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Lecture 8. Enterprise Reengineering

Lecture 8. Enterprise Reengineering. Informatics in Logistics Management. Lecturer: Prof. Anatoly Sachenko. Lecture overview. Enterprise Engineering and Reengineering Definition The scope of Enterprise Reengineering Business Process Reengineering Some BPR Issues BPR Problems

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Lecture 8. Enterprise Reengineering

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  1. Lecture 8. Enterprise Reengineering Informatics in Logistics Management Lecturer: Prof. Anatoly Sachenko

  2. Lecture overview • Enterprise Engineering and Reengineering • Definition • The scope of Enterprise Reengineering • Business Process Reengineering • Some BPR Issues • BPR Problems • IT role in BPR • Steps for BPR

  3. Enterprise Engineering and Reengineering • Enterprise reengineering is regarded as an approach within enterprise engineering • Enterprise engineering is "an life-cycle oriented discipline for identification, design and implementation of enterprises and their continuous evolution" (Kosanke et al, 1999) • Enterprises models are "essential components in enterprise engineering" (IFIP-IFAC taskforce, 1999) • Enterprise engineering encompasses HW, SW communications protocols, info, and architectures, but also social and organizational issues that are relevant for enterprise modeling and improvement

  4. Definition • Enterprise reengineering focuses primarily on the operations activities, and how they should be modelled and designed • The total transformation process can be decomposed into a large collection of concurrent processes executed by a set of operations entities that contribute to business objectives • Each process consist of a group of operations activities that takes input, adds value to it and provides an output to internal or external customers

  5. Definition • Enterprise reengineering is essentially a matter of modeling and improving these activities: • how they are grouped in operations entities and processes, • how resources are dedicated to the operations entities, • how resources are laid out physically to create information and material flows, • how operations entities activities are structured in the organization, and, • how processes are controlled.

  6. The scope of Enterprise Reengineering • The idea behind enterprise engineering is that enterprises may be engineered like any other complex systems • The enterprise is a system that must be engineered, implemented, and • integrated in a systematic way very similar to approaches developed for software engineering

  7. The scope of Enterprise Reengineering • Enterprise reengineering is an model-based approach that aims to improve operations performance in the overall direction determined by the operations strategy • The main purpose of operations strategy is to make plans for how the enterprise can improve it’s competitiveness • This encompasses numerous strategic decisions that range from human resources strategies to localization of new enterprises, and • It’s directing the work in research fields such as operations management and enterprise engineering

  8. The scope of Enterprise Reengineering • However, since these are research fields that cover many design issues, • the scope of enterprise reengineering, as defined in this thesis, is restricted to the modeling and reengineering of operations processes • That is, how operations processes are logically and physically organized, and how they are controlled

  9. The scope of Enterprise Reengineering

  10. Business Process Reengineering • Enterprise Re-Engineering / Business Process Re-Engineering (BPR) is a form of organizational improvement • It aims to improve a business through restructuring of processes • BPR is given force by the thinking that old ways of organizing work are no longer appropriate for a competitive business environment • The ultimate aim of re-engineering processes to achieve better quality, service and innovativeness • The radical restructuring entailed in BPR is risky and uncertain

  11. Business Process Reengineering • For hundreds of years, commercial activity has been based on the Adam Smith principle of Division of Labor • Division of labor encourages specialization and thereby leads to improved productivity • The classical enterprise also exhibits the concepts of: • Hierarchical control: - the classical layers of management • Mass production of largely uniform goods/services

  12. Business Process Reengineering • An organization based on these principles is successful in a stable market environment, characterized by growing demand for uniform goods/services • In a changed market environment characterized by sever competition, globalization, more demanding customers, smaller profit margins etc, the classical organizational models are less and less appropriate • BPR provides one alternative to the old methods of organizing business processes • The goals of BPR can be started in expanded form as either cost objectives or service objectives

  13. Hierarchical Design Pyramid

  14. Cost Objectives • Reducing stocks: New materials or Intermediate goods • Economies of scale in procurement • Reduced staff costs (administrative costs) • Competitive pricing of goods/services

