Business Process Re-engineering

Example – Ford Motor Company

• In the 1980s Ford’s Accounts payable employed more than 500 people.
• The purchasing department sent a copy of a purchase order to Accounts and the
Vendor.
• The goods were received by Material control who sent a copy of the receiving
document to Accounts. And the Vendor would send their invoice to Accounts.
• Most Accounts Payable Clerks spent time matching values on invoices, chasing
various people and then issuing payments.
• Ford firstly asked Vendors to not send any invoices to Accounts.
• Purchasing creates purchase orders online through their online ordering system,
Materials control uses this entry to check the good received. If there’s a match, the
payment is automatically generated and sent to Accounts who just pay the relevant
Vendors.
• By implementing this process Ford managed to achieve a 75% reduction in their
head count.

What is BPR?
• Co-founded in the early 90s by Michael Hammer and James Champy.
• A process employed to greatly improve organizational performance by radically
redesigning business processes.
• Methodology to radically redesign core business processes to achieve dramatic
improvements in productivity, cycle times and quality.
• The aim is to dramatically improve organizational performance by improving an
organization’s efficiency and effectiveness of processes.
• BPR also involves redesigning associated systems and organizational structures.
• 3 step process – Analysis, Design and Implementation.

Steps for carrying out BPR

• Michael Hammer and James Champy were key contributors in the field of Business
Process Re-engineering.
1. Identify the Process for review
2. Review processes selected to analyze the current situation in process: the
managers need to understand how the process is performing currently and
they can do so by looking at financial data, stakeholder data, software tools
available, efficiency data, etc.
 3. Design Process Improvements: here it’s important to designate key
performance indicators (KPIs) for every improvement mapped and to
ensure improvements can actually be measured.
4. Implement the Process Improvements: here it’s important to keep all
relevant stakeholders in the loop. What’s also important is to review the
whole process, the whole redesign periodically to ensure that the results
that we set out to achieve were actually achieved.

Principles of BPR
• 7 principles of BPR to ensure successful implementation:
1. Organize around outcomes, not tasks: Defining the outcome clearly and
combining several jobs together. Focus shifts from ‘what are we doing
now?’ to ‘what do we need to do?’. Get one person to perform all steps of a
process, by redesigning his/her job around the outcome and not the tasks.
2. Have those who use the output of the process perform the process:
For instance, managers should be able to complete certain purchases
themselves rather than going to Procurement for everything.
3. Integrate information-processing work into the real work that
produces the information: People who collect information need to also
analyze it instead of relying on other people to do so.
4. Treat geographically dispersed resources as though they were
centralized: For instance, an organization with various branches located
across the nation needs to have a centralized procurement division.
5. Link parallel activities instead of integrating their results: Various
product development projects can fail because of several components
being designed in parallel and the components not working together.
6. Put the decision point where the work is performed and build control
into the process: Project managers and Line managers need to be
responsible for monitoring results and making decisions.
7. Capture information once and at the source: It’s best to not have people
responsible purely for feeding information captured by others.

Shortcomings of BPR
• All-or-nothing approach: uncertain results with the all-or-nothing approach. Such
approaches are not entirely practical in the modern business scenario.
• Negative results: landscape layoffs, radical changes to corporate culture,
opposition to change, declining staff morale, disruptions and disorders are just
some potential negative effects of something as drastic as a BPR implementation.
• Gradual and innovative approaches are usually chosen over BPR.
Benefits of Employing BPR
• Decreased Costs & Cycle Times by automating or removing manual activities.
• Increased Productivity by using less resources to complete the same amount of
work.
• Improved Quality & Customer Service via clear process ownership and customer
focus.
• Improved Competitive Position.

Challenges with Employing BPR

• Decreased Employee Morale
• Reduced Staff/Layoffs
• Incomplete Impact Analyses
• All-or-Nothing Philosophy

Overcoming BPR Challenges

1. Focus on ALL Change Management Impacts – People, Process & Systems.
2. Communicate Change Impacts Early & Often in multiple mediums.
3. Practice Continuous Improvement

6 Key Principles in Implementing BPR

1. Start with a clear Vision and measurable Objectives of success.
2. Analyze all processes, Identifying underperformers most impactful to the
organization.
3. Understand & Measure underperforming processes to be redesigned.
4. Establish IT systems that will support re-engineering efforts (IT Capabilities).
5. Design, Build, and Test the re-engineering process (prototype), resolve errors
and testing before going live.
6. Prepare the organization for change in the newly designed process (Adapt the
Organization).

Real life application BPR in Telecom – American Tower

American Tower Corporation is a leading owner and operator of cell towers. American
Tower is performing well but still has archaic processes. Evaluate their purchase order
process and how they plan to improve.

BPR in Action at American Tower

Today, in order to send a purchase order to a vendor, a requester must fill out an offline
spreadsheet and email it to a centralized inbox. Another team receives the request and
manually transposes the information into Oracle if any of the information on the request
is incorrect, the person transposing only knows the data doesn’t match but doesn’t know
why or how to fix it, so they must send it back to the original requested to fix it and the
process starts all over again.

The requester gets back their work only knowing it’s wrong and had to repeat the process
guessing how to fix the error causing frustration even in situations where the user gets all
their information correct the first time they still receive a request to validate the information
they originally provided a wasteful and equally frustrating event.

