Business Process Reengineering Literature Review

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LITERATURE REVIEW

Defining BPR:

Business Process Reengineering was an idea put forward by Michael Hammer, father of reengineering, in the late 1990’s when he published his article “Reengineering work: don’t automate, obliterate” at the Harvard Business Review. The improved results from the article were crucial for many companies that BPR became a trend in 1994. Success stories like ‘Ford cuts account payable headcount by 75%’, ‘Mutual Benefit Life improves insurance underwriting efficiency by 40%’, ‘Xerox redesigns its order fulfillment process and improves service levels by 75% to 97% and cycle times by 70% with inventory savings of $500 million’, ‘Detroit Edison reduces payment cycles for work orders by 80%’ encouraged many companies to utilize the reengineering to attain their own heights. (Hammer, 1990)

Organisations are no longer able to cope with the conventional management mechanisms to get their client’s 100% satisfaction. Due to the increase in number of customers, the level of competition and changes, organisations are currently in such an intense environment with very high demand where mass productivity and high quality of service with lesser turnaround time are required. In this situation, the organisations cannot totally rely on IT alone to meet its business goal. Hence, they need to look deeply into their core business process to meet changes needed. So basically, what BPR is meant for is to redesign the business processes, especially the one which helps in developing the value of the business. With BPR, organisations can analyse the basic business processes and systems, restructure them periodically so that they can be flexible for any kind of future design.

Various authors had their own definitions for reengineering. Petrozzo and Stepper (1994) pointed out BPR is a combination of redesigning the processes, organisation and the IT support which in lead helps the company to attain drastic improvement in time, quality, customer satisfaction, cost and services. Whereas Lowenthal (1994) explains the fundamental rethinking and redesign of the business processes and organisational structure, mainly focused on organisations ability to achieve dramatic improvements in business performance, as BPR’s most essential constituents. Hammer and Champy in 1993 explained that with radical improvements sought more a function of organisational process redesign, rather than IT implementation (Hammer and Champy, 1993). Many other authors have pointed out that reengineering can be performed at different levels in an organisation. For example, IBM improved their costs; time and quality by a large percentage by reengineering their finance process, but had very little effect on overall performance of the company. The three types of companies that undertake reengineering as identified by Hammer and Champy (1993) are:

  1. Companies that are in very big crisis have no other options. Examples such as company’s costs being higher than the competitors in the market or than how much its business model allocate and the customer service is failing to satisfy the current customers and they openly rail against them. In other words, the company needs an order-of-magnitude improvement i.e., reengineering in their business.
  2. Companies that are not having any crisis now but the management feels that they are vulnerable to a crisis in the recent future.
  3. Companies that are doing very god in their business but have a very good opportunity to develop a lead among their competitors.

BPR Tools and Techniques:

Even though are various definitions of BPR, the main goal of BPR is the radical improvement of the processes. However, there are no particularly assigned tools and techniques being used in Business Process Reengineering. This is because authors and various BPR consultants have pursued the use of many different tools and techniques for the best result. Some of the tools and techniques commonly used are as follows.

  • Process visualisation:  Many authors suggest that, for processes to be reengineered, an ideal “end state” need to be developed. However, Barrett (1994) suggested that the development of the vision of the process is the key to successful reengineering.
  • Process mapping: Cypress (1994) suggests that process mapping/operational method studies, even though they are the mostly neglected BPR technique, are ideally suited to reengineering process. Recent studies recommend that these concepts have been integrated into BPR tools such as IDEF0 (Integrated Definition Method), DFD (Data Flow Diagram), OOA (Object Oriented Analysis) (Yu and Wright, 1997), and Prince2 (process based Project Management).
  • Change management: Various authors have suggested that human element in reengineering is an important factor to be considered. Authors like Mumford and Beekma (1994), Bruss and Roos (1993) etc. penned that management of change is the largest task in reengineering. Whereas, Kennedy (1994) pointed out the human element is an important element of reengineering, considering the threat it has on work methods and jobs.
  • Benchmarking: bench marking is an integral part of reengineering. It allows the mapping and development of processes which are key operational elements in other organisations/competitors. (Harrison and Pratt, 1992; Chang, 1994; Furey, 1993)
  • Process and customer focus: Per some authors, the basic aim of BPR is redesigning of processes to improve the performance from the customer’s perspective and customer satisfaction. (Chang, 1994; Vantrappen, 1992). This will lead to the improvement of the business process which in turn will improve the quality of company’s product and services.

Studies shows that only few authors/consultants refer to any single technique for business process reengineering. Most include a combination of tools and techniques even though the way the techniques are integrated are different in different cases. Many studies have shown that BPR is not just about methodologies themselves, but rather the way the techniques and tools used in the reengineering process.

