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Case study business process reengineering in an international company

This differentiation is sought with the goal of maximizing corporate profitability and, ultimately, shareholder wealth. One of the many ways organizations are approaching these goals is through the use of a concept called business process reengineering BPR. In their book "Reengineering the Corporation," Michael Hammer and James Champy formally define BPR is as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.

The two most important words with regards to the case study business process reengineering in an international company of the underlying systems are fundamental and processes. First, fundamental refers to the most basic aspects of a business and it's underlying processes.

When undertaking a BPR initiative, the reengineering team must understand the fundamental assumptions underlying the current business process and ensure that these critical assumptions are disregarded throughout the BPR process. Hammer and Champy further state that BPR must begin with no assumptions. Second, process refers to the actual processes involved in the BPR initiative. Hammer and Champy state, "most businesspeople are not process-oriented.

Then, they must analyze the relationship of the process to the overall goals of the organization. Hammer and Champy suggest that a paradigm shift from task-oriented thinking to process-oriented thinking is crucial for successful BPR. Information systems analysis is a crucial component of BPR.

Systems analysis and it's relationship to the overall BPR process will be further examined. Furthermore, to illustrate this concept, a case study will be presented. However, to fully understand the concept, we must first study the history of BPR. Those who study BPR believe an engineer by the name of Frederick Taylor is truly the father of the concept.

In the 1880s, Taylor asserted that "managers should use process reengineering methods to discover the best process for performing work, and that processes be reengineered to optimize productivity. This apparent discovery of a new concept led another engineer to take the idea one step further. In the early 1900s Henri Fayol, also a French organizational theorist, believed this concept could be applied to the organization as a whole.

However, it was not until the early 1990s that the concept received a much-needed injection of popularity. The revival of the concept was highlighted by Hammer and Champy's book. At the time of the first edition's publication 1993the American economy was stagnant.

Profit margins were being squeezed and companies were searching for ways to survive. Thus, Hammer and Champy's pioneering book was well timed. However, since the late-1990s and after some successes and many failures, the concept has lost some of its popularity. Thus, it is very important to select the team participants wisely, as well as choosing a sound methodology. Reengineering groups can vary from project to project.

However, they all should contain a couple common characteristics. First, every BPR team should contain members of varied backgrounds and experiences. Team members should not only be IT professionals or only business professionals. Second, while there is no set size for a group, it is imperative to have the proper number of individuals for the task at hand. This is however, easier in theory than in practice. Furthermore, to facilitate a smooth BPR process, a team must select a methodology that is appropriate for the project.

Many methodologies have been developed to help guide the process successfully towards the organization's goal.

Although a myriad of BPR methodologies exist, almost all of them contain the same basic steps. For example, on their website, ProSci posts their seven-phase methodology: The first two phases of this methodology however, encompasses the analysis aspect of the project.

Re-engineering Business Processes

While helpful in practice, this methodology hardly provides a basis for purposes of this discussion. Thus, Band's methodology provides the backbone of our discussion as the first four phases all provide for direction with regard to the analysis of the organization's reengineering initiative. In phase one, the reengineering team must identify the core processes critical to the ongoing survival of the organization. It is important at this point to differentiate between core processes, or those processes which help to differentiate the organization from it's competitors, and non-core processes.

Conversely, a non-core process typically serves no differentiation purpose such as the payroll function. In an effort to compile and analyze an organization's core processes, that organization may utilize data flow diagrams DFD and entity-relationship diagrams ERD. DFDs show the flow of data throughout an organization's system.

  • The dissemination of information took the forms of monthly newsletters, e-mail, faxes, telephone calls, and, most importantly, employee involvement;
  • Although they each differ in the phase titles and the number of phases, they both encompass the same critical tasks required for a successful BPR initiative;
  • They too, were being pressured to reengineer their processes;
  • DFDs show the flow of data throughout an organization's system;
  • Empower workers and use in-built controls.

More specifically, DFDs show a system's data sources, destinations, flows, stores, and processes. For example, the context level DFD simply shows the inputs and outputs of an organization's system as well as it's external entities.

It does not incorporate how the output was generated only what output was generated. However, as the levels of the diagram increase, the detail of the systems correspondingly increases. Therefore, the mid- and high-level DFDs can be very helpful in assisting the reengineering team to determine core processes. Furthermore, ERDs illustrate the entities in a process and their relationships to each other.

These diagrams specifically show the entities, relationships, and the cardinality of those relationships within a particular system. A deep understanding of the entity-relationship can be helpful in identifying participants and stakeholders and ultimately, focusing the scope of the project. Again, it is important to stress that the team must differentiate between core and non-core processes. Careful preparation and analysis of these diagrams should provide helpful insight into this critical area for reengineering teams.

Phase two of Band's methodology mandates the establishment of performance requirements.