  15. Service Objectives • More reliable delivery system • Stock availability • Good after sales service • Quick Response/adaptation to market changes • Reduced product development lifecycle

  16. The role of enterprise reengineering in operations strategydevelopment

  17. A strategic framework for enterprise reengineering

  18. Qualities of BPR • Several jobs are combined into one • This implies a reversal of the Adam Smith principle of division of labor and function • Workers make decisions, actual work and decision making are integrated • Processes are reorganized • so that tasks are done in the most sensible/logical order • Checks and controls are reduced • The checks and controls are reduced to the minimum acceptable level • The checks and controls are also deferred(cont-d)

  19. Qualities of BPR • Reconciliation is minimized. • A case manager is appointed to oversee the re-engineering process. • Hybrid processes that combine centralization and decentralization by use of communication technology are often adopted. • Processes have multiple versions (polymorphic) – the process is re-designed to include capabilities to deal with custom orders.

  20. Some BPR Issues • Candidates for BPR: • In theory, any business process can be subject to BPR; • but in practice, certain processes can benefit more from BPR than others • Such processes have the following qualities • Dysfunction: The process is visibly out of order, it is problematic • Dysfunction in a process occurs when the process is slow (frustratingly slow), occasional complaints, generates errors(cont-d)

  21. Some BPR Issues • Importance: Important processes that have a prominent place in the value chain • They contribute directly to the delivery of goods and services to the end consumer. • Feasible: From the managers stand point the BPR project is technically, economically and socially feasible/viable • Processes that require high capital input, or enjoy limited management support are less feasible for BPR.

  22. BPR Problems • What causes BPR projects to fail?: • Inadequate funding • Insufficient management commitment/support • Poor project leaders • Inadequate feasibility evaluation • Resistance to process change • Failure to focus on most process re-design and dwelling on improving the existing process. • Quitting too early or declaring victory too soon.

  23. BPR Problems • Re-engineering or Re-developing? Systems targeted for re-engineering have 2 qualities • They are heavily/regularly used • They are currently being maintained a lot • Re-engineering usually has two main merits over re-developing. These are: • Lower costs: re-engineering costs about ? of redeveloping • Reduced risk: lower likelihood of making mistakes.

  24. IT role in BPR • IT enables processes to be re-engineered • It supports the re-engineered process • Leading edge technology products can be particularly useful in process innovation • They can even lead the innovation process. • IT also facilitates process integration. • It has been argued that the most effective contribution of IT in business redesign is to enable an enterprise to do things that it was not doing before – extending the capabilities of the enterprise.

  25. IT role in BPR • BPR computer system: at a minimum it comprises of an ordered collection of HW/SW and data resources • Computer systems are the basis for automated information system. • Re-engineering computer systems means examining, rethinking and re-implementing such systems in a new form. • The process is usually carried out on legacy options, re-implementing them in a more modern form. • Re-engineering computer systems can be seen as a management response to the challenge of keeping old systems alive within a changing environment.

  26. IT role in BPR • Merits • The useful life of a system is increased • The business value of such a system also increases • Future maintenance costs are reduced • The morale of maintenance staff may improve; because they know they are working in a modern system i.e. the systems become more maintainable.

  27. IT role in BPR • Approaches to re-engineering computer systems: When a system is re-engineered any of the following changes may occur: • It may be placed in a distributed platform. • It will usually be re-documented • The data may be migrated to a new database platform • The code may be restricted • The code may be written in a different language

  28. Automated Program Restructuring • When code is maintained over an extended period, its structure and hence its efficiency, deteriorate • Indeed, the more a software product has been maintained, the more it costs to maintain it in future • When the program is re-structured: • irreconcilable code is detected and removed • complex control structures are simplified • program modularity is enhanced Use of software tools may not be fully effective. Manual rewriting of code may still be applied.

  29. Automated Program Restructuring • Automated program and Data Restructuring: When the existing data structures are re-structured then even the programs that process the data have to be reviewed • When data is restructured: • The overall model may be re-organized into one database. • Data in a relational model may be modified to suit the needs of a different relational DBMS.

