Business Process Re-engineering (BPR)

Definition -Michael Hammer and James Champy in their book entitled “Reengineering the Corporation –
A Manifesto for Business Revolution” provide the definition of the term reengineering. They define
reengineering as “the fundamental rethinking and radical redesign of business process to achieve dramatic
improvements in the critical contemporary measures of performance such as cost, quality, service and
speed”.

Explanation of Definition- the definition of re-engineering is loaded with a number of important

concepts and it’s understanding is necessary for successful re-engineering of business.
The first and the foremost is fundamental rethinking. The fundamental rethinking calls for
questioning everything (basic principles of management and administration) that is being followed, practiced
and found acceptable for centuries. It rejects old legacies and 'proven' practices. For example, one can
question the necessity of an invoice for billing and recovery of money. Is there any other way whereby the
sales transaction can be registered and money recovered without raising the invoice document. The
fundamental rethinking calls for starting all over rejecting the past. It requires a vision, an innovation and an
imagination.
Radical design is the second important concept used in the definition of re-engineering. For example,
the business is conducted in a certain manner, i.e., one buy raw material, process it, pack the finished goods,
sell and distribute the goods to the customer. There are standard procedures and designs for these
activities. The radical redesign calls for trimming and chopping these designs so that the cost is
reduced, service is improved and the customer get higher value at a higher speed. The redesign calls for a
change in the technology, tools and techniques.
The radical redesign calls for off-loading the activity outside the business organization if it contributes
to the cost and not to the customer desired value. It begins with objective of activity elimination, then
improvisation and finally outsourcing. It suggests only doing what can be done best, and rest to be done
through outsource.
The 'fundamental rethinking and radical redesign' mentioned in the definition is that exercise
which produces dramatic improvements. Any re-engineering exercise, if it produces only marginal
improvements is then not a result of fundamental rethinking and a radical redesign.
When the re-engineering exercise is complete, the organization will have fewer people, less space, a
product or service of excellence and highest customer satisfaction.
Business process reengineering is also known as Business Process Redesign or Business
Transformation, or Business Process Change Management.

What is a Business Process? - Michael Hammer and James Champy in their book entit led
“Reengi neeri ng t he Corporati on - A Manifesto for Business Revolution" provide the definition of
Process as a collection of activities that takes one or more kinds of input and creates an output that is of
value to the customer.
It implies a strong emphasis on how work is done within an organization" (Davenport 1993).
Processes have two important characteristics:
(i) They have customers (internal or external),
(ii) They cross the organizational boundaries, i.e., they occur across or between
organizational subunits.

Processes are generally identified in terms of beginning and end points, interfaces, and organization units
involved, particularly the customer unit. High Impact processes should have process owners.
Processes may be defined based on three dimensions (Davenport & Short 1990):

 Entities: Processes take place between organizational entities. They could be Inter-organizational,
Inter-functional or Interpersonal.

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  Objects: Processes result in manipulation of objects. These objects could be Physical or
Informational.
 Activities: Processes could involve two types of activities: Managerial (e.g. develop a budget) and
Operational (e.g. fill a customer order).

Origin of the BPR concepts- In 1990, Michael Hammer, a former professor of computer science published
an article, in which he claimed that the major challenge for managers is to obliterate non-value adding
work, rather than using technology for automating it. This statement implicitly accused managers of having
focused on the wrong issues, namely that technology in general, and more specifically information
technology, has been used primarily for automating existing work rather than using it as an enabler for
making non-value adding work obsolete.
Hammer's claim was simple: Most of the work being done does not add any value for customers, and this
work should be removed, not accelerated through automation. Instead, companies should reconsider their
processes in order to maximize customer value, while minimizing the consumption of resources required
for delivering their product or service.
This idea, to unbiasedly review a company’s business processes and this concept rapidly adopted by a huge
number of firms, which were striving for renewed competitiveness, which they had lost due to the market
entrance of foreign competitors, their inability to satisfy customer needs, and their insufficient cost
structure. Even well established management thinkers were accepting and advocating BPR as a new tool
for re-achieving success in a dynamic world.

Why Business Process Improvement required and when BPR advisable?

