Key Drivers Of Business Process Changes Commerce Essay

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5/12/16 Commerce Reference this

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Harmon (2007) explains about key drivers of business process change. He argues that in economically bad times, companies seek to make their processes more efficient and in good times, companies seek to expand their production and enter into new markets. There is much emphasis on improvement of processes to attract new customers and enter into new markets. Another factor which led to improvement of process is the impact of globalisation on the organisation performance especially to those companies that are engaged in the world trade. In order to compete in the global environment, companies are focusing on mergers and acquisitions to acquire new knowledge and technology. In the same vein, due to advancement of the information technology, it is easier for companies to approach customers and suppliers around the world. The breakthrough development in the information technology is the advent of internet; companies are changing their process to go online. When the buyer and seller are available on one click so there is need to consider the process for redesigning.

Levels of process change:

To carry out the process change, it is necessary identify the levels of changes that are required for each of the process.

Process re-engineering – This is strategic level change, when major threats or

opportunities in the business’s external environment prompt a fundamental rethinking of the large scale processes critical to the operation of the value chain.

Process redesign – This is intermediate scale of change in operations, appropriate for medium sized processes that require extensive change or improvement. It results in changes in job description or automation of processes..

Process improvement – Appropriate for smaller, stable and existing processes which are tactical in nature and require incremental change

(ACCA Student Accountant, Business Process Change, Edition 2008, p66-67)

Process identification and Evaluation:

Process identification is the way to identify the processes which are required to be reengineered. There are many ways in which process that need to be reengineered is determined.

Process evaluation:

Peter Keen (1997) explains mechanism by which an organisation evaluates the process. He suggests that by asking questions about the process, the identification of processes is possible which are required to be reengineered. First, ‘Does the process represent an organisation to customers, employees and investors? If the answer is yes then that process is important. But if the answer is no then another question needs to be asked. Is the excellency of the process important for the performance of the company? If the answer is yes then we give priority to this process that dose need to be considered. If the answer is ‘no’ then another question is asked. Does the process is necessary to support other business process? If the answer is ‘yes’ then again process need to be considered but the importance is supporting process. But if the answer is ‘no’ then final question is asked whether there is legal conditions apply for this process? If the answer is yes then that process is mandatory and again need to be considered. Again if the answer is no then its management decision whether to continue to operate or abandoned the process.

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Rosemann (2001) proposes identification of the processes that need to be change or reengineered. There are two dimension proposes by the Rosemann. First, need to reorganise and second dimension is value of process. If the values of the processes are high and recognise needs are also high then process has high priority. If the process value is low but reorganise need is high then that is the second choice that we need to consider. Third set of process that we need to consider is the low value and low need for organising. If the process value is high and need to reorganise is low then reengineer is required to be carefully planned because it has impact on the other process if problem arises.

Hammer and Champy (1993) suggest way to improve the process on the basis of dysfunction, importance and feasibility. Dysfunctional is where the process is in deep trouble. If the process is crucial for the customer satisfaction then it is important and feasibility in terms of that is most ready to successful redesign.

Porter value chain:

Porter value chain also provides the valuable analysis of the activities or processes that need to be changed or where improvement is required. In the business process reengineering, Porter (1985) is considered one of the most important mechanisms.

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http://www.provenmodels.com/files/2825c320f5910a4647fd289cdcf5a780/value_chain_analysis.gif

(Porter Value chain Analysis Diagram- source www.google.co.uk)

Porter value chain consists of primary activities and secondary activities. As shown in diagram, primary activities are inbound activities, operations, outbound logistics, sales and services. Whereas, secondary activities consist of the procurement, human resources, technology and infrastructure. When the organisation plan for reengineering, it is important to start from the primary activities because these activities are crucial for the success of the company.

Business Process Reengineering:

“The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance such as cost, quality, service and speed”. (Hammer-1990)

‘ A strategy driven organisational initiative to (re) design of business process to achieve competitive breakthroughs performance, differing in scope from process improvement to radical new process design, contingent upon the degree of socio-technical change required.’ (Grover and Kettinger1995)

Goals of BPR:

The rapid adoption and radical change by BPR, despite its failure, is fuelled by promise to make drastic improvement in business performance. The improvement results from:

Improved customer satisfaction:

Customer satisfaction is one of most important benefits of reengineering. Its results are high level customer’s satisfaction. Customers are internal and external to the organisation. Reengineering achieves this by making organisational structure that serves through the organisation rather than department.