Hence from one point of view, BPR incorporates a range of activities concerned with the improvement of processes. Whereas some authors suggest that the key to success is in understanding and developing a BPR strategy. From all the studies till date, the success for a company can be scaled on how good the senior management supports BPR. (Gadd and Oakland, 1996; Barrett, 1994)

BPR and TQM Coexistence

TQM refers to Total Quality Management. It is an approach for improving the competitiveness, flexibility and effectiveness of a whole organisation. It is basically a way of planning, organising and studying about various activities and depends on each people at each level of the organisation. (Oakland, 1993) TQM basically concentrates on involving customer satisfaction as the main objective. The operations are carried to improve process performances to attain customer satisfaction. (Bennis, 1992) The organisation that goes with TQM understands the process involved in the organisation, and makes customer as the focal point and improve the activities to obtain customer satisfaction.

Whereas in BPR, the companies adopting it do not concentrate just on the customer satisfaction, but will consider all the necessary changes needed to be made to the processes. Many authors like Klein (1993) Suggested that BPR is more radical than TQM for a company. But some others especially Harrison and Pratt (1992) suggested that an integrated strategic management using BPR and TQM within the organisation will be more effective. Davenport (1993c) points out that, a process analysis must be conducted to identify the processes to be reengineered and which one is to be managed on basis of continuous improvement.

Continues improvement of processes is considered as the only link to TQM by many authors and researchers. Whereas when we consider other aspects of managing processes, following are considered important in both TQM and BPR equally:

  • Benchmarking (D’Aveni, 1995; Harrison and Pratt, 1992)
  • Culture change (Barrett, 1994; Barlett and Ghosal, 1995; Ghosal, 1995)
  • Performance measurement (Hagel, 1993; Guha etal., 1993)

Various research shows that BPR is less likely to be successful outside TQM. This is because it uses the methods, process and customer orientation of TQM to deliver step changes. But according to the authors Zairi and Sinclair, on their study of UK organisations, very slight difference exists between organisations using TQM and organisations not using TQM and integration with BPR successfully.

From the studies, we can say that most of the authors agree that if BPR helps in focusing attention on transformational change, with-out affecting the core competencies and continuous improvement, it can effectively contribute to a complete quality framework that will be fruitful for the entire organisation. Considering this fact, Gadd and Oakland (1996) concluded that TQM and BPR can be distinguished as two different approaches capable of coexisting in the same organisation, but used at different periods to get a result of different performance improvement levels.

Understanding the Organisational Processes:

To understand BPR and its application in an organisation, it is very important to understand the entire system and the processes and how the processes fit into the organisational system. Information Technology has the capability of providing facility to achieve breakthrough performances in organisational systems. The study conducted by Hammer (1990) at Ford and by Davenport and Short (1990) at Xerox shows that a radical redesign of processes concerned was involved. The report by Cranswick (1994) says about many Australian companies that have undergone similar radical redesigns. Some examples are listed below:

  • IT had only a small role in the reengineering process of FAI insurance. IT was used basically to facilitate the cross functional thinking needed for successful reengineering.
  • Ansett Australia is another organisation that purchased an off-the-shelf revenue management system. This was done by knowing that all other competitors were buying the same product. In this case the strategic advantage came from the overall integration of system design with the human resource of both organisation and its clients, rather than just from the system itself.

The Reengineering Challenge:

The study conducted in 1994 by Champy (1995) on 621 companies from North America and Europe together showed that companies are taking BPR very seriously. 69% of 497 companies from North America and 75% of companies from Europe have already engaged in BPR activities. The study also showed that half of the companies from the remaining were planning of the same process.

The study clearly shows that the reengineering was not very effective as expected by the organisations. The organisations studied fell short of certain goals that were set by the corporation.

Figure 1: Goals set by corporation in the study

This study shows that the participants had failed to attain the benchmarks set by the corporation by as much as 30%. Chapman (1995) concluded that a properly and completely reengineered organization is yet to be identified since they are very rare.

The reason was identified by Champy in his study. The top management of the companies was excited about the proposed reengineered results for the companies like 20% increment in customer retention rate, 50% decrement in production time and 30% less administrative costs. But the problem identified was that, the top management of the organization was not very willing to give up the control over the functional area and collaborate with the reengineering team. This resulted in the failure of reengineering efforts in a year after its inception.

Day (1994) points out the three different principles that must be understood by the senior management before initiating BPR.

