Transcript LECTURE 12.pptx

MGT 563
OPERATIONS STRATEGIES
Dr. Aneel SALMAN
Department of Management Sciences
COMSATS Institute of Information Technology,
Islamabad
Recap Lecture 11
• Lean Operations
• Elements of Lean Operations
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Waste Elimination
Behavior
Synchronization
Customer focus
• JIT
• Kanban
• Benefits and Implementation of Lean System
• How do lean operations fit into operations
strategy?
Todays Lecture
• General Introduction
• Business Process Reengineering BPR Symbols
• Understand and be able to implement a BPR
Strategy
• Understand the main challenges in implementing a
BPR Strategy
• Conclusion: Summary
Industrial Revolution’s Model of
Organization and Production
• Complex work is broken down into simple and
repetitive tasks that are performed in sequence by
specialists.
• 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
Problems
• 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.
Process Evolution
• "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."
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
What Business Reengineering Is
Not?
• 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.)
Spectrum of Change
• Automation
• Rationalization of
procedures
• Reengineering
• Paradigm shift
Automation
• refers to computerizing
processes to speed up
the existing tasks.
• improves efficiency and
effectiveness.
Rationalization of Procedures
• refers to streamlining of
standard operating
procedures, eliminating
obvious bottlenecks, so
that automation makes
operating procedures
more efficient.
• improves efficiency and
effectiveness.
Business Process Reengineering
• refers to radical redesign of
business processes.
• Aims at
• eliminating repetitive,
paper-intensive,
bureaucratic tasks
• reducing costs
significantly
• improving
product/service quality.
Paradigm Shift
• refers to a more radical
form of change where
the nature of business
and the nature of the
organization is
questioned.
• improves strategic
standing of the
organization.
Reengineering Is ...
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.
Gordian Knot
• 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.
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:
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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
Dimensions & Type
Types of Processes
Examples
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
Redesign," Sloan Management Review, Summer 1990, p. 17.
Processes Are Often Cross Functional Areas
"Manage the white space on the organization chart!"
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."
Value-added
Products/
Services to
Customers
Process-Orientation
• 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.
BPR Achieves Dramatic
Improvement
• Ford reduced its account payable department by
75%
• Bell Atlantic cut the cycle time for installing carrier
services for customer from 15 days to 3 days.
• IBM Credit Company reduce loan application turn
around time from 6 days to 4 hours while loan
applications increased by 100 times. No personnel
was added.
Benefits of Reengineering
Customer Service
Process Timeliness
Quality
Reduce Cost
Competitiveness
New/Improved Technology
Actual Benefits
Expected Benefits
Sales/Revenues
0
1
2
3
4
Source: Delotte & Touche, 1993
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Reengineering for Achieving Strategic Goals
Senior executives' choice for achieving strategic goals
Outsourcing
40
Downsizing
67
Restructuring
77
Automation
78
88
0
50
Source: Gateway Information Services, Inc. New York,
Reengineering
100
Figures are based on responses from 121 executives at US firms in the manufacturing, insurance, and utilities
industries.
* Joanne Cummings, "Reengineering is high on list but little understood," Network World, July 27, 1992, p. 27.
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
Reengineering Example
Cash Lane
No more than
10 items
Which line is
shorter and
faster?
Reengineered Process
Key Concept:
• One queue for multiple
service points
• Multiple services
workstation
BPR Principles
• Organize around outcomes, not tasks.
• Have those who use the output of the process perform
the process.
• Subsume information-processing work into the real
work that produces the information.
• Treat geographically dispersed resources as though
they were centralized.
• Link parallel activities instead of integrating their
results.
• Put decision points where the work is performed and
build controls into the process.
• Capture information once and at the source.
Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,”
Harvard Business Review, July-August, 1990, pp. 104-112.
BPR Principles - Derived
• Redesign process steps such that they are perform in a
correct order. Combine several process steps into one.
• Design for parallel subprocesses whenever possible to
reduce waiting time between tasks. Integrate
subprocesses.
• Processes may have multiple versions. Remove
complex, exceptions, and special cases.
• Empower human potentials. Give front-line workers
the responsibility to make decisions.
• Provide mechanism in the process to encourage
individual, team, and organizational learning
Source: Derived from Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for
Business Revolution, HarperCollins Publishers, Inc., 1993
Informating, Not Automation
An individual without information
cannot take responsibility;
an individual who is given
information cannot help but take
responsibility.
Jan Calzon
CEO, Scandinavian Airlines
Business Process Reengineering
• “Reengineering is 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.”
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Key Words
• Fundamental
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Why do we do what we do?
Ignore what is and concentrate on what should
be.
• Radical
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Business reinvention vs. business improvement
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Key Words
• Dramatic
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Reengineering should be brought in “when a need exits
for heavy blasting.”
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Companies in deep trouble.