Cost reduction:

In the current dynamic environment, cost effective is considered as core competences. Many companies are focusing on how to improve the cost efficiencies. On the other hand, big cost also effects the customer’s satisfactions. If the companies try to reduce cost then have to compromise on the quality. Reengineering aims to produce leaner and fitter companies which can easily adapt to new product and circumstances.

Gover et al (1997), addressed in their journal, “Wal-Mart has been reduced restocking time from six weeks to thirty-six hours.”” Hewlett Packard’s assembly time for server computers touches new low- four minutes.” “Taco Bell’s sales soar from $500 million to $3 billion.” The whole credit goes to reengineering for these breakthrough changes.

Improved product and service quality:

Quality is one of key determinants in making product or services offerings. In the current competitive environment, sales are made on quality rather than price. Sometimes sales are made on the basis of quality rather than price. Reengineering accomplishes this by breaking organisational structure consisting of functions where the work is passed from one function to another as a package. The responsibilities are centralised in one group rather than splitting over different departments.

Harnessing skill:

The success of the company depends upon the utilising the skills, knowledge and expertise of the workers. In function based, individuals work in their hierarchical layer rather than contributing their knowledge and expertise. Reengineering breaks this barrier by allowing individuals to share their knowledge and empowering them for their tasks. This enables the company to fully exploit workforce skills.

Reduced times:

By making work flow through and between different departments in functional structure, the business performance wasting time is quite high. The reengineering approach eliminates this wasting time by bringing together those parts of the disparate organisation working on the same task into one group. The whole process is then considered as in one domain allowing everybody in that domain to focus on the effective operations and improvement of the process.

Improving value-added:

Business reengineering is an effective way to identify and remove those tasks and activities which result in inefficiencies and repetition factors. This allows focusing on the value adding activities that result in creating high value for the organisation and satisfying customers’ needs.

Faster responsiveness:

Business success in today’s environment depends upon responding to changes. Horton believed that his major management concern for 90’s to create company that can manage surprise (Horton-1989). Functional management structures slow down the decision making procedures and hence reduce the ability of managers to deal with surprises. Reengineering encourages empowering business units to take decisions and thus increase the speed with which they react to events. It also increases the speed by the removal of the time-wasting across functional transaction in the production process.

Principles of BPR:

The principles of BPR are agreed upon and are reviewed to get familiar with Business Process Reengineering:

Achieving step change in performance:

One common principle that in favour of pioneers of the reengineering is that incremental improvement is not enough in the global competition. Global competition calls for radical improvement in the quality, services, faster response and lower cost.

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Davenport points out that reengineering is all about shifting from 5 to 10m percent annual improvement to 50 percent or even higher improvement in few key processes. Firms strive for multiplicative levels of improvements rather than fractional level. (Davenport- 1993).

Function vs. Process oriented organisational Structure:

Holtham (2001) suggests that careful thinking is required when the company plans to change business process and especially implementing the reengineering approach to improvement. BPR is used where required and when the management has sufficient potential to follow it. Because BPR is not just process change but it results in the radical redesign of the organisation structure. Normally, process improvement changes results in a change from functional structure to the process oriented structure. People who work in the functional structure also support the process orientated structure. Many organisation try to intervened their processes with the functional structure because don’t want to lose benefits of the functional specialization. Thus there is move of flexible organisational structure that has both functional and process orientation. The process improvement enables organisation to think through processes and come up with design which are more efficient and effective. It results in weeding out of the unnecessary steps within the systems.

Create customer focus:

Reengineering philosophy believes that the customer is key driver behind process improvement. Hammer indicates that the seller has low bargaining power and the customer now tells the supplier “where they need, what they want, how they want it and what they are willing to pay” (Hammer-1993). This concept also applies to internal processes where the customer is another person, or group within the organisation.

Integrating work:

The philosophy of reengineering is to eliminate inefficiencies from the processes by eliminating non value- added activities. The remaining activities are simplified and integrated to create new ways of working. Sometimes the solution is achieved by giving one person the authority to handle a spectrum of operations or solution is to create multidisciplinary teams. The solution achieved by giving one person the ability to handle a spectrum of operations or the solution is to create multidisciplinary teams. The overall emphasis is on giving responsibilities for processes in few hands.

Developing a process management culture:

The functional management based structure is incompatible with the process culture. The working practices, skills and management responsibilities need to be redefined and more productive ways are found for harnessing the expertise of every individual within company.

