Industrial Revolutions Model of Organization and Production 1

Industrial Revolution’s Model of Organization and Production 1 �Complex work is broken down into simple and repetitive tasks that are performed in sequence by specialists. Specialization of labor: Individual jobs become simple Sequential processes: Coordinating people becomes more complex (The role of the hierarchy) Narrow and repetitive jobs: De-skilling the work forces �Managers’ job is to control the quantity, cost, and quality of the work performed. Control as a dominant style Financial-oriented scoreboard �Employees are organized by business function. Hierarchical structure Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP R_all_Part_I. ppt

Problems 2 �Functional departments become barriers to change. �Too much time and money are spent in ineffective coordination and communication. �Too little time for doing work that really benefits customers. �Overheads are soaring. �Business processes are evolved over a period of time and are not designed to handle changing business environments or to take advantages of emerging technologies. Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

Process Evolution 3 �"We are structured today by historical accident. As we added products, we added functional stovepipes. " �"Processes in organizations have never been designed in the first place. " Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

Definition of Reengineering 4 The fundamental rethinking and radical redesign of core business processes to achieve dramatic improvements in critical performance measures such as quality, cost, and cycle time. Source: Adapted from Hammer and Champy, Reengineering the Corporation, 1993 Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

What Business Reengineering Is Not? 5 �Automating: Paving the cow paths. (Automate poor processes. ) �Downsizing: Doing less with less. Cut costs or reduce payrolls. (Creating new products and services, as well as positive thinking are critical to the success of BPR. ) Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP R_all_Part_I. ppt

Reengineering Is. . . 6 Extremist's View �Obliterate what you have now and start from scratch. �Transform every aspect of your organization. Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate, ” Harvard Business Review, July-August, 1990, pp. 104 -112. Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

Gordian Knot 7 �In a Greek legend, nobody could untie a knot tied by King Gordius of Phrygia. Many people tried to untie the knot, but nobody succeeded. �. . . until Alexander the Great found a smart and direct solution. Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

Definition of Process 8 �A process is simply a structured, measured set of activities designed to produce a specific output for a particular customers or market. -- Thomas Davenport �Characteristics: A specific sequencing of work activities across time and place A beginning and an end Clearly defined inputs and outputs Customer-focus How the work is done Process ownership Measurable and meaningful performance Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

Types Dimensions & Type of Processes Examples 9 Organization Entity • Inter-organizational Order from a supplier • Inter-functional Develop a new product • Inter-personal Approve a bank loan Objects • Physical Manufacture a product • Informational Prepare a proposal Activities • Operational Fill a customer order • Managerial Develop a budget Adapted from: Davenport, T. H. and Short, J. E. , "The New Industrial Engineering: Information Technology and Business Process Sumber. Sloan Kepustakaan : Review, Summer 1990, p. 17. Redesign, " Management gunston. gmu. edu/ecommerce/mba 731/doc/BP

Processes Are Often Cross Functional Areas "Manage the white space on the organization chart!" 10 Supplier "We cannot improve or measure the performance of a hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it. " Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP Customer/ Markets Needs Value-added Products/ Services to Customers

Process-Orientation 11 �Process-orientation is the key to the BPR success �Remove stovepipe functions �Focus on cross-functional core process redesign �“Link activities, functions, and information in new ways to achieve breakthrough improvements in cost, quality, and timeliness. ” * * Source: Dichter, Gagnon, and Alexander, “Leading Organizational Transformation, ” The Mc. Kinsey, Quarterly, 1993, Number 1. Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

BPR and Other Organizational Initiatives 12 �Alias: Process Innovation Core Process Redesign (CPR) �Relevant Initiatives in Organizations TQM Continuous Process Improvement Information Strategy Planning and Information Engineering IT for Competitive Advantages �Related Initiatives in Public Sectors Reinventing the Government Functional Process Improvement (DOD) Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

Ford Accounts Payable Process* Purchasing Purchase order Vendor 13 Receiving Goods Copy of purchase order Accounts Payable Receiving document Invoice ? ? PO = Receiving Doc. = Invoice Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP Payment *Source: Adapted from Hammer and Champy, 1993

Purchasing Ford Procurement Process Purchase order Vendor 14 Receiving Goods Purchase order Goods received Data base Accounts Payable Payment Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

Before Ford Accounts Payable 15 � More than 500 accounts payable clerks matched purchase order, receiving documents, and invoices and then issued payment. � It was slow and cumbersome. � Mismatches were common. After • Reengineer “procurement” instead of AP process. • The new process cuts head count in AP by 75%. • Invoices are eliminated. • Matching is computerized. • Sumber Accuracy is improved. Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP

Reengineered Process 16 Key Concept: • One queue for multiple service points • Multiple services workstation Sumber Kepustakaan : gunston. gmu. edu/ecommerce/mba 731/doc/BP