We have heard a lot about business process reengineering recently, through business journals and trade publications, newly published books or in training workshops. It seems BPR is the latest and hottest management trend to hit the business communities. But is it more than just a passing phenomenon? Is reengineering just the latest fashionable word that comes into being to slay the 'bureaucracy' in the name of efficiency? Or does reengineering reach a highest point of many years of management evolution, bring a new emphasis on creativity, go where no one has gone before? The debate is almost endless. In this project we will look at the logic under BPR and we will focused on its implementation on a Turkish firm.
When we are through, we will try to answer to these questions,
- What is BPR and what is not?
- What are the key components of BPR?
- Why reengineering?
- How do we plan, organize and control BPR?
- Are there methods for effectively accomplishing BPR?
- What are the common mistakes and common themes made by implementing BPR?
- How do firms perform reengineering projects in our country?
WHAT IS BUSINESS PROCESS?
Business process is a set of activities that transform a set of inputs into a set of outputs for a particular customer or market. It implies a strong emphasis on how work is done within an organization.
If you have waited in a line at the grocery store, the process begins with you stepping into line and ends with you receiving your receipt and leaving the store.
Business Process as a set of triangles
inputs your outputs
supplier process customer
feedback
Process has two important characteristics:
1) It has customers (internal and external).
2) It occurs across or between organizational subunits.
Processes are generally identified in terms of beginning and end points, place where interaction occurs and involved organizational units, customer and supplier units. Example of business processes include: developing a new product, ordering good from a supplier, creating a marketing plan, requesting new telephone service from your telephone company, administering the social security process, building a new home etc.
Processes may be defined based on three dimensions:
-Entities: Processes take place between organizational entities. They could be interorganizational, interfunctional or interpersonal.
-Objects: Processes result in manipulating of objects. Those objects could be physical or informational.
-Activities: Processes could involve two types of activities: Managerial (eg. develop a budget), Operational (eg. fill a customer order)
WHAT IS BUSINESS PROCESS REENGINEERING?
Depending on who you talk to, there can be many different definitions of reengineering. However, before we can discover what really is, let's take a look at what it is not.
There are many misconceptions as to the essence of reengineering. Many times organizations go through a major reorganization and call it reengineering. Others reduce their staffs by half and call it reengineering. Still others take an efficiency program they have in place and rename it reengineering.
Reengineering is not 'reorganizing'. Reengineering looks at what work is required to be done, not how the organization is structured. Organization structures are defined only after the processes necessary to produce products and services for the organization's customers are designed.
Reengineering is not 'downsizing'. Downsizing focuses on the reduction of people to achieve short term cost reductions. Reengineering on the other hand, focuses on rethinking work, eliminating work that is not necessary and finding better, more effective ways of doing work.
Reengineering is not simply making an organization more efficient. You can have the most efficient organization in the world, but it can not be effectively serves its customers, accomplish its mission, it is still of no value. Reengineering is creating value for the customer. Value may be defined by the customer as lower cost , higher quality or increased response time.
THE DEFINITION OF BUSINESS PROCESS REENGINEERING
The classic definition of Business Process Reengineering (BPR) is given in Michael Hammer's and John Chamby's pioneering book. "Reengineering the Corporation, a Manifesto for Business Revolution," published by Harper Collins, 1993. They define BPR as "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."
Three key components of this definition are:
- Radical redesign: Reengineering means abandoning long-established procedures and looking again at the work required creating a company's product or service and delivering value for customer. This definition highlight the clean-sheet approach to process redesign.
- Business process: Each function through the BP must have thought as a whole, each of them is important and they don't have any value for the customer if they don't work well. The change occurs across the whole process.
- Dramatic Improvement: Reengineering is not simply rethinking what already exists or making incremental changes that leave basic structures interact. A properly reengineering process provides leaps in performance.
Another aspect to this definition is the notion of breakthroughs. This approach to reengineering assumes the existing process isn't well founded and therefore needs to be replaced. Reengineering make a sense to achieve breakthroughs in providing value to the customer.