IT and BPR:

IT and BPR have no clear relationship. There is emphasise on technological innovations rather than the organisation itself when BPR was not developed (George-1991). These innovations bring reduction in time, processing, information system and storage cost. This makes the technology as independent variable to determine changes in organisation. This researchers group have been used the technology to automate the complicated “as is” situation of organisations which, as reported earlier, did not have significant improvements in productivity. Parnaby 1991 states that this time, failure is partly because of wrong use of IT to automate over-complex corporate process. However, it is partly fault of IT directors who have failed to raise the importance of IT to senior executive that IT plays in transforming a business. Other researchers emphasis on organisation and BPR, and believe that people deliberately design IT for intended objectives. Kim defines BPR as that an organisation uses the IT to change the way work is being done (Kim-1994). Renkema (1995) implies that “A BPR investment is regarded as long term commitment of organisational resources to achieve ambitious business goals through transformation of business processes with IT as an enabling technology. There are many successful cases of major performance improvement of IT enabled BPR in the industry (Alter et al, 1990). This group of researchers believe that IT is depended variable that is planned for and configured by managers.

Role of IT in BPR:

The role of IT in business process reengineering is two-way: as an ‘Implementer’ or an “Enabler”, Lyons (1995). For the first role, it is used to support the mapping, analysis and modelling aspects of BPR and helps in transformation process. The second role is to develop major communication and system infrastructure to support the integration and automation of redesigned work process. There are some technologies which are used as enablers of BPR. Technologies such as: Local Area Networks (LANs) and Electronic Mail (Email), Electronic Data Interchange (EDI), Executive Information Systems (EIS), Document Image Processing (DIP).

BPR Methodologies:

Lucas methodology:

Lucas Engineering and Systems talk about manufacturing system redesign. Their argument is that to survive in today’s market, it is necessary to set high targets in current competitive market and think for radical change. In their methodology, emphasise on eliminating the non-value added activities which do not add value to the customers and result in bad system operations. Four-step approaches for waste elimination are suggested by them, namely (Lucas-1991):

Simplify the systems

Eliminate waste

Re-organise into Natural Groups

Technology improvements

Another idea which is introduced here by Lucas is “Natural Group”. Natural group is defined in their mini guides. A Natural grouping is a multiskilled group or team who hold a whole flow chart and then sit together in one office, area or cell

Davenport and Short methodology

Davenport addresses five stage approaches to redesign business process by using information technology capabilities (Davenport-1990).

Develop Business Vision and Process Objectives- Organisation develops the vision which leads to the redesign objective and in turn results in improvement of process. Some objectives need to be related to the specified business vision like; cost reduction, time reduction and quality.

Identify Processes to Be Redesigned- In this stage; there are two major approaches; the exhaustive approach and high impact approach. In the exhaustive approach, attempts are made to identify all processes within the organisations and then priorities depending upon their urgency. In high impact approach, process is redesign which has great impact on the organisation.

Understand and Measure Existing Processes- Before redesigning the process, problems are well understood so that there is no chance of repetition. Secondly, accurate measures are used as basis for future improvement.

Identify IT Levers- The major role of IT is to improve coordination and information access across the organisational units. The best approach is to use the IT in the early stages of process redesign rather than developing an IT system and matching with an existing system.

Design and Build a Prototype of the Process- Final stage is not final design of the process though it is based on the prototype of the design. It is suggested that the redesigned process after agreement by the process owner be implemented on pilot basis and also examined regularly for problems and objectives. The key factors in process redesign and prototype create include IT design tools and understanding generic design criteria. The redesign is fully implemented after final acceptance of the process

Rummler- Brenche methodology:

Rummeler- Brache (1990) wrote in their book, Improve Performance: How to manage the White Space on the organisation chart. They explained that the organisation as system and worked down from top down to develop a comprehensive picture of how organisations are defined by processes and how people define that process help in accomplishing the activities. Rummler-Brenche (1990), define three level of performance: organisational level, process level and a job or performance level. They introduce the matrix that they obtain by crossing levels with three perspectives. There are nine different concerns that managers need to consider when changing or improving processes they emphasise that approaches that only focus on process or performance level or process management are limited perspective.