Figure 2: Three principles as mentioned by Day (1994)

Organisational Redesign using BPR:

Schaffer and Thomson (1992) pointed out in their publication that how focusing on results rather than just the process/activities in BPR makes drastic difference between success and failure for the company. They suggested that at every level of BPR, focusing on end results gives a direction and measurability. Benchmarking is one of the most powerful tools in BPR. The account payable process by ford is a main example which can be considered here when we talk about benchmarking. The whole idea of benchmarking doesn’t mean copying what it’s done in another company. It is all about identifying the goals and executing it by redesigning the processes accordingly.

The company should focus on establishing their core process by identifying what it does, how it does, and how it should do. Strategic competitive advantage can be attained by redesigning the core processes accordingly to get the most required output. The key element in this process is visioning the outcome. (Goss et al., 1993)

The Process of Redesigning

According to Earl and Khan, 1994, most of the BPR efforts take the form of a project. Numerous methodologies are proposed which will have a common element. Project happens in several stages like all the other projects. The main objective is to asses, reengineer and support all the key processes that contribute to customer satisfaction and corporate goals, and the people needs to be equipped with all the appropriate technologies for that. Hence we can say that BPR implementation can involve substantial investment (Petrozzo and Stepper, 1994), but they also require considerable top management support and commitment. The most critical element of reengineering is the formation of the reengineering team for the organisation. From various studies, many suggest that the team should have the following:

  • Senior Manager
  • Steering Committee of senior managers to manage the overall reengineering strategy.
  • Process Owner
  • Team Leader
  • Redesign Team

This can vary according to authors. Harrington (1991b) referred to executive improvement teams and process improvement teams instead of steering committees and reengineering teams. Hammer and Champy in their study in 1993 stated that the sponsor, process owner and leader may be one or more person depending on scope of reengineering effort.

The BPR projects are mostly a one-off approach. Once the project is over, the entire BPR team is disbanded and the organisational business returns to the normal but in the new reengineered way. It is always suggested that the organisation should not attempt reengineering on more than one process at the same time. This can cause process disruption and confusion in the organisational processes. In major reengineering process involving more than one process to be reengineered, a new team will be formed for each process once the reengineering team for the previous process is disbanded. For example we can consider the reengineering process of FORD that took 5 years to redesign its accounts payable process (Davenport, 1993c). In this rapidly varying business environment, companies may reengineer more than one process.

Most of the authors suggest that, once the process redesigning has been done, continuous improvement of the new process by the employees working in the process. This basically means organising the work among the people in such a way that it fosters interaction, understanding and responsibility.

Risks involved in implementing a BPR programme:

There are two major risks involved in the implementing of BPR as identified by Carr and Johansson (1995). They are:

  • Technical Risk: It is the fear that the process redesign will not work.
  • Organisational Risk: This is the possibility of the corporate culture reaction against changes.

From the study conducted by Carr and Johansson, the identified that only 44% of organisations that participated in their survey they are willing to accept a small amount of risk while implementing BPR. While 37% of the organisations that participated reported that communication with employees as a key factor to minimise any kind of risks during the implementation. The message to the employees should be simple to understand, as early as possible and should involve all the top-level management so that the understanding can be attained before the start of the project. Carr and Johansson also suggested that through implementation of precisely targeted pilot programmes can help in BPR being successful.

RESEARCH METHODOLOGY

The research will be conducted in a company in Melbourne. The company wants the project to be done there. Currently I am waiting for final response from the company. The company wants their business process reengineered. Hence, I will be concentrating on studying about the current business process of the company initially. The company selected is a supply chain company which supplies technical parts.

With no information from the company, it is not possible to make a project plan on how the project will be carried out. The first step will be learning about the company’s structure and its current process. After the thorough study of the company’s business processes only the redesigning of the company’s business process can be redesigned. Currently the history and other literatures on BPR are studied before getting involved with the company’s project.

CASE STUDIES:

The project concentrates on Business Process Reengineering that was already executed at leading companies around the world. Here I discuss about the Business Process Reengineering in companies like SCM reengineering in Mahindra & Mahindra, TELECO, CISCO, . The case studies will show why and how the BPR projects are carried out & the common elements identified in all the 5 BPR case studies.

Case Study 1: Mahindra & Mahindra Ltd. (M&M)

Image result for mahindra and mahindra about the company

Company Background:

Mahindra & Mahindra Ltd is part of an Indian USD 4 billion worth Mahindra group. The company’s farm equipment system is one of the top manufacturers of agricultural Tractors. The company has manufacturing plants located at leading countries in the world like India, China, USA and Australia. The company is also manufacturing passenger vehicles as well and is a leading seller in India. Here in the case study we are concentrating on reengineering of Mahindra & Mahindra’s (Farm equipment sector) supply chain process.

