Definition and explanation
Business process reengineering (BPR) is a management procedure which is used to increase the efficiency of the existing processes of a business by restructuring and excluding non-value adding activities from these processes.
Business process reengineering (BPR) is a management discipline which suggests structural changes within a process or processes of a business. Unlike the process re-design which is more common in businesses and usually involves the elimination of bottlenecks (also known as constraints) from a process, process reengineering promotes a more radical change within processes of an organization.
BPR compels a business to focus upon a process in an unorthodox manner. Rather, focusing upon all the individual links or segments of a business process, BPR deems the whole process as one single unit of business and then tries to reshape it from zero base to improve its overall output. BPR suggests that instead of speeding a process through automation, organizations must focus upon removing the links in a process that do not add value or are repetitive.
Business process reengineering is practiced on the highest level of hierarchy of an organization and is directly affected by the direction of an organization’s strategy, mission and vision. The main focus of BPR is to cut costs and add value to the processes of a company by increasing dissemination of data and information, minimizing resource consumption, improving the decision making process and rationalizing the functional capabilities of the business.
Application of business process reengineering (BPR) in real business world:
The idea of business process reengineering was presented by American management author Michel Hammer in his paper “Reengineering Work: Don’t Automate, Obliterate”.
One of the companies that successfully implemented the business process reengineering (BPR) model is Ford. Ford is an American multinational automobile company. The company applied the BPR model in its early years and restructured its “Accounts Payable” function. Before the implementation, the account department of the company had to reconcile purchase order, invoice and the goods received note to generate a payment to the vendor. After the implementation of process reengineering, a central database was introduced in this particular system. This was an Invoice less process. Whenever a purchase order was placed, it was entered into the database. This was then matched with the goods received note which was also updated into the database and a payment check was electronically generated to the vendor except for the purchase orders that had discrepancies. Ford achieved its required efficiency into this system and a 75% reduction of employees in its administrative department.
Mahindra and Mahindra, an Indian multinational company that manufactures cars applied the business process reengineering model in its overall processes. Before the implementation of BPR, the company was facing inefficiencies in relation to its manufacturing procedures, productivity, labor capacity etc. which ultimately lead to prolonged operational cycles and low quality outputs. Major changes were introduced to tackle these complications under the ‘process reengineering’. This involved human resource restructure, in result incompetent and corrupt employees were fired and replaced. This oozed a ‘signaling effect’ all around the organization and the labor of Mahindra & Mahindra become more efficient. Other than this, major changes were introduced in relation to communication, infrastructure and automation/IT in the company. Simultaneously company introduced ‘Total Quality Management (TQM)’ and ‘Just-in-time (JIT)’ approaches in their manufacturing. These steps lead to improvement and upgradation in current products as well as encouraged research and development for new products. The number of employees reduced by 400, incremental productivity reported to rise by 125% and the company achieved an overall improved efficiency by 50% to 60%.
Many other companies like Cisco System – an American multinational IT and telecommunication company, General Motors – an American multinational automobile company, Toyota – a Japanese multinational automobile company etc. also implemented business process reengineering (BPR) successfully.
Advantages and disadvantages of business process reengineering (BPR)
Following are some of the advantages that business organizations can derive from a successful application of business process reengineering (BPR):
- The main advantage of business process reengineering (BPR) is to identify any processes, sub-processes, costs and labor that are not required in an organization. It not only highlights the deficiencies of a procedure but also shows areas where business is incurring costs without getting required returns.
- The BPR provides management an opportunity to understand the systems of their business in more detail. It improves the communication within the enterprise and also enhances the quality of internal management reports.
- The BPR approach provides an insight of business analysis to management which can help in future decision making as it presents a better picture of the strengths and weaknesses of the business and business’s ability to adapt and respond towards the changes in external environment. It makes a business entity more pro-active and a learning organization.
- BPR provides long term solutions to minimize the deficiencies of a business. The focus of the exercise is to take short-term damage control measures but specifically initiate a long-term plan enabling for improvement in efficiency, capability and effectiveness of the organization.
- One important advantage of implementing a BPR function is to meet the customer needs and maintain product value. However, BPR does not directly affect the customer satisfactions but it provides organizations room for improvement. As the non-value adding costs are minimized, businesses can improve the quality of products and services by inducing or shifting these costs to the parts that ultimately add value for the customers.
The major disadvantages or limitations of business process reengineering (BPR) are given below:
- Although the Idea of process reengineering is easy to understand in a literal manner, its practical implementation is very difficult. Business process reengineering (BPR) not only requires monetary assets of a company but also consumes time and human resources.
- Business process reengineering may not suit to every business. The size, availability of resources and needs of every business are different. BPR usually benefits large organizations.
- The approach does not provide immediate results. Incremental improvements in processes can be seen instantly as these focus upon the costs of business, but BPR focuses majorly upon long term revenue synergies of a business which take time to crystallize and are difficult to forecast.
- The sustainability of a change in a business process is a difficult task. BPR follows many aspects that are unfavorable for certain levels of business i.e. redundancies, cost cuttings, changes etc. So, the development of a consensus among all the stakeholders of the organization to experience and continue the processes after change has occurred is difficult.
- It may be difficult to align the BPR with a common goal of an organization. A business can have many priorities and choosing the most appropriate section of business for implementing the process change can become problematic.