This is primarily done through a process known as benchmarking. On their website, ProSci defines benchmarking as "the search for the best practices that yields the benchmark performance. To accomplish this, an organization may compare some statistical information to another organization within the industry often an industry-leading organization.

The benchmarking procedure though has its limitations. There have been numerous documented case studies in which organizations have overlooked their core competencies during the benchmarking process, thus producing a failed BPR project. The organization attempted a new service that would ensure next day delivery by 10: Everything was reengineered, including restructuring of the delivery organization, retraining of drivers, rescheduling of routes, and even redesigning the doors on the delivery trucks.

After these initiatives had been implemented, UPS soon discovered that their customers were more concerned about the services they provide than with the promptness of delivery. By implementing this initiative, UPS lost one of its core processes, advertising by driversand also experienced poor labor relations. Since this discovery UPS has since returned its operations to more closely resemble the pre-reengineering effort.

This phase actually incorporates the information gathered in phases one and two and enables the team to "pinpoint problems and diagnose the causes of performance gaps. There are primarily four ways to evaluate the performance of a process. These measures are cost, time, quality, and efficiency.

Efficiency, however, is not so easily measured. In spite of its ambiguity, efficiency often is a combination of other performance measures including cost, time, and quality. Each organization must define efficiency in terms of their respective processes and then attempt to measure it based on their definition.

This unit of IBM provides financing for customer purchases. While researching their loan approval process, IBM found the complete loan process to take approximately six days to complete. Furthermore, IBM found that during this six day period customers were able to "shop around" for a better deal for their financing needs. Since the reengineering process had been completed, IBM has cut the personnel involved in the process to one per loan request. This person processes the loan from origination to closing using a new computer system developed by this initiative.

The results of this energetic project were a substantial reduction in the complete loan process time from six days to four hours as well as a reduction in the workforce required to support this function.

  • This apparent discovery of a new concept led another engineer to take the idea one step further;
  • They redesigned the organization structure, roles and responsibilities, work flows, IT, and the culture;
  • This director brought with him the concept of migrating BPR from cost cutting projects towards creating new business strategies and new businesses.

In IBM's case, they determined the time aspect of performance was affecting the overall efficiency of the business unit. Building on the previous three phases, phase four develops a vision for the reengineered process.

Additionally, during this phase, the team must also develop a set of specific change initiatives. These change initiatives should be established according to the objectives and goals of the project, which can be in terms of performance improvement dimensions, such as the duration of operation, cost of running the process, variety service options, product or service quality, etc.

IT is seen by many as an enabler of BPR. In fact, Bustard and He suggest in their article that the business and IT functions are interrelated to the point that any attempt to change one function should case study business process reengineering in an international company include a change to the other. IBM reengineered the loan process to shorten the total time required for the process. Correspondingly, IBM implemented a new computer system to assist the employee working on the loan.

This BPR initiative would not have been possible without the implementation of a new computer system. These four phases of Band's methodology provide a solid basis for the analysis of a BPR project. The final phase incorporates implementation of the changes and is fairly irrelevant to our topic.

While ProSci and Band's methodologies may not be representative of the entire population of BPR methodologies, one important aspect can be derived from both of them. Although they each differ in the phase titles and the number of phases, they both encompass the same critical tasks required for a successful BPR initiative.

An analysis of a real-world example of successes and failures may help to identify guidelines an organization can follow to help minimize the chance of project failure.

CIGNA is an international insurance provider with over 125 years of experience. The company has segregated these four areas into separate functional areas.

Business Process Reengineering Examples – Understand and Learn from them

Ten individuals with various backgrounds and experiences initially staffed the group. These individuals were envisioned to remain in the group for approximately 12-18 months. This process would serve two purposes. First, the individuals leaving the team would return to their respective positions with the newly acquired reengineering knowledge that could be applied on a continuous basis.

Second, it would provide a revolving door for new individuals to acquire the reengineering skills and experience so that once their project is completed, they too can return to their positions with a new knowledge base from which to work.

From the strategic planning process and various benchmarking studies, the senior management of this area decided that the information systems they utilized were inadequate, including the support for systems development.

  1. IBM reengineered the loan process to shorten the total time required for the process.
  2. Thus, Band's methodology provides the backbone of our discussion as the first four phases all provide for direction with regard to the analysis of the organization's reengineering initiative.
  3. Ten individuals with various backgrounds and experiences initially staffed the group. This is a complete change in the process, resulting in greater control, fewer accidents, greater employee satisfaction, and increased ability to focus on customer needs, all without losing quality.
  4. However, they all should contain a couple common characteristics. IBM reengineered the loan process to shorten the total time required for the process.
  5. First, fundamental refers to the most basic aspects of a business and it's underlying processes. Then, the implementation phase began in January of 1994 and took 12-24 months.