Improving business processes is paramount for businesses to stay competitive in today's marketplace. Over
the last 10 to 15 years companies have been forced to improve their business processes because we, as
customers, are demanding better and better products and services. And if we do not receive what we want
from one supplier, we have many others to choose from.

Some questions are given below, positive answer of which indicates that then BPR are advisable:

• Does the competition clearly outperform the company?

• Are there many conflicts in the organization?
• Is there an extremely high frequency of meetings?
• Is there excessive use of non-structured communication (memos, emails, etc)?
• Is it possible to consider a more continuous approach of gradual, incremental improvements?

Approach of Re-engineering- The approach to re-engineering aims at customer focus. It requires one to
take a different view of the business -view based on the process and not on the tasks or functions. I.e., A
business has a number of processes, which together produce the business results. The business should be
re-engineered through process re-engineering and the scope of the process runs across the departments and
functions and ends up in substantial value addition, which can be measured against the value expectation of a
customer.
For example, the order processing scope in the traditional sense is within the marketing department. But
when it comes to re-engineering, the scope expands to manufacturing, storing, delivering and recovering the
money. The customer's order on the company is received in the marketing department. The order is verified
and an order acceptance is sent to the customer. The information about an accepted order communicated to
other departments within the organization. Someone is responsible for performing credit checking and
approval of customer’s order. Some function or department is responsible for arranging for materials
against customer orders. Some department is responsible for planning the production while some other
department arranges to procure the raw materials required. After the production department manufactures
materials for meeting the customers' requirement, some other department takes care of shipping and
invoicing. Invoices are subsequently accounted for in the financial accounting system. These are typical
steps within a business process. Different functions or departments within the company perform these
steps.

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 The basic element of the processes is motivation to perform certain activities. In the process execution, the
data is gathered, processed and stored. The data is used in the process to generate the information, which would
be checked, validated and used for decision-making. The decision is then communicated. These steps are
performed a number of times across the execution process. When the process is performed, it consumes
resources and time.

The concept of reengineering suggests that the organization reviews all these activities or steps involved in
the business process and challenges each of the steps for its value addition. The reengineering concept
allows business organization to eliminate waste in the process; remove steps in the business process that
does not add any value to the customer. By this method, the process improves and waste is eliminated. The
new information technology tools can be used to look at conventional business processes and suggest
radical changes to improve efficiency and cut down waste and reduce cycle times.

I n o r d e r t o p e r f o r m r e - e n g i n e e r i n g e x e r c i s e i n a n o r g a n i z a t i o n , it is necessary to identify
and map the existing business processes. This exercise is typically called as "mapping the existing
processes" or "As is" study. During this phase, the current practices of the company are studied and
documented. This document is used as input for evolving "proposed processes" or "To be" processes.

As the business process is mapped during the "as is" or existing process mapping, each and
every step of process gets charted in a logical manner. It is therefore possible to challenge each and every
step for the value addition it makes. It is easy for the implementation team to raise several questions are
pertinent for each of these steps. Some pertinent questions are:

Is this step adding value to the process?

Can this step be eliminated without any effect on output?
Can this step be clubbed or merged with some other step?
Is there a better way of accomplishing work done by this step?

In organization there are long processes and short processes. There are critical processes and not so critical
processes. The critical business processes are those, which contribute to the value significantly. While the non-
critical processes do not contribute much to the value the customer is looking for. For example, the process of
receiving a visitor in the organization could be considered as non-critical. But the process of new product
development from the concept to the prototype is critical as it is expected to contribute high value to the
customer. If the external customer focus is taken as criterion for process selection, then all the processes,
which generate and add value to the customer, are called the value stream processes.

The value stream processes are critical and become the immediate candidates for re-engineering.
The other processes in the organization contribute to the overheads of performing the business function.
For example, the processes involving attendance, leave, payment of wages, security, traveling and
accounting are not value stream processes as the resources employed in them do not create a value or
improve a value to the customer. Such processes are a second priority as far as re-engineering is
concerned.

Four major areas can be identified as being subjected to change in BPR - organization, technology,
strategy, and people - where a process view is used as common framework for considering these
dimensions.