Image result for mahindra farm equipment

Figure 3: Mahindra’s latest “Mahindra 8000” model tractor

Customer Base:

M&M’s agro product manufacturing sector has a very good customer base in countries like Australia, USA, China and India. The company has been using high end Korean technologies in their products. The customers are very satisfied with the products and hence the company can be considered as a company with strong customer base in countries leading in agro products.

The company’s aim is to empower the rural farmer and transform rural productivity, income and living standards. They want to make the farming easier and more technology oriented. This can help in increasing the yield thereby increasing returns. The close relationship to Indian agriculture has given Mahindra & Mahindra extensive expertise to design and manufacture agro-equipment that is suitable for local conditions. This helped the company to gain its customer base in countries like USA, China, Australia, New Zealand, African countries, and Latin American countries and even in Middle East and Eastern Europe. M&M can boast about their customer base of 1.45 million which is again increasing.

Products:

Why Reengineering was needed in M&M Ltd.?

Mahindra and Mahindra Limited had already undergone a BPR project in the 1990’s in which the whole organization was reorganized and separate self-sufficient modules were introduced for each products like engine, Transmission and tractor, with scheduled and procured materials for itself.

Indian market was a main arena for all the international companies in 1990’s after the introduction of globalization by Indian Prime Minister Late. Rajiv Gandhi. Many global market giants with more investment capital, improved latest technology and features brought in high expectations and standards for the customers. To cope up with this change in the market, M&M Ltd responded by setting up a New Product Development, heavily investing in marketing and sales promotions and making sure the company maintains more than enough inventories for more variety of models which helped the company by not losing any sale. After the invasion of the global companies, customers were not ready to compromise on waiting period as they had many other alternatives. Due to this M&M had to face substantial increment in investment and costs which affected the company’s cash flow and margins. The company had already attained in-house efficiency with the help of the BPR previously. But this was the right time for them to redesign their supply chain sector to initiate cost reduction and create value for the customers.

SCM in M&M Ltd before the reengineering:

In Mahindra & Mahindra, basic SCM responsibilities were distributed as follows:

Figure 4: SCM process in Mahindra and Mahindra Ltd. before Reengineering

Mahindra and Mahindra had 2 plants operating in India during that time. The plants were at Mumbai and Nagpur. The production planning of the company was done centrally and respective plan heads had the responsibility of production scheduling and material procurement. The central sourcing department has the following main responsibilities:

  • Vendor selection
  • Development
  • Cost negotiation
  • Capacity contracts

The production plans were developed according to the dispatch plan and are run through MRP in SAP-R/3 every month to generate a supplier schedule. However the results developed were not accurate and hence was corrected before being downloaded to excel sheets and communicated to suppliers through various methods like phone, fax, emails etc. This process was one of the time consuming phase and this generally used to take 4-5 days to reach around 600 suppliers.

The local suppliers always used to lump supplies to make savings on transportation costs. Too many transporters were involved with the business volumes which were not attractive enough to get commitment and interest. This caused logistics delay due to increased transit time and was inconsistent. Also there were no technologies available for shipping tracking then.

The outbound logistics also faced various problems. High level of damages and shortages used to occur during the transits. Each stockyard was equipped for repairing such small repairs and minor paint touch-ups before delivery. Another major issue was the availability of the right model at right locations. The company sales operated on a push system which uses a forced billing system for dealers in order to achieve competitive targets for the company. Most of the sales to the dealers were on credit. This resulted in M&M Ltd paying off for all the high stock with dealers. The accounts receivable were very high and the doubtful debts kept on increasing.

Reengineering Mahindra & Mahindra Ltd.

Different departments were assigned to handle different responsibilities in the supply chain process. The Materials and inbound logistics section was handled by the sourcing department, Production planning was done by the manufacturing department and the outbound logistics was the responsibility of the marketing department.

Figure 5: Department Responsibilities in SCM before reengineering

Due to this, there were many confusions happening in the company’s SCM. This resulted in each department putting the blame on others if the customer requirements were not met. Hence the first necessary change to be implemented in the company was to set up a separate supply chain management system by itself for the company. This department will have all the SCM elements like Planning, logistics and materials under its control and would be fully accountable for meeting the customer requirements. This clearly reflected that Mahindra and Mahindra Ltd is an organization that took SCM very seriously in their business process.

Similarly, the rest of the organization also had to be restructured in order align it with the newly developed SCM department. Unlike before reengineering, various departments that worked independently were now required to work together to achieve the company goals. This sudden change in the work culture in the company required the employees to change their work mentality from ‘My department’ to ‘Our Customer’. Various activities were introduced for the employees in order to make them understand the new change in SCM and its importance.  SCM games like “Beer Game” were played with them to show how effective the company will be when all the SC members work in unison. These activities had the common goal of end customer satisfaction.

