Business Process Reengineering: How to reengineer towards an efficient process?
Business Process Reengineering (BPR) has become yet another buzz word of recent times where every System Integrator advises clients that before going ahead with any large transformation program they need to conduct BPR of their existing processes. But is there a correct prescription for this critical step? After all, a wrong move can jeopardize the entire ERP investment.
Based on my experience on numerous recently concluded Green Field Implementations, I realized that there are three Golden Rules for achieving efficient business processes. These must be followed after the AS-IS business process has been studied and laid out to provide a baseline on how a particular business process is running in the organization with Lead Times/Process Times captured.
1. Remove Non Value Add Activities: Non Value Add activities are redundant activities that have no value to the process. These activities have been a result of age old business practices that should have been discarded ages ago. These can be identified based on some of the pointer questions listed below
a. Does the process step add any quantitative or qualitative value to the process?
b. Is the process just a handshake without incremental value?
c. Is the step just duplicating effort where the same data can be accessed somewhere else?
d. Is the step aimed towards compartmentalizing data/process where there is no harm to the organization to have an open architecture?
e. Is the step a result of an underlying assumption? Have we validated the truth behind the assumption?
2. Automate Operational Value Add Activities: These activities are focused in providing data additions or doing some value adds for downstream activities. They may not directly provide value to the customer but the existence of these help in serving the customer better. E.g. stacking the goods in warehouse correctly so it's easy to locate during a pick cycle. As part of BPR, we need to ask questions on whether there is a better way of doing the task? Can we automate the task or does it necessarily require human judgment? By automating these tasks, we assure that the time spent on these activities is less and the chance of human error is minimized. Sometimes even decomposing the task further down or consolidating the tasks upwards can help bring in efficiency in the system. These can be identified based on some of the pointer questions listed below:
a. Does the step add to the customer value add related activities downstream?
b. Is the step necessary for the business to run efficiently?
3. Increase/Strengthen Customer Value Add Activities: These activities are the groundwork for creating real customer value adds - the reason for an organization's existence. What is it that the organization's customers are seeking? There are very few customer value adding activities in the entire business process and the entire operational value add activities should position themselves towards supporting these activities. Theoretically, Customers basically want their goods in best shape to be delivered on time where they receive a correct invoice with previously agreed terms. Obviously there are other factors which can lead towards higher customer satisfaction but we should consider the hygiene factors only as Customer Value Adds while doing a BPR while noting the other satellite value adds as 'Nice to Have' factors. Simple ways of identifying Customer Value Add activities are:
a. Will the customer pay for this activity?
b. Does it put the customer in a frame of recommending our services to other folks?
Once the above process is done, we have a baselined process which would have minimum operation as well as wait time. This can then be mapped to the package of choice.
While browsing some of the other blogs@infosys, I saw a blog about how to reduce customizations. I am in agreement with the colleague of mine on the same and I feel once the BPR is done, the guidelines mentioned in the blog must be followed to arrive at a Lean ERP Solution with a reduced TCO. There would be times where we realize that automating an Operational task is not worth since the volumes are low or it requires human judgment. These are calls that we can take during the implementation while adopting a decision framework.
Although, I completely understand BPR is easier said than done with the resistance towards change and that's where the experience of industry experts coupled with organizational change management, tools such as Decision Frameworks, help in making the transition.
If you have been part of a green Field implementation and would like to share your BPR experiences, please do write your comments as part of the blog.
Comments
BPR - Not to be confused with Process Improvement
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BPR pioneer Micheal Hammer explains that many of the work being done in business organizations do not add any value for customers. He says that this work should be removed, and not accelerated through automation. Business organizations should reconsider their processes in order to maximize customer value, while minimizing the consumption of resources required for delivering their product or service. The customer mentioned here could be internal or external to the organization.
BPR is generally defined as an exercise of fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed.
While I appreciate the golden rules indicated, one should remember that in a Business Process Re-engineering (BPR) exercise, we are not aiming for incremental results as in Business Process Improvement (BPI) exercise. BPI aims at optimizing the business processes existing in an organization (influencing process variables) while BPR aims at improving the result expected from the business process (enhancing process outputs).
One of the major reasons why BPR became a popular buzz word is because of its radical approach to bringing change in business processes. The essential characteristics of BPR that are different from BPI are:
a) Dramatic change in process variables
b) The process is not the issue, the outputs and impact by the process is
c) The process may get transformed beyond recognition
Since BPR is a more ambitious exercise than BPI, it’s expected to produce results more valuable to the organization, and therefore has a more holistic approach. In this context, I would recommend the following steps while doing a BPR exercise.
1. Measure Process Parameters:
This is done to measure the changes brought about by the BPR exercise. The process parameters are compared to benchmarks to identify apparent scope of improvement.
2. Understand the Process Objectives:
In other words, find what benefits the relevant stakeholders expect (and perhaps, should expect) from the process. This would indicate the outputs and value created by the process.
3. Analyze the process to find re-engineering benefits:
This could be reduction in costs, reduction in cycle times, increase in output, improvement in customer satisfaction, easiness of execution, etc. While many such benefits could be identified early, some could be identified while the process is being re-engineered.
4. Reconsider the Process:
Going by the spirit of BPR, the process is examined in a holistic perspective and new process options to redefine process are developed. These options would aim at improving the process objectives. Some of the tasks in the existing process could be eliminated or improved upon or a whole new chain of tasks could define the new process.
5. Identify the IT levers:
The various tasks in the new process options are analyzed for manual / automated components. Usage of IT would bring about further improvement in process objectives. The goal here would be to enhance the value created by the process.
6. Obtain the buy-in from relevant stakeholders:
For a successful transition, it is imperative to convince the stakeholders involved in adopting the new process. Meanwhile, the stakeholders could also see the new process from a practical / user perspective and thus provide vital insight on implementing the new process.
7. Design, implement, and refine the re-engineered process prototype:
Successive iterations are necessary to develop the new process to make it refined enough for actual implementation and usage.
Successful BPR exercises also look at cross-industry practices that would make sense, thereby eliminating the need for excessive brainstorming – while saving valuable time.
Rajesh Ponnan
rponnan@yahoo.com
Posted by: Rajesh Ponnan | May 13, 2010 12:33 PM
Thanks Rajesh for your thoughtful comments. Indeed you are correct in many aspects and i would put the difference being more on terminology rather than the process itself. For me BPR is re-enginering where the start is the existing process and then decompose it to manageable steps, finally recreating the process in a manner which is more efficient using the golden rules described in my blog. On the other hand, we have Business Process Transformation(BPT) where all we know is the output/input for the process and we want to radically rethink every step within it. Both processes are indeed holistic but they require different thought process altogether. In one, you are using the existing process to create a process free of NVAs while in the other, you start with a blank board and then put pieces together removing any previous assumptions or existance of any constraints. Indeed with the second method, the process may undergo radical change beyond recognition while in the initial method, the backbone would remain more or less similar.
While BPR would bring results incremental to the baseline and would be faster to accept while BPT would bring about major changes and would create a new baseline itself.
Posted by: Abhishek Sabharwal
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May 17, 2010 5:06 AM