• Business strategy is the primary driver of BPR initiatives and the other dimensions are governed
by strategy's encompassing role.
• The organization dimension reflects the structural elements of the company, such as hierarchical
levels, the composition of organizational units, and the distribution of work between them.
• Technology is concerned with the use of computer systems and other forms of communication

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 technology in the business. In BPR, information technology is generally considered as playing a
role as enabler of new forms of organizing and collaborating, rather than supporting existing
business functions.
• The people / human resources dimension deals with aspects such as education, training,
motivation and reward systems.

Difference of Total Quality Management (TQM) and Business Process Reengineering (BPR)

Process Improvement (TQM) Process Innovation (BPR)

Level of change Incremental change and gradual Radical change and drastic
improvement improvement
Starting Point Existing Process Clean Slate
Frequency of Change Continuous One-time
Time Required Short Long
Participation Bottom-Up Top-Down
Typical Scope Narrow, within functions Broad, cross-functional
Risk Moderate High
Primary Enabler Statistical Control Information Technology
Type of Change Cultural Cultural/Structural

Common Principles of Re-engineering

(a) Organize around outcomes, not tasks;
(b) Have those who use the output of the process perform the process;
(c) Subsume information processing work into the real work that produces the information;
(d) Treat geographically dispersed resources as though they were centralized;
(e) Link parallel activities instead of integrating their results;
(f) Put the decision point where the work is performed, and build control into the process; and
(g) Capture information once and at the source.

Describe the steps involved to work out a BPR action Plan?

Reengineering assumes the current process is irrelevant - it doesn't work, it's broke, forget it. Start over.
Such a clean slate perspective enables the designers of business processes to disassociate themselves from
today's process, and focus on a new process. Steps of BPR are as follows:

1. Scope Project
• Begin with defining the scope and objectives of reengineering project
2. Learn From Others
• Go through a learning process (with customers, employees, competitors and non-
competitors, and with new technology)
3. Prepare for Reengineering
• Build cross functional team
• Identify customer driven objective
• Develop strategic purpose
4. Map and Analyze As-Is Process

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 • Create activity model
• Create process models
• Simulate and perform ABC
• Identify disconnect and value adding process
5. Design To-Be process
• Benchmark processes
• Design To-Be processes
• Validate To-Be processes
• Perform Trade-off Analysis
6. Plan Transition
• Creation of a plan based on the gap between your current processes, technologies and
structures, and where the business want to go
7. Implement Reengineered Process
• Prototype & simulate transition plans
• Initiate training programs
• Implement transition plan
8. Improve Process Continuously
• Initiate Ongoing measurement
• Review performance against target
• Improve process continuously

A FIVE-STEP APPROACH TO BUSINESS PROCESS REENGINEERING

Davenport (1992) prescribes a five-step approach to the Business Process Reengineering model:

1. Develop the business vision and process objectives: The BPR method is driven
by a business vision, which implies specific business objectives such as cost
reduction, time reduction, output quality improvement.
2. Identify the business processes to be redesigned: most firms use the 'high-
impact' approach, which focuses on the most important processes or those that
conflict most with the business vision. A lesser number of firms use the 'exhaustive
approach' that attempts to identify all the processes within an organization and then
prioritize them in order of redesign urgency.
3. Understand and measure the existing processes: to avoid the repeation of old
mistakes and to provide a baseline for future improvements.
4. Identify IT levers: awareness of IT capabilities can and should influence BPR.
5. Design and build a prototype of the new process: the actual design should not be
viewed as the end of the BPR process. Rather, it should be viewed as a prototype,
with successive iterations. The metaphor of prototype aligns the Business Process
Reengineering approach with quick delivery of results, and the involvement and
satisfaction of customers.

As an additional 6th step of the BPR method, sometimes you find: to adapt the organizational structure, and
the governance model, towards the newly designed primary process.