Companies that see trouble coming.
Companies that are in peak condition.
• Business Process
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a collection of activities that takes one or more kinds of
inputs and creates an output that is of value to a
customer.
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BPR & The Organization
BPR is Not?
• BPR may sometimes be mistaken for the following five tools:
• 1. Automation is an automatic, as opposed to human,
operation or control of a process, equipment or a system; or
the techniques and equipment used to achieve this.
Automation is most often applied to computer (or at least
electronic) control of a manufacturing process.
• 2. Downsizing is the reduction of expenditures in order to
become financial stable. Those expenditures could include
but are not limited to: the total number of employees at a
company, retirements, or spin-off companies.
BPR is Not?
• 3. Outsourcing involves paying another company to
provide the services a company might otherwise
have employed its own staff to perform.
Outsourcing is readily seen in the software
development sector.
• 4. Continuous improvement emphasizes small and
measurable refinements to an organization's
current processes and systems. Continuous
improvements’ origins were derived from total
quality management (TQM) and Six Sigma.
Reengineering & Continuous
Improvement--Similarities
Similarities
Basis of analysis
Performance measurement
Organizational change
Behavioral change
Time investment
Reengineering
Continuous Improvement
Process
Rigorous
Significant
Significant
Substantial
Process
Rigorous
Significant
Significant
Substantial
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Reengineering & Continuous
Improvement--Differences
Differences
Level of change
Starting point
Participation
Typical scope
Risk
Primary enabler
Type of change
Reengineering
Continuous Improvement
Radical
Clean slate
Top-down
Broad, cross-functional
High
Information technology
Cultural and structural
Incremental
Existing process
Bottom-up
Narrow, within functions
Moderate
Statistical control
Cultural
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What is a Process?
• A specific ordering of work activities across time
and space, with a beginning, an end, and clearly
identified inputs and outputs: a structure for
action.
What is a Business Process?
• A group of logically related tasks that use the firm's
resources to provide customer-oriented results in
support of the organization's objectives
Why Reengineer?
• Customers
• Demanding
• Sophistication
• Changing Needs
• Competition
• Local
• Global
Customer Demands
• expect us to know everything
• to make the right decisions
• to do it right now
• to do it with less resources
• to make no mistakes
• expect to be fully informed
Why Reengineer?
• Competition
• Local
• Global
• Change
• Technology
• Customer Preferences
Business Process Reengineering
WHY ?
Integrate people, technology, & organizational culture
To Respond to rapidly changing technical & business
environment and customer’s needs to achieve Big
performance gains
Why Organizations Don’t Reengineer?
• Complacency
• Political Resistance
• New Developments
• Fear of Unknown and Failure
Performance
• BPR seeks improvements of
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Cost
Quality
Service
Speed
BPR Symbols
Business Process Flowchart
Symbols
An Activity
A Document
A Decision
Data (input as outputs)
Business Process Flowchart
Symbols
A Predefined Process
Start
The Start of a Process
End
The End of a Process
Representing a Relation
Business Process Flowchart
Symbols
Continuation of the process at the same page
at an equal symbol with the same number. Used
when a relation arrow crosses another relation arrow
Off-Page Connector - Process will continue on the
next page
Integration Relation - A relation to another module is
identified and described
Data Flowchart Symbols
An Activity
A Document
A Decision
Flat Data File (input as outputs)
Data Flowchart Symbols
Manual Data Item
A Database File
Representing a Relation
Continuation
Off-Page Connector
Rules For Data Symbols
Rules For Data Symbols
Start
Symbol used to identify the start of a business process
Generate
Purchase
Order
OK?
Activities must be described as a verb
Yes
Decisions have only two possibilities (Yes & No)
No
Crossing lines are not allowed
End
If one side of the decision has no further processes
defined this symbol has to be used
Rules For Data Symbols
I
Purchase
Order
A
Posting
of Bonus
Continuation symbol within the same number must be
present twice on the same page
Name the document
Off- Page Connector is used to continue a process at the
next page or to let the process to flow over at the previous
to the next page. If more than one is needed use A, B, C,
D…
Name the data
Rules For Data Symbols
Sub-Process
Delivery
BC 4.04
Predefined Processes always have a relation to level and
stream by a number in the line below a sub-process
description
A predefined process must be described in a different
flowchart. To make the relation clear between the
predefined process and the belonging flowchart a unique
alpha numeric number should be assigned to this
predefined process.
Version Management
• For different versions of a business process or data
flow some mandatory information must be on the
flowchart.
