Process View of Organization

Enterprise-wide Information Systems

Dictionary meaning of Process

As per Oxford English Dictionary

A continuous and regular action or succession of actions, taking place or carried on in a definite manner, and leading to the accomplishment of some result A continuous operation or series of operations

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Organizational Processes

Strategic processes are those processes by which the organization plans for and develops its future included here are

Strategic Planning, Product/Service Development and New Process Development processes.

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Operational processes are those by which the organization carries out its regular day-today functions, such as

winning the customer, satisfying the customer, supporting the customer, cash and treasury management, financial reporting.
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Contd.

Enabling processes are those which enable strategic and operational processes to be carried out, such as

Human resource management, Management accounting And information systems management.

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Business Process: An overview

A business process is a collection of activities that takes one or more kinds of inputs and creates and output that is of value to the customer. Business processes are simply a set of activities that transform a set of inputs into a set of outputs (goods or services) for another person or process using people and tools. We all do them, and at one time or another play the role of customer or supplier. Improving business processes is paramount for businesses to stay competitive in today's marketplace.

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MODEL OF BUSINESS PROCESS

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Business Process Improvement

Over the last 10 to 15 years companies have been forced to improve their business processes because we, as customers, are demanding better and better products and services. And if we do not receive what we want from one supplier, we have many others to choose from Many companies began business process improvement with a continuous improvement model. This model attempts to understand and measure the current process, and make performance improvements accordingly.

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Contd.

This method for improving business processes is effective to obtain gradual, incremental improvement. However, over the last 10 years several factors have accelerated the need to improve business processes. The most obvious is technology. New technologies (like the internet) are rapidly bringing new capabilities to businesses, thereby raising the competitive bar and the need to improve business processes dramatically. Another apparent trend is the opening of world markets and increased free trade. Such changes bring more companies into the marketplace, and competing becomes harder and harder.

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Contd.

In today's marketplace, major changes are required to just stay even. It has become a matter of survival for most companies. As a result, companies have sought out methods for faster business process improvement. Moreover, companies want breakthrough performance changes, not just incremental changes, and they want it now. Because the rate of change has increased for everyone, few businesses can afford a slow change process. One approach for rapid change and dramatic improvement that has emerged is Business Process Reengineering (BPR).

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Continuous Improvement versus Radical Improvement

A main area of debate and indeed some contention is whether BPR is concerned with radical change only while other philosophies, such as TQM, focus on continuous incremental change. The point of BPR is improvement not change for its own sake.
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Contd.

It may that to effect radical improvements a company ends up having to make radical changes to both its processes and its organization, but this does not necessarily follow. Even where radical changes are required, it is important that the focus remains firmly on the improvement and that the changes are seen only as a mechanism for achieving it.
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Re-engineering
At the heart of re-engineering is the notion of discontinuous thinking -- of recognizing and breaking away from outdated rules and fundamental assumptions that underlie operations. . . . We cannot achieve breakthroughs in performance by cutting fat or automating existing processes. Rather, we must challenge old assumptions and shed the old rules that made the business under perform in the first place. . . . [There is] one factor that is necessary for re-engineering to succeed: executive leadership with real vision.

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Some Methodologies
Approaches to Business Process Improvement Total Quality Management (TQM) Kaizen Just-In-Time (JIT) Business Process Re-engineering (BPR)

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Business Philosophy Comparisons

Element TQM JIT Simultaneous TCM/FCR Engineering BPR

Focus

Quality Attitude to customers

Reduced inventory Raised throughput

Reduced time Reduce time to market (time=cost) Increased quality Radical

Process Minimize non-value added Radical

Improvement Continuous Continuous Radical Scale Incremental Incremental

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Organization Common goals across functions

Cells and teamR&D and Process based working Production work as a single team Initiator of action pulls production Internal partnerships Quick response

Process based

Customer focus

Internal and external satisfaction

Outcomes driven

Process focus Simplify Improve Measure to control

Workflow/ Throughput efficiency

Simultaneous R&D and Production development

Eliminate time in Ideal or Streamlined all processes

Techniques

Process maps Benchmarking Self-assessment

Visibility Small batches Quick set-up

Program teams Process maps CAD-CAM Benchmarking

Process maps Benchmarking Self-assessment IS/IT Creativity

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What is BPR?