Relevance Of Information Technology (IT) in BPR

It is experienced that the role of the information technology as an enabler is very important and significant in re-
engineering. Its contribution is maximum, compared to other technologies to the radical redesigning of the process.
The range of technologies in all fields based on the microprocessor applications affect a number of factors of the
business processes.
IT and BPR have recursive relationship. IT capabilities should support business processes, and business

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processes should be in terms of the capabilities IT can provide. Davenport & Short (1990) refer to this broadened,
recursive view of IT and BPR as the new industrial engineering.
Business processes represent a new approach to coordination across the firm; IT's promises and its
ultimate impact -- is to be the most powerful tool for reducing the costs of coordination. Davenport & Short
(1990) outline the following capabilities that reflect the roles that IT can play in BPR: Transactional,
Geographical, Automatical, Analytical, Informational, Sequential, Knowledge Management, Tracking, and
Disinter-mediation.
Several IT related tools & technologies bring radical improvement in business performances. They are as
follows:

1. Shared databases, making information available at many places

2. Expert systems, allowing generalists to perform specialist tasks
3. Telecommunication networks, allowing organizations to be centralized and
decentralized at the same time
4. Decision-support tools, allowing decision-making to be a part of everybody's
job
5. Wireless data communication and portable computers, allowing field
personnel to work office independent
6. Interactive videodisk, to get in immediate contact with potential buyers
7. Automatic identification and tracking, allowing things to tell where they
are, instead of requiring to be found
8. High performance computing, allowing on-the-fly planning and revisioning

In the mid 1990s, especially workflow management software was considered as a significant contributor to
improved process efficiency. Also ERP (Enterprise Resource Planning) vendors, such as SAP, JD Edwards,
Oracle, PeopleSoft, positioned their solutions as vehicles for business process redesign and improvement.

Since each business process is to be redesigned for a dramatic improvement, its key areas of attack are time
and resource used by the processes. Our goal in re-engineering is to save the process time considerably and use
minimum direct and indirect resources. The Information Technology, being efficient and effective in
meeting the goals of re-engineering, its relevance to business process reengineering is very appropriate.

A n um b e r o f l e a d i n g organizations working on reengineering the enterprise are finding

tremendous advantages being offered b y c o m p u t e r s a n d c o m p u t e r n e t w o r k s , powers of
database management systems, especially enhanced through 4GL tools etc. With the availability of
such powerful solutions, some of the old acknowledged rules are being replaced with new rules.
Following are just a few of these examples to illustrate the point.

Old rule:
Information is available within the organization, but it is scattered across different locations,
departments or sections. O n e h a s t o s e a r c h a n d c o l l e c t t h e required information. Time and
effort need to be spent to achieve this.
New rule:
I n f o r m a t i o n i s m a d e a v a i l a b l e a t a n y l o c a t i o n , i r r e s p e c t i v e o f the location at which the
information is generated. Information is made available without significant efforts or time being spent. This
is done through appropriate use of Internet and related technology and tools including search
engines.

Old Rule:
Exchange of information between several individuals or departments within an organization

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involves considerable time and effort through inter-office memos, reports and circulars. This
involves volumes of papers.
New Rule:
Different i n d i v i d u a l s o r d e p a r t m e n t s communicate with each other through
electronic m a i l . I n t e r o f f i c e c o m m u n i c a t i o n c a n virtually a paper-less arrangement.

Old Rule:
A c u s t o m e r w a n t i n g t o p l a c e a n o r d e r o n a manufacturer either has to wait for the visit of the
marketing executive or send a fax or letter to the company to place the order. The order
confirmation and indication of tentative shipment date be com m uni cat ed by t he m anufact ure r
woul d t ake several days.

New Rule:
A c u s t o m e r w a n t i n g t o p l a c e a n o r d e r o n a manufacturer visits the web site and
electronically places the order and gets online order confirmation and tentative shipment dates.

BPR Success and Failure

A number of organizations report benefit that they achieved from reengineering the corporation. These
companies also report about the enabling role of information technology that helped in reengineering.
There are a number of success stories that have been published which speak about the dramatic
improvements achieved by business organizations across continents. BPR has helped giants like Procter
and Gamble Corporation and General Motors Corporation to gain success after financial drawbacks due
to competition. It helped American Airlines somewhat get back on track from the bad debt that is
currently haunting their business practice. BPR is all about the proper method of implementation.
It would not be out of place to mention that there are examples of failure of reengineering in some
companies. These failures are either due to faulty implementation or due to overdoing the act of
reengineering. The companies who have been successful at reengineering appear to have adopted the
reengineering approach prudently and applied the principles keeping practicability in mind.
We can identify some reasons of BPR failure:

