T4. Enterprise systems analysis and improvement

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T4. Enterprise systems analysis and improvement

• Chin-Sheng Chen
• Florida International University

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T4. Enterprise systems analysis and improvement

• Classic enterprise operations
• The diamond
• PDCA
• DMAIC
• PFMEA
• BPR

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Classic Enterprise Operations

• Source
• The Wealth of Nations
• By Adam Smith
• Principles
• Division of labor
• Economies of scale
• Hierarchical control

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The business system dynamics (diamond)

• Values and beliefs
• Business processes
• Jobs and structures
• Management and measurement systems

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The PDCA Cycle (ISO 9000)

• Plan
• Do
• Check
• Act

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TQM/Lean 6 Sigma (DMAIC)

• Define
• Measure
• Analyze
• Improve
• Control

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PFMEA

• Process Failure Mode and Effects Analysis (PFMEA)
  for process analysis
• A structured methodology to assist engineers in
  identifying potential failure modes for a new or
  changed business process, typically applied to
  study of a manufacturing process.

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Business process reengineering (BPR)

• Reference
• Reengineering the Corporation by M Hammer and J
  Champy, 2009
• Definition
• Fundamental rethinking and radical redesign of
  business processes to achieve dramatic
  improvement in critical, contemporary measures of
  performance, such as cost, quality, service, and
  speed.

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Four key words in enterprise re-engineering

• Fundamental
• Radical
• Dramatic
• processes

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Business processes

• A business process is a set of organized
  activities
• for a business objective or
• That delivers value to a customer.
• Enterprise operation is a business process
• A process may have sub-processes
• Processes are usually invisible, unnamed, and
  unmanaged
• Because like-activities are grouped into
  functional departments
• And processes go through various departments.

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Typical business process types

• Manufacturing
• From procurement to shipment
• Product development
• From concept to prototype
• Concept formulation
• From need to concept design
• Order fulfillment
• From order to payment
• Service
• From inquiry to resolution

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Business process re-engineering cycle

1. Identify processes
2. Review, update, and analyze as-is.
3. Design to-be
4. Test and implement to-be

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An Re-engineering example - Ford Motors (1)

• Background
• Accounts payable department of 500 workers in
  80s
• Set a goal to reduce 20 head counts
• It acquired 25 interest in Mazda at the time and
  found out it had only five workers.

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An Re-engineering example - Ford Motors (2)

• Effort
• Re-engineer the process (not an org. unit) of
  procurement (including the accounts payable)
• Eliminate invoice via an on-line database,
• so that payment authorization is shifted to the
  receiving dock
• from the account payable, who had to match PO
  with invoice and receiving documents.

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An Re-engineering example - Ford Motors (3)

• Result
• The new process
• A buyer in the purchase department issues a PO to
  a vendor and enters it to an online database.
• Vendors send goods to the receiving dock
• At the dock, a receiving clerk checks at the
  computer terminal if the received shipment
  correspond to an outstanding in the database.
• If so, the goods are recorded and the computer
  will automatically issue and send a check to the
  vendor at the appropriate time.
• It ended up with 125 workers in vendor payment at
  the end.
• Handling only exceptions (Pareto 80-20 rules)

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An Re-engineering example - Ford Motors (4)

• Lessons learned
• Reverse the industrial revolution (division of
  labor)
• Flatten the organization to eliminate
  fragmentation and bureaucracy
• Process orientation
• Ambition
• Rule-breaking
• Creative use of information technology

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Information Technology BPR enabler

• Shared database
• Expert systems
• Telecommunication networks
• Decision support tools
•  Portable wireless data communication
•   Interactive videodisk
•   Automatic ID and tracking systems
•   High performance computing

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Common themes in re-engineered processes

• Several jobs are combined into one
• Workers make decisions
• Processes have multiple versions
• Work is performed where it makes the most sense.
• Checks and controls are reduced
• Reconciliation (consolidating redundant papers)
  is minimized.
• Hybrid centralized/decentralized operations are
  prevalent.