The essence of reengineering
BPR
Level of change Radical
Starting point Clean slate
Frequency of change One-time
Time required Long
Participation Top-down
Risk High
Primary enabler Information technology
Reengineering is a radical design of all process, it does not promise a revolutionary approach to change. As Hammer's statement "Don't automate, obliterate!" It means taking the organization as a blank sheet of paper but clean slate change is rarely found in practice. Reengineering is a long-term application which occurs one-time in a corporation life. It happens from top to bottom, the participation, acceptance and ownership, at the grass roots level is essential for successful BPR. Hammer centered on IT as the driver of BPR. More recent efforts in BPR indicate that IT is not necessary the driving factor, but one possible facilitator to achieving the dramatic results that are necessary. It should use IT not to automate an existing process but to enable a new one.
The success of Business Process Reengineering Program is based on several factors that need to be in placed before launching on BPR project.
BPR must have:
Leadership: No organization can transform itself as radically as like in BPR without the active and motivating influence of top management.
Strategy: Each organization must have a clear statement of mission and a well developed business plan that lays out goals, objectives, critical success factors and evaluation techniques. It is appreciated that all business process redesign begins with mission and business plans.
Project Teams: Advanced planning needs to be in placed to organize BPR project teams. Teams are made up of individuals from different organizational elements.
Training: BPR changes the nature of an organization. People will have to learn new skills and new patterns of working and the nature of the work will change.
WHY REENGINEERING?
According to Jery Colonna, editor of Information Week, "On some level, reengineering has been going on since the introduction of technology into business. It's driven in part by the fundamental sense. There is something wrong with the way business is being run. Part of that has to do with economy, part of it's politics, and part of it's competition. The shift in economies and the rise of different nations as economic powers are another part of it is. And there is the need to turn data into information these are all forces for change."
From another point of view Gary Page, Transportation Services Director for Monsanto Chemical Group, claims "we have been quite successful at Monsanto in bringing about major improvements in performance and practices, as well as in customer service level, through business redesign. But it's taken time, not to mention trial and error to get us to the level of total enterprise integration. By the way undertaking comprehensive effort on business redesign was the best."
THE HISTORY OF REENGINEERING
Before reengineering comes into being, the other process orientation management systems, like reengineering, are accepted by firms. These approaches such as TQM, JIT, quality circles, FMS cannot response the need of the firms that are changing continuously. Thus the concept of reengineering is created.
However from the sources reviewed, the roots of the modern BPR movement could be regard as belonging to two major sources, as well as a number of other subsidiary influences:
- Intense market competition
- A development of TQM and practical problems with its implementation
What is clear that BPR is not a new phenomena but the bringing together of various concepts of modern, and not so modern management theory in an attempt to solve the problems faced by today's business executives. These same problems Hammer and Champy neatly sum up as the three C's.
- Customers becoming more demanding.
- Competition becoming stronger.
- Change becoming the only thing that is constant.
BPR in historical context:
1920-Time and motion studies: Taylor
1930-Statistical sampling: Shewhart
1940-Application of statistical sampling technique for Bureau of Cencus:Edwards-Deming
1950-Statistical process control: Edward-Deming, Feigenbaum and Juran
1960-Japanise quality movement: Ishikawa, Taguchi
1970-Zero defects: Crosby
1980-TQM, quality circles, JIT
1990-Reengineering: Hammer
FOUR STEPS TOWARDS CONTINUAL CHANGE
In the reengineering process there are four steps toward the continual change:
- Know What You Want
2. Make a Plan
3. Do It
4. Monitor
1) Know What You Want
"Know yourself, and know your enemy, and you can fight a thousand battles without defeat."(Sun Tzu, Chinese philosopher, BC)
Before any large organizational Business Re-engineering or strategic change is undertaken, we need to understand what it is we are changing, and why. This requires a fair amount of analysis, and thinking. However analysis sometimes seen as a boring activity if the action isn't thought out, both what and how, the chance of failure is high. If people aren't 100 percent clear about the target and why they need to go for it, they can't be expected to hit it! So we need to understand the organization and what it is trying to achieve at the moment and the technology and process it employees, as well as appreciate the competitive environment within which it operates.
There are three stages to this first step of "Know What You Want" :
- To clarify the need for change.
- To clarify how to serve the needs of stakeholders better.
- To construct a "Framework for Success" to assist communication and planning.
