Teguh I Santoso, MBATeguh I Santoso, MBA
BUSINESS PROCESS REENGINEERINGBUSINESS PROCESS REENGINEERING
Chapter 1Chapter 1
QuitQuitXX
BUSINESS
PROCESS
REENGINEERING
“memulai lagi dari awal”
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Traditional Business ConceptsTraditional Business Concepts
Adam Smith (1776, The Wealth of Nations)
 Use separ...
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Today’s RealityToday’s Reality
Organizations in Crisis
 No company is safe
 There is no such things as a ‘sol...
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Business PressuresBusiness Pressures
Market Pressures
 Global economy - strong competition
 Changing nature o...
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The Power of 3CThe Power of 3C
 Customers (Pelanggan memainkan peran)
– Demanding
– Sophistication
– Changing ...
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BPR OverviewBPR Overview
Business Process Reengineering (BPR),
a fundamental rethinking and a radical redesign ...
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BPR Overview (cont.)BPR Overview (cont.)
 The idea is to start from “ground zero”
 Then determine what things...
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BPR Four key wordsBPR Four key words
1. Fundamental
means business people have to ask themselves with a fundame...
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Why Company need to implementWhy Company need to implement
BPRBPR
BPR has been implemented in various industry
...
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Process: Where and Who?Process: Where and Who?NEED
CUSTOMER
PRODUCT/SERVICE
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Reasons for BPRReasons for BPR
Competition Market Share/
Profits
Technology Stock Price
More Important Less Imp...
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Why Company do not ReengineerWhy Company do not Reengineer
 Satisfaction
 Political Resistance
 New Developm...
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Effective Reengineering StepsEffective Reengineering Steps
1. Develop business vision, process objectives
The B...
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BPR ExpectationBPR Expectation
 Identify and quantify process improvement opportunities aligned
with the organ...
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BPR ObjectivesBPR Objectives
 Improve Efficiency e.g reduce time to market, provide
quicker response to custom...
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Scope of BPRScope of BPR
 Intra-functional
Small scope within department, least impact
 Inter-functional
Hori...
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BPR ImpactsBPR Impacts
 Resulting changes may include
 Organizational structure
 Roles and responsibilities
...
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BPR PerformanceBPR Performance
BPR seeks improvements of
 Cost
 Quality
 Service
 Speed
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Obstacle to ReengineeringObstacle to Reengineering
Most Important
Least Important
Organization
Time
Risk
Cost
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Reengineering Vs IncrementalReengineering Vs Incremental
Incremental
improvement
Time
Performance
Improvement
R...
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Reengineering vs. Other MethodsReengineering vs. Other Methods
Dimension Reengineering Rightsizing Restructurin...
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Reengineering - ‘NOT’Reengineering - ‘NOT’
not
abdicating leadership and management responsibility to your cons...
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 TQM
 ISO9000
 Automation
 Downsizing
 Restructuring
 Change Management
Reengineering - ‘NOT’ (cont.)Reen...
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Some Success FactorsSome Success Factors
 Senior Management, Commitment and Sponsorship
 Realistic Expectatio...
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Some Failure FactorsSome Failure Factors
 The wrong sponsor
 Cost-cutting focus
 Narrow technical focus
 La...
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Core Business : Financing the computers, software and service
that the IBM Corporation sells
Length to Process ...
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Example Case: IBM CreditExample Case: IBM Credit
1
Request for financing from IBM Corp sales representative, IB...
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Result:
1. The entire process consumed six days on average
2. From the sales reps’ point of view, this turnarou...
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False Assumption:
Every bid request was unique and difficult to process, thereby requiring
the intervention of ...
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Result:
- The performance improvement achieved dramatically
- IBM Credit slashed its six days turnaround to fou...
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 A five-step approval process
 Duration — from six days to two weeks
 Actual processing time — 90 minutes
 ...
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 In 1987
 Kodak’s arch-rival, Fuji came up with a new 35mm
single-use camera
 Kodak has no competitive offer...
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 Reaction to competition from Fuji
 Kodak reengineered its product development process
through the innovative...
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 Key Redesign Strategy
 Apply innovative use of CAD/CAM + integrated
product design database
 Allow engineer...
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Example Case: Ford MotorExample Case: Ford Motor
FORD MOTOR COMPANY’S ACCOUNTS PAYABLE DEPARTMENT
 500 employe...