Goals and Measure

Design and

Implementation

Management

Organisation Level

Organisational gaols& measures of organisational success

Organisational and implementation

Organisational management

Process Level

Process goals and measures of process success

Process design and implementation

Process management

Activity or performance level

Activity goals and measures of activity success

Activity design and implementation

Activity management

(Rummeler and Brache’s Performance framework)

Process Redesign Patterns:

Paul Harmon (2003) describes four basic process redesign patterns: re‑engineering, simplification, value-added analysis, and gaps and disconnects.

Business Process Re-engineering:

Re-engineering pattern relates to a fundamental rethinking of existing processes to achieve major dramatic improvements. To achieve radical improvements in efficiency, it starts from scratch without considering the current situation. This approach ignores the existing processes and emphasises starting by asking what the goals of processes to be achieved are and work is carried out to achieve best outcome using the latest technology.BPR is large scale change and therefore high risk of disruption is involved. Re-engineering is best suited when large scales of changes are required.

However, the other three can all be applied on a more modest scale, and could therefore be more relevant to the type of practical situation presented on.

Simplification:

The simplification pattern assumes that most established processes are likely to have developed elements of duplication or redundancy. Process efficiency is only possible by removing these. This approach is useful on large scale business process or more limited business processes. The best starting point for this approach is to identify the process, sub processes or activities in the existing processes and challenging each activity or sub process in the sequence. This process highlights where there is tendency of duplication or redundancy. Many organisations employ simplification for the process redesign because it is less disruptive and risky in nature.

Value-added analysis:

Value added analysis looks at the processes from the customer point of view identifies the value adding activities which are perceived to be valued by the customers. Customers may be internal or external.

This pattern looks at the process (or sub-process) from a customer’s perspective. A process or activity is said to add value if it meets three criteria:

1: the customer is willing to pay for the output

2: it physically changes or transforms the output

3: it is performed correctly at the first attempt.

The process or activities is said to be non value adding if:

1: preparation and set-up

2: control and inspection

3: simply moving a product from one place to another without physically changing it activities that result from delays or failures of any kind.

Harmon (2003) suggests that non-value-adding activities are needed to be eliminated as far as possible. Some of these activities are essential (for example set-up activities) for the value-added activity to take place. These essential support activities are value enabling activities and need to be kept. However, these activities are expected to undertaken if these are simple and cost effective which means allowing resources for the value enabling activities to be employed.

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Gaps and disconnects

This pattern was introduced by the Geary Rummler ad Allen Brache in1990. They argue that many of the problems arise because of failure of communication between the business functions. Manufacturing makes some new product economically but marketing and sales are not aware result in failure of whole system. The gaps and disconnects put an emphasis on the careful analysis of how existing processes are being done and before thinking for its improvement.

Process improvement by Six Sigma:

Yang and EI-Haik(2009) in their book explain six sigma. They argue that six sigma is best approach to bring improvement in the sub processes or activities rather than large scale processes. This approach helps the management to develop the process architecture. If architecture is already in place it helps in manager in identifying the projects which have potential of success by improving process. Six Sigma emphasises that measures at any level should be tied back to higher level process and to the strategic goals as well.

There are some phases in a six sigma process improvement project:

Define customers requirement for the process or services

Measure existing performance and compare with customer requirements

Analysis existing process

Improve the process design and implement it

Control the results and maintain the new performance

Absecon Textile-New Jersey based company:

One supplier of the contract upholstery fabric has found new ways of manufacturing process which make its efforts more efficient, more profitable and more competitive.

Absecon textile based in southern New Jersey implements the lean manufacturing system. After one month implementation of lean manufacture systems processes are getting changed and there is seeing 70 percent reduction in the waste material it needlessly stored.

‘I have heard people say lean manufacturing is applicable to every industry but textile’ says David Adair, Vice President of the Absecon. ‘We don’t believe that. We fully expect that lean manufacturing can give us competitive advantage ‘. (Manufacturing Journal 2003)

Marketing:

‘Marketing is the management process responsible for identifying, anticipating and satisfying customer’s requirements profitably’.

(Chartered Institute of Marketing cited in Rowson Pauline 2009)

Levison (2007), author of Gurialla Marketing noted: ‘Marketing is not an event, but a process….. It has a beginning, a middle, but never an end, for it a process. You improve it, perfect it, even pause it. But you never stop it completely.’