Bearing in mind the four variables needed as a background for a re-engineering program, you need to analyze how much the organization is willing to change, and how much pain is associated with the status quo.
The next step is to form a cross-functional team to analyze the needs of the stakeholders of the organization. These are typically:
- Customers
- Employees
- Suppliers
- Shareholders
There are various tools and techniques for analyzing stakeholders' needs. (swot analyzing, market versus product, growth/share matrix, value chain, organizational structures, organizational culture, etc...)
The process for gathering this information should include small cross-functional project teams from the organization who can work and share their findings, and lay the foundation for decision-making. The project teams should include not only the key decision-makers, but also some of the people who will likely be involved in future implementation.
You will need to understand how much effort is spent on the activity, which make up the process, how long the overall duration of the process is, how much of the effort is value added versus non-value added, do the output of the process meet the needs of the customers, are all the inputs necessary.
The analysis of the key stakeholders should give a clear answer to where we are now, what direction are we heading in, where should we be going. To do this some additional analysis on the external environment needs to be done-competitors' strengths and weaknesses are key. Their strengths can give clues as to what you can achieve-ask ourselves: If they can do it, why can't we? Their weaknesses can give us how to attack them.
Before delving too deep into the details, stand back and formulate a mission or vision statement. From this statement we should be able to formulate strategic goals to serve the key stakeholders. At the same time considers using a value statement communicate the needed behaviors of the future state. While mission statement help focus in organization onto 'what', value statements help focus individuals onto the 'how'.
2) Make a Plan
"If you fail to plan, you plan to fail."(anon)
During the first stage of the change process ( Know What You Want ), we have defined an overall mission or vision statement for the organization. These objectives should be 'Specific, Measurable, Achievable, Result-oriented and Time Deadline'.
The second stage of the change process (Make a Plan) is to detail the action resources, which are going to turn these objectives into reality. Each objective should be backed up by a project plan. A small core cross-functional project team given the responsibility and authority to deliver the change, led by a project manager should drove up each project plan. The team should be trained in project management, as well as in team dynamics. Each change team should have sponsored at the highest level. The best approach the team can use to plan the implementation is to employ the project management planning techniques, possibly backed by a simple computer program such as Microsoft project. They should also use workshops and meeting with those affected to ensure implementation gains consensus. Each project should have a strict definition that should include a specific project objective, clear deliverable's, measures of success, and definition of completion. The project plan should include tasks; deadlines, resource schedules, a critical path analysis, a budget, a clear program and 'work-to list' for those involved following. Those people involved in delivering the project should draw up this detailed plan, and they should be formed into project or project teams. The plan must be signed off and agreed by all concerned to ensure that everyone has a full understanding of what is going on.
There should also be a clear understanding regarding the cost of the project, and the budget should be agreed in advance. Too many re-engineering programs or projects run out of the steam because no one had the courage to nail the cost up front.
Change requires action, and action requires people. If all these people for the project teams and the transition team come from with in the organization, then we need to understand what action should be stopped to release the people. ' Too often re-engineering programs fail because all the time is spent planning what should be done, and no thinking is devoted to what should not to be done '.
3) Do It
"Whatsoever hand findeth to do, do it with thy might; for there is no work, nor device, nor knowledge, nor wisdom in the grave, wither thou gouest".
This section is split into two. The first part talks about the technical techniques that can be used the ensure some success in implementation. The second describes the cultural techniques that can be used to help the organization deal with the trauma of the change too often people focus on the first, only to see re-engineering program run onto the murky rocks of organizational politics.
1.Technical Techniques
2.Cultural Techniques
4) Monitor
"If you can't measure it, you can't hit it"
Monitoring needs to concentrate on two things; monitoring progress of action and monitoring the result. This monitoring should be done in a ' project coordination center' (PCC) set up especially for the process. The use of the maps and planning board can assist both in revealing what is going on as well as in communicating to people in the organization who comes in for information.
- Monitoring Progress of Action:
The PCC should monitor the progress of each project and report weekly to the transition team. The progress can be tracked via the project manager. Any problem should be sold by the small PCC team.
- Monitoring Result:
The result should be directly linked to the individual projects' measures of success. These need to be quantifiable, and these should include more than just financial results. The monitoring should also include such measures as employee attitudes, customer perceptions, supplier responsiveness.