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Changes in re-engineered business processes

• Work units changes from functional departments
  to process teams
• Jobs change from simple to multi-dimensional
  work
• Peoples role change from controlled to
  empowered
• Job preparation changes from training to
  education
• Focus of performance measures and compensation
  shifts from activity to results
• Advancement criteria change from performance to
  ability
• Values change from protective to productive
• Managers change from supervisors to coaches
• organizational structures change from
  hierarchical to flat
• Executives change from score keepers to leaders

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What re-engineering is NOT

• Automation
• More efficient way of doing wrong things
• Software re-engineering
• Use more sophisticated computer system)
• Downsizing
• Reduce capacity to meet lower demand
• Other re-s
• Restructuring
• re-organizing
• Flattening
• De-layering
• Quality improvement (TQM)
• Kaizen continuous incremental improvement

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Who re-engineer

• leader
• steering committee
• reengineering czar
• reengineering team
• process owner

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Three criteria to identify re-engineering
opportunities

• Dysfunction
• the processes that are in deepest trouble
• Importance
• the processes with the greatest impact on the
  companys customers
• Feasibility
• the processes most susceptible to successful
  redesign

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Broken processes (1)

• Observation
• extensive information exchange, data redundancy,
  and re-keying
• Problem
• arbitrary fragmentation of a natural process
• Solution
• consolidate fragmented tasks, when feasible

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Broken processes (2)

• Observation
• inventory, buffers, and other assets
• Problem
• system slack to cope with uncertainty
• Solution
• structure processes such that suppliers and
  customers plan and schedule their respective work
  together.

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Broken processes (3)

• Observation
• High ratio of checking and control to value
  adding
• Problem
• Fragmentation
• Solution
• Eliminate managers mistrust and incompetence
  that come from fragmentation

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Broken processes (4)

• Observation
• rework and iteration
• Problem
• inadequate feedback along chains
• Solution
• eliminate mistakes

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Broken processes (5)

• Observation
• complexity, exceptions, and special cases
• Problem
• growth onto a simple base (simple process grows
  complex).
• Solution
• develop simple processes with decision points

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Important business processes

• From customers point of view
• product quality and features
• product cost
• on-time delivery
• Customer service
• Product life cycle

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Factors for choosing feasible processes for
re-engineering

• Likelihood of success
• Commitment of the process owner
• Strength of the re-engineering team
• Cost
• Lead time

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The re-engineering process

• identify a process to reengineer
• understand the current process
• what and why including input output, but not
  how
• understand how the customer uses the output of
  the process
• by watching how it does
• Redesign
• try to avoid benchmarking, as it may limit the
  teams innovation

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BPR Principles

• Work is best organized around outcomes, not tasks
• As few people as possible should be involved in
  the performance of a process
• Identify and destroy assumptions
• Look for opportunities for creative application
  of information technology

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Additional BPR principles as role players

• You dont need to be an expert to redesign a
  process
• Being an outsider helps
• Your have to discard preconceived notions
• Its important to see things through the
  customers eyes.
• Redesign is best done in teams.
• Your dont need to know much about the current
  process
• Its not hard to have great ideas
• Redesign can be fun.

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Avoidance in BPR (1)

• Try to fix a process instead of changing it
• Dont focus on business processes
• Ignore everything except process redesign (as it
  affects others).
• Neglect peoples values and beliefs
• Be willing to settle for minor results
• Quit too early
• Place prior constraints on the definition of the
  problem and the scope of the reengineering effort
• Allow existing corporate cultures and management
  attitudes to prevent reengineering from getting
  started.
• Try to make reengineering happen from the bottom
  up.

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Avoidance in BPR (2)

• Assign someone who doesnt understand
  reengineering to lead the effort
• Skimp on the resources devoted to reengineering
• Bury reengineering in the middle of the corporate
  agenda
• Dissipate energy across a great many
  reengineering projects
• Attempt to reengineer when the CEO is 2 years
  from retirement
• Fail to distinguish reengineering from other
  business improvement programs
• Concentrate exclusively on design
• Try to make reengineering happen without making
  anybody unhappy
• Pull back when people resist making
  re-engineerings changes
• Drag the effort out (should not longer than 12
  months)

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Nature of the business environment

• Knowledge intensive product/service
• Innovation
• Consumers market
• Individuality
• Mass customization
• Very dynamic and short product lifecycle
• Concurrent engineering/operations
• Highly mobile labor market
• Agile manufacturing
• Free product or service

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Enterprise characteristics

• Innovation
• First in the market (market pre-emption)
• Mass customization
• Quick response
• No inventory
• Virtual resources (collaborative via SCM)
• Scalability
• Agility
• Process knowledge management

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Business process intelligence

• Business knowledge
• Product mfg. process
• Production
• Business process
• Business process knowledge mgt.
• Knowledge warehouse ( ISO) vs.
• Process embedded with knowledge