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Lean Manufacturing via Business Process Reengineering 


PART I. 

 

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


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