METHODOLOGY
The Business Reengineering Methodology is a complete life cycle approach to identify and implement business process and infrastructure support redesigns for business process of a company.
- It's comprehensive and complete
- Addressing such activities as organizing the project
- Assessing the current business process
- Designing the reengineered business process
- Planning the implementation
- Implementing the business solutions
According to the definition of all phases are able to answer underlined questions.
- What is the basis for your vision?
- Will it meet the needs of your customer in 3 to 5 years?
- Will it provide you with a competitive advantage?
- Have you fully capitalized on new technology?
The methodology is divided into 5 phases:
PHASE 1:MOBILIZATION
The major objectives in performing this phase is to lay groundwork for managing client expectation, gain early definition of the business process under review, gain early client commitment to the business reengineering process, identify the areas of greatest need and opportunity for reengineering, address any critical issues and begin preparing for the impact of change. The phase ends with a management sign-off of the overall project definition, project and plan, the enterprise reengineering plan on the change management program.
This case consists of three processes:
- Organize Project: ensures that a clear understanding as to the project scope, objectives, deliverables, and other areas exists between the client and the project team.
- Establish Enterprise Reengineering Program: is used to develop an overall plan for business reengineering in the company, establishing a key for action, a governance structure for subsequent projects and partitioning the enterprise into manageable prioritized projects.
- Develop Change Management Program: recognizes that the management of change is a critical factor for the successful implementation of business reengineering recommendations, and develops the change management program early in the overall project life cycle.
PHASE 2:BUSINESS SYSTEM EVALUATION
This phase essentially performs almost the entire data gathering required to address the subsequent reengineering of the business processes. The four processes aren't conducted sequentially, but are conducted in more of a parallel fashion. They are brought to a conclusion simultaneously in a major milestone, the Phase 2 management review.
The Business System Evaluation Phase contains four methodology processes:
- Measure Service Quality: is focused on customer and supplier service quality levels and their impact on the business process.
- Evaluate Current Processes: examines at the business process itself, and develops the detailed documentation and analysis that forms the basis for identifying process-oriented reengineering opportunities.
- Assess Information Technology: identifies the impact on the information technology infrastructure on the business process.
- Assess Infrastructure: identifies the impact on the business process of external and internal factors ranging from the regulatory environment to business policies to organizational and human factors.
PHASE 3:BUSINESS SYSTEM REDESIGN
This phase essentially performs all of the reengineering activity and produces the recommendations to establish the new business processes and effectively support them with information technology and internal infrastructure capabilities.
The Business Redesign phase contains three major methodology processes:
- Redesign Business Processes: utilizes the redesign workshops and information gathered in Phase 2 to develop change ideas, analyze change feasibility, and create the new business process.
- Redesign Information Technology: identifies the information technology components required to support the reengineered process, and maps those requirements against the current level of IT support to identify the magnitude of IT change required.
- Redesign Infrastructure: maps the reengineering recommendations against the internal infrastructure (jobs, organization, policy, management systems, recognition and reward systems) to determine the recommended changes in those areas.
PHASE 4:IMPLEMENTATION PLANNING
The phase concludes with an important management presentation, presenting the overall implementation plan with defined reengineering projects and anticipated benefits.
The Implementation Planning phase contains three methodology processes:
- Establish Performance Requirements: identifies the resources required to perform the new business process, and establishes the business performance objectives of the new process.
- Plan Continuous Improvement: is focused on the need to establish mechanisms to sustain the reengineering gains, and make additional gains.
- Develop Implementation Plan: focuses on the cost/benefit aspect of the reengineering recommendations, defines the implementation projects, and defines an overall implementation plan.
PHASE 5:IMPLEMENTATION
The implementation phase contains two methodology processes:
- Implement Business Solution: initiates, conducts and manages the implementation of the reengineering recommendations through a defined plan of implementation projects, including prototyping, piloting and roll-out.
- Conduct Post-implementation Review: conducts an assessment of the results of completing key projects to identify what further changes may be necessary to fully achieve targeted benefits.