The next step was to implement pull type sale for the company. The company had already accumulated huge amount of stocks even with their dealers due to the old method of push sales. So Mahindra and Mahindra had to clear out at least a good amount of this stock in order to increase the “pull” demand.  There for the company had to implement a strategy was implemented to discourage push sales and increase the focus on increasing order. This process turned out to be a very slow process in Mahindra and Mahindra Ltd as the company’s results were based on sales to dealers and not sales from dealers. Hence the stock reduction short period of time was not possible. It took around 2 years for the company to bring down the pipeline stocks to a reasonable level.

Also for the company to replenish the stock norms at the stockyards there was a need to access the stock online. The company had already implemented SAP ERP in all the plants but all the sales offices were not connected. The implementation of the new SAP ERP systems in all the sales offices and warehouses was done parallel to reducing the pipeline stocks.

The next main objective was to redesign the company’s logistic system. The increased cost of transportation, resistance shown by the suppliers and the extra maintenance costs at transit were the major logistics problems to be rectified. As a first step towards the solution for the logistics gap in the company, Mahindra & Mahindra Ltd decided to implement a transport system in which the transport vehicle collects the materials from the suppliers on daily basis or alternate days with a full load so as to make transportation more effective and cheaper. Mahindra & Mahindra also decided to outsource the logistics operations to third party logistics service providers. This made sure that the logistics operations were carried out more effectively than the company could have done by itself. For the inbound logistics, the company identified their supplier luster and dec8ided on a hub for each cluster. To implement the same system in these clusters, a third party logistics service provider was assigned for each cluster. The challenge here was to find proper third party providers (3PL) for the company. There were only few foreign 3PL companies in India at that time and those were very expensive for the company at that time. Mahindra and Mahindra then tried one 3PL operator in India that was just establishing in the market. The attempt was a failure as the 3PL operator didn’t have their own assets and relied on associates who are not always available. Also the 3PL provider that M&M Ltd opted was very expensive. So the only option for Mahindra & Mahindra Ltd was to upgrade the existing transporters to 3PL operators. This needed training and facilities up gradation. This worked out cheaper for the company even though it was a very slow process.

After this process change, the company had to introduce some solution to tackle the increasing logistic costs. The major logistic challenges were the rise of diesel price at a very fast rate. Also the new model of tractor which was manufactured by Mahindra & Mahindra was longer than the previous one and was the longest in the market at that time. Hence this was also difficult task to transport the new model. The transporting vehicles could accommodate 5 tractors of the old model whereas only 2 of the new longer one could fit in the same truck. Due to this the company had to use two trucks to transport the new model. This doubled the costs again. In order to rectify this, company came up with a new idea of loading the tractors in two layers on the truck instead of one layer (like how it was done before).

Figure 6: Loading method used by M&M before the introduction of the new model.

Figure 7: Two layer loading method used by M&M to reduce logistics cost

Introducing this method reduced the transportation cost per tractor from 25% to 50% depending on the distance and volume on that route. The two layer loading was achieved by removing the tyres and other protruding parts from the tractors and were fitted at the destination. This allowed Mahindra and Mahindra to reduce the Octroi (a duty levied in some countries on various goods entering a town or city) for tractors dispatched from Mumbai. The company managed to save 4% on the parts that were not fitted before dispatching. (The company later had to stop this practice as government declared excise duty exemption on tractors, but this was not applicable for tractors dispatched without wheels and other parts.)

Majority of the production was happening in the Mumbai plant and all the rest of the production took place in the Nagpur plant. But this was a very bad period for the tractor manufacturing industry as the demand in India was going down. Hence it was very important for M&M to cut down on costs to maintain profitability. At the same time two proposed plants in Jaipur and Rudrapur were coming up. The two new plants highly depended on the Mumbai plant for the intermediate products. This made the supply chain more complex and hence the company took initiatives to introduce an IT enabled Supply Chain Management system. Mahindra & Mahindra Ltd, with the help of an SCM consultancy company called ‘Bristlecone’ implemented and configured APO in the company. APO (Advanced Planner and Optimizer) is basically an SCM tool of SAP. APO has various modules for different elements of supply chain like demand planning, supply network planning, production planning, detailed scheduling etc. APO was run twice every month and it helped to generate plant-wise, model-wise, day-wise production plan that would meet the demand at lower cost. All these were done by considering the model wise demand, the production capacity and costs for each geographical area.

The newly implemented APO generated quite reliable forecasts and production according to that did not pose much problems. But the market downturn and increased competition in the market made it more difficult to forecast reasonably accurately. Production and supplying stocks according to the forecasts resulted in excess stocks in some places where actual sales were much lower than the forecasted number, and lower stock at some places where the actual sale was much more than the forecasted value. In this case stock had to be moved from one stockyard to another which caused increased transportation costs. This made the company realize that they should be producing and supplying only those products according to the customer demands and hence there was a need to implement a Pull-Production system.

