Lean Manufacturing via Business Process Reengineering
PART I.
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Business Process Reengineering is being embraced by most corporations as the savior in a highly competitive, global marketplace Mired in age-old practices and organizational structures, these corporations are working hard to find new ways to muster the flexibility required for success and survival through the 1990s and beyond. Reengineering offers tremendous potential for these corporations. However, the transition has been extremely painful and somewhat tricky. More than seventy percent of the reengineering efforts are reported to have failed to achieve their objectives and promised benefits. Most of these efforts have not even gone through all the requisite phases to complete the transition. Organizational stamina and focus have been among the major stumbling blocks. The recipe for successful reengineering initiatives is not an "off-the-shelf commodity. The good news is that there is a wealth of information on what works and what doesn't from the consultants and professionals who have been courageous enough to be the early adopters of this activity. Background American companies are expected to spend an estimated $32 billion on reengineering projects. Nearly two-thirds of those efforts are predicted to fail.1 Such gloomy predictions do not seem to slow down these corporations from aggressively pursuing reengineering programs. Peter Drucker, an eminent management expert says "reengineering is new and it has to be done."2 Michael Hammer who is credited with coining the term "reengineering" defines it as "the fundamental rethinking and radical redesign of an entire business system—business processes, job definitions, organizational structures, management and control systems and values and beliefs—to achieve dramatic improvements in cost, quality, service and speed." The overriding philosophy guiding the reengineering efforts is a disbelief in the traditional ways corporations are organized in planning and executing work. Steep organizational hierarchies preached and practiced during the industrial era seem to be no longer suitable in the information era which is characterized by intense global competition and value creation for customers. Quality and continuous improvement initiatives that attempted to deliver 5% or 10% improvements, though still essential, are no longer sufficient. To survive in today's competitive environment, firms have recognized the need to make dramatic improvements—10X rather than 10%. Thomas Davenport in his book on Process Innovation says, "Businesses must be viewed not in terms of functions, divisions, or products, but of key processes. Achievement of order-of-magnitude levels of improvement in these processes means redesigning them from beginning to end, employing whatever innovative technologies and organizational resources are available."3 Results Many success stories have been published to hail the benefits of reengineering efforts. Union Carbide has used reengineering to scrape $400 million out of fixed costs in just three years.2 Many of the process-focused change programs in corporations are delivering notable improvements in cost, quality and time. Major efforts in a variety of industries to redesign core processes such as customer service, order fulfillment, or new product development have begun to pay handsome dividends. However, for every success story, there are numerous horror stories and failed attempts at making this non-trivial transition. Other success stories characterize reengineering efforts, with very little improvement to the critical factors. Reengineering the Accounts Payable function in one of the industrial firms, for example, did not have much impact on the overall performance although it achieved substantial percentage improvements within the function. Accounts payable, in this case, was not one of the few core processes that determined the success or failure of the company's business.4 What then are the critical success factors for these sweeping, enterprise-wide initiatives? What did the successful organizations do right? What lessons can the other firms, both considering launching such programs, and ones that are deeply entrenched in it learn from such successes and failures? To be Continued STAY CONNECTED To stay current on bullet-proofed manufacturing solutions, subscribe to our free ezine, "The Business Basics and Best Practices Bulletin." Simply fill in the below form and click on the subscribe button. We'll also send you our free Special Report, "Five Change Initiatives for Personal and Company Success." Your
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