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 Beberapa pekerjaan digabungkan menjadi satu
 Para Pekerja membuat keputusan
 Tahap-tahap di dalam proses di...
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Thank You
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Chapter 1

  1. 1. Teguh I Santoso, MBATeguh I Santoso, MBA BUSINESS PROCESS REENGINEERINGBUSINESS PROCESS REENGINEERING Chapter 1Chapter 1
  2. 2. QuitQuitXX BUSINESS PROCESS REENGINEERING “memulai lagi dari awal”
  3. 3. QuitQuitXX Traditional Business ConceptsTraditional Business Concepts Adam Smith (1776, The Wealth of Nations)  Use separating work areas to increase productivity American Railway (1820)  Create modern business bureaucracy (control-command procedures ) Frederick Taylor (1880)  Managers could discover the best processes for performing work and reengineer them to optimize productivity  In Taylor's time, technology did not allow large companies to design processes in a cross- functional or cross-departmental manner  Specialization was the state-of-the-art method to improve efficiency given the technology of the time
  4. 4. QuitQuitXX Today’s RealityToday’s Reality Organizations in Crisis  No company is safe  There is no such things as a ‘solid’ or even substantial, lead over one’s competitors  Traditional business relationships and operational models are evolving or collapsing  New opportunities exist for businesses that can use information technology to create and capitalize on emerging markets  Market expectations and pressures are changing  Global business opportunity are expanding  Information technology is crucial to realizing and managing these opportunities
  5. 5. QuitQuitXX Business PressuresBusiness Pressures Market Pressures  Global economy - strong competition  Changing nature of the workforce  Powerful customers Technological Pressures  Technological innovation and obsolescence  Information overload Societal Pressures  Social responsibility  Government regulations  Government deregulation  Shrinking budgets and subsidies  Ethical issues
  6. 6. QuitQuitXX The Power of 3CThe Power of 3C  Customers (Pelanggan memainkan peran) – Demanding – Sophistication – Changing Needs  Competition (Persaingan semakin ketat) – Local – Global  Change (Perubahan menjadi konstan) – Technology – Customer Preferences
  7. 7. QuitQuitXX BPR OverviewBPR Overview Business Process Reengineering (BPR), a fundamental rethinking and a radical redesign of a business process to achieve dramatic improvements Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (New York: Harper Business, 1993) BPR is a systematic approach or methodology for analyzing business activities or processes with a view to  Improving the organization's alignment with strategic goals  Its effectiveness, efficiency, competitiveness and so on
  8. 8. QuitQuitXX BPR Overview (cont.)BPR Overview (cont.)  The idea is to start from “ground zero”  Then determine what things the company must do  Then seek the best way to do those things  It ignores what is and concentrates on what should be  It’s intended to overcome the shortcoming of seeking incremental improvements  Solving problems at one part of a process instead of replacing the entire process with something better  In reengineering, instead of “patching up” parts of a faulty process, the entire process itself is radically improved
  9. 9. QuitQuitXX BPR Four key wordsBPR Four key words 1. Fundamental means business people have to ask themselves with a fundamental question, such as why, what and how we do the business. 2. Radical means, ‘if it did not exist today, how would we create it’ and then destroying the old system to create the new one 3. Dramatic means improvement in business result, not of 5%, not of 15% nor 20%, but in term of quantum leaps of 100%, 300%, 500% better result 4. Process means a group of distinct tasks that together create a product or service desired by one or more stakeholders Business Process Reengineering (BPR), a fundamental rethinking and a radical redesign of a business process to achieve dramatic improvements
  10. 10. QuitQuitXX Why Company need to implementWhy Company need to implement BPRBPR BPR has been implemented in various industry 1. Increase skill and knowledge every specialist 2. Reduce time 3. The discovery of new machines makes one job running easily and efficiently