PITFALLS AND MISTAKES MADE WHILE IMPLEMENTING BPR
- Trying to fix a process instead of changing it
- Ignoring everything except process redesign
- Neglecting people's values, beliefs and corporate culture
- Placing prior constraints
- Trying to make reengineering from bottom to up
- Concentrating executively on design to the exclusion of actual implementation through pilot or full blown projects
- Telling BPR is implemented although it is not implemented
- Lack of concentration on processes
- Spending too much time on analyzing the existing process
- Lack of suitable and strong leader
- Not being creative
- Going straight to implementation
- Being too slow for BPR (It mustn't continue for more than 1 year)
THE WAYS TO BE SUCCESSFUL WHILE IMPLEMENTING BPR
- The processes must be changed totally instead of repairing them
- To become dense on business processes
- Shouldn't be contended with smaller results
- Shouldn't give up early
- Must give priority to the implementation of BPR, not to the scope of problem
- Mustn't let the corporate culture or management behavior prevent BPR
- It must be from bottom to up
- Leaders must know BPR well, be experienced and talented
- Resources departed for BPR must be enough
- BPR mustn't be disappear in the company's agenda
- BPR mustn't be stopped after it had been started and must continue quickly
- BPR projects mustn't be concentrated more than one process within the same period, in the same company.
The process of reengineering has no fixed rules. Hammer,
"Reengineering the Corporation, a Manifesto for Business Revolution," identified common themes found in reengineered processes. Some of these include:Several jobs combined into one; Work normally performed by a number of specialists in different functional departments can now be performed by one individual or team. Through shared databases and decision support systems this generalist has access to all the required information and expert systems to make a sound decision.
Workers make real decisions;
They have a full grasp of the entire process. They take responsibility if there is customer dissatisfaction. Creativity, ability to work independently and a sense of responsibility are required from this "new worker". Managers act more as coaches than "bean counters".Work is made where it makes the most sense;
A team, instead of being spread out over multiple locations and departments, is now under one roof or group.Checks and controls are reduced.
Reconciliation and the associated overhead, is minimized; For example, in the case of Ford Motor Company invoices are no longer reconciled with what is shipped because a shipment is not received unless it agrees with the original invoice. Further, suppliers are not paid until their parts are actually used in production, thus forcing the supplier to deliver quality and to be in tune with Ford's production schedules.
A case manager provides a single point of contact; When a customer calls with a complaint, one person is responsible and takes ownership for the resolution of that complaint.
SAMPLES OF BUSINESS PROCESS REENGINEERING
ABOUT VESTEL CORPORATION
Vestel group of companies, which was established after Vestel Electronic Industry and Trade S.A has joined Zorlu Holding, is composed of production and marketing and distribution companies active in the white goods, information technology and electronics sectors. It operates in the home appliances, information technology and electronics sectors.
Vestel Companies Group is a leading firm in Turkish economy by its current export to approximately 100 countries in Europe, Asia, Middle East, Africa, and South America. 99 % of its TV producer in Europe with 6,5 million TV in a year. Its target is to increase its current exports to $1.5 billion.
Vestel, with its more than 3000 people work force, is producing air conditioners, refrigerators, monitors, color TVs, portable satellite receivers, PCs, television tuners, and Internet TVs in its 100,000 square meter production facility in Manisa.
Vestel, which has the ISO 9002 Certificate, with its production capacity of 1,000,000 is the market leader in monitor sales having a market share of 70%. Vestel, is also market leader of exporting in 2000 among all sectors.
Vestel develops its own technologies in a research and development centers. Manisa Vestel is also one of resent and development center.
Despite the shrinkage in the world economies and in our country in the year 1999, Vestel production has increased 18% in comparison with the previous year due to increasing market share and growing export capacity. Vestel has also decreased production costs and therefore gained important advantages in competition.
When the top manager of the Vestel Electronic has changed in 2000, February, the reengineering project had been started. The new top manager's mission is to increase efficiency in order to decrease the costs and increase the sales.
We have interviewed with Mustafa Kocakoç, an industrial engineer in the Method Engineering Group, about some of the reengineering processes Vestel has implemented. They had implemented Business Process Reengineering in production level -the assembly lines-; in Quality Control Departments; and in Human Resources Department.
