Reengineering Business Processes

Today's intensely competitive business environ­ment is forcing all business sectors; manufactur­ing, service, or government, to constantly improve product quality while reducing costs. The advent of the combined European Community Market, the North American Treaty Agreement and aggressive competition from the Asian conti­nent will clearly amplify these pressures and cre­ate renewed efforts for cost containment and productivity improvement. In part, due to these pressures, management finds itself scurrying from one improvement approach to another in an effort to keep abreast or stay ahead of the competition. Business process reengineering is a technique that was developed specifically to address the needs of organizations striving to distance themselves from their competition. The purpose of this paper is to expose the basic concepts of business process reengineering, provide practitioners a framework for implementation and to communicate benefits from real life examples.

Our definition of business process reengineering begins with what reengineering is not. Reengineering is not another name for software engineering. True, reengineering may use elements of automation to support a redesigned process, but it is the process that is of critical importance. Information systems are simply one of the enablers that support the redesigned process and not the reason for the redesign. Reengineering is not another technique for downsizing an organization. A reengineered process may require fewer resources after implementation, but this is due to the fundamental changes in the process not due to some hidden agenda for reducing headcount. Reengineering is not the same as quality improvement, Just-in-Time, or cycle time reduction efforts. These activities typically focus on improving the existing process, whereas reengineering has as its goal radically changing the process.

Reengineering has been described by Michael Hammer, the creator of the term, as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance—cost, quality, capital, ser­vice, and speed." Business Process Reengineering is an approach for identifying and implementing radical changes to the core processes of a business rather than focusing improvements on products or other isolated activities. Reengineering business processes provides the means for companies to innovate core processes rather than simply improve them and is therefore radically different from typical improvement programs. Reengin­eering projects generally carry greater risk to the enterprise but provide far greater returns (Figure 1). For example, a typical improvement program for the purchasing function might suggest that purchasing processes be automated with the use of packaged software, whereas a reengineering project for the same purchasing function might suggest that the purchasing organization be elim­inated.

Many business have exhausted the benefits gained from the use of more traditional approaches for improving operations such as: MRPII or JIT. The returns from these investments in technology have run their limit as they typically follow a strategy of automat­ing existing processes. Businesses have found that, in instances where processes cross several functional areas, implementation of these techniques is often suboptimized. This is caused primarily because business processes are independent of organization struc­ture (Figure 2), and must be viewed in this way to truly optimize operations.

Companies are searching for new approaches for improving operations that will enable them to break through the current paradigm of improvement efforts and leapfrog the competition. They have discovered that in order to achieve level of magnitude improvements they must evaluate how the whole enterprise operates to create value from its core business processes. These companies have learned that having a process view of their business is critical to future profitability and survival.

Core business processes refer to those processes that are valued by the customer or shareholder, and are therefore critical to the success of the business. Typically they are also those processes that the businesses' strategy has identified as critical to sustaining competitive advantage and market position. These core processes cross many functional boundaries within the organization and are therefore significantly impacted by the level of integration within the organization. Examples of core processes might be: strategy development, order fulfillment, conversion (manufacturing), delivery (distribution and logistics), sales, service (inquiry to resolution) and product development. Core processes will vary by organization and industry, however it is important to note that most companies have fewer that half a dozen core processes and it is extremely rare to find a company with as many as 10. Each of these processes converts inputs into outputs such as: the conversion processes uses the outputs from order fulfillment to determine which products to produce and in what quantity. A sample business process map is provided in Figure 3 to illustrate both the key points of integration between core processes as well as the basic logical flow of process outputs.

To be Continued

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