  30. The enterprise reengineering methodology

  31. Steps for BPR • Identify process for innovations • Manage business • Manage people and work • Identify change levels ( technology etc) • Develop process vision – what you want to process must fit with the strategic direction of the organization (IS) • Understand existing processes – study current process and understand necessary changes • Design and prototype new process/create design of new process(cont-d)

  32. Steps for BPR • When deciding whether to re-engineer or to redevelop you may consider such issues as: • budget provisions or costs constraints • current state of the old system; • the old system may be so old and messy that it may not be susceptible to re-engineering • Time limitations: re-engineering is likely to be quicker than to redevelop(cont-d)

  33. Steps for BPR • Scope i.e. system scope; if the scope of the existing system is to be excluded substantially then it may be more practical to redesign and re-implement the system instead of re-engineering it. • Perceived risk level; Risk arises from the combined effect of many factors • If the perceived project risk is high then it might be safer to re-engineer the system than to redevelop it.

  34. Steps for BPR • Link between reengineering of computer systems and BPR: • Computer systems are usually embodied within business processes/systems such as accounts receivable, production planning, marketing and distribution, human resources etc • When such process/systems are re-engineered, then the supporting technology infrastructure also needs to be reviewed(cont-d)

  35. Steps for BPR • The overall aim of reengineering a computer system should be to re-align it with the existing business goals • The goals of a BPR project require an altered IT infrastructure then the existing infrastructure should be reengineered or re-developed (cont-d)

  36. Steps for BPR • The enterprise reengineering methodology supports manufacturing enterprisesin efforts to improve operations performance. • The objective is to achieve fit between operations capabilities and marketrequirements through a reengineering of operations processes. • The methodology is model-based and applies an enterprise modellingarchitecture to represent different views of enterprise operations. • Reengineering efforts are typically carried out when some problem makes it difficultfor operations to achieve their performance objective (cont-d)

  37. Steps for BPR • The enterprise reengineering process includes: • Mapping and evaluating the current operations strategy, i.e. the strategicdecisions regarding operations (such as the implementation of a best practicemethod) and the affected decisions areas and performance objectives. • Mapping the AS-IS operations model, and representing the enterprise graphicallyfrom a resource-, material-, info-, process- organization-, • and controlview (termed control model) should represents a synthesis ofthe other views and show a picture how operation processes areorganized and controlled (cont-d)

  38. Steps for BPR • Analyzing the current operations model on operation capabilities (operationsprocesses, control methods, layout etc,) and their ability to meet the demandsituation • Analyzing operations capabilities in an audit sheet in order to rate the performancein broad areas of strengths and weaknesses • Based on this analysis, improvementareas are identified and problems to be solved are formulated(cont-d)

  39. Steps for BPR • Designing a revised operations strategy that targets the improvement areasidentified in the mapping and analysis. • Designing a TO-BE operations model that represents the new solution foroperations. The design efforts can be supported by best practice methods such asflow manufacturing. • Implementing the operations model.

  40. References • Bruce Caldwell "Missteps, Miscues: Business reengineering failures have cost corporations billions" InformationWEEK June 20, 1994, pp. 50-60. • Elliot Chikofski and James H. Cross II "Reverse Engineering and Design Recovery: A Taxonomy" IEEE Software January 1990 7(1):13-17. • Michael Hammer & James Champy Reengineering the Corporation: A manifesto for business revolution Harper Business, 1993. • Stephanie King "How to Fail" NAPM Insights February 1995 pp. 50-52. • Kosanke, K., Vernadat, F., Zelm, M. (1999) CIMOSA: enterprise engineering and integration. In Computers in industry 40, pp.83-97.

  41. References • Leatt, P., Baker, G.R., Halverson P.K and Aird C. Downsizing, Reengineering and Restructuring: Long-Term Implications for Economical Organisations // Strategic Management Journal, 2004, vol.13, No(4), pp. 578-599. • Erlend Alfnes. Enterprise Reengineering. VDM Verlag, 2008. – 320 p. • Vernadat, F.B. (1996) Enterprise Modelling and Integration: principles and applications. Chapman & Hall. • IFIP–IFAC Task Force on Architectures for Enterprise Integration (1999) Generalised Enterprise Reference Architecture and Methodology, Version 1.6.3 (March 1999).

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