  11. 11. QuitQuitXX Process: Where and Who?Process: Where and Who?NEED CUSTOMER PRODUCT/SERVICE
  12. 12. QuitQuitXX Reasons for BPRReasons for BPR Competition Market Share/ Profits Technology Stock Price More Important Less Important
  13. 13. QuitQuitXX Why Company do not ReengineerWhy Company do not Reengineer  Satisfaction  Political Resistance  New Developments  Fear of Unknown and Failure
  14. 14. QuitQuitXX Effective Reengineering StepsEffective Reengineering Steps 1. Develop business vision, process objectives The BPR method is driven by a business vision which implies specific business objectives such as cost reduction, time reduction, output quality improvement. 2. Identify process to be redesigned most firms use the 'High-Impact' approach which focuses on the most important processes or those that conflict most with the business vision 3. Understand, measure performance of existing processes avoiding the repeating of old mistakes and for providing a baseline for future improvements 4. Identify opportunities for applying information technology awareness of IT capabilities can and should influence BPR 5. Build prototype of new process the actual design should not be viewed as the end of the BPR process
  15. 15. QuitQuitXX BPR ExpectationBPR Expectation  Identify and quantify process improvement opportunities aligned with the organization's strategic plan  Establish objectives that "stretch" the existing activities  Identify the associated benefits to the organization  Identify the changes necessary, including any changes in associated activities  Formulate projects for their accomplishment
  16. 16. QuitQuitXX BPR ObjectivesBPR Objectives  Improve Efficiency e.g reduce time to market, provide quicker response to customers  Increase Effectiveness e.g deliver higher quality  Achieve Cost Saving in the longer run  Provide more Meaningful work for employees  Increase Flexibility and Adaptability to change  Enable new business Growth
  17. 17. QuitQuitXX Scope of BPRScope of BPR  Intra-functional Small scope within department, least impact  Inter-functional Horizontal view across departments, more impact  Inter-organizational Broad view including entire supply & delivery chain, most impact
  18. 18. QuitQuitXX BPR ImpactsBPR Impacts  Resulting changes may include  Organizational structure  Roles and responsibilities  Supplier relations  Customer interfaces, and  Other stakeholder relationships  Often, it means a cultural change within the organization  Change management should be invoked to deal with the people aspects  The fear among employees that their jobs are endangered and that years of experience will account for nothing
  19. 19. QuitQuitXX BPR PerformanceBPR Performance BPR seeks improvements of  Cost  Quality  Service  Speed
  20. 20. QuitQuitXX Obstacle to ReengineeringObstacle to Reengineering Most Important Least Important Organization Time Risk Cost
  21. 21. QuitQuitXX Reengineering Vs IncrementalReengineering Vs Incremental Incremental improvement Time Performance Improvement Reengineering then continuous improvemen
  22. 22. QuitQuitXX Reengineering vs. Other MethodsReengineering vs. Other Methods Dimension Reengineering Rightsizing Restructuring TQM Automation Assumptions Questioned Fundamental Staffing Reporting relationship Cust. wants and needs Technology applications Scope of Change Radical Staffing, job responsibilities Organization Bottom-up Top-down Orientation Process Functional Functional Process Procedure Improvement Goals Dramatic Incremental Incremental Incremental Incremental
  23. 23. QuitQuitXX Reengineering - ‘NOT’Reengineering - ‘NOT’ not abdicating leadership and management responsibility to your consultant not a fancy name for eliminating the redundant positions that should never have created anyway not radically redesign functional department or radically redesign people not expecting your people to coorporate wholeheartedly while you obviously put their jobs and lifestyles in jeopardy not thinking that you will have your new process implemented without problems
  24. 24. QuitQuitXX  TQM  ISO9000  Automation  Downsizing  Restructuring  Change Management Reengineering - ‘NOT’ (cont.)Reengineering - ‘NOT’ (cont.)