Here is the reengineering process of the Final Assembly Quality Control
TV FINAL ASSEMBLY QUALITY CONTROL
- MISSION
- To increase the efficiency of quality control.
- EVALUATION OF PERFORMANCE
- Protecting the existing quality control criteria.
- Optimization of the number of employees who works at quality control.
III. SCENARIO OF IMPLEMENTATION
- Before Packaging Control (BPC) and Process Control (PC) Functions:
SUBJECT: Work Study
Value Analysis
Activity Modeling-Process Reengineering
Establishing Existing Quality Criteria
B. Making the work easy:
SUBJECT: Making the operations easy
Tools for operation
Settlement of materials
Walking distances
Operation's order, flow of work
Flow of information writing reports
Communication
IV. PLAN AND PROGRAM
SUBJECT: Education
Improving the settlement of tools and materials
Setting up a system on flow of information and reports
Evaluation of employees
WORK STUDY
Work-study about the Before Packing Control (BPC) and Process Control (PC) operators who work at the TV final assembly line has been done. Firstly, the BPC & PC works has been established and then a time study about these works has been done.
SOME ASSUMPTIONS
- For test or/and control periods, +50% more tolerance given to BPC workers than the production workers.
- The sampling percentage has been assumed at 5% at all inches –which is normally under 5%-.
- Because the controls made in BPC is changeable to the product's characteristics, the BPC periods are determined according to maximum characterized products.
- Hourly production at inch base and needed sample numbers according to 5% sample ratio;
Hourly Production
5% Sample Number
14"
185
10
20"-21"
140
7
25"-28"
120
6
H-E*
25
2
- Sampling ratios made in BPC according to time analysis, at any random day;
Production/hour
Sample / Number
Sampling Ratio
14"
185
7
4%
20"-21"
140
4
3%
25"-28"
120
4
3%
H-E*
25
2
8%
- The business of the BPC operators at watch under 5% sampling ratio and +50% tolerance standard periods circumstances;
Test time needed /TV
Business Ratio
14"
319
89%
20"-21"
420
82%
25"-28"
462
77%
H-E*
1505
84%
As a result of time study, it's seen that BPC employees are busy between 77% and 89%(at inch base).
VALUE ANALYSIS
As a second step of the project, it is analyzed whether the controls or/and tests made in BPC add value to product or goal. What take attention in this analysis is the long time spent on the control of "Remote Control"(RC).If we estimate RC controlling period to a TV's total BPC test period;
14" | 50% |
20"-21" | 38% |
25"-28" | 35% |
H-E* | 11% |
RC controlling operations:
- Opening the package of RC.
- Getting off the RC out of its package and placing a battery in it.
- Controlling RC model.
- Controlling all the buttons of the RC.
- Taking out the battery and packing the RC.
If we examine the production and entrance quality control data;
- RCs are produced at Vestelkom and at the end of the process they are controlled with a machine that can test mistakes at 8/10000 sensitivity.
- At the entrance quality control department of Vestel, controls are made with a 5% sampling. And within a few months there has been no faulty RC.
- At last assembly exit, if we look the last few months there were no faulty RCs.
Conclusion:
Because of all these reasons mentioned above, there is no need to make RC control for every sample in BPC. Making this control adds no value to the product or goal. It will be enough to make one RC model testing in every lot.
When we cancel the RC control in BPC operations, the new business of the operators are; BEFORE AFTER Needed test time/TV(s) Busyness ratio Needed test time/TV(s) Busyness ratio 14" 319 89% 161 45% 20"-21" 420 82% 261 51% 25"-28" 462 77% 303 50% H-E 1505 84% 1346 75% ACTIVITY MODELLING –PROCESS REENGINEERING According to value analysis, BPC workers (except H-E line) will have 50% busyness ratio. If we examine process flow charts we see that the BPC and the PC employees are doing the similar works. Therefore we can unite the BPC and PC operations / employees for every line. With the unity of BPC and PC;
- The new activity modeling will be like the suggested work flow.
- 26 BPC+ 10 PC workers will be reduced to 19. As a result there will be a reducing at a 17/36=47% rate in the TV Final Assembly Quality Control Team.