The next step for the company was to change the ongoing production planning system. The company decided to make production plans for just 3 days instead of a whole month which enabled them to respond to market demand at least twice every week. Hence the company decided to adopt the system on Tuesdays and Fridays. In order to bridge the communication gap with suppliers, M&M Ltd implemented the SRM module of SAP. Now the suppliers could see their supply schedules, supply’s acceptance status and payments etc. on the SRM supplier website. Also the new system could help Mahindra & Mahindra track the shipping notifications for the materials in transit and analyze how much the company is spending and also supplier performance.

Another important and final stage of the reengineering was the implementation of the e-tracking of the transportation vehicles. Due to delay in transit, it was difficult to get the production planning done. Hence it becomes very important to track the transport vehicles to know the status of the transportation vehicle which can be useful for production planning. For example, in case if there is any delay shown, necessary changes can be made in the production schedules and can avoid loss of production capacity. Hence, Mahindra & Mahindra Ltd implemented e-tracking for vehicles carrying the materials for production.

GSM based tracking system was initiated in the company in which the tracking information could be accessed through internet. This could track not just the location of the vehicle but also provide data on the vehicles entry time, exit time and also the idle time for each city covered. Mahindra & Mahindra could now make use of these data to analyze the delays caused in its logistics and actions were taken in order to avoid these unnecessary delays. This also made a change in the driver’s mentality as they know that they are being watched every time. Hence all kinds of unnecessary delays could be avoided.

The following figures show the screenshots of the e-tracking system interface displaying the trajectory and the data table.

Figure 8: eTrack interface displaying the trajectory

Figure 9: eTrack interface showing the data table

BENEFITS FOR M&M LTD FROM REENGINEERING

Mahindra & Mahindra’s sales doubled when studied 4 years after the reengineering. Be that as it may, in spite of enormous increase in the item assortments, demand vulnerability, and increased supply imperatives, ideal time, right item accessibility was kept up which helped in exploiting sales opportunities to increase sales and market share. Following are the remarkable achievements by Mahindra & Mahindra after the reengineering of its SCM.

  • After implementing process changes via reengineering, during the season month with sales 50% more than the annual average sales, there were negligible follow ups and the operations ran smoothly in the company.
  • There was substantial reduction in inventories and increment in service levels.
  • General demand satisfaction lead times end to end was diminished from 51 days before to around 22 days, a larger part some portion of it being the physical transportation time (from suppliers to Plants and from plants to dealers) lessening of which has restrictions.

CASE STUDY 2: CISCO

Image result for cisco

COMPANY BACKGROUND

CISCO is a leading IT and Networking company in the world which was found in 1984 by Len Bosack and his wife Sandy Lerner, who both worked in Stanford University as computer operations staff alongside Richard Troiano. The company was found in San Francisco in USA and this led to the formation of its name “CISCO”. In 1990, “NASDAQ” stock exchange listed CISCO in their stock exchange. The company was granted a trademark by the US government in the year 1989 as “Cisco”. Cisco was quoted as the most valuable company in the world in the year 2000 when the internet business was booming. The company had a market value of more than $500 billion (USD). The company’s current market value is over $158 billion (USD). Routers, switches and other network frameworks still record for a noteworthy extent of Cisco’s general item offerings, yet its portfolio has since expanded to incorporate programming administrations, for example, security and video conferencing. The organization still to a great extent targets organizations; however its Linksys access points and switches are an unmistakable piece of the shopper advertises.

Since its establishing 30 years back, Cisco has moved far from its namesake, moving its central command south to San Jose, California. Nonetheless, with 60,000 workers the organization highlights areas around the globe, incorporating a noteworthy nearness in India with its Globalization Center East in Bangalore.

In spite of solid late execution, Cisco still faces a wide assortment of hazard variables, including indeterminate demand for network products amid monetary downturns, developing difficulties from household and worldwide contenders and potential supply chain interruptions.

CISCO: MARKET & PRODUCTS

Cisco Systems’ products and services center upon three market portions—enterprise and service provider, small business and the home. Cisco has become progressively mainstream in the Asia-Pacific locale in the course of the most recent three decades and is the predominant seller in the Australian market with administration overall market sections. It utilizes its Australian office as one of the principle home office for the Asia-Pacific locale, offering an assorted item portfolio for long haul strength, and coordination is a feasible upper hand. It offers its products in roughly 115 countries and utilizes upwards of 38,000 workers around the world. Cisco Systems’ produces Internet and PC extras of an incredible range to different segments hence making it a huge organization. Almost all exchanges that are done over the Internet are brought through Cisco.

