Introduction

 As we had entered the 1990s, with globalization and the extraordinary

pace of the developments in the IT area, three driving forces; Customers,
Competition, and Change (“the three C’s” as described by
Hammer&Champy, 1993) resulted with a new approach to the
management of processes, termed Business Process Reengineering, that
produces radical improvements in performance.

The aim of reengineering in this environment is to facilitate the match

between market opportunities and corporate capabilities, and in doing
so, reengineering represents a radical shift away from Frederick Taylor’s
traditional task-based thinking to process-based thinking.
What is business process?
Davenport Short (1990) define business process as
“a set of logically related tasks performed to achieve a defined business

outcome”.
Devin port & Short (1990) have categorized business processes according to
three
dimensions:
 Organizational entities or subunits involved in the process (Inter
organizational, Inter functional, and Interpersonal Processes)
 The type of objects manipulated (Physical and Informational Processes)
 The type of activities taking place (Operational and Managerial Processes)
What is business process
reengineering (BPR)
Business process reengineering is the fundamental rethinking and radical
redesign of business processes to achieve dramatic improvements in critical,
contemporary measures of performance.

To be a truly world-class organization, the company needs to work as a team

and all the functional areas of the business need to be properly integrated,
with each understanding the importance of cross functional processes. As the
basis of competition changes from cost and quality to flexibility and
responsiveness, the value of process management is now being recognized.
The role that process management can play in creating sustainable
competitive advantage was termed Business Process Reengineering (BPR),
and was first introduced by Hammer (1990); Davenport&Short (1990).
Definition of BPR
according to
Hammer&Champy
The BPR definition of Hammer&Champy (1993) is widely accepted
today. This definition comprises four keywords: fundamental, radical,
dramatic and processes.

 Fundamental:
Understanding the fundamental operations of business is the first step
prior to reengineering. Business people must ask the most basic
questions about their companies and how they operate: “Why do we do
what we do?” and “Why do we do it the way we do?”
 Redical:
Radical redesign means disregarding all existing structures and procedures, and
inventing completely new ways of accomplishing work. Reengineering is about
business reinvention, begins with no assumptions and takes nothing for granted.

 Dramatic:
Reengineering is not about making marginal improvements or modification but about
achieving dramatic improvements in performance. There are three kinds of companies
that undertake reengineering in general. First are companies that find themselves in
deep trouble. They have no choice. Second are companies that foresee themselves in
trouble because of changing economic environment. Third are companies that are in
the peak conditions. They see reengineering as a chance to further their lead over their
competitors.
 Processes
The final keyword “Process”, though the most important in the definition, is
the one that gives most corporate managers the greatest difficulty. Most
business people are not process-oriented; they are focused on tasks, on jobs,
on people, on structures, but not on processes.
The Role of Information
Technology
Information technology (IT) has historically played an important role in the
reengineering concept..
 Early BPR literature identified several so called disruptive technologies that
were supposed to challenge traditional wisdom about how work should be
performed.
 Shared databases, making information available at many places
 Expert systems, allowing generalists to perform specialist tasks
 Telecommunication networks, allowing organizations to be centralized and
decentralized at the same time
 Decision-support tools, allowing decision-making to be a part of everybody's
job
 Wireless data communication and portable computer, allowing field
personnel to work office independent
 Interactive videodisk, to get in immediate contact with potential buyers.
BPR Methodology
Assuming that a company has decided its processes are inefficient or
ineffective, and therefore in need of redesign, how should it proceed? This
is a straightforward activity, but Davenport&Short (1990) prescribe a five-
step approach to BPR:
 Develop Business Vision and Process Objectives
 Identify Processes to be Redesigned
 Understand and Measure the Existing Processes
 Identify IT Levers
 Design and Build a Prototype of the New Process
BPR Tools & Techniques

 The various definitions of BPR suggest that the radical improvement of

processes is the goal of BPR. They do not, however, refer specifically to the
tools and techniques used in BPR.The result of this void is that authors and
consultants alike have pursued the use of many different tools in the search for
the best reengineering application. The basic ones among these tools and
techniques are briefly summarized in a BPR literature review by O’Neill&Sohal
(1999):Some tools are:
 Process visualization
 Process mapping/operational method study
 Change management
 Benchmarking
 Process and customer focus
TOOLS AND TECHNIQUES
Hammer’s Principles of BPR
Hammer (1990) has described some of the principles of reengineering the
business processes as follows:

 Organize around outcomes, not tasks.