BPR is an improvement philosophy. It aims to achieve step improvements in performance by redesigning the processes through which an organization operates, maximizing their value-added content and minimizing everything else. This approach can be applied at an individual process level or to the whole organization.

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Contd.

BPR is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvement in critical contemporary measures of performance such as cost, quality, service, and speed. BPR is a methodology for significant improvement to a business process, or for radical change in, or complete replacement of, such a process. It has significant impacts across organizational boundaries and generally has impacts or effects on external suppliers and customers as well as organizational structures.
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Contd.

It is the search for, and implementation of, radical change in business processes to achieve breakthrough results Some of the synonyms of BPR are:

business process redesign, business transformation, process innovation, business reinvention, change integration

The starting point of BPR is clean sheet of paper

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Underlying Principles
ENVIRONMENT

PEOPLE PRODUCT CUSTOMER SERVICE PROCESS

TECHNOLOGY

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Contd.

All organizations are built on three main pillars: processes, people, and technology. In designing a set of processes these three elements must be aligned to the needs of the market and the customers within it, and with each other. It is imperative that each of these three pillars is considered.
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Contd.

We start first with the processes of the firm which must be identified and designed. This stage is iterative: having considered the people it will be necessary to go back and review the processes and then return to people. People can only perform as well as the processes let them and similarly the processes can only perform to the level of the skill, knowledge and motivation of the people who operate them.
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Contd.

The third element to consider is the technology to be used to support the processes and people. In technology we include the office and factory technology together with the buildings, the telecommunications and information technology of all types. In considering technology, it will also be important to revisit the process and people designs as technological opportunities or constraints become apparent.
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Redesigning Processes

A central area of contention centers around the role that existing processes should play in BPR:

Should existing processes be the basis for the new, redesigned processes? To what extent should the existing processes be understood? Should existing processes be changed at the implementation stage or new processes set up to replace them? Should the organization start with a clean sheet?
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Contd.

The different approaches to BPR can be classified into two broad categories:

Systematic redesign identify and understand existing processes and then work them systematically to create new processes to deliver the desired outcomes. Clean sheet approach fundamentally re-think the way that the product or service is delivered new processes from scratch.
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Contd.

The choice between these two approaches will depend on what the organization is most comfortable with, and also on the time scales involved. Whichever alternative is selected, it is important to ensure that the analysis of existing processes is not over done, though the danger of this is higher in the systematic redesign approach.
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Systematic Redesign

This approach has the advantage that change can be made incrementally and thus quickly, in small chunks at reduced disruption and risk. Its disadvantage is that its base is the existing process and an innovative new approach is less likely to emerge than with the clean sheet approach, though it can happen.

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Contd.

This incremental approach can, however, result in significant step changes in performance when applied on a massive scale, what is referred to as massive incremental improvement. Systematic redesign should eventually become an integral part of organizational life as it is, in the form of kaisen (continuous improvement), at Toyota.
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Clean Sheet Approach

This approach has the advantage that it throws away the existing assumptions implicit in the existing process and allows a fundamental rethink in the way business is conducted. Such an approach offers the possibility of a leap in performance; an order of magnitude change in the desired outcome.

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Contd.

To obtain a several hundred, or even several thousand per cent improvement in a target, things have to be done very differently. The clean sheet approach is about working back from that target to a design that will make it happen. The main disadvantage of the clean sheet approach is that the required organizational changes can be difficult, though not impossible, to implement incrementally. Overall, with this approach the risk is higher and the pain and disruption greater.

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Contd.

During implementation, a crucial problem faced by many teams who have used this method is that the new processes so fundamentally from the existing ones that workers have great difficulty in relating to them. Unless great care is taken and management commitment is solid, workers may refuse to switch to the new methods.
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Salient features of BPR

Start from the future and work backwards BPR is not easy it is a serious work BPR is not free there are financial & cultural costs BPR often driven by fear and greed Change is a struggle; BPR is a war

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Important lessons for BPR

Get the strategy straight first Lead from the top Create a sense of urgency Design from the outside in (customer) Combine top-down & bottom-up efforts
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Identifying opportunities for BPR

Combine several jobs into one.