WHY REENGINEERING WAS NEEDED IN CISCO?

CISCO had some performance gaps in the organization. The gaps had to be rectified to increase their customer base which will gradually result in profit, dominance of market and upper hand in the competitive market. Few of the major aspects that led to the reengineering of CISCO were:

  1. CUSTOMERS
  • REQUEST: Frequently the pattern of demand from clients more often than not requires a re-designing of which an inability to do this could be unfavorable to the association. Generally when an item or administration starts to pick up notoriety, there is requirement for an expansion in client request and this for the most part put a great deal of weight on the organization in light of the fact that trying to meet client ask for, they frequently wind up delivering sub-standard items because of absence of accessible materials and time however with a business procedure re-building set up, they would re-structure the association to have the capacity to oblige such demands and thusly they keep up their clients and even obtain increasingly and this would be an achievement of the associations objectives in regards to clients.
  • SUPERIORITY: A desire and requirement for advanced and exclusive expectation products and enterprises is additionally a call for re-engineering. This is on the grounds that current frameworks including procedures and staff do not have the capacity to get together the complexity in requests and this may be a wellspring of breakdown or failure to the association. To this impact, a re-engineered association would be the arrangement as proposed steady change of the framework may be costly and an awkward errand yet an entire updating of the framework would take care of the issues. Assist clarification would be found under the advantages of re-engineering.
  • CHANGE IN CUSTOMER DESIRE: Customer satisfaction is typically the sole point of any company. Non satisfaction of customers implies that the generation cycle isn’t finished and the whole business process would be stuck since there are no buyers for the item.
  1. COMPETITION
  • LOCAL COMPETITION: By the end of the 20th century, there were many networking and IT Company which bloomed from nowhere when the IT started hitting all the markets around the world. Local competition in the market was a major reason for re-engineering because as every new day, the market turns into an aggressive ground for all participants as they have to re-structure, overhaul, remodel and so on to get together with the standards of other rivals in the market and it is just re-engineering that can give such room.
  • INTERNATIONAL COMPETITION: Products and services which have gone globally and required consistent communication channels regardless of area made Cisco as an organization thick of such in its re-building outline. This prompted Cisco’s adjustment of meeting calling with its item called “TELE PRESENCE”. This item empowers a discussion including countless over the globe to speak with each other in video and with rapid. This is a piece of Cisco’s re-built process towards communication and joining the whole people.

This was a result of Cisco’s understanding the requirement for worldwide competition and fulfillment and after strategically learning about the market and contrasting it and what it needs, it turned out with this item and this has made Cisco a name to figure with regards to telecommunication as a current overview among organizations saw that 89% of them had no less than a Cisco phone in their association while some completely relied on upon Cisco for their communication needs.

NEED FOR A CHANGE:

With the exceptional pivot in innovation and the globe slowly turning into an arranged and remote world, there is an essential requirement for associations to re-design the procedure to suit this pattern as an appropriate business prepare re-building process very much executed would cost a fortune to set up yet would get an enduring lessening cost of production. This could be clear in Cisco’s dispatch of its item called “MCO” (Manufacturing Connection Online) in 1999.

The manufacturing connection online straight forwardly and quickly diverted requests from clients to fabricate and additionally suppliers. This thusly definitely diminished operational costs for Cisco, decreased cycles required in installment to the suppliers, annihilated cost of papers utilized for paper based buys and this brought an aggregate reserve funds of $24 million (USD) for material costs and another investment funds of $51 million typically spent on work and this likewise made an incredible 45% inventory reduction.

With a quick increment in development, Cisco saw the motivation to modernize and encourage correspondence with its providers, purchasers and other logistic providers. Their system and business process was starting to miss the mark concerning this target and there was have to build up an internal support and make a channel for business-to-business interaction, guarantee a diminishing in expenses acquired after routine exchanges, an expansion in the productivity level of its staff, give an exceedingly standard and secure channel for data communications (trade and exchange) and harden the security existing between it, accomplices and customers.

This development experienced by Cisco implied more demand and request by customers, expanded deals, all the more assembling and supply units and reports to track the exchanges and receipt/receipts to record the materials and income.

It turned into a lumbering assignment for Cisco to deal with every one of these processes physically and the overwhelming dependence on fax and manual section on online interfaces implied a troublesome handling of exchanges. Hence Cisco had to keep records of the voluminous and routinely changing inventory and data controls and balance sales with product availability.

To offer more productive administrations, Cisco needed to adjust to the current certification and affirmation of product availability and after deals administrations and repair, combined with conveyance of a huge number of products close by administration faculty all the time. This was a fundamental test expected to keep up and give most extreme product fulfillment as business exercises increment every day.