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Name of the business process
Unique number of the business process
Revision number
Date of last change
Author
Page number with total pages
Implementing a BPR
Strategy
The C’s related to
Organization Re-engineering Projects
The 3C’s of
organization Reengineering:
The 4C’s of effective
teams:
- Customers
- Commitment
- Competition
- Cooperation
- Communication
- Change
- Contribution
Key Steps
Select The Process & Appoint Process Team
Understand The Current Process
Develop & Communicate Vision Of Improved Process
Identify Action Plan
Execute Plan
1. Select the Process & Appoint
Process Team
• Two Crucial Tasks
• Select The Process to be Reengineered
• Appoint the Process Team to Lead the Reengineering
Initiative
Select the Process
• Review Business Strategy and Customer
Requirements
• Select Core Processes
• Understand Customer Needs
• Don’t Assume Anything
Select the Process
• Select Correct Path for Change
• Remember Assumptions can Hide Failures
• Competition and Choice to Go Elsewhere
• Ask - Questionnaires, Meetings, Focus Groups
Appoint the Process Team
• Appoint BPR Champion
• Identify Process Owners
• Establish Executive Improvement Team
• Provide Training to Executive Team
Core Skills Required
• Capacity to view the organization as a whole
• Ability to focus on end-customers
• Ability to challenge fundamental assumptions
• Courage to deliver and venture into unknown areas
Core Skills Required
• Ability to assume individual and collective
responsibility
Use of Consultants
• Used to generate internal capacity
• Appropriate when a implementation is needed
quickly
• Ensure that adequate consultation is sought from
staff so that the initiative is organization-led and
not consultant-driven
• Control should never be handed over to the
consultant
2.
Understand the Current Process
• Develop a Process Overview
• Clearly define the process
• Mission
• Scope
• Boundaries
• Set business and customer measurements
• Understand customers expectations from
the process (staff including process team)
2.
Understand the Current Process
• Clearly Identify Improvement
Opportunities
• Quality
• Rework
• Document the Process
• Cost
• Time
• Value Data
3.
Understand the Current Process
• Carefully resolve any inconsistencies
• Existing -- New Process
• Ideal -- Realistic Process
3. Develop & Communicate Vision of
Improved Process
• Communicate with all employees so that they are
aware of the vision of the future
• Always provide information on the progress of the
BPR initiative - good and bad.
• Demonstrate assurance that the BPR initiative is
both necessary and properly managed
3. Develop & Communicate Vision of
Improved Process
• Promote individual development by indicating
options that are available
• Indicate actions required and those responsible
• Tackle any actions that need resolution
• Direct communication to reinforce new patterns of
desired behavior
4. Identify Action Plan
• Develop an Improvement Plan
• Appoint Process Owners
• Simplify the Process to Reduce Process Time
• Remove any Bureaucracy that may hinder
implementation
4. Identify Action Plan
• Remove no-value-added activities
• Standardize Process and Automate Where Possible
• Up-grade Equipment
• Plan/schedule the changes
4. Identify Action Plan
• Construct in-house metrics and targets
• Introduce and firmly establish a feedback system
• Audit, Audit, Audit
5. Execute Plan
• Qualify/certify 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
Information Technology &
BPR
Benefits From IT
• Assists the Implementation of Business Processes
• Enables Product & Service Innovations
• Improve Operational Efficiency
• Coordinate Vendors & Customers in the Process Chain
BPR Challenges
Common Problems with BPR
• Process Simplification is Common - True BPR is Not
• Desire to Change Not Strong Enough
• Start Point the Existing Process Not a Blank Slate
• Commitment to Existing Processes Too Strong
• REMEMBER - “If it isn’t broke …”
Common Problems with BPR
• Process under review too big or too small
• Reliance on existing process too strong
• The Costs of the Change Seem Too Large
• BPR Isolated Activity not Aligned to the Business
Objectives
• Allocation of Resources
• Poor Timing and Planning
• Keeping the Team and Organization on Target
How to Avoid BPR Failure
• To avoid failure of the BPR process it is recommended that:
• BPR must be accompanied by strategic planning, which addresses
leveraging Information technology as a competitive tool.
• Place the customer at the centre of the reengineering effort,
concentrate on reengineering fragmented processes that lead to
delays or other negative impacts on customer service.
• BPR must be "owned" throughout the organization, not driven by
a group of outside consultants.
• Case teams must be comprised of both managers as well as those
who will actually do the work.
How to Avoid BPR Failure
• The Information technology group should be an
integral part of the reengineering team from the
start.
• BPR must be sponsored by top executives, who are
not about to leave or retire.
• BPR projects must have a timetable, ideally
between three to six months, so that the
organization is not in a state of "limbo".
• BPR must not ignore corporate culture and must
emphasize constant communication and feedback.
Summary
• Reengineering is a fundamental rethinking and
redesign of business processes to achieve dramatic
improvements
• BPR has emerged from key management traditions
such as scientific management and systems
thinking
• Rules and symbols play an integral part of all BPR
initiatives
Summary
• Don’t assume anything - remember BPR is
fundamental rethinking of business processes