BUSINESS PR 0 CESS R E-ENGINE ERING

1 Streamlining 0 your busmess processes One of the ‘buzz’ phrases set to see us through the 1990s is that of business process re-engineering. With claims of improving business effectiveness and drastically cutting operating costs, it is capturing a great deal of interest.

by Steve Croxall

espite its sudden appearance, business process re-engineering (BPR) has D actually been around for many years

under a variety of guises. During the late 1980s the concepts were adopted and adapted by many organisations to suit their particular needs. The basic principles evolved into a suite of related techniques under names such as departmental purpose analysis, process model- ling, process mapping, process streamlining, waste elimination, business process improve- ment and the current popular title of business process re-engineering.

BPR exists because most business processes are not ‘engineered’, they just evolve over many years. As businesses grow, the workload increases and the organisation typically responds by dividing work into groups based on individual disciplines with specific func- tions. Departments are created, increasingly leading people to become specialists. The processes evolve to cope with the needs of these departments rather than the needs of the customer and in time become cumbersome and bureaucratic.

Typically major business processes are segmented, departments deal with their own parts of a process, focusing on their own departmental procedures, priorities and functions rather than the needs of the customer.

Attempting improvement within a department is likely to refine the existing department activity with some local benefit but would miss the opportunity of improving the complete process. Intra-department communication may be effective, but inter-departmental communi- cations tend to be difficult. In reality the major business processes cut across the departments (Fig. 1). The only way to achieve significant and effective change is to review the complete

Fig. 1 Executives and managers generally consider their own developments1 responsibilities, yet many departments are involved with tasks for each major business process. Significant improvement will only be achieved by taking a business view

rocess process tasks tasks

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BUSINESS PROCESS RE-ENGINEERING

Panel 1 Example: Component

manufacturing and assembly process improvement in

a medium-large manufacturing company

Through reviewing and designing out the NVA/wasteful activities of the manufactur- ing system the team achieved an 80% reduction in inventory, improved delivery performance from 50% to virtually 100% and reduced response time from 30 days to five days-all with fewer people.

process and not just the traditional depart- mental disciplines.

BPR concepts During the 1970s and 1980s many businesses

achieved benefits from re-organising manu- facturing into natural groups based on component/product families (often called cellular manufacturing), eliminating significant non-value-added activity (NVA), seeking simplification and providing a basis for teamwork, ownership and autonomy (Panel 1). There is still much that can be done to achieve further manufacturing benefits, but now BPR is exploiting the same philosophy in ‘administra- tion’ areas, attacking the waste which is prevalent in office practices by redesigning the organisation around natural groups of major business processes.

Business processes are the activities, jobs, tasks, actions which people carry out, increasingly with the support of information technology. Closer inspection of the major business processes usually shows that they are slow, cumbersome, expensive, resource hungry, error prone and bureaucratic, and there is

Panel 2 What is NVA?

Non-value-added (NVA) activities are those which do not add to the object which the customer wants, e.g. internal documentation is pure NVA. NVA includes the following general activities found in all organisations: filing, storage, interruptions, delays, author- ising, checking, inspection, errors, waste, scrap, reworking, movement, transport, :omplexity, variability, paperwork.

generally poor communication and co- operation between departments. Most business processes have a high degree of NVA, typically 80-90% (Panel 2). BPR is a way of eliminating some NVA, improving the time taken to perform processes (process leadtime) and reducing the effort expended on wasteful activity.

BPR is a collection of tools and concepts which are applied differently dependent on the circumstances. The toolkit includes process mapping, NVA and waste elimination, benchmarking, natural grouping and measures of performance. Whilst each BPR initiative will have common features there is no single solution to re-engineering and no single path to follow except the most appropriate one!

During the 1980s the customer rightly came to expect (and generally receive) a ‘quality’ product. Price has always been, and no doubt will continue to be, a primary supplier selection factor, but responsiveness is increasingly becoming a vital distinguishing criteria in the market place. Effective BPR offers step change improvement in operating costs, quality and particularly cycle time.

BPR is not for the faint-hearted. The real benefits are derived from radical thinking, combining the best of ‘bottom-up’ redesign of existing practice with ‘top-down’ examples of best practice from elsewhere. Executive commitment is essential, as the BPR changes will shake the very roots of the traditional organisation, destroying long-held beliefs along with the ‘steel re-inforced’ protection around some departments. The degree of resistance to proposals is proportional to the degree of change recommended!

Applying BPR Start at the top

As with any significant change project BPR must be strategically directed with the executive team agreeing the vision and deciding on their particular approach to the application of BPR. This must clearly fit within the company’s strategy. Commitment and involvement of the executive team must be both real and visible.