Save labor costs, greater simplicity in process, less time through process.

Let workers make decisions previously made by managers.

Faster response time, flatter organization, fewer employees, lower cost

Perform process steps in a more natural order.

Faster response times, less material handling.

Design processes to be more flexible, and thus handle more contingencies.

Provide faster turnaround times for easier jobs.

Perform work where it makes the most sense.

Locally or distributed, instead Agrawal Shweta of centralized, for faster turnaround times.

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Issues driving BPR

Common internal business problems:

Many customer touch points. Many suppliers. Many independent legacy applications within functional areas. Little information about activities in supply chain. Poor inventory management practices. No/poor information provided to customer service reps or to other customer touch points.
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Contd.
Common external business problems: Three Cs Customers: Todays customers are empowered.

Competition : Continues to get tougher on all dimensions. Change: significant, rapid, and unpredictable change in markets, products, technology, and the business environment

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Contd.
Common problem: stovepipes

The stovepipe or functional silo

So called because of lack of cooperation between functional areas (vertical dimension). Business process reengineering (BPR), which makes a fundamental change in specific business processes, integrates information required for good decision making.

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BPR Strategy

Stakeholder assessment - shareholders, customers, employees Determine which stakeholder expectations should be met to gain competitive advantage Determine how to redesign to meet expectations Map out it solutions to support Develop & implement new processes, etc.
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Process Innovation

Process innovation involves

Stepping back from a process to inquire into its overall business objective, And then effecting creative and radical change to realize order-ofmagnitude improvements in the way that objective is accomplished.

Re-engineering is only part of what is necessary in the radical change of processes; it refers specifically to the design of the new process. The term process innovation encompasses

The envisioning of new work strategies, The actual process design activity, And the implementation of the change in all its complex technological, human, and organizational dimensions
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A CONTRAST BETWEEN INNOVATION AND IMPROVEMENT

INNOVATION IMPROVEMENT

EFFECTS CHANGE

Immediate, dramatic Abrupt, volatile

Long-term, more subtle Gradual, constant Everybody Low initially, high to sustain People Processes

INVOLVEMENT A few champions INVESTMENT ORIENTATION FOCUS High initially, less later Technology Profits

IT as an enabler of re-engineering

Networked databases for shared access Document imaging On-line systems for jit decision making Expert systems User friendly interfaces Case tools, object-oriented development approaches

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Ford motor companys case of ac payables department

500 employees 20% savings anticipated -- reduction of 100 people But mazdas payables department had five people! Old process: Matching purchase orders, invoices, and reviewing documents to issue payment. New process: Purchase orders to go suppliers and on-line database. Upon receipt, receiving clerk verifies shipment. If okay, payment is made; if not, it is returned.
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Contd.

Results: -No invoices -No receiving reports -75% staff reduction -- 375 people reassigned

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Case of IBM credit corporation

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 case Five experts replaced with one deal structure Support of IT essential Results -Six days to four hours -Slight work force reduction -1000% work load increase!
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IS critical success factor for BPR

For undertaking IT . . .

Quality IS staff Quality IS services Receptive corporate culture Top management leadership Clearly identifiable economic benefits Communicate, communicate Full-time team, top people A re-engineering czar Careful change management
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For ensuring success . . .

Key concepts of BPR

Minimize as-is business process analysis Streamline business operations and leverage the capabilities of the software meaning let the process inherent in the software package drive the to-be process Minimize the number of custom development objects Hone in on the real business requirements and challenge processes that merely accommodate the way it has always been done

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Contd.

