Business Process Engineering Minder Chen Ph D y Or ga g lo ni za o hn tio c Te n Minder chen csuci edu Process References Hammer Michael and Champy James Reengineering the Corporation A Manifesto for Business Revolution New York HarperCollins Publishers Inc 2001 Davenport Thomas H Process Innovation Reengineering Work through Information Technology Harvard Business School Press 1992 Hammer Michael Reengineering Work Don t Automate Obliterate Harvard Business Review July August 1990 Davenport Thomas H and Short James E The New Industrial Engineering Information Technology and Business Process Redesign Sloan Management Review Summer 1990 pp 11 27 Minder Chen 1993 2011 2 RFID Video http rfid net applications retail Pay attention to What activities or processes had RDIF been used in the video What benefits had been achieved Comparing information contents carried by Bar Code and RFID Identify innovative applications mentioned in the video Minder Chen 1993 2011 3 Definition of Reengineering 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 Minder Chen 1993 2011 4 What Business Reengineering Is Not Automating Paving the cow paths Automate poor processes Downsizing Doing less with less Cut costs or reduce payrolls BPR involves innovation Creating new products and services as well as positive thinking are critical to the success of BPR Minder Chen 1993 2011 5 A Cow Path Minder Chen 1993 2011 6 Reengineering Is Extremist s Extremist sView 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 Minder Chen 1993 2011 7 Definition of Process 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 Minder Chen 1993 2011 8 Processes Are Often Cross Functional Areas Manage the white space on the organization chart Customer Markets Needs CEO Supplier M a r k e tin g S a le s P u rc h a s e P r o d u c tio n D i s t r ib u t io n A c c o u n tin g 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 Minder Chen 1993 2011 Value added Products Services to Customers 9 BPR Examples Ford Accounts Payable Mutual Benefit Life New Life Insurance Policy Application Capital Holding Co Customer Service Process Taco Bell Company wide BPR Others Minder Chen 1993 2011 10 Ford Accounts Payable Process Purchasing Purchasing Vendor Vendor Purchase order Receiving Receiving Goods Copy of purchase order Accounts Accounts Payable Payable Receiving document Invoice PO Receiving Doc Invoice Minder Chen 1993 2011 Payment Source Adapted from Hammer and Champy 1993 11 Trigger for Ford s AP Reengineering Mazda only uses 1 5 personnel to do the same AP Ford 500 Mazda 5 When goods arrive at the loading dock at Mazda Use bar code reader is used to read delivery data Inventory data are updated Production schedules may be rescheduled if necessary Send electronic payment to the supplier Minder Chen 1993 2011 12 Ford Purchasing Purchasing Procurement Process Vendor Vendor Purchase order Receiving Receiving Goods Purchase order Goods received Data base Accounts Accounts Payable Payable Payment Minder Chen 1993 2011 13 Ford Accounts Payable Before Before 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 After Reengineer procurement instead of AP process The new process cuts head count in AP by 75 Invoices are eliminated Matching is computerized Accuracy is improved Minder Chen 1993 2011 14 New Life Insurance Policy Application Process at Mutual Benefits Life Before Reengineering Department A Step 1 Issuance Application Department A Step 2 Mutual Benefits Life Before Reengineering Issuance Policy Department E Step 19 30 steps 5 departments 19 persons Issuance application processing cycle time 24 hours minimum average 22 days only 17 minutes in actually processing the application Source Adapted from Rethinking the Corporate Workplace Case Manager at Mutual Benefit Life Harvard Business School case 9 492 015 1991 Minder Chen 1993 2011 15 The New Life Insurance Policy Application Process Handled by Case Managers Mainframe Physician Underwriter LAN Server Case Manager PC Workstation Minder Chen 1993 2011 application processing cycle time 4 hours minimum 2 5 days average Application handling capacity double Cut 100 field office positions 16 Capital Holding Co Direct Response Group A direct marketer of insurance life health property and casualty via television telephone and direct mail In 1988 DRG president Norm Phelps and other senior executives decided that for our company the days of mass marketing were over Need to strengthen DRG s relationships with existing customers and target our marketing to those potential customers whose profiles matched specific company strategies A new vision for DRG The company needed to be exactly what most people didn t expect it to be an insurance company that cares about its customers and wants to give them the best possible value for their premium dollar Source Adapted from Capital Holding Corporation Reengineering the Direct Response Group Harvard Business School case 192 001 1992 Minder Chen 1993 2011 17 Capital Holding Co Vision Caring Caring Listening Listening Satisfying Satisfying one one by by one one Each of us is devoted to satisfying the financial concerns of every member of our customer family by Deeply caring about and understanding each member s unique financial concerns Providing value through products and services that meet each member s financial concerns Responding with the clear information personal attention and respect to which each member is entitled Nurturing an enduring relationship that earns each member s loyalty and recommendation