Using a re-engineering effort, American Tower is implementing processing system

enhancements that allow requesters to enter PIO requests directly into Oracle. If there
any errors, the requester knows why and can immediately correct. If there are no errors,
the request is processed with assistant validation and no additional approvals needed.

The improvement:
• Eliminates the need for duplicative data entry
• Reduces cycle time and administrative efforts
• Rely on IT System to ensure adherence to controls

Summary
BPR is a great tool when companies need to make radical changes to decrease costs,
improve customer satisfaction, and stay relevant.

When employing BPR, it’s important to have a clear vision of your future state and run a
thorough change management initiative in parallel. Ensuring a company’s most valuable
resources its people are taken care of.

Introduction to Lean Production/Just in Time Production

Toyota Production System (TPS) Elements
1. Andon
2. Pull System
3. Kanban
4. Standard Work Practices
5. Minimal machines
6. Kaizen Area
7. Jidoka
8. Level Schedules
9. JIT
10. Respect for People
11. Empowered Employees
12. Assembly Components
JIT/Lean Operations
Good production systems require that managers address 3 issues that are pervasive and
fundamental to operations management: eliminate waste, remove variability, and improve
throughput.

Just-In-Time, TPS, and Lean Production

1. JIT is a philosophy of continuous and forced problem solving via a focus on
throughput and reduced inventory.
2. TPS emphasizes continuous improvement, respect for people, and standard work
practices.
3. Lean production supplies the customer with their exact wants when the customer
wants it without waste.
4. JIT emphasizes forced problem solving.
5. TPS emphasizes employee learning and empowerment in an assembly-line
environment.
6. Lean operations emphasize understanding the customer.

Eliminate Waste
1. Waste is anything that does not add value from the customer point of view.
Customer could be the end customer (also our succeeding process).
2. Storage, inspection, delay, waiting in queues, and defective products do not add
value and are 100% waste.
3. Other resources such as energy, water, and air are often wasted.
4. Efficient, sustainable production minimizes inputs, reduces waste.
5. Traditional “housekeeping” has been expanded to the 5 Ss (“Sort”, “Set In Order”,
“Shine”, “Standadize”, and “Sustain/Self-Discipline”).

Ohno’s 7 Wastes
1. Overproduction
2. Queues
3. Transportation
4. Inventory
5. Motion
6. Overprocessing
7. Defective products

Process Strategy
• Process: any part of an organization that takes inputs and transforms them into
outputs.
 • Objectives: build a value creation process that meets customer expectations and
product/service specifications within certain cost and other managerial constraints.
• Have long term impact on quality, cost, and flexibility.
• Process classification based on volume and variety.
Based on volume and variety can be illustrated in this matrix:

Product Focus
• Main characteristic is taking few inputs and produce high variety of products.
Example, this type of process is commercial bakery products, chips, crackers, and
beverages. This type of process is also called continuous process because they
have very very long continuous production run. The process naturally require high
fixed but low variable cost since the equipment is designed for a specific purpose
only.

Mass Customization
• The term mass customization comes to represent the demand.
• Mass customization is the rapid locus production of goods and services that fulfill
increasingly unique customer desire.
• Mass customization bring the variety of products traditionally provided by low
volume manufacturer/process focus at the cost of standardized of high
volume/product focus.

Achieving production process that has high variety and volume is a challenge that
requires sophisticated operational capabilities with the recent trend of technology in the
industry 4.0.

When we compare all those 4 types of process based on the fixed and variable costs.
 • Process focus has low fixed costs but high variable costs.
• Product focus has high fixed costs but low variable costs.
• Repetitive process lies in between of these 2 process types.

Process Design
Key Questions:
1. Is the process designed to achieve a competitive advantage?
2. Does the process eliminate steps that do not add value?
3. Does the process maximize customer value?

Terminology
• Cycle time: the average successive time between completions of successive
units.
• Utilization: the ratio of the time that a resource is actually activated relative to the
time that it is available for use.
• Lead time: the time between the initiation and completion of a production process.
• Process time: the time it takes for one or more inputs to be transformed into a
finished product or service by a business process.
• Flow time: the amount of time a flow unit spends in a business process from
beginning to end, also known as the total process time.

Lead time vs. Process time

Process Representation
• The use of a diagram to present the major elements of a process.
• The basic elements can include tasks or operations, flows of materials or
customers, decision points, and storage areas or queues.

Process Type
 1. Serial flow process: a single path for all stages of production.
2. Parallel process: some of production has alternative paths where two or more
machines are used to increase capacity.

Process Analysis and Performance

Terminology
• Buffer: a storage area between stages where the output of a stage is placed prior
to being used in a downstream stage.
• Blocking: occurs when the activities in a stage must stop because there is no
place to deposit the item.
• Starving: occurs when the activities in a stage must stop because there is no work.
• Bottleneck: stage that limits the capacity of the process.

Service Process Design

• Interaction with customer is necessary, but this often affects performance
adversely.
• The better customer interactions are accommodated in the process design, the
more efficient and effective the process.
• Find optimum combination of cost and customer interaction.

Catetan Kelas
• Kalo core activities diusahakan jgn di outsource, agar kita tidak hilang
competitiveness company nya.
•