting – where do we begin?
Reasons “destructive” silos develop
 Lack
of top management awareness and
involvement
 Absence of cross-functional knowledge,
processes, and tools
 Fear of sharing knowledge
 Misaligned metrics
 “I win – you lose”
Customer is shortest path to concerted action
 Customer pays the bills
 Customer is ignorant to internal politics
 External customer focus enables “blameless”
dialogue and problem-solving
Your organization’s customer satisfaction metrics
provide the “starting point” for your
supply chain improvement agenda and lay the
foundation for your change initiative.
Why performance does not happen
Customer needs/expectations are unclear
Measures of success are not clear/captured
No repeatable, consistent, scalable processes
Organization not aligned, skilled &/or managed
to deliver
Business Process Redesign (BPR)
 Addresses
these issues to improve
organization performance
 Clarify customer expectations
 Define measures of success in the customers’
terms
 Create processes that drive consistent
execution
 Organization structure, skills and
measurements are set up to support the
processes and organization’s mission/role
Critical success factors of BPR
 Senior management support – must be visible
– Alignment at senior leadership team level
 Clear
and consensed understanding of
customer requirements and expectations
– Everyone must “sing off of the same songsheet”
 Be
aware of, and engage, the “Shadow
Organization”
 Involve everyone and communicate often
 Build strong internal relationships
Keys to change management success
 Prepare
the organization for what’s
new/different
 Understand and leverage your informal leaders
 Create alignment at top of organization around
what “success” looks like
 Understand the nature of “learning curves”
 Keep the dialogue grounded in the customerrelevant metrics and language
“Management System” components
Problem-Solving
Accountability
For Process
Owners
Scorecard that
Reflects Customer
Requirements
& Process
“Health”
Communication
Team-Based
of Performance to
Reward &
Customers, Staff &
Recognition
Process Partners
Continual Associate
Education &
Process Tweaking