UNIVERSITY OF PETROLEUM & ENERGY STUDIES

DEHRADUN

BPR vs. TQMBusiness Process Reengineering

(MBCG 749)

Submitted to:Professor - Dr. NEERAJ ANAND

CoMESSubmitted by: Anupam Biswas

R600214019Arpit Jha

R600214020

Roll No. R600214019MBA (LSCM) Sem III

Batch 2014-16

1

Sr. no. Topics Page no.

1 Introduction to TQM 3

2 Elements of TQM 4

3 TQM Flowchart 7

4 Introduction to BPR 7

5 BPR Methodology 9

6 BPR & IT 11

7 BPR Project Classification 12

8 BPR Flowchart 13

9 Difference b/w BPR & TQM 14

10 Statistical Tools 15

11 Applications 18

12 References 20

Contents

2

What is TQM?

Total quality management (TQM) is a management philosophy practiced in many organizations,

focusing on continuously improving the quality of its products and services in order to fulfill the

customer expectations without influencing the ethical values. Therefore, everybody who is

related to the organization from top to bottom has a huge responsibility in providing

quality products or services.

In order to achieve TQM by fulfilling the requirements of the customers, one needs to be

thoroughly concerned about the following principles.

• Necessity of producing quality output in the first time.

• Focusing on satisfying the customer expectations.

• Following a strategic approach for continuous improvements.

• Encouraging mutual respect and teamwork.

Benefits of TQM

Using the TQM philosophy ensures the following results:

• Organization becomes more competitive.

• Helping to establish a new culture which enables growth and long-term success.

• Creates a productive working environment in which everyone can succeed.

• Helps to reduce stress, waste and defects.

• Helps to build partnerships, teams and co-operation.

3

To be successful implementing TQM, an organization must concentrate on the eight key elements:

Ethics Integrity Trust Training Teamwork Leadership Recognition Communication

I. FoundationTQM is built on a foundation of ethics, integrity and trust. It fosters openness, fairness and sincerity and allows involvement by everyone. This is the key to unlocking the ultimate potential of TQM. These three elements move together, however, each element offers something different to the TQM concept.1. Ethics – Ethics is the discipline concerned with good and bad in any situation. It is a two-faceted subject represented by organizational and individual ethics. Organizational ethics establish a business code of ethics that outlines guidelines that all employees are to adhere to in the performance of their work. Individual ethics include personal rights or wrongs.

2. Integrity – Integrity implies honesty, morals, values, fairness, and adherence to the facts and sincerity. The characteristic is what customers (internal or external) expect and deserve to receive. People see the opposite of integrity as duplicity. TQM will not work in an atmosphere of duplicity.

3. Trust – Trust is a by-product of integrity and ethical conduct. Without trust, the framework of TQM cannot be built. Trust fosters full participation of all members. It allows empowerment that encourages pride ownership and it encourages commitment. It allows decision making at appropriate levels in the organization, fosters individual risk-taking for continuous improvement and helps to ensure that measurements focus on improvement of process and are not used to

4

contend people. Trust is essential to ensure customer satisfaction. So, trust builds the cooperative environment essential for TQM.

II. BricksBasing on the strong foundation of trust, ethics and integrity, bricks are placed to reach the roof of recognition. It includes:4. Training – Training is very important for employees to be highly productive. Supervisors are solely responsible for implementing TQM within their departments, and teaching their employees the philosophies of TQM. Training that employees require are interpersonal skills, the ability to function within teams, problem solving, decision making, job management performance analysis and improvement, business economics and technical skills. During the creation and formation of TQM, employees are trained so that they can become effective employees for the company.

5. Teamwork – To become successful in business, teamwork is also a key element of TQM. With the use of teams, the business will receive quicker and better solutions to problems. Teams also provide more permanent improvements in processes and operations. In teams, people feel more comfortable bringing up problems that may occur, and can get help from other workers to find a solution and put into place. There are mainly three types of teams that TQM organizations adopt:

A. Quality improvement teams or excellence teams (QITs) – These are temporary teams with the purpose of dealing with specific problems that often recur. These teams are set up for period of three to twelve months.B. Problem solving teams (PSTs) – These are temporary teams to solve certain problems and also to identify and overcome causes of problems. They generally last from one week to three months.C. Natural work teams (NWTs) – These teams consist of small groups of skilled workers who share tasks and responsibilities. These teams use concepts such as employee involvement teams, self-managing teams and quality circles. These teams generally work for one to two hours a week.6. Leadership – It is possibly the most important element in TQM. It appears everywhere in organization. Leadership in TQM requires the manager to provide an inspiring vision, make strategic directions that are understood by all and to instill values that guide subordinates. For TQM to be successful in the business, the supervisor must be committed in leading his employees. A supervisor must understand TQM, believe in it and then demonstrate their belief and commitment through their daily practices of TQM. The supervisor makes sure that strategies, philosophies, values and goals are transmitted down throughout the organization to provide focus, clarity and direction. A key point is that TQM has to be introduced and led by top management. Commitment and personal involvement is required from top management in creating and deploying clear quality values and goals consistent with the objectives of the company and in creating and deploying well defined systems, methods and performance measures for achieving those goals.

5

III. Binding Mortar7. Communication – It binds everything together. Starting from foundation to roof of the TQM house, everything is bound by strong mortar of communication. It acts as a vital link between all elements of TQM. Communication means a common understanding of ideas between the sender and the receiver. The success of TQM demands communication with and among all the organization members, suppliers and customers. Supervisors must keep open airways where employees can send and receive information about the TQM process. Communication coupled with the sharing of correct information is vital. For communication to be credible the message must be clear and receiver must interpret in the way the sender intended.There are different ways of communication such as:A. Downward communication – This is the dominant form of communication in an organization. Presentations and discussions basically do it. By this the supervisors are able to make the employees clear about TQM.B. Upward communication – By this the lower level of employees are able to provide suggestions to upper management of the effects of TQM. As employees provide insight and constructive criticism, supervisors must listen effectively to correct the situation that comes about through the use of TQM. This forms a level of trust between supervisors and employees. This is also similar to empowering communication, where supervisors keep open ears and listen to others.C. Sideways communication – This type of communication is important because it breaks down barriers between departments. It also allows dealing with customers and suppliers in a more professional manner.IV. Roof8. Recognition – Recognition is the last and final element in the entire system. It should be provided for both suggestions and achievements for teams as well as individuals. Employees strive to receive recognition for themselves and their teams. Detecting and recognizing contributors is the most important job of a supervisor. As people are recognized, there can be huge changes in self-esteem, productivity, quality and the amount of effort exhorted to the task at hand. Recognition comes in its best form when it is immediately following an action that an employee has performed. Recognition comes in different ways, places and time such as,

Ways – It can be by way of personal letter from top management. Also by award banquets, plaques, trophies etc.

Places – Good performers can be recognized in front of departments, on performance boards and also in front of top management.

Time – Recognition can be given at any time like in staff meeting, annual award banquets, etc.

6

TQM Flowchart

What is BPR?

Business Process Re-engineering (BPR) results in changes among the structures and processes

within the business environment. Therefore, there may be technological advancements and

human resource replacements with the automation techniques which will increase the

efficiencies and the productivity of the organizations. These would result in increasing the

flexibility and adaptability to the rapid changes in the competitive business environment.

Business processes can be divided into three elements as inputs, process and outputs. The BPR is

related to the processing element in order to reduce the cost and improve the delivery time.

According to Hammer Champy in 1993, BPR is the fundamental rethinking and radical design of

7

the business processes to achieve improvements within performances, cost, quality, service and

speed.

Objectives of BPR

The main objectives of BPR include the following factors:

• Customer focus -The main objective of BPR is to increase the level of customer satisfaction.

• Speed – With the use of advanced technologies, the processing speed is expected to be

improved as most of the tasks are automated.

• Compression – It explains the ways of reducing the cost and capital invested in primary

activities, throughout the value chain. It can be done by combining the interrelated activities or

by performing parallel activities in a particular process.

• Flexibility – It is an out the adaptive processes and structures used to changing conditions and

competition. By being closer to the customer, the company would be able to develop the

awareness mechanisms to tackle the areas that require improvements.

• Quality – The level of quality can always be maintained with the expected levels of standards

and can be monitored by the processes.

• Innovation – Leadership through innovation provides changes in the organization to achieve

competitive advantage.