One circumstance which could be referred to as a purpose behind Cisco to re-engineer is the point at which it had contracts from an organization worth about $45,000,000 (USD) and spends an astounding $.5 million (USD) just to monitor this particular request without starting the venture. They along these lines chosen to make a system that would be utilized to keep record and monitor arranges and that, as well as would give a database and storage offices and to be of nonstop use and most likely require just update.

This re-designing process was to decrease cost related with paper based request following and record keeping.

Cisco’s mission for an aggressive edge in the market and to be a goliath among different associations in the “electronic business” additionally called E-Business, to make a basic, standard yet moderate correspondence and interaction between its customers and accomplices was likewise an explanation for Cisco’s business process re-engineering.

REENGINEERING AT CISCO:

Cisco at first believed that by simplifying the process (making of a business gateway on their website), the issue would be tackled.

In any case, this demonstrated effective and productive at first and was serving approximately 52% of Cisco’s accomplices and purchasers around the world. The functionality and reliability on this entry soon started to devalue and wind up noticeably lacking as the achievement of Cisco kept expanding its accomplices and clients and thusly the arrangement started to turn out to be a brief one. The client and accomplice ask for started to develop and was accomplishing thousands when followed and these requests alone could take the human data entry clerk a ton of hours to keep record of and this was constraining Cisco’s capacity to gain and provide food for more accomplices and purchasers.

Additionally when the accomplices and shoppers discovered this process a tedious one, they came about to faxing their requests which was frequently massive to Cisco and this diminished time and weight all alone side however moved the weight to Cisco as the data handling and entry must be finished by Cisco and since this was done physically, it obstructed Cisco’s coveted development and target.

After re-considering the finishing up on re-engineering the procedure, Cisco chose to create and integrate a “Business-2-Business” exertion that would provide food for and keep up the communications it had with its biggest customers and partners. Keeping in mind the end goal to maintain this fundamental relationship, Cisco built up the MCO (Manufacturing Connection Online) program to create a real and virtual correspondence channel between its suppliers, contractors and buyers.

Fabricating Communications Online (MCO) demonstrated profitable as it offered a prompt diverting of customer requests to manufacturers and suppliers. This reduced overhead expenses and reduced the procedures required in installment and further made the “Demand and Supply” prepare a quick and “no paper” based process.

This re-engineering spared Cisco $24,000,000 (USD) and a further $51,000,000 reduction which was typically diverted towards work fetched on a yearly premise. As a result, 45% inventory reduction was acquired which is a positive result.

This result from Cisco’s re-engineering was additionally renamed as “Engineering and Manufacturing Connection Online”. This approach later turned out to be the correct answer for their business forms as it was ensured, a re-popular entryway and a secret framework that associated more than 15,000 clients and a substantial number of customers required in Cisco’s supply chain.

Cisco’s re-engineering of its business procedure to wind up plainly a Business-2-Business process and this has been very productive and fruitful. This impact of reengineering on CISCO can be easily proven with the following facts:

  • The Business-2-Business integration was followed by over 50 of CISCO’s partners.(in 2006)
  • 254,000 orders were placed to CISCO online through computerized processes and channels to CISCO partners. This number constituted 35% of the total orders.
  • 39% of the total orders are managed with the help of the business-2-business platform by CISCO.
  • The current business-2-business process used by CISCO is capable of processing transactions for more than 40,000 requests hourly.
  • There has been an unmistakable reduction in transactional costs at Cisco and for its partners as the computerized and business-2-business framework cooks for most exercises, for example, manual information passage that expends a great deal of resources and assets. This re-engineered process additionally helped Cisco create funds adding up to 70% when compared to the “pre re-engineering” handle that included manual data entry.
  • There is an increment in profit as the requests put to Cisco and its partners are presently robotized so costs related with manual data entry have been disposed of.
  • There has been an increase in time saved and lessening in process costs as most manual processes have been decreased to negligible level and along these lines expanding profitability among workers.
  • An announcement by the sales department demonstrated that utilizing a computerized framework for the vast majority of Cisco’s processes given an immense decrement of 70% while expanding representative efficiency by 88%.
  • Cisco’s customer base and partners expanded as there was a stage set up to cook for new and massive customer solicitations and this is one of the impetuses for a company’s advance and development.
  • A computerized invoicing and receipt process likewise guaranteed speedier payment and record compromise since they were altogether mechanized.
  • There has been an high level of satisfaction among Cisco’s customers and partners as there are less risks,  less time grasped to handle business and payment procedures and in general, shorter business processing time. This reinforced Cisco’s partnership with its current customers and partners and also obtains new customers and partners.

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