This document discusses business process reengineering and principles for effective reengineering. It provides examples of Ford Motor Company and Mutual Benefit Life reengineering their accounts payable and insurance application processes, respectively. Both saw significant reductions in headcount and time to complete processes by centralizing information and putting decision points closer to the work. The document advocates for reengineering processes based on outcomes rather than tasks, using technology to enable new processes rather than just automating old ones, and treating resources globally rather than locally.

1. Reengineering Work : Don’t
Automate, Obliterate
-Michael Hammer
RAHUL BABAR

2. CONTENT
Past & Current Scenario (1980’s -90’s)
Where it’s going wrong ?
Ford Motor Company
Mutual Benefit Life
Principles of Reengineering
Impact of Reengineering
Conclusion

3. Despite Restructuring and Downsizing, US
companies were still struggling in 80’s.
Rapid changes in Technology
Shorter Product Life Cycle
Slow Product Development
Asset Utilization
High Inventory Level
Solution by USA companies: Rationalization &
Automation

4. Current Scenario ( Early 90’s )
Customer Oriented
High Error in Order Fulfillment
Customer enquiries unanswered
Japan Developed Product:
2x Faster production
8x Asset Utilization
10x Faster Response to Customer

5. Where it’s going wrong ?
Automating Outdated/Traditional
Automating Useless thing will still remain
useless in the end. You are just doing useless
thing faster than you did before !!
Environment has become a lot more
competitive and customer oriented.

6. Ford Motor company
Automotive Industry was in great depression in
early 80’s
Ford Motor identified problem in one of their
Accounts payable process
Ford Should be aiming at 5 times less and not 20%
500 People 400 People Aim 20% less
In Mazda same process was carried out by 5 People

7. Earlier Process
Purchase Order Copy
By Purchase Dept
Good’s Received Copy
by Materials Dept
Vendor Sends Invoice
Accounts payable
Receives & Checking
Accounts payable personal took a lot of time in checking
and investigating in case of error or mismatch. He had to
separately cross check with each.

8. Reengineered Process
Centralized Database & Every department does its job of
entering + checking entries and taking further decisions.
Purchase Order Input
By Purchase Dept
Good’s Received by
Materials Dept match
with PO
Issue Payment Return Order
Mismatch

9. Result from Reengineering Accounts
payable process
Reduction in headcount by 75% i.e. Ford
managed to reduce number from 500
employees to 125 employees for same work.
“Invoice-less Processing”
We pay when invoice is
received
We pay when Goods are
received

10. Mutual Benefit Life
Insurance Application Process Reengineering
Credit checking, quoting, rating, underwriting,
etc.
It took 30 steps, 5 departments & 19 People
Took 22 days in process but worked on for just
17 minutes
DEPARTMENT DEPARTMENT
1 day at best or
Avg. 5 -25 days to
transfer info.

11. Solution was Centralized database & expert
system for Insurance application process
60% improvement in the efficiency
Now application was completed in 4 hours
Case manager was appointed who could now
handle twice the work and 100 field office
positions were removed.

12. Industrial Revolution
Post World War
• Specialization of labour &
economies of scale.
• Narrow Defined Tasks.
• Dept. wise re-aggregation,
installed managers as
administers.
• Imposed control & Discipline
• Cost, Growth without going
broke
Few Professionals Entry Level abundant

13. Current Scenario
Narrow look & Approach
Work handing over reason for errors
Accountability Blurs
Work structure pace didn’t keep up with
technology, demographics and business
objective.
IT should be used not to automate existing process
but to enable new one.
What most of companies are doing is..
“ Rearranging Deck chairs on Titanic ”

14. Reengineering Principles

15. 1. Organize around outcomes, not tasks
Mutual Benefit Life ( Case Manager performs all functions )
Initially it was done dept wise.
Solution :
Customer Service Representative
Customer Req.
Internal Product
coding
Convey Plant &
Warehouse
Assembling
Deliver & Install

16. 2. Have those who use the output of
the process perform the process
It was observed that purchasing non-expensive/
secondary items were more expensive.
Industrial automation
In case of breakage or breakdown customer
must be given instructions for repairs in case
of non complex. Spares must be kept with
customer using automated inventory system
and reduce breakdown time

17. 3. Subsume Information processing
work into the real work that produces
the information
Ford Motor’s Centralized database idea
The Person who is gathering information can
also carry out processing job as well with use
of expert system for decision taking. This
reduces time & cost.

18. 4. Treat Geographically dispersed
resources as though they were
centralized.
Hewlett-packard Centralized Purchasing
Purchasing dept. shared same database related to
vendors and market prices, instead of different depts.
In different regions having their own vendor database.
Result:
Purchasing at lower cost
150% improvement in on time delivery.
50% reduction in lead time
75% reduction in failure rates

19. 5. Link Parallel activities instead of
integrating their results.
Useful in Product Development
Different activity worked on separately saves
time but at integration of those activities into
one fails, because of some mismatches in
certain aspects while testing.
Solution: Shared Database, communication
network & teleconferencing.

20. 6. Put the decision point where the
work is performed and build control
into the process
MBL eliminated need for layers of managers instead
created CASE MANAGER who overlooks both
processing as well as decisional responsibilities.
IT can help capture & process data, while expert
system can supply knowledge & decisional
expertise.
Manager role changed from controller/supervisor
to supporter/facilitator

21. 7. Capture Information Once and at
the Source
An Insurance company had to capture same
data 5 times separately. So they centralized
system and gave access to all 5 departments.
Maintaining Online live database which is
accessible to all concerned at a time, reduces
time wastage in gathering information and
maintaining.

22. CHANGES
FORD
Employees had to get familiar with computers
Employees were given decision making
responsibilities
Vendors are looked more as partners instead of
adversaries.
Mutual Benefit Life
New Job rating schemes and compensation
policies.
Culture change as workers were now looked upon
as more important than those supervising.

23. CONCLUSION
Business Process Reengineering will bring
changes:
Not just process but Job Designs, Organizational
Structure, Management System.
Will lead to New Career Paths, Jobs,
Recruitment and Training methods.

24. “ Big Companies are not Dinosaurs who are
doomed to extinct but layers of
unproductive overheads and army of
unproductive workers to be shed. ”
DECISIONS TECHNOLOGY
TECHNOLOGY DECISIONS