ERP

AND

BUSINESS PRECESS REENGINEERI NG

DISHA TECHNICAL CAMPUS

SYLLABUS
Introduction to Process Concept, Primary value chain concept, Process Activities Product complexities, Reengineering, current situation, necessary to reinvent organization. Continuing the mass production concept, variation on the Greenfiled approach. The impact of accounting system on decision seeking outside help, BPR success determination Industry consolidation. The value of BPR BPR experiences and examples. Case Study Question paper discussion.

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BUSINESS PROCESS
Business processes are sequences and combinations of business activities. They can be divided into external customer-facing processes that deliver products and services of value, management processes and support processes. Management processes control and coordinate these activities and ensure that business objectives are delivered. Support processes, as the name implies, provide infrastructural and other assistance to business processes.

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TYPES OF BUSINESS PROCESS

processes are typically of non-standard nature; they rely on the knowledge and creativity of the persons involved. Knowledge-based processes are not dominant in Business Process Reengineering projects.

Knowledge-based processes : These

processes arc at the core of most Business Process Reengineering efforts. Operational processes arc classified by their relative stability, standardization, and repeatability. Typical operational processes are customer service, procurement, and manufacturing.
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Operational processes : Operational

Operational processes arc further classified into key and secondary processes.

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VALUE CHAIN ANALYSIS

Bottom Line - improve overall profitability!

Increase your competitiveness Reduce your costs Improve your market share
Value Chain analysis was first suggested by Michael Porter (1995) as a way of presenting the construction of value as related to end customer.

It can:

VALUE CHAIN ANALYSIS

A value chain is a graphical representation of all the work that must be done by a business or work area in order to provide its goods/services (i.e.. value') to its customer. A C T I V I T I E S S U P P O R T

Overall infrastructure Human Resource Management Technology Development Procurement

Primary Activities

ASSESSMENT
Pros: Value Chain Analysis provides a generic framework to analyze both the behaviour of costs as well as the existing and potential sources of differentiation. Porter emphasized the importance of (re)grouping functions into activities to produce, market, deliver and support products, to think about relationships between activities and to link the value chain to the understanding of an organization's competitive position. The value chain made clear that an organization is multifaceted and that its underlying activities need to be analyzed to understand its overall competitive position. Cons: The quantitative analysis is time consuming since it often requires recalibrating the accounting system to allocate costs to individual activities. Porter provided qualitative guidance for a quantitative exercise. His analysis began with identifying the relevant activities that lead to competitive differences and are significant enough to influence the organisation's overall cost base. The Value Chain Analysis should be accompanied with a customer segmentation analysis to mix the internal and external view. A feature or product provides the firm with a differentiating competitive advantage only if customers are willing to pay for it. Customer value chains need to be analysed to determine where value is created.

The Value Chain model was intended as a quantitative analysis. It can also be used as a quick scan to describe the strengths and weaknesses of an organization in qualitative terms.
With the Value Chain Analysis, Porter tried to overcome the limitations of portfolio planning in multidivisional organizations. Porter used his Value Chain Analysis to identify synergies or shared activities between Strategic Business Units and to provide a tool to focus on the whole rather than on the parts.

The Value Chain is used to analyse a firm's position in relation to its direct competitors with the assumption that rivalry drives profitability. This excludes other assumptions such as customer bonding in Alexander Hax's delta model.
The Value Chain Analysis was developed to analyse physical assets in product environments. Other authors amended the model to accommodate intangible assets and service organisations.

BUSINESS PROCESSES
Business Processes Business processes are sequences and combinations of business activities. They can be divided into external customer-facing processes that deliver products and services of value, management processes and support processes.

Knowledge-based processes : Among knowledge-based processes are product

development, research, advertisement, and management consulting. These processes are typically of non-standard nature: they rely on the knowledge and creativity of the persons involved.

Operational processes : Operational processes arc at the core or most Business

Process Reengineering efforts. Operational processes are classified by their relative stability, standardization, and repeatability. Typical operational processes are customer service, procurement, and manufacturing. Operational processes are further classified into key and secondary

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PRODUCT COMPLEXITY

Product complexity can be classified into following categories:

Short term costs

Long term costs

Hidden costs

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BUSINESS PROCESS REENGINEERING

The fundamental rethinking and radical redesign of the business processes to

achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed".

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NECESSARY TO RE-INVENT ORGANIZATION

The proper aim of reengineering in this environment is to facilitate the match between market opportunities and corporate capabilities, and in doing so. ensure corporate growth.

Internally reengineering the functional hierarchies into teams to facilitate work processes will lead to the elimination of most management layers and would teach managers to do a lot more with much less.

Promotion of cross-functional activities, shared objectives, and externally oriented thinking.

Above all, it is the value adding processes that enable long term success for an organization.