• Productivity-It can be improved drastically with effectiveness and efficiency.

8

BPR as an organizational change includes:

Activity based costing analysis – Baselining and benchmarking studies – Business case analysis

– Functionality assessment – Industrial engineering techniques – Organization analysis –

Productivity assessment – Workforce analysis – Others, as needed (e.g., human capital tools)

BPR methodology:

9

Seven Principles of Reengineering

Hammer and Champy felt the design of workflow in most large corporations was based on no-longer-valid assumptions about technology, people and organizational goals. They also outlined seven reengineering principles to streamline the work process and thereby achieve significant levels of improvement in quality, time management and cost:

Organize around outcomes, not tasks. Identify all the processes in an organization and prioritize them in order of redesign urgency. Integrate information processing work into the real work that produces the information. Treat geographically dispersed resources as though they were centralized. Link parallel activities in the workflow instead of just integrating their results. Put the decision point where the work is performed, and build control into the process. Capture information once and at the source.

In evaluating Hammer and Champy’s principles of BPR, one must note that BPR is not reorganizing, restructuring, downsizing, automation or cost-cutting – although these results are often part of a well thought-out, well planned, and well-executed reengineering project. A successful BPR project can be more identified with the following success factors identified in Prosci’s study “1998-1999 Reengineering Best Practices:”

Proven methodology Compelling business case for change Effective change management Strategic alignment Line ownership Top management sponsorship Reengineering team composition

Prosci’s success factors directly map to tenants of Six Sigma:

Executive management support Willing participation and buy-in of all associates involved in the redesign Focus on value-add and customer-focused processes

10

BPR and Information Technology

Business Process Re-engineering has rapidly developed towards a new management

philosophy. The inherent business process orientation changes the perspective of

international management from a structural to that of a process view. The re-engineering

of business processes is only one aspect of the management of business processes. In

particular, the re-engineering of international business processes needs special attention,

because the multi-faceted structure of multinational corporations increases the complexity

of business processes, there by influencing the options for redesign. Business Process Re-

engineering has rapidly developed towards a new management philosophy based upon

predecessors like Total Quality Management, Overhead Value Analysis, Kanban or Just-

In-Time-Management. Business processes can be re-engineered by redesigning the steps, by

changing the logical and temporal sequence of the steps, or by changing any other

characteristics of the process. The role of IT is discussed in contradictory way. Advocates

of information systems favor the view that the new technology is an enabler of process re-

engineering. IT has to be monitored constantly to determine whether it can generate new

process designs or contribute to the performance of a business process. The breakthrough

of BPR is closely connected with IT, which opens new dimensions of process

reorganization. Moreover, those who take the initiative in process improvement/redesign,

influence the role of IT. If the data processing department initiates the process change, then

IT will have more of a generator function for new process redesigns. If on the other hand,

the top management sets off the change process, then the process will be first restructured

and later optimized through IT.

11

BPR Project classification

                                       Objective Scope

StreamliningProcess

Improvement"Cost-

Reduction"

Re-engineering

Achieving Best-In-Class

"Competitive Parity "

Re-inventingBreak-Point

"Rewriting the Rules"

Pro

Example 1.1:Eliminate costly paper work by introducing an e-mail system to internal communication.

Example 1.2.:Reengineer the sourcing process to ensure that the lowest cost suppliers are being selected.

Example 1.3.:A company uses a digital voice recording system to streamline its acquisition process, and to improve communications

Example: 2.1:A bank has created a simplified, one page form for loan applications for those customers, seeking up to US$ 60k.

Example 2.2.:Introduce self-directed work teams to the order management process in a manufacturing company.

Example 2.3.:A bank dissolves all existing 120 branches, and introduces an extremely user-friendly direct banking system on the Internet.

Example 3.1:Link up with one particular vendor for cost saving purposes in product design and parts delivery (single source concept).

Example 3.2.: Reengineering the delivery process between a german machine manufacturer and all its European automotive parts suppliers (just-in-time processes).

Example 3.3.:An automotive company externalizes all employees, except a staff of thirty people. Former employees turn into entrepreneurs and form a network of suppliers together with other vendors.

12

SCOPE

Intra-functional

Projects are aimed at single and isolated tasks, activities or single function.

Inter-functional

Projects target cross functional business processes, but arecontained within a business unit.

