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Business Process Reengineering in Operations Management
Operations management is the area of management that caters to the entire system of operations in an organization. It deals with all the activities that range from planning and organizing to ensuring efficiency in entire business operations. It has its role spread across all verticals of organizations whether manufacturing or service industries. Basic inputs of operations management involve tangible and intangible resources.
Here, various tasks are carried out to convert these set of resources into a fruitful output through a transformation process. This process of converting labour and raw materials using correct tools and techniques into final products or services collectively come under the operations management pursuit. Business Process Reengineering is a process based management tool used to improve a business drastically.
Definition of BPR
The notion of Business Process Reengineering was first brought to light in 1990 by a late management author, Michael Hammer. He was the former professor of Massachusetts Institute of Technology. He defines BPR as "the fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed." As per the definition there are four key elements that need to be highlighted. They are fundamental, radical, dramatic and process.
Understanding the fundamental functioning of a business is the key task leading to reengineering. Radical redesign involves a complete revamp of the current structure and procedures and chalking out new innovative ways of achieving business goals. Hammer emphasises and aims on a dramatic hike in revenue of a business through reengineering and not just a marginal boost. Finally, it is the process that involves a number of interlinked activities that needs to be altered or removed to reduce costs to improve efficiency.
Concept of BPR
Operations management arena serves as the focal point of any business entity that interacts with all other functional areas to deliver goods or services to the customer. It takes care of customer satisfaction as well as effective utilization of resources. In short, it can be viewed as managing the entire business process. When engineering techniques and principles are applied to the business process it is known as Business Engineering.
It accentuates the use of system approaches and problem solving techniques that links people, process and technology. Changing this logical flow of action that leads to a desired business outcome with increased efficiency and quality with lesser costs is known as Business Process Reengineering. It is basically the rethinking and redesign of business process to substantially increase quality, service and speed with decreased cost.
Need for Reengineering
As discussed, reengineering is the fundamental realignment of a business as a whole to enhance its business considerably. Many entities try to implement BPR due to the advancement or changes in market conditions. They might need a novel process and infrastructure to stay aggressive with their competitors. Others might need a comprehensive overhaul by scrapping off out-dated process and adopting latest available techniques. An organization should consider business reengineering under the following circumstances.
Tight competition − Business reengineering becomes a necessity when a competitor starts providing a much better product or service. For example, a competitor producing goods with much more performance at the same market rate.
Redundant technologies − When advanced technology is available in the market that can reduce cost and improve the quality and quantity of the output, reengineering needs to be carried out. Technology used in all process should be updated.
Low profits − Heavy operating costs and delayed cycle time often lead to lower profits. Some people and process oriented tasks might run unproductive causing errors and rework. Multiple handoffs may also lead to delay in delivering the output. All these factors lead to lowering the profits of the business.
Challenges in BPR
Business process reengineering has its own challenges as well. I cannot be applied to or suit every business. Size of the company and resource availability plays a great role in it. BPR is also not advisable if the optimization gets reduced to a minimal area or process. It also does not give an immediate solution to all the issues faced by a business as its value is reaped in the long run. The major barriers apart from these are:
Ascertaining the fundamentals − To determine all the fundamental factors and operations of business and finding the root cause of the problem is an arduous task. Only the actual problem would pave way to the ideal solution.
Resistance to change − As reengineering brings in radical change to the existing system, considerable resistance from employees and stakeholders are expected. Traditional work culture is not that easy to alter though it could produce yielding results.
Cost & Time − The procedure of business process reengineering is a big budget activity. Identification of the problem to the entire revamping involves a great amount of time and money.
Suspicion − People are more sceptical on the effectiveness of BPR implementation. Many view this just as a normal modernization activity.
Job loss − One major challenge is to tackle the issue of job loss as a result of BPR. As radical revamping is ought to bring in technology and automation for repeated tasks, people employed in these roles might get laid-off.
Principles of BPR
The principles put forward by Hammer for the effective execution and implementation of Business process reengineering are stated below.
Organize to create an explicit end product rather than aligning specific tasks. This works better than organizing tasks.
Eliminate traditional intra and inter departmental boundaries. This facilitates time saving
Processing information at the point of work. This helps to reduce errors considerably.
Linking geographically distributed supplies under a centralised database. This ensures cost saving with higher magnitude of output.
Minimize rework and delays through logically linking parallel activities.
Incorporate technology for control and decision making at the point of work.
It is also vital for a business to cross-check the company’s objective, vision and mission statements before altering the process flow. Reengineering should be initiated keeping in mind
The prime clientele
Ascertaining the need for a total revamp
Aligning the aim of BPR with company’s long term goals.
To conclude, Business process reengineering is all about stepping back and rethinking the ultimate essence of business, breaking down the process to understand the fundamentals and then realigning the entire structure in a systematic way to reap dramatic results. Cross-functional teams unite to uncover the areas that require enhancement and chalk out ways for obtaining maximum potential.
Additionally, business reengineering will serve as an exercise to facilitate superior decision making resulting in higher customer satisfaction. An effectively implemented BPR lowers cost of operations drastically by eliminating unproductive areas and elevate the business processes at a faster pace. It results in substantially higher return on investment (ROI), brings down costs and upgrades quality.
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