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RECENT TRENDS IN PUBLIC SECTOR

Radical versus incremental redesign: Clean slate versus existing process:
Intra-versus interorganizational processes

IT led versus IT enabled

Mechanistic versus holistic

Dramatic versus modest.

Top down versus bottom-up

Inspiration versus methodology

Operational versus Knowledge process

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IMPLEMENTATION PROCEDURE OF BPR

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BPR- ADDING VALUE

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MASS PRODUCTION
Mass production (also called flow production, repetitive flow production, series production, or serial production) is the production of large amounts of standardized products, including and especially on assembly lines. The concepts of mass production are applied to various kinds of products, from fluids and particulates handled in bulk (such as food, fuel, chemicals, and mined minerals) to discrete solid parts (such as fasteners) to assemblies of such parts (such as household appliances and automobiles). In mass production systems, highly skilled professionals are involved in product design while the actual production is being carried out in the shop-floor by semiskilled or unskilled workers. They often find it difficult to understand the intricacies of a design particularly when It relates to a complex product. In order to derive the maximum benefit of economy of scale, mass production system attempts to maximize the output of a production line once it is set up. thereby limiting the choice of customers to a great extent. Such limitation is of serious consequence in a competitive market.
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CONCEPT OF GREEN FIELD APPROACH

The Green field Approach, is also known as the radical turnaround. A Green field Approach, is applied to the design and formation of a new Organization and its working practices. A Green field Approach asks the following question, "If a new organization is formed, what has to be done and how would it be done?

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BPR SUCCESS FACTORS

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DETERMINANTS OF SUCCESS FACTORS

Diversity of human resources allocated to the project; and

Compliance with BPR principles;

The advantages of BPR are determined by three independent constructs:

All of these constructs are themselves determined by another independent construct, organizational support.

The methodological rigor of the project.

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INDUSTRY CONSOLIDATION
Industry consolidation is a situation in which separate companies become one. It is sometimes described as a merger, although technically these are two different situations. In a merger, a new business is formed when one company absorbs the other; in a consolidation, companies join forces on relatively equal terms to form one new company. However, the two terms are often used interchangeably.

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INDUSTRY CONSOLIDATION
Reasons for Consolidation: Companies join forces to cut costs. utility company image by Greg Pickens from Fotolia.com

Consolidation is a major trend in many industries, and the main reason why companies consolidate is To improve investment returns through cost cutting and productivity gains. Sometimes, even companies that have nothing in common come together in order to diversify. All these consolidations can be voluntary, or hostile--when the management of one firm resists the advances of the other, but is eventually forced to accept a deal by its current owners. The Economist magazine writes that consolidation is an activity that happens in waves.
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INDUSTRY CONSOLIDATION
Benefits to the Consumer

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INDUSTRY CONSOLIDATION

Horizontal integration occurs when two companies within the same industry become one, on roughly equal terms. This type of integration often raises antitrust concerns, as the combined firm will have a larger market share than either firm had before merging.

Vertical integration occurs when two companies are at a different stage in the production process; for example, a car maker merging with a car retailer or a parts supplier. It raises antitrust concerns only if one of the companies already enjoys some monopoly power, which the deal might allow it to extend into a new market. A third variation is called conglomeration--it is an organization of previously independent firms with different activities brought under the same management and control of a corporate holding company.

Horizontal Integration

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Vertical Integration

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Human Reengineering Case Study: The Conquering Power of the Small

GTO Inc. is a small company which manufactures automatic gate openers based in Tallahassee, Florida. When the founder died suddenly, the company was appeared to be in desperate need of reengineering: GTO was losing money on a monthly basis, it lacked a line of credit and suppliers shipped only on a COD basis. Employees were required to work twenty-four hour shifts to fill important orders and salesmen were reduced to writing minuscule orders to supplement their incomes. The new CEO, Chuck Mitchell, adopted "...a strategy made up of small gestures rather than sweeping moves. These gestures consisted of creating an atmosphere of trust and optimism among GTO's harried employees by listening to and adopting their suggestions and improving their health and disability insurance. When things started to turn around, pay was increased and bonuses distributed from a profit sharing plan. The salesman were put on salary with incentives. Acts such as fixing the leaky roof, allowing ten minute breaks, and keeping the coffee machine stocked convinced the employees that Mitchell was "genuine." The following year, GTO witnessed a cultural and company turnaround. Net profits moved from the red to nearly $500,000. This was accomplished by a 9% increase in gross sales along with a 33% decrease in total operating and administrative costs. Employee turnover decreased equally dramatically. As employees began to seek outside education and were promoted from within, the number of returned goods fell.

GTO's dramatic turnaround was a result of many small steps which could be said to foster precisely the "culture of instrumentalism" that Hammer and Champy warn against. The focus was on human resources rather than on processes.

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