Reduce cost of doing business by eliminating: Obsolete and inefficient processes Obsolete regulations and controls Lengthy review and approval cycles Ensure business processes are integrated across all impacted functional areas

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GUIDING PRINCIPLES OF BPR

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Key success factors of BPR

Executive leadership Alignment with strategic objectives Business case for change Proven BPR methodology Effective change management Process ownership Re-engineering team composition
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Pitfalls to avoid

Divorce the re-engineering effort from the main goals of the organization. Underestimate the changes required to achieve a process orientation Run before you can walk Do not expect too much too soon Be wary of the title Appoint the IT department as BPR agents Do not pilot the new processes Concentrate on computer packages to do the reengineering
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TEN STEPS FOR BPR

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Effective change management for BPR

One of the most difficult obstacles to successful project implementation is resistance from those whom implementers believe will benefit the most. Most projects underestimate the cultural impact of major process and structural change, and as a result do not achieve the full potential of their change effort. Change management is the discipline of managing change as a process, with due consideration that we are people, not programmable machines. It is about leadership with open, honest and frequent communication.
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Reengineering team composition

A team leader who understands re-engineering and its impacts on the organization Process subject matter experts from the organization Cross-functional resources from impacted areas Systems integrator resources with expert knowledge of the processes inherent in the software

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When to go for BPR in ERP implementation?

Business process re-engineering activities occur primarily within the requirements definition and design phases of an ERP implementation effort. However, BPR should be given consideration starting in the initiation phase and carry through the entire life cycle of the project.

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BPR IN ERP IMPLEMENTATION

Sustainm ent & Continuous Im provem ent

Initiation

Acquisition

Im plem entation

Business Case

Integration Services RFP

Acquisition Strategy

Evaluate Against RFP Requirem ent RICE Repository

Continuous Process Im provement

Incorporate into Design T.O.

Build T.O. fixes # & $ of RICE objects

Execute BPR Methodology

Initiation

One of the key reasons for implementing an ERP is to run your business in a more efficient, effective and flexible manner. Therefore your to-be business processes will have to be efficient, effective and flexible. To this end BPR must be part of the overall vision/strategy for undertaking an ERP project and should be stated as such in the business case. Subsequently, your acquisition strategy must include finding a solution and a systems integrator who have the requisite skills and methodology to meet this vision.
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Acquisition

The solicitation of systems integration services must specifically include a request for information about the vendors BPR methodology including, approach, tools & templates, deliverables and roles & responsibilities. The task of executing the BPR methodology then becomes part of the requirements and design contract task order. The results of the BPR effort, number of development objects required and costs to develop the objects, become fixed in subsequent task orders.
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Implementation

BPR is executed during the requirements and design phases of implementation. Also, it is at the beginning of design when the rice repository must be utilized to leverage work already done.

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Sustainment & continuous improvement

Process improvement is not at one time exercise. Responding to customers needs, improved interaction with vendors and making processes more efficient and effective should be an on-going process. Even though a process has been radically redesigned does not mean it does not have to be validated and continuously improved.

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Some Re-engineering Results

Western Provident Association slashed the time taken to process insurance claims from 28 days to 4 days and settles 90 per cent of claims within five working days. The Baxi Partnership reduced manufacturing lead times from 9 weeks to an incredible 24 hours.

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Contd.

Rank Xerox UK reduced the processing time of special bills from 112 days to 24 hours. Reuters reduced its debt collection days from 120 to 38 days, increased invoice accuracy by 98 per cent, and can now deliver some new services in just 15 minutes.

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Contd.

DEC cut $1 billion from its manufacturing costs through re-engineering to meet customer needs. AT & T Global Business Communications System subsidiary designed from scratch the way it processes orders for customers, cutting delivery times from 8-12 weeks to days, even while using 35 per cent fewer people to do the job.

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Contd.

Lucas industries automotive business cut manufacturing lead time by nearly 80 per cent, and reduced overall order-to dispatch lead time by 70 per cent to 32 days before automation. It doubled inventory turn-around, achieved a 50 per cent increase in productivity, and a 25 per cent reduction in operating costs.
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Contd.

Compaq Computers cut its costs by more than 30 percent through a complete re-think of its business. Hillingdon Hospital in London, having reengineered in-patient care, reduced the steps for getting a blood test down to a process which now takes five minutes.