  25. 25. QuitQuitXX Some Success FactorsSome Success Factors  Senior Management, Commitment and Sponsorship  Realistic Expectations  Empowered and Collaborative Workers  Strategic Context of Growth and Expansion  Shared Vision  Sound Management Practices  Appropriate People Participating Full-Time  Sufficient Budget
  26. 26. QuitQuitXX Some Failure FactorsSome Failure Factors  The wrong sponsor  Cost-cutting focus  Narrow technical focus  Lack of sustained management commitment and leadership  Unrealistic scope and expectations  Resistance to change  The negative preconditions relating to the organization, include:  Unsound Financial Condition  Too Many Projects Under Way  Fear and Lack of Optimism  Animosity Toward and By IS and HR Specialists
  27. 27. QuitQuitXX Core Business : Financing the computers, software and service that the IBM Corporation sells Length to Process : 5 steps 1 2 3 4 5 Customer Service Credit Department Business Practices Department Appraisal Administration Example Case: IBM CreditExample Case: IBM Credit
  28. 28. QuitQuitXX Example Case: IBM CreditExample Case: IBM Credit 1 Request for financing from IBM Corp sales representative, IBM Credit staff log on a piece of paper (14 Staff) 2 Someone carted that paper to the credit department, where the specialist entered the information into a computer system and checked the potential borrower’s creditworthiness The specialist write the result of the credit check on the piece of paper and dispatch it to the business practices department 3 The business practices department modify the standard loan agreement in response to customer request When done, a person in that department would attach the special terms to the request form 4 Appraiser write the rate on a piece of paper, enter the data into a PC spreadsheet and give the paper to a clerical group 5 An administrator turn all this information into a quote letter that could be delivered to the IBM sales representative by Federal Express
  29. 29. QuitQuitXX Result: 1. The entire process consumed six days on average 2. From the sales reps’ point of view, this turnaround too long  Customer could find another source of financing  Customer simply to call the whole deal off 1. Difficult to control Example Case: IBM CreditExample Case: IBM Credit
  30. 30. QuitQuitXX False Assumption: Every bid request was unique and difficult to process, thereby requiring the intervention of four highly trained specialist Fact: Most requests were simple and straightforward Solution: BPR - IBM Credit senior manager found that most of their job was little more than clerical - IBM Credit develop a new computer system to support the deal structurer - In really tough situations, he/she can get help from a specialist expert in credit checking, pricing and so on Example Case: IBM CreditExample Case: IBM Credit
  31. 31. QuitQuitXX Result: - The performance improvement achieved dramatically - IBM Credit slashed its six days turnaround to four hours - The number of deals has increased a hundredfold - 90 percent reduction in cycle time and hundredfold improvement productivity - The company achieved a dramatic performance by making a radical change to the process as a whole Example Case: IBM CreditExample Case: IBM Credit
  32. 32. QuitQuitXX  A five-step approval process  Duration — from six days to two weeks  Actual processing time — 90 minutes  Why so many steps? Engineered for the most difficult cases  Five experts replaced with one “deal structurer”  Support of I/T essential  Results - Six days to four hours - Slight work force reduction - 100% work load increase Example Case: IBM CreditExample Case: IBM Credit
  33. 33. QuitQuitXX  In 1987  Kodak’s arch-rival, Fuji came up with a new 35mm single-use camera  Kodak has no competitive offering  Kodak’s Traditional Product Development Process  Slow: would take 70 weeks to produce a rival to Fuji’s camera!  Product development process was partly sequential and partly parallel Example Case: KodakExample Case: Kodak
  34. 34. QuitQuitXX  Reaction to competition from Fuji  Kodak reengineered its product development process through the innovative use of CAD/CAM-Computer Aided Design/Computer Aided Manufacturing  The technology that has enabled Kodak to reengineer its process is an integrated product design database  Result: the new process, “Concurrent Engineering”  Reduce turnaround time to 38 weeks  Priority to release product on time Example Case: KodakExample Case: Kodak
  35. 35. QuitQuitXX  Key Redesign Strategy  Apply innovative use of CAD/CAM + integrated product design database  Allow engineer to design at computer workstations  Database collect each engineer’s work and combines into overall design  Each morning, problems are resolved immediately  Manufacturing can begin tooling design just 10 weeks into product design instead of 28 weeks in the past Example Case: KodakExample Case: Kodak
  36. 36. QuitQuitXX Example Case: Ford MotorExample Case: Ford Motor FORD MOTOR COMPANY’S ACCOUNTS PAYABLE DEPARTMENT  500 employees  20% saving anticipated — a reduction of 100 people  But… Mazda’s Payables Department has five people!  Old process: matching purchase orders, invoices, and receiving documents to issue payment authorizations  New Process: purchase orders go to suppliers and on-line database. Upon receipt, receiving clerk verifies shipment. If okay, payment is made; if not, it is returned  Results - No invoices - No receiving reports - 75% staff reduction — 375 people reassigned
  37. 37. QuitQuitXX  Beberapa pekerjaan digabungkan menjadi satu  Para Pekerja membuat keputusan  Tahap-tahap di dalam proses dilakukan menurut kebiasaan  Proses-proses mempunyai banyak versi  Pekerjaan dilakukan pada tempat yang paling berarti  Pemeriksaan dan kontrol berkurang  Rujukan minimum  Manajer kasus membuat satu titik kontak  Operasi-operasi gabungan sentralisasi/desentralisasi merata BPR CharacteristicBPR Characteristic
  38. 38. QuitQuitXX Thank You

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