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

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