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Kaizen :An Overview

It is a Japanese term that means continuous improvement, taken from words 'kai' means continuous and 'zen' means improvement. In other words it means change to become good It is a type of improvement without spending much money, involving everyone from managers to the workers, using much of the common sense In the Japanese context, it encourages small improvements day after day continuously
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Contd.

It is an ongoing, never ending continuous improvement process It is a soft and gradual process as contrasted with the western style of scrapping everything and starting with new

The kaizen method is originally a Japanese management concept for incremental improvement This methods incorporates many other concepts like total quality control, quality control circles, small group activities, labor relations etc
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Key elements of Kaizen method

The foundation of this method consists of the following 5 founding elements: Teamwork Personal discipline Improved morale Quality circles Suggestions for improvement

All these focus on elimination of waste (muda) and inefficiency

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KAIZEN 5S FRAMEWORK

SEIRI: TIDINESS SEITON: ORDERLINESS SEISO: CLEANLINESS SEIKETSU: STANDARDIZED CLEAN-UP SHITSUKE: DISCIPLINE STANDARDIZATION

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KAIZEN AND BPR

Kaizen philosophy is more people oriented, more easy to implement and requires long term discipline On the other hand BPR is harder, technology oriented, enables radical change but for which it requires major change management skills

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Total Quality Management (TQM)

TQM is a structured system for satisfying internal and external customers and suppliers by Integrating the business environment, Continuous improvement, And breakthroughs with development, improvement, and maintenance cycles while changing organizational culture. One of the keys to implementing TQM can be found in this definition. It is the idea that TQM is a structured system. Describing TQM as a structured system means that it is a strategy derived from internal and external customer and supplier wants and needs that have been determined through daily management and cross-functional management.
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Contd.

Pinpointing internal and external requirements allows us to continuously improve, develop, and maintain quality, cost, delivery, and morale. TQM is a system that integrates all of this activity and information. When all of its elements are implemented properly, TQM is like a well-built house. It's solid, strong, and cohesive. If TQM is not planned for and implemented correctly, it will be structurally weak and will probably fail Total quality management is an approach to the art of management that originated in Japanese industry in the 1950's and has become steadily more popular in the west since the early 1980's.
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Contd.

Total quality is a description of the culture, attitude and organization of a company that aims to provide, and continue to provide, its customers with products and services that satisfy their needs. The culture requires quality in all aspects of the company's operations, with things being done right first time, and defects and waste eradicated from operations. Many companies have difficulties in implementing TQM. Surveys by consulting firms have found that only 20-36% of companies that have undertaken TQM have achieved either significant or even tangible improvements in quality, productivity, competitiveness or financial return

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Useful messages for implementation of TQM

If the company wants to be a first-rate company, it should not focus on the second-rate companies who can't handle TQM, rather look at the world-class companies that have adopted it The most effective way to spend TQM introduction funds is by training top management, people involved in new product development, and people involved with customers It's much easier to introduce EDM/PDM (electronic document management/product data management) in a company with a TQM culture than in one without TQM.
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Contd.

People in companies that have implemented TQM are more likely to have the basic understanding necessary for implementing EDM/PDM . For example, they are more likely to view EDM/PDM as an information and workflow management system supporting the entire product life cycle then as a departmental solution for the management of cad data

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Key aspects of TQM

Customer-driven quality Top management leadership and commitment Continuous improvement Fast response Actions based on facts Employee participation And a TQM culture

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Customer-driven quality

TQM has a customer-first orientation Customer satisfaction is seen as the company's highest priority. The TQM company is sensitive to customer requirements and responds rapidly to them. In the TQM context, `being sensitive to customer requirements' goes beyond defect and error reduction, and merely meeting specifications or reducing customer complaints The requirements is expanded to take in not only product and service attributes that meet basic requirements, but also those that enhance and differentiate them for competitive advantage.
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TQM leadership from top management

The key point of TQM is, it has to be introduced and led by top management Commitment and personal involvement is required from top management in creating and deploying clear quality values and goals consistent with the objectives of the company, and in creating and deploying well defined systems, methods and performance measures for achieving those goals The development and use of performance indicators is linked, directly or indirectly, to customer requirements and satisfaction, and to management and employee remuneration.

