T4. Enterprise systems analysis and improvement

1. T4. Enterprise systems analysis and improvement Chin-Sheng Chen Florida International University

2. T4. Enterprise systems analysis and improvement • Classic enterprise operations • The diamond • PDCA • DMAIC • PFMEA • BPR

3. Classic Enterprise Operations • Source • The Wealth of Nations • By Adam Smith • Principles • Division of labor • Economies of scale • Hierarchical control

4. The business system dynamics (diamond) • Values and beliefs • Business processes • Jobs and structures • Management and measurement systems

5. The PDCA Cycle (ISO 9000) • Plan • Do • Check • Act

6. TQM/Lean 6 Sigma (DMAIC) • Define • Measure • Analyze • Improve • Control

7. 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.

8. 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.

9. Four key words in enterprise re-engineering • Fundamental • Radical • Dramatic • processes

10. 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.

11. 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

12. Business process re-engineering cycle • Identify processes • Review, update, and analyze as-is. • Design to-be • Test and implement to-be

13. An Re-engineering example - Ford Motors (1) • Background • Accounts payable department of 500 workers in 80’s • 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.

14. 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 tomatch PO with invoice and receiving documents.

15. 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)

16. 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

17. 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

18. 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.

19. Changes in re-engineered business processes • Work units changes – from functional departments to process teams • Jobs change – from simple to multi-dimensional work • People’s 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

20. 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

21. Who re-engineer • leader • steering committee • reengineering czar • reengineering team • process owner

22. Three criteria to identify re-engineering opportunities • Dysfunction • the processes that are in deepest trouble • Importance • the processes with the greatest impact on the company’s customers • Feasibility • the processes most susceptible to successful redesign

23. 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

24. 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.

25. 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

26. Broken processes (4) • Observation • rework and iteration • Problem • inadequate feedback along chains • Solution • eliminate mistakes

27. 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

28. Important business processes • From customer’s point of view • product quality and features • product cost • on-time delivery • Customer service • Product life cycle

29. 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

30. 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 team’s innovation

31. 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

32. Additional BPR principles as role players • You don’t need to be an expert to redesign a process • Being an outsider helps • Your have to discard preconceived notions • It’s important to see things through the customer’s eyes. • Redesign is best done in teams. • Your don’t need to know much about the current process • It’s not hard to have great ideas • Redesign can be fun.

33. Avoidance in BPR (1) • Try to fix a process instead of changing it • Don’t focus on business processes • Ignore everything except process redesign (as it affects others). • Neglect people’s 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.

34. Avoidance in BPR (2) • Assign someone who doesn’t 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-engineering’s changes • Drag the effort out (should not longer than 12 months)

35. Nature of the business environment • Knowledge intensive product/service • Innovation • Consumer’s market • Individuality • Mass customization • Very dynamic and short product lifecycle • Concurrent engineering/operations • Highly mobile labor market • Agile manufacturing • Free product or service

36. 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

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