 Have those who use the output of the process perform the process.
 Subsume information-processing work into the real work that produces the
information.
 Treat geographically dispersed resources as though they were centralized.
 Link parallel activities instead of integrating their results.
 Put the decision point where the work is performed, and build control into the
process.
 Capture information once and at the source.
Business Process
Reengineering Cycle
Successful Examples of BPR

Until this section, we have examined the theoretical background of BPR. But
what does reengineering look like in the real world? Here is how some
mainstream companies such as Ford Motor and IBM Credit have done it.

Case 1: Ford Motor Co. reengineering

Case 2: IBM Credit Co. reengineering
Ford Motor Reengineering

In the early 1980s, when American automotive industry was in a

depression, Ford’s top management put accounts payable –along with many
other departments- under the microscope in search of ways to cut costs.
At that time, Ford’s North American accounts payable department
employed 500 people. By using computers to automate such processes, Ford
thought it could cut head count by 20%. Pretty good, thought Ford’s
executives, until they visited Mazda.
The Ford managers noted that the admittedly smaller company took
care of its accounts payable chores with only five people. The contrast –
Ford’s 500 people to Mazda’s 5- was too great to attribute just to the smaller
company’s size. Finally, to match Mazda’s efficiency, Ford realized that it
would have to rethink the entire process in which the accounts payable
department took part.
Ford’s Old Process
 Under the old system, a number of paper documents was processed
sequentially by 3 functions who participate in the process indirectly with a
work force of 500 clerks to perform many intermediate steps:

 The purchasing function issues a purchase order to the supplier and sends a
copy to the accounts payable function
 Upon arrival of purchased goods, the inventory function sends a copy of the
receiving document to the payable function.
 When the invoice from the supplier arrives in the mail, the payable function
matches it against the purchase order and the receiving document before
issuing payment to the supplier.
 Much of efforts are needed to resolve frequent discrepancies between the
documents, and a total of 14 data items must be checked in the process.
Ford’s New Process
 Ford’s new accounts payable process looks radically different. Accounts
payable clerks no longer match purchase order with receiving document,
primarily because the new process eliminates the invoice entirely. With a
work force of only 125, the 3 functions participate in the process directly by
accessing a shared database, eliminating many intermediate steps and
sequential flow of paper documents. The new process looks like this:

 The purchase order is entered into the shared database by the purchasing
function.

 Upon receiving goods, the inventory function accesses the database. If a

match is found, the goods are shipped and the status of the order in the
database is updated. Otherwise, the goods are returned to the sender.
 The payable function routinely accesses the database to prepare payment
checks for orders that have changed status, and invoices from suppliers are
eliminated.
 Matching and discrepancy resolution of paper documents are no longer
needed, and only 3 data items need to be checked in the process.

The basic concept of the change at Ford is simple. Payment authorization,

which used to be performed by accounts payable, is now accomplished at
the receiving dock. And the result is a 75% improvement in head count.
Failure of BPR Projects
 Barriers to effective implementation:

Downsizing and restructuring means doing less with less. Reengineering, in

contrast, means doing more with less. It is a refreshing new approach to doing
business and there is plenty of evidence that it works well -even
spectacularly- at times. Performance gains of 50 to 100 percent are common
for some reengineered processes.

Hammer&Champy (1993) estimate (unscientifically) that 70% of

organizations that undertake reengineering fail to achieve any results.
This is true, not because the concept is flawed, but because of
implementation problems. Attaran (2003) describes the common
barriers to effective implementation of BPR projects as follows:
Common Barriers

 Misunderstanding of the concept

 Misapplication of the term
 Lack of proper strategy
 Unrealistic objectives
 Management failure to change
 Failing to recognize the importance of people
 IS failure to change
Conclusion
The concept of BPR has originated in the early 1990s and has achieved
popularity amongst businesses in a very short period of time. Now it is going
through its second wave with the great pace of the advent in
telecommunications.

What is clear from the review presented in this paper is that although there
seems to be confusion in the literature as to what constitutes BPR, there is a
consensus on the fact that reengineering requires creative thinking. It requires
a new perspective on the part of management—may be even a new
philosophy…