Inter-organizational

Projects bridge  between two ormore business units, such as thecompany and its customers andsuppliers.

BPR Flowchart

What is the difference between TQM and BPR?

• TQM and BPR have a cross-functional relationship. TQM is concerned about improving

productivity through quality improvements while BPR is about making process improvements

through radical redesign and use of advanced technologies.

• TQM is focusing on continuous improvements while BPR is concerned about product

innovations.

• TQM emphasis on the use of statistical process control while BPR emphasis on the use of

information technology.

13

• Both top down and bottom up approaches can be used in implementing TQM, but BPR can be

implemented only through a top-down approach.

 Difference:

14

Statistical tools

1. Pareto AnalysisPareto principle suggests that most effects come from relatively few causes. In quantitative terms: 80% of the problems come from 20% of the causes (machines, raw materials, operators etc.); 80% of the wealth is owned by 20% of the people etc. Therefore effort aimed at the right 20% can solve 80% of the problems. Double (back to back)

Pareto charts can be used to compare 'before and after' situations. General use, to decide where to apply initial effort for maximum effect.

The 80/20 rule can be applied to almost anything:

80% of customer complaints arise from 20% of your products and services.

80% of delays in the schedule result from 20% of the possible causes of the delays.

20% of your products and services account for 80% of your profit.

20% of your sales-force produces 80% of your company revenues.

20% of a systems defects cause 80% of its problems.

15

2. Cause and Effect/Fishbone analysis: IshikawaThis tool is used to:

Discover the root cause of a problem.

Uncover bottlenecks Add to My Personal Learning Plan in your processes.

Identify where and why a process isn't working.

Schematic representation of Fishbone: Third-party agents/

Internal Staff Customers Subcontractors

Lack of preparation

Staff input Unclear booking order Cargo status

wrong information No standard format Delayed Booking

HAWB problems Too many paper documents Lack of contract CCP

Misunderstanding, no Booking order is missing Incomplete ld

Standard format Non IT booking Booking

Delayed No Forecast Lack of Contract

Or inaccurate pre-alert Late booking

Lack of Contract

Order Booking ProblemsNo IT order booking Use longer processing

Too much time Natural problems

Rely on email/call Softwares are out-of-date IT system problems

Limited local IT Lack of care NSS

Development Lack of maintenance

16

Communication Gap Fax/Printer work down Management flaw

Lack of follow up No proper maintenance/old

Methods Systems Management

3. Control chart

Control charts, also known as Shewhart charts (after Walter A. Shewhart) or process-behavior charts, in statistical process control are tools used to determine if a manufacturing or business process is in a state of statistical control.

The control chart is a graph used to study how a process changes over time. Data are plotted in time order. A control chart always has a central line for the average, an upper line for the upper control limit and a lower line for the lower control limit. These lines are determined from historical data.

Interpreting the chart: The most standard display actually contains two charts (and two histograms); one is called an X-bar chart, the other is called an R chart.

In both line charts, the horizontal axis represents the different samples; the vertical axis for the X-bar chart represents the means for the characteristic of interest; the vertical axis for the R chart represents the ranges. For example, suppose we want to control the diameter of piston rings that we are producing. The center line in the X-bar chart would represent the desired standard size (e.g., diameter in millimeters) of the rings, while the center line in the R chart would represent the acceptable (within-specification) range of the rings within samples; thus, this latter chart is a chart of the variability of the process (the larger the variability, the larger the range). In

17

0102030405060

1 2 3 4 5 6 7 8 9 10 11 12

UC L

LCL

addition to the center line, a typical chart includes two additional horizontal lines to represent the upper and lower control limits (UCL, LCL, respectively); we will return to those lines shortly. Typically, the individual points in the chart, representing the samples, are connected by a line. If this line moves outside the upper or lower control limits or exhibits systematic patterns across consecutive samples, a quality problem may potentially exist.

Application:

18

BPR

Application:

19

TQM

Application:

References: 1. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.307.9409&rep=rep1&type=pdf

2. http://www.slideshare.net/?ss

3. http://www.differencebetween.com/difference-between-tqm-and-vs-bpr/

20

4. http://www.yourarticlelibrary.com/business/comparison-between-business-process-reengineering-and-total-quality-management/21147/

21