Lecture 8
Business Process Redesign
Part 1: Business Process Reengineering
1
Learning Objectives
• Identify and document business processes at different levels of detail using
contemporary process modelling techniques
• Understand how IT can be used to deliver value by automating business processes,
and how transactional data can be exploited to build insightful process analytics
• Apply qualitative and quantitative techniques to analyse process performance and to
assess the impact of process changes
Content
• Deals with the methods that help to rethink and re-organize business processes to
make them perform better
• Clarify the motivation for redesign and delve deeper into what improving process
performance actually means.
• Present the spectrum of redesign methods and discuss representative sample
methods in some detail.
• Distinguish between transactional and transformational methods.
Exercise 8
Process Redesign
Management Processes
Define Vision Develop Strategy Implement Manage Risk
Strategy
Core Processes
Process
Manage
Procure Procure Market Deliver
Customer
Materials Products Products Products
Service
identification
Support Processes
Manage
Manage Personnel Information Manage Assets
Process architecture
Conformance and Process As-is process
performance discovery model
insights
Process Process
monitoring analysis
Executable Insights on
process weaknesses and
model their impact
Process Process
implementation To-be process redesign
model
Process Redesign
Identify possibilities for improving the design of a process
AS-IS: Descriprive modelling TO-BE: Prescriptive modelling
of the real world of the real world
• No silver-bullet: requires creativity
• Redesign heuristics can be used to generate ideas
Process redesign approaches
Transformation Redesign
• Puts into question the fundamental assumptions and principles of the existing
process structure
• Aims to achieve breakthrough innovation
• Example: Business Process Reengineering (BPR)
Transactional Redesign
• Doesn’t put into question the current process structure
• Seeks to identify problems and resolve them incrementally, one step at a time
• Example: Heuristic redesign (next week)
Business Process Reengineering (BPR)
• Transformative: Puts into question the fundamental assumptions of the “as is”
process
• Analytical: Based on a set of principles that foster:
• Outcome-driven processes
• Integration of information gathering, work and decisions
The Ford Case Study
Ford needed to review its procurement process to:
• Do it cheaper (cut costs)
• Do it faster (reduce turnaround times)
• Do it better (reduce error rates)
Accounts payable in North America alone employed > 500 people and turnaround
times for processing POs and invoices was in the order of weeks
(Hammer, 1990)
The Ford Case Study
Automation would bring some improvement (20% improvement)
But Ford decided not to do it… Why?
a) Because at the time, the technology needed to automate the process was not yet available.
b) Because nobody at Ford knew how to develop the technology needed to automate the process.
c) Because there were not enough computers and computer-literate employees at Ford.
d) None of the above
The correct answer is …
Mazda’s Accounts Payable Department
Mazda’s accounts payable team was about 15 people, versus a
department of over 500 in Ford.
Even after taking into account differences of size, this was 6-7
times smaller than Ford.
How the process worked?
(“as is”)
How the process worked?
(“as is”)
How the process worked?
(“as is”)
How the process worked?
(“as is”)
How the process worked?
(“as is”)
How the process worked?
(“as is”)
Reengineered Process (“to be”)
Reengineered Process (“to be”)
Reengineered Process (“to be”)
Reengineered Process (“to be”)
Reengineered Process (“to be”)
Reengineered Process (“to be”)
Evaluated Receipts Settlement
Outcome…
• 75% reduction in head count
• Simpler material control
• More accurate financial information
• Faster purchase requisition
• Less overdue payments
Lessons:
• Why automate something we don’t need to do at all?
• Automate things that need to be done.
“Don’t Automate, Obliterate!” (Hammer, 1990)
Some principles of BPR
1. Capture information once and at the source
2. Subsume information-processing work into the real work that produces
the information
3. Have those who use the output of the process drive the process
4. Put the decision point where the work is performed, empower workers
to decide, and build control into the process
5. Treat geographically dispersed resources as though they were
centralized.
Principle 1
Capture information once and at the source
• Shared data store
• All process workers access the same data
• Don’t send around data, share it!
• Self-service
• Customers capture data themselves
• Customers perform tasks themselves (e.g. collect documents)
Principle 2
Subsume information-processing work into the real work
• Evaluated receipt settlement: when receiving the products, record the fulfillment of
the PO, which triggers payment
Principle 3
Have those who use the output of the process drive the process
• Vendor-managed inventory
• Scan-based trading
• Push work to the actor that has the incentive to do it
Example: problematic claims process
Authorize
Pay
Claim
Client Insurer
Request quote
Approved
Pay glass
vendor
Redesigned claims process
Client Insurer
Claim Pay
Drop Approved
glass
vendor
Principle 4
Put the decision point where the work is performed, empower workers to
decide, and build control into the process
• Empower the process workers
• Provide process workers with information needed to make decisions
themselves
• Replace back-and-forth handovers between workers and managers
(transportation waste) with well-designed controls
Equipment rental process
Self-service-based redesign
Principles 1 & 2
• When equipment is needed, site engineer queries the suppliers’ catalogue, selects
equipment and triggers PO
Principle 3
• Supplier stocks frequently used equipment at construction site, site engineers scan
to put them into use
Principle 4
• Site engineer is empowered with the authority to rent the equipment; works
engineer performs statistical controls
Principle 5
Treat geographically dispersed resources as though they were centralized.
• If same people perform the same function in different locations, integrate and share
their work wherever possible
• Larger resource pools less waiting times even with relatively high resource
utilization
Next week
• Transactional process redesign
• Redesign heuristics
