Posted in Marketing and Strategy Terms, Total Reads: 2399
Definition: Business Process Reengineering
It is the redesigning of business processes for improvement. It looks into the workflow within and between the enterprises. The process is necessary to lower costs and increase quality of service. It usually involves incorporating the innovative information technology processes.
The concept was given by Michael Hammer and James Champy in the early 1990s who recommended a few principles of reengineering to achieve business improvement:
1. Organize around outcomes, not tasks. 2. Identify all the processes in an organization and prioritize them in order of redesign urgency. 3. Integrate information processing work into the real work that produces the information. 4. Treat geographically dispersed resources as though they were centralized. 5. Link parallel activities in the workflow instead of just integrating their results. 6. Put the decision point where the work is performed, and build control into the process. 7. Capture information once and at the source.
Factors affecting BPR’s success include:
• Proper team composition
• Requirement analysis for business
• Sufficient IT infrastructure
• Continual Improvement
• Effective change management
Advantages of BPR: BPR enables a company to reduce costs and improve the productivity of the company through newer, more efficient processes.
Disadvantages of BPR: Reengineering the workflow of a company has an adverse effect on the employee morale. Many people are vary of change and do not manage to adapt to it easily. This aspect needs to be kept in mind while trying to make the judgment to go through with the action.
Examples of Business Process Reengineering:
While implementing BPR in Ford, Michael Hammer proposed to eliminate the invoice. In the fresh circumstances, a buyer was no longer required to send a copy of the purchasing order form to the creditor administration. Instead, he registers the order in the online database and when the items show at the store, the storekeeper ensures whether the items match up to the purchase order form in the system. In the old system he did not have access to this form. If the items match the order, he accepts the order and registers this in the computer system. If they do not, the items are returned.
According to Hammer, implementation of this idea resulted in almost a 75% decrease in workforce in the accounts payable department at Ford.
Hallmark executives were convinced that the product development process needed to be redesigned, when more niche markets were identified. Earlier, Hallmark used to spend 3 years in bringing new products to the market. Using reengineering, the goal was placed to change cycle time from three years to one year. They realized that two thirds of the product cycle was spent on scheduling and conceptualizing the card rather than on printing and assembly rework as had previously been thought. The concept spent 90% time waiting for a creative staffer to complete a new iteration till it was ultimately finalized. In 1991, a new line of cards was brought to market in 8 months, ahead of schedule, by creating a cross functional team for product expansion.