For the greatest gain from BPR the executive team must consider ‘re-engineering’ the business at the top level and be prepared to revise this as the detail of the BPR recommendations are presented. Initially the executive should identify the major business processes, considering especially those which directly affect the external customer and define

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BUSINESS PR 0 CESS RE- ENGINE ER ING

Table 1 Major business activity can be divided into two general areas

(i) Examples of the primary development business processes are:

rn strategic business planning rn business development/marketing 0 product development rn supplier development

manufacturing and business system development rn people trainingldevelopment

~

(11) Examples of the primary operational business processes are

sales inquiriedtendenng sales order processing material acquisltion manufacturing customer invoicing supplier payment management and financial accounting

the BPR project with a realistic vision for the Launching the team changes along with specific, quantified To ensure that the BPR team has a flying start objectives. If the project is really business wide it is important that a formal launch process is then the Managing Director is probably the initiated. The launch structure will vary but only person who can ‘own’ the project, after all should include the following elements: the MD is perhaps the only executive with a business-wide view. Launch briefing-the project owner and

other key executives should brief the team, Major business processes describing the project and providing a

Major business activity can be divided into written ‘project definition’. two general areas: (i) Development processes, Team training, including team building and which create new products, structures, systems specific BPR skills input. and procedures, and (ii) *Team planning of the Operations processes, which project. generate (and support) the The review of a *Team presentation of pro- products and services for the ject plans to executives/ customer (Table 1). process through Droiect owner.

I ,

A multi-disciplinary team is often the most appropriate ‘many new eyes’ will The should mechanism to perform the identify a multitude encourage the team to detailed work on BPR. The consider radical and creative team must have a variety of of potential thinking in the identification skills, knowledge and experi- of step changes to the existing ences which will help to improvements processes. This is also the

executives

provide a wide perspective, beyond the major time to communicate the ensuring that nothing is taken project objectives to the for granted. Team mem- process changes whole business. Regular bership should be a balance of formal reviews of progress skills, length of service and should be organised, allowing personal attributes. In fact it is the team mix the executives to retain control, display which will help in the creative stages of BPR, commitment and address issues and concerns. where the question ‘Why?’ will be frequently heard. Seniority is not a team selection Anapproach criterion, but attitude, capability, enthusiasm The pragmatic approach begins with the and stamina are! team modelling the current business processes.

Challenging, realistic and signz$cunt targets This provides a great deal of data about the must be set for change; 30-50% improvement processes which the company wants to in measures of time, cost and quality are typical. improve, and offers a relatively easy approach These targets help the team to focus on what is to change. Next comes analysis and review of important and give the team the ‘authority’ to the potential for improvement, seeking out be radical! waste, errors, repetition and NVA. The creative

The review of a process through ‘many new phase follows, with the team redesigning the eyes’ will identify a multitude of potential processes, specifically considering the needs improvements beyond the major process of the customer (Panels 3 and 4). Finally the changes. proposals must be costed, benefits listed,

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B USZNESS PROCESS RE-ENGZNEERING

Panel 3 Example: Sales order process improvement in a medium-

large manufacturing company

By reviewing and re-engineering the process and eliminating NVNwaste the team achieved a 50% reduction in paperwork, 11 fewer changes of ownership, six fewer departments involved and a reduction in personnel.

Panel 4 Example: Customer inquiry process improvement in a

medium-large manufacturing company

A team review of existingprocesses focusing on the elimination of NVMwaste resulted in the setting up of a dedicated team of both commercial and technical skills to concentrate on inquiries. This quickly resulted in halving the number of departments involved, the elimination of seven changes of ownership, a 50% reduction in paperwork and a dramatic improvement in the inquiry response time. Now most inquiries are responded to by the next day-all with fewer people.

implementation planned and the complete package presented to the executive for discussion, revision and decision. More detailed implementation planning will be necessary following final approval of the plans.

The BPR attack on business processes must be directed by the (executive generated) ‘project definition’, with some processes attracting attention whereas others may be ignored: for example, focusing on processes which affect the external customer directly, or those which have the greatest potential for cost reduction, or perhaps those which have the greatest impact on ‘delivery’ response.

Generally, departments will introduce their own delays and bureaucracy, each will create, move, check and file their own documentation, apply their own priorities and potentially introduce their own ‘errors’ (particularly

communication errors). Each department will not really know (or even be concerned with) what the other departments do.

One of the more radical BPR recommenda- tions could be the creation of a mixed discipline (co-located) process team to operate a major business process, eliminating NVA activity, reducing overall resourcing, improving the quality of the output and speeding up the process.

Not all major processes will be radically re- engineered through BPR, not all resources will be reorganised into cross-functional teams, not every manager will be directly affected by change ... but there should be few (if any) restrictions on the attack as all the organisa- tion’s interrelationships must be reviewed before engineering the changes.

BPR is perhaps best supported by those who have experience of applying it, perhaps using consultants. If this is the chosen approach then avoid consultancies whose approach is to flood your organisation with their personnel, learn about your organisation, (hopefully) make the changes and then take most of the knowledge away with them. Look for support which uses your people, retains ownership within your company and leaves your employees more capable of running the company and further applying the philosophies themselves. This will initially require more of your resources, but will help in acceptance and implementation of ideas, as the activity will be more an internal project not an imposition from outside!

Team members will gain valuable experience from a BPR project, and by the end they will better understand the construction of the business and its processes. They will also have learnt a lot about projects and teamwork. Many will assume broader responsibilities or perhaps be promoted as a direct result of the personal development which the project provides.

There is no panacea for redressing the lethargy left by decades of evolution, and the application of BPR is not a simple and painless solution. Only through changing our fundamental approach to business processes will there be a step change in effectiveness.

This article was first published in Manufac- turing Engineer

0 IEE: 1995 Steve Croxall is a Tutor-Consultant with Dunchurch- The GEC Management College, Rugby, War. CV22 6QW, UK, and can be contacted on 01788 810656.

62 ENGINEERING MANAGEMENT JOURNAL APRIL 1995