1 Informatics in Logistics Management Lecture 8 Enterprise

1 Informatics in Logistics Management Lecture 8. Enterprise Reengineering 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 strategy development

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 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 ¦

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 restructured 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 reengineering ¦ 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 reengineered, 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 enterprises in efforts to improve operations performance. ¦ The objective is to achieve fit between operations capabilities and market requirements through a reengineering of operations processes. ¦ The methodology is model-based and applies an enterprise modelling architecture to represent different views of enterprise operations. ¦ Reengineering efforts are typically carried out when some problem makes it difficult for 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 strategic decisions regarding operations (such as the implementation of a best practice method) and the affected decisions areas and performance objectives. ¦ Mapping the AS-IS operations model, and representing the enterprise graphically from a resource-, material-, info-, process- organization-, ¦and control view (termed control model) should represents a synthesis of the other views and show a picture how operation processes are organized and controlled (cont-d)

38 Steps for BPR ¦Analyzing the current operations model on operation capabilities (operations processes, control methods, layout etc, ) and their ability to meet the demand situation ¦Analyzing operations capabilities in an audit sheet in order to rate the performance in broad areas of strengths and weaknesses ¦Based on this analysis, improvement areas are identified and problems to be solved are formulated(cont-d)

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

40 References ¦ Bruce Caldwell "Missteps, Miscues: Business reengineering failures have cost corporations billions" Information. WEEK 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).