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Continuous improvement

Continuous improvement of all operations and activities is at the core of TQM Once it is recognized that customer satisfaction can only be obtained by providing a high-quality product, continuous improvement of the quality of the product is seen as the only way to maintain a high level of customer satisfaction. TQM also recognizes that product quality is the result of process quality Elimination of waste is a major component of the continuous improvement approach. There is also a strong emphasis on prevention rather than detection, and an emphasis on quality at the design stage. The customer-driven approach helps to prevent errors and achieve defect-free production
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Fast Response

To achieve customer satisfaction, the company has to respond rapidly to customer needs. This implies short product and service introduction cycles. These can be achieved with customer-driven and processoriented product development because the resulting simplicity and efficiency greatly reduce the time involved Simplicity is gained through concurrent product and process development. Efficiencies are realized from the elimination of non-valueadding effort such as re-design.

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Actions based on facts

The statistical analysis of engineering and manufacturing facts is an important part of TQM. Facts and analysis provide the basis for planning, review and performance tracking, improvement of operations, and comparison of performance with competitors In practice, data is collected and put in the hands of the people who are in the best position to analyze it and then take the appropriate action to reduce costs and prevent nonconformance. Usually these people are not managers but workers in the process

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Employee participation

A successful TQM environment requires a committed and well-trained work force that participates fully in quality improvement activities. Such participation is reinforced by reward and recognition systems which emphasize the achievement of quality objectives. On-going education and training of all employees supports the drive for quality. Employees are encouraged to take more responsibility, communicate more effectively, act creatively, and innovate
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A TQM Culture

An open, cooperative culture has to be created by management for a successful TQM implementation. Employees have to be made to feel that they are responsible for customer satisfaction. They are not going to feel this if they are excluded from the development of visions, strategies, and plans and it's important they participate in these activities. They are unlikely to behave in a responsible way if they see management behaving irresponsibly - saying one thing and doing the opposite.

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Awards for quality achievements

The Deming prize has been awarded annually since 1951 by the Japanese union of scientists and engineers in recognition of outstanding achievement in quality strategy, management and execution. Since 1988 a similar award (the Malcolm Baldrige national quality award) has been awarded in the us. Some of the winners of the Baldrige award include AT&T (1992), IBM (1990), Milliken (1989), Motorola (1988), Texas Instruments (1992) and Xerox (1989).

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Comparison of BPR and TQM

TQM and BPR both strive to achieve the outcome of organisational improvement, it is the method, degree, and time length of improvement in which they differ. TQM focuses improving the current organizational processes by continuous incremental improvements for the long-term benefit. On the other hand BPR employs a dramatic and radical redesign methods to completely change the organizational processes for increased improvements and short-term success.
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Contd.

Specialized single processes that were originally carried out by many different employees are no longer necessary as employees are empowered with the responsibility of making more decisions. Employees will no longer be trained only in their own field but also will be familiarized with other fields in order to respond to any problems encountered An important difference between TQM and BPR to note is that BPR involves greater a risk than TQM because BPR requires a greater increase in productivity, there are changes to all the processes.
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Contd.

Both TQM and BPR may bring about some employee resistance, not just to the changes but to potential employee downsizing which may occur due to implementation of new information systems and the specialised processes The cost of implementation between the two methodologies is also different. BPR will require a relatively high amount of money as it requires major restructuring, whereas TQM will generally require less money due to its simple principles. The use of technologies is another difference between TQM and BPR, BPR may focus around a certain piece of major technology whereas TQM may implement minimal it, this issue will be discussed later on.
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ROLE OF IS IN TQM AND BPR PROJECTS

BPR and TQM both use is however a stronger reliance lies with BPR because new processes may be engineered around a certain system like a wireless network or database system. TQM will rely less on is but will still implement it in some form, such as setting up simple computer terminals to input/print customer invoices or to log appointments. However is and it implementation alone cannot insure success
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