The document discusses business process reengineering (BPR), including its key concepts, approaches, examples, and benefits. BPR involves fundamentally rethinking and radically redesigning business processes to achieve dramatic improvements. It ignores the current processes and concentrates on designing new, improved processes. The examples of IBM Credit and Kodak show how BPR was used to dramatically reduce processing times and improve productivity.

1. Teguh I Santoso, MBA BUSINESS PROCESS REENGINEERING Chapter 1

2. BUSINESS PROCESS REENGINEERING “ memulai lagi dari awal”

3. Today’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

4. Business 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

5. The Power of 3C Customers (Pelanggan memainkan peran) – Demanding – Sophistication – Changing Needs Competition (Persaingan semakin ketat) – Local – Global Change (Perubahan menjadi konstan) – Technology – Customer Preferences

6. Traditional 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

7. BPR 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. 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. BPR Four key words Fundamental means business people have to ask themselves with a fundamental question, such as why, what and how we do the business. Radical means, ‘if it did not exist today, how would we create it’ and then destroying the old system to create the new one 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 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. Why Company need to implement BPR 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. Process: Where and Who? NEED CUSTOMER PRODUCT/SERVICE

12. Reasons for BPR Competition Market Share/ Profits Technology Stock Price More Important Less Important

13. Why Company do not Reengineer Satisfaction Political Resistance New Developments Fear of Unknown and Failure

14. Effective Reengineering Steps 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. 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 Understand, measure performance of existing processes avoiding the repeating of old mistakes and for providing a baseline for future improvements Identify opportunities for applying information technology awareness of IT capabilities can and should influence BPR Build prototype of new process the actual design should not be viewed as the end of the BPR process

15. BPR 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. BPR 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. Scope 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. BPR 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. BPR Performance BPR seeks improvements of Cost Quality Service Speed

20. Obstacle to Reengineering Most Important Least Important Organization Time Risk Cost

21. Reengineering Vs Incremental Incremental improvement Time Performance Improvement Reengineering then continuous improvement

22. Reengineering 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. 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. TQM ISO9000 Automation Downsizing Restructuring Change Management Reengineering - ‘NOT’ (cont.)

25. Some 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. Some 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. Core Business : Financing the computers, software and service that the IBM Corporation sells Length to Process : 5 steps Example Case: IBM Credit 1 2 3 4 5 Customer Service Credit Department Business Practices Department Appraisal Administration

28. Example 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. Result: The entire process consumed six days on average 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 Difficult to control Example Case: IBM Credit

30. 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 Credit

31. 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 Credit

32. 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 Credit

33. 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: Kodak

34. 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: Kodak

35. 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: Kodak

36. Example 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. 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 Characteristic

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