1. Lack of management support for the initiative and thus poor acceptance in the
organization
2. Exaggerated expectations regarding the potential benefits from a BPR
initiative and consequently failure to achieve the expected results
3. Underestimation of the resistance to change within the organization
4. Implementation of generic so-called best-practice processes that do not fit
specific company needs
5. Overtrust in technology solutions
6. Performing BPR as a one-off project with limited strategy alignment and
long-term perspective
7. Poor project management

Business Process Re-engineering & E-commerce

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E-commerce is the latest weapon that information technology offers, especially for business
organizations that wish to survive and grow in the ever-increasing competition in the market place.
R e e n g i n e e r i n g c a n b e u s e d a s i n f o r m a t i o n technology enabler in an e-commerce
initiative. This can create tremendous opportunities for dramatic improvement in the performances for
business organization. It permits the existing brick and mortar organizations to re-look at their
existing business processes. It helps the brick and mortar organizations to realign them as per
the requirement of e-commerce initiative and taking the advantages of information technology
tools that offer an opportunity to reduce cost and time of business transaction processing and
bringing about dramatic improvement in service to the customers. Reengineering is known to
have helped a number of “brick and mortar” establishments in their efforts into click
and mortar establishment.
The concept of reengineering stresses the importance of inductive thinking. In simple terms,
inductive thinking involves ability to first recognize a powerful solution and then try to
locate areas within t he o rg an i z at i o n wh er e s uc h p ow er fu l s ol ut i on c an b e us ed t o
r ed uc e p ro bl em s o r t o i m prove efficiency and productivity or to improve quality of t h e
product or service.

If the brick and mortar establishment were to insist on mapping their existing business processes exactly as
they are, in the e-commerce solution, the organization would hardly find a dramatic improvement in the
overall results. It is basically because the built-in redundancies in the existing business processes would
be carried forward in the e-commerce solution as it is. In order to identify and eliminate redundant
steps or practices, the business process reengineering helps the organization duri ng e-com merce
alt ernati ve evaluat ion and implementation. While the exercise of converting existing processes to
proposed process is bei ng carri ed out , t he proces s refi nem ent c a n b e c o m f o r t a b l y
a d d r e s s e d . I m p l e m e n t a t i o n o f e-commerce initiative by existing brick and mortar establishments
would naturally mean that some of the existing business processes in the organization would have to
undergo radial changes. But then, the results are also radical. Benefits of business process
reengineering are typically manifested in form of reduction in order turnaround time, improvement in
productivity reduction in inventory, improvement in on-time deliveries etc.
It would be better to highlight at this juncture that reengineering is not so simple as it appears to be. When
the e-commerce initiative implementation team is looking at each of the business process for applying the
reengineering principles, the going is not smooth. There are many pitfalls that need to be guarded against.
The implementation team needs to exercise caution. There have examples of disasters arising out of
careless application of reengineering principles. The e-commerce implementation team must
remember that the existing customers of the brick and mortar establishment would continue to visit the store
physically and ask for their orders while some customers would shift to the online web store for their
requirements. It will be necessary for the brick a n d m o r t a r e s t a b l i s h m e n t t o c a t e r t o t h e
r e q u i r e m e n t s o f p h y s i c a l a s w e l l a s o n l i n e customers. The reengineered business processes
must be able to address the requirements of physical visiting customers as well as online
customers.

Process improvement is never a result of casual, offhand effort. It needs conscious and careful study of
individual steps in the process and giving due consideration to linkages and interfacing with other steps or
other processes. It is necessary that an in-depth understanding of the existing business processes and
business priorities is available within the team undertaking the exercise of mapping the business process via

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reengineering into the e-commerce solution. The exercise of mapping the business processes into e-
commerce needs a firm and committed approach towards human resource and change management
practices. Commitment to people approach hardly needs any more emphasis.

Process improvement through deployment of reengineering principles often demands a high degree of
top management commitment. This can even be considered as a basic prerequisite for success. Any
reengineering activity is bound to bring about change – change in the work and change in the way
people perform their duties. There is bound to be a resistance to change. Specific efforts are required to
handle resistance to change and bring about a conscience in implementation.
What role BPR plays in e-commerce?

BPR helps e-commerce to do the following:

 Level of service increase

 Elimination of the bullwhip effect
 Time saving
 Better utilization of resources
 Risk reduction
 Increase in cost-effectiveness of supply chain
 Reduction in response time