REENGINEERING ALL AROUND THE WORLD
We have also researched the reengineering in the world. We see that there are many samples of it like Motorola Inc., Xerox Corporation, Kodak, Ford Motor Company, Coca-Cola Company and Banc One Corporation. And we decided to take the IBM as an a sample firm that accomplish its goals through re-engineering.
REENGINEERING YOUR ACCOUNTING, THE IBM WAY
In 1979,when IBM reviewed how it used information technology in its accounting function, the company conducted a survey to determine the number of separate accounting systems that supported the function worldwide. The survey focused on these applications; general ledger; fixed assets intracompany or U.S., transactions; intercompany or worldwide, transactions; accounts receivable; and accounts payable IBM discovered it used 315 separate systems worldwide to support these six basic accounting functions. At the same time, IBM executives realized the existing systems had several major problems;
- The systems weren't able to respond quickly to the company's changing information requirements.
- They couldn't consolidate financial information efficiently.
- The redundancy in the systems made developing and maintaining them expensive.
To solve these problems, the company –guided by the CFO and the controller, supported by the CEO, and lead by the accounting organization—decided to develop a global set of common accounting systems. The "common systems" approach was to consolidate and standardize the hundreds of different systems into a limited set of applications for each of the basic accounting functions.
IBM pursued this strategy throughout the 1980s. By the end of 1991;
- The company had reduced the number of systems from 315 to 36.
- Equally impressive, however, are IBM's savings. The company reduced the number of employees required worldwide to support these activities by approximately 20%, while increasing worldwide revenue by 300%.
- The internal rate of return on the investment in common systems exceeds 19% worldwide.
But IBM wasn't satisfied. Although the company was tremendously successful solving the earlier problems, the common systems still weren't flexible enough and didn't provide 2 functions IBM needed.;
- Company executives wanted to be able to use the systems to reengineer enterprise process so they could continually improve the way IBM delivers the goods and services.
- They wanted to implement enterprise wide decision making, essential to competing in today's business environment.
Solution
To meet company needs, IBM received to first look at its accounting processes, since many traditional accounting methods have flaws, regardless of the technology the company employs.
From another enterprise wide perspective, traditional accounting has some fundamental weaknesses. But these weaknesses can be corrected. IBM now applies a solution concept to guide the company's new financial processes:
Reengineering business:
Reengineering involves eliminating processes, doing essential processes more effectively and efficiently or developing new business and information processes that increase an organization's value. Reengineering is not a one-time effort that results in a company's optimal operation. It's a process of continual improvement adapting to changing business requirements.
How IBM Improved?
Leveraging these solution concepts across the enterprise gives companies a powerful opportunity to gain competitive advantage. They can optimize their overhead, cost and resources and they can make essential information available for decision-making. The CFO and controller are critical to making this happen.The company reengineered into one process four fund-disbursement processes—payroll, travel expense accounting, miscellaneous expense reimbursement, and time and attendance recording—called the National Disbursement Strategy, or NEDS.
You can measure the results in 3 main ideas; financial return, user satisfaction and improved decision making.
- Financial Returns; IBM estimates that when the project is complete the company will save more than $300 million over 10 years, the majority of which will come from eliminating clerical jobs and redundant systems.
- Customer satisfaction rates are in the 85 to 90 percent range and cycle time reductions range from 65 to 70 percent.
- Executives are finding decision making much easier and more effective.
Now, by implementing reengineering process, IBM's accounting organization can respond to fundamental changes in information structure and in measurement systems in half the time and with approximately one-third resources than it could before.
CONCLUSION
As a conclusion, we want to summarize the concept. We made the definition of BPR, its steps, methodology and we give some samples. While searching the BPR, we found that it's a very new trend in the business area, and the number of firms implementing BPR has been increasing in the world. We can shortly say that reengineering is a process for creating efficient, effective and speedy organizations. So if you implement BPR correctly it's one of the best ways for organizational success.
REFERENCES
- Obelensky, Nick Practical Business: London,1994
- Institute of Industrial Engineers. Business Process Reengineering. Geogia: Industrial Engineering & Management Press,1993
Other Sources
www.c3i.osd.mil/bpr/bprcd/7224.htm
www.prosci.com/methodology.htm
www.lionhrtpub.com/IM/Imsubs/IM-4-95/bpr.htm
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