Importance of marketing:

Marketing has strategic importance in today’s competitive environment even the finance department not able to work without integration with the marketing department. The key to success in the current environment is to satisfy the customer needs and business trends by using marketing skills. Due to its importance, different companies employ marketing at different levels depending upon their need but consider it as essential element for business success. The Conference Board (2007) survey of the ‘top CEO Challenge’ acknowledges the importance of the marketing. The report highlights the marketing challenges that are different at global level. CEO in Europe focuses on more new and responsive ideas. Due to this reason adoption and flexibility to change is more dominant in the Europe rather than Asia and America. The importance of the marketing for building brands and customer’s loyalty are accepted by all CEOs.

Marketing Practices:

Coveille et al (2002) in Contemporary marketing Practice Framework addresses five marketing approaches which the company adopts depending upon the customers and industry:

Transactional marketing: is based on management of marketing mix to attract and satisfy customer’s needs and active communications to buyers in the mass market in order to create an arm’s length transaction.

Database marketing: It involves using database technology to create relationship, thus allowing firms to compete differently from the mass market.

E-marketing: It involves the use of internet and other technologies to create and settle dialogue between the company and customers.

Interaction marketing: It is based on face to face interaction between individuals. This approach is highly practical because both parties’ customer and market invest resources to develop mutual relationship with each others.

Marketing strategy:

Marketing strategy is the process by which an organisation communicate its business objectives and strategy into market activity (Paul Field, 2006)

Marketing strategy helps to identify the target market, what directions need to be taken and what actions need to be taken to create dependable position in the market. To this end, the core objectives of the marketing strategy are focused on the buyer behaviour and identifying the market that needs to be target and marketing programme moves around the marketing strategy. Weitz and Wensley (1998) defines marketing strategy as, it is an indicator that is specific towards which activities to be targeted and how to develop and exploit the competitive advantage. In order to get the best outcome, strategy requires clear objectives and focus on the organisation corporate goals; it also involves selecting the right customers and developing the marketing mix to implement the marketing strategy successfully. (Varadarajan 1999)

A strategic market plan layouts the methods and resources required to achieve organisation goals within a specific market. Marketing department has responsibility to adopt those policies and procedure which can fulfil the customers ‘needs. It takes into account not only marketing but also involves finance, human resources, research and development and production. The concept of strategic business units is used to define areas of consideration in specific marketing plan. Strategic business unit is a division, product line or other profit centre within a parent company. (Dibb et al 2001)

Vass 2006 explains some strategies which the textile companies adopts to improve the growth and prosperity of the business. He also believes that marketing is not just about the sales. It is ongoing process of creating and maintaining relationships and measuring results. Marketing managers are required to implement strategy that helps in satisfying customer need and market targets.

Market share strategy:

Market share strategy is based on gaining the large share in the operating market. The success of this strategy depends upon the market penetration and the customer has to perceive that your offerings are unique. Before implementing this strategy, target market is defined? How the customers perceive your offering in relation to competitors. This information is helpful in targeting the right customers and develops communication links with the existing and potential customers.

Market expansion:

Seeks to expand the market size. To implement this strategy, markers are sure about the potential customers in the target market and competitors action.

Market segmentation:

Market segmentation concentrates on segmenting the market according to their homogenous needs and wants.

Position strategy:

A positioning strategy is psychological. It is designed to create and maintain a specific image in the customers mind. It’s all about how the customers think and feel.

Product life cycle strategy:

The product life cycle strategy is driven by innovation and can apply to brand or to a product category. Its duration may be only for few months or century. Product life has four stages such as introduction, growth, maturity and decline. At the introduction stage, advertising cost is normally highly for making people aware of company offerings

Quality:

To implement the quality strategy, it is necessary to have better design or offering more durable product or more reliable services or faster delivery. Vass (2006) suggests that marketer should select one or two areas where they are superior to the competition and implement marketing strategy that identifies these specific attributes.

Reminder strategy:

Strategy is communication based. It targets regular and loyal customers to remind them to make an additional or replacement order.

Simplicity strategy:

Simplicity emphasis on the customer convenience. Businesses and customers are overwhelmed with the complexity and choices of goods and services available to them, with the product fully functional and features that only a small number of the users ever use.

Strategic Marketing Plan and Planning:

Planning:

Planning is a process for accomplishing purposes. It is a blue print of business growth and a road map of development. It helps in deciding objectives both in quantitative and qualitative terms. It is setting of goals on the basis of objectives and keeping in the resources.

A plan helps to avoid losing direction and to uncover the hidden opportunities. An organisational success depends upon careful planning. So preparing a satisfactory plan of the organization is essential because it helps the business in terms of products, management, finance, market and competitions. If appropriate intention is given to the planning then

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