OPERATIONS MANAGEMENT III

Business Process Management and

Business Process Reengineering
or Business Process Innovation
Miguel Ángel Heras Forcada
[email protected]
 Learning Objectives

Explore the Business Process Management (BPM) concept which

allows companies to simultaneously reduce costs and focus on
their clients.

Analyze the Process Reengineering concept as a process

innovation focus that breaks away from existing paradigms and
enables radical improvements within organizations.
 Contents

01 From Process to Business Process Management

02 Business Process Management (BPM) definitions.

Process flow diagrams

03 Stages of BPM evolution

04 Business Process Reengineering (BPR) or Business Process

Innovation
 Business Process Management (BPM)

PROCESS
A process consists of a series of related and sequential
activities that transform some inputs (material, labor,
capital, clients, data, etc.) into the desired outputs
(goods or services), adding value.

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 General Discussion

 Which are the problems that the departmental organization

creates?
 BPM definition
A management discipline focused on using business
processes as a significant contributor to achieving an
organization’ s objectives through the improvement, ongoing
performance management and governance of essential
business processes.

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 Business Process Management (BPM)

BUSINESS PROCESS MANAGEMENT

It implies managing organizations by

managing processes focused on clients.

BPM HAS TO IDENTIFY THE

ORGANIZATION’S KEY PROCESSES BASED
ON:

With this approach, the most Its mission, values and vision
important thing is the value The key success factors
provided to clients, not to the
different functions. Its key competencies

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Business Process Management (BPM)

Companies are seen as a series of processes that

crisscross the traditional departments with the
aim of implementing the firms’ strategies.
 Business Process Management

GENERAL
MANAGEMENT

PROCESS “A” PROCESS “B” PROCESS “C”

MANAGEMENT MANAGEMENT MANAGEMENT INFORMATION HUMAN
FINANCE OPERATIONS MARKETING
SYSTEMS RESOURCES

Process
Owner PROCESS "A"

Process
Owner PROCESS "B"

Process
Owner PROCESS "C"
 Process Flow Diagram:
Concept

It has to depict the process exactly as it’s currently

carried out.

It has to represent the different process

stages graphically.

It informs about the process to external related

functions.

Analyzing it is fundamental to identify improvement

opportunities.
 Process Flow Diagram:
Diagramming

ACTIVITY OR
DECISION DATABASE LIST
OPERATION

IMMEDIATE DATA CONNECTION BETWEEN

TRANSMISSION FLOW LINES START AND END
DIAGRAMS

CONTROLLED STORAGE OUTPUT EVALUATION WAIT TIME TRANSPORTATION

 Process Hierarchy

INFORMATION
SISTEMAS HUMAN
FINANCE RECURSOS OPERATIONS MARKETING
SYSTEMS
DE FINANZAS RESOURCES OPERACIONES MARKETING
HUMANOS
INFORMACIÓN

MACRO-PROCESS Start

Database Operation

MICRO-
Decision
No

Yes

PROCESSES List
Operation Database

Document

End

OPERATIONS
 Process Detail

Mapping Level 0 Level 1 Level 2

Start Start Start

N
Mission/Vision Y
End
Y
End

End
Business Process Management: Hierarchy
Sub-process: Order Management - Level 0
Order management
 Business Process Management: Hierarchy
Sub-process: Order Reception - Level 1

The client asks to Can I

speak to the Is he/she N Message
take a Y End
person in charge available? received
message?

Y N

Order data
duly noted
Start

Order End
INTERNET
received

Forward to
Fax received the person in
Does the charge
Telephone fax connect
automatically? Y
rings
N
Connect
fax
 BPM : Sub-process hierarchy
Order Processing -Level 1-

Rq. data Look up Ask for

Start N Customer No. required
Complete?
data

Contact
Y Customer/Salesman

Process

N Data
Y End
Correct?
 Group Discussion

 What value does Business Process Management provide

organizations?
 Stages of Business Process
Management Evolution

Stage where the

improvement /
innovation is
optimised

From to traditional departments …… to …… process management

 Without change there can be no improvement!

“The definition of insanity

is doing the same thing
over and over again but
expecting different
results.”
Business Process Reengineering (BPR)

The fundamental re-thinking and

radical redesign of business
processes to achieve spectacular
improvements in terms of:

Costs
Quality
Speed
Service

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.
 When do companies begin to think
about introducing reengineering processes?

When they detect that their competitors have a competitive

advantage in terms of: costs, flexibility, speed and quality

¿?
To establish a new vision and improve their strategic options
When they perceive that their strategic objectives are
unattainable
When there is evidence that their fundamental processes
are antiquated
When they face changes in the market: reduced market share,
the appearance of new technology, new competitors, shorter
lifecycles, etc.
 We have to change our paradigms!

