Business Process Reengineering – What it means and why it’s needed

Definition of Business Process Reengineering

Business Process Reengineering (BPR) can be defined as radical redesign and rethinking of business processes to bring out remarkable differences in contemporary and critical areas of a company performance such as quality, speed, service and cost. Though different authors have used different definitions, important characteristics of BPR are radical change and its scale and spread across the organisation (Neill & Sohal, 1999).

The Need for BPR

The high expectations of customers (in terms of price, service and quality), high level of competition and unprecedented changes in the industry have created a business world in which companies should have flexibility and embrace change quickly. BPR targets at these requirements by matching market opportunities with that of corporation capabilities. Hence, it ensures growth of the company. It helps in eliminating various intermediate layers connecting customers directly to product managers (Davenport, 1993b).

References:

Neill,P. & Sohal,S.A., 1999. ‘Business Process Reengineering – A review of recent literature’, Technovation, 19, pp. 571-581

Davenport, T.H., 1993b, ‘Process innovation: reengineering work through information technology’. Harvard Business School Press, Boston.

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BPR – Important tools and techniques

BPR, although highly impactful, may result in a failure if the companies do not carefully consider major factors. The following are the important tools and techniques that are part of Business Process Reengineering (Neill & Sohal, 1999).

  • Customer & process focus – The primary focus is to change the processes to bring benefits to customers.
  • Visualisation for end process & Benchmarking – To achieve the objectives of BPR, the companies should be able to visualise and benchmark, what their end business processes should be like.
  • Change Management – BPR should also take into consideration the human side as these processes require significant involvement of employees and impact their work.
  • Business process mapping – A company should also have a good understanding of its existing business processes to effectively reach the required result.

References:

Neill,P. & Sohal,S.A., 1999. ‘Business Process Reengineering – A review of recent literature’, Technovation, 19, pp. 571-581

Business Process Reengineering – Ford’s Accounts Payable Case Study

Case Study – Ford

One of the companies that successfully utilised BPR in the initial years is Ford, for its accounts payables system. Before implementation, Ford used the accounts payable as shown in the figure below. Ford’s purchasing department initially sends a purchase order for raw materials. It also sends a copy of the purchase order to the accounts payable department. After sending the raw materials, the vendor raises an invoice to the accounts payable department. The accounts payable department tallies the purchase order, received materials and invoices and makes payments to the supplier. Ford employed about 500 people to handle the entire process, whereas its competitor, Mazda, a Japanese car manufacturer has managed the same process with 100 people, a remarkably low number of employees even if the size is taken into consideration.

Ford Accounts Payable Process – Before Business Process Reengineering

Ford - Before

Instead of making minor changes to the business processes. Ford has decided to use BPR and information technology to radically change its accounts payable process. It has implemented an invoice-less process. The purchasing order will be raised by the purchasing departments and updated in the database. As soon the materials have been received a warehouse man would update the materials received and the payment will be automatically be made without waiting for the invoice to be received from the vendor.

Ford Accounts Payable Process – After Business Process Reengineering

Ford - After

Through these changes in the business process, Ford had achieved a 75% reduction in employees in the administration department.

More case studies on the use of Business Process Reengineering and the impact it has created can be seen in the following video.

https://www.youtube.com/watch?v=bca91f2zIJE

References:

Neill,P. & Sohal,S.A., 1999. ‘Business Process Reengineering – A review of recent literature’, Technovation, 19, pp. 571-581

Davenport, T.H., 1993b, ‘Process innovation: reengineering work through information technology’. Harvard Business School Press, Boston.

Thomas,S., 1998. Workflow management systems for process orgainisations,Springer, 2nd edition