• Paradigms are guidelines and assumptions used

unconsciously when making decisions.

• They help when

making routine
decisions but
they limit our
ability to
innovate.
 We have to change our paradigms!

• Current process design corresponds to existing

paradigms.

• The key to process redesign is identifying our

current paradigms and exploring new ones.
 Tool: Paradigm Change
Form to Consider New Paradigms

CURRENT EFFECTS ON PROCESS ALTERNATIVE POTENTIAL IMPACT ON

IMPORTANCE
PARADIGM PERFORMANCE PARADIGM PROCESS PERFORMANCE

I Information is - It doesn’t provide full Shared - No one is

centered on information about the information indispensable.
individuals process and it encourages available to the - Motivation improves:
and used as a a department-based view. entire “We know what we’re
source of organization fighting for.”
power.

I Employees -Managers have to keep Employees are - Employees track

are track, monitor, etc. better themselves.
incompetent. positioned to
- Costs: general expenses, make decisions - Impact: process quality,
long cycles, etc. about their own shorter cycles, and
work. greater satisfaction
 Tool: Paradigm Change
Form to Consider New Paradigms

CURRENT EFFECTS ON PROCESS ALTERNATIVE POTENTIAL IMPACT ON PROCESS

IMPORTANCE PERFORMANCE PERFORMANCE
PARADIGM PARADIGM

I • We pay as • It adds more general • We pay when • Quicker payment for

soon as we expenses due to having to we receive the producers and smaller
receive the bill compare and match product from number of employees
from our documents. our supplier. involved.
supplier.

II • Work is • Supervision-related costs • Service quality • Shorter process cycle

divided into and lack of employee will improve if • Reduced supervision
small tasks to motivation employees see costs
improve • A global overview of the the entire
productivity. process is missing. process.
 Example Reengineering Process: Ford Motor
“Before”
Purchase order

Purchasing SUPPLIER
Department
WAREHOUSE

Delivery
note Bill

Purchase order
copy
Payment
Accounting
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.
Example Reengineering Process: Ford Motor
“Before”

500 employees to receive and verify:

•Purchase orders
•Delivery notes and
•Bills.

The company paid suppliers after

completing the above steps.
 Example Reengineering Process:
Ford Motor “After”

Purchase order

Purchasing
Department SUPPLIER

WAREHOUSE

Bill

DATABASE Payment
Accounting
 Example Reengineering Process: Ford Motor
“After”

•75% of accounting positions

eliminated

•Bills eliminated

•The company pays when it

receives the order.

•Computer-based verification
 “As is” and “To be”

Current Future
Products/Services Products/Services

Information S Information
T
R
Current A Future
processes Technology T Technology processes
E
G
Y
Skills Skills

Current environment (“AS IS”) Future environment (“TO BE”)

Transition/Implementation (Change Management)

 Reengineering Implementation
The traditional design concept doesn’t work!!

Concept creation

Design solution

Component breakdown

Component Component Component Component

development development development development

Integration

Installation

.
 Reengineering Implementation
The traditional design concept doesn’t work!!

IT’S NOT THIS… …BUT THIS.

 Process Reengineering

It’s a change process.

“Employees aren’t innately opposed to change but they don’t
like surprises. Leaders are responsible for making sure that
their employees know about the issues and their
consequences.”

Mark Wallace
CEO, Texas
Children’s Hospital

.
 How to Successfully Implement
Reengineering Processes (I)

To succeed, the following recommendations will help:

 The BPR initiative has to include strategic planning processes that use information
technology as a competitive tool.

 Clients have to be the center of reengineering efforts.

 The BPR initiative has to be ”owned" by the entire organization and not led by a
group of external consultants.

 Reengineering teams have to include executives and the employees who will
actually carry out the work.
 How to Successfully Implement
Reengineering Processes (II)

• The IT Department has to be an integral part of the reengineering team from the
outset.
• Senior executives who aren’t about to retire or quit have to sponsor BPR initiatives.
• BPR projects have to have a set calendar.
• BPR initiatives should not ignore the current corporate culture and should ensure
constant communication and feedback.
 Example Success Stories

Ford Motor Company: A radical improvement in its

billing process. 75% reduction in required
employees and more precise financial data.

IBM Credit Corporation: It went from a two-week

credit issuance process to a four-hour process
while increasing productivity.

Taco Bell: It increased the maximum capacity of its

restaurants, now earning $1,500/hour
versus$400/hour and with a 25% lower average
price compared to nine years before.
Level of Usage and Satisfaction with
Process Reengineering Initiatives

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Some Companies Serious
about Processes
Some Companies Serious
about Processes