EIN 6133EIN 6133Enterprise Systems EngineeringEnterprise Systems Engineering

Chin-Sheng ChenChin-Sheng ChenFlorida International UniversityFlorida International University

T2. Short Visit to History T2. Short Visit to History of Enterprise Operationsof Enterprise Operations

Classic enterprise operationsClassic enterprise operations Concepts related to enterprise Concepts related to enterprise

engineeringengineering– Enterprise re-engineering (BPR)Enterprise re-engineering (BPR)– Systems integration (ERP I and II)Systems integration (ERP I and II)

Trend & enterprise systems of Trend & enterprise systems of futurefuture

Classic Enterprise Classic Enterprise OperationsOperations

SourceSource– The Wealth of NationsThe Wealth of Nations

By Adam SmithBy Adam Smith

PrinciplesPrinciples– Division of laborDivision of labor– Economies of scaleEconomies of scale– Hierarchical controlHierarchical control

The business system The business system dynamics (diamond)dynamics (diamond) Values and beliefsValues and beliefs Business processesBusiness processes Jobs and structuresJobs and structures Management and measurement Management and measurement

systemssystems

Business process Business process reengineering (BPR)reengineering (BPR)

DefinitionDefinition– Fundamental rethinking and radical Fundamental rethinking and radical

redesign of business processes to redesign of business processes to achieve dramatic improvement in achieve dramatic improvement in critical, contemporary measures of critical, contemporary measures of performance, such as cost, quality, performance, such as cost, quality, service, and speed.service, and speed.

Four key words in Four key words in enterprise re-enterprise re-engineeringengineering FundamentalFundamental RadicalRadical DramaticDramatic processesprocesses

Business processesBusiness processes

A business process is a set of organized activities A business process is a set of organized activities – for a business objective orfor a business objective or– That delivers value to a customer.That delivers value to a customer.

Enterprise operation is a business processEnterprise operation is a business process A process may have sub-processesA process may have sub-processes Processes are usually invisible, unnamed, and Processes are usually invisible, unnamed, and

unmanagedunmanaged– Because like-activities are grouped into Because like-activities are grouped into

functional departmentsfunctional departments– And processes go through various And processes go through various

departmentsdepartments..

Typical business Typical business process typesprocess types ManufacturingManufacturing

– From procurement to shipmentFrom procurement to shipment Product developmentProduct development

– From concept to prototypeFrom concept to prototype Concept formulationConcept formulation

– From need to concept designFrom need to concept design

Order fulfillmentOrder fulfillment– From order to paymentFrom order to payment

ServiceService– From inquiry to resolutionFrom inquiry to resolution

An Re-engineering An Re-engineering example - Ford Motors example - Ford Motors (1)(1) BackgroundBackground

Accounts payable department of Accounts payable department of 500 workers in 80’s500 workers in 80’s

Set a goal to reduce 20% head Set a goal to reduce 20% head countscounts

It acquired 25% interest in Mazda It acquired 25% interest in Mazda at the time and found out it had at the time and found out it had only five workers.only five workers.

An Re-engineering An Re-engineering example - Ford Motors example - Ford Motors (2)(2) EffortEffort

Re-engineer the process (not an org. Re-engineer the process (not an org. unit) of procurement (including the unit) of procurement (including the accounts payable)accounts payable)

Eliminate invoice via an on-line Eliminate invoice via an on-line database, database,

– so that payment authorization is shifted to so that payment authorization is shifted to the receiving dock the receiving dock

– from the account payable, who had tofrom the account payable, who had to match match PO with invoice and receiving documents.PO with invoice and receiving documents.

An Re-engineering An Re-engineering example - Ford Motors example - Ford Motors (3)(3) ResultResult

The new processThe new process– A buyer in the purchase department issues a PO to A buyer in the purchase department issues a PO to

a vendor and enters it to an online database.a vendor and enters it to an online database.– Vendors send goods to the receiving dockVendors send goods to the receiving dock– At the dock, a receiving clerk checks at the At the dock, a receiving clerk checks at the

computer terminal if the received shipment computer terminal if the received shipment correspond to an outstanding in the database. correspond to an outstanding in the database.

– If so, the goods are recorded and the computer If so, the goods are recorded and the computer will automatically issue and send a check to the will automatically issue and send a check to the vendor at the appropriate time.vendor at the appropriate time.

It ended up with 125 workers in vendor payment It ended up with 125 workers in vendor payment at the end.at the end.

– Handling only exceptions (Pareto 80-20 rules)Handling only exceptions (Pareto 80-20 rules)

An Re-engineering An Re-engineering example - Ford Motors example - Ford Motors (4)(4) Lessons learnedLessons learned

– Reverse the industrial revolution (division Reverse the industrial revolution (division of labor)of labor)

– Flatten the organization to eliminate Flatten the organization to eliminate fragmentation and bureaucracyfragmentation and bureaucracy

– Process orientationProcess orientation– AmbitionAmbition– Rule-breakingRule-breaking– Creative use of information technologyCreative use of information technology

Information Information Technology – BPR Technology – BPR enablerenabler Shared databaseShared database

Expert systemsExpert systems

Telecommunication networksTelecommunication networks

Decision support toolsDecision support tools

  Portable & wireless data communicationPortable & wireless data communication

    Interactive videodiskInteractive videodisk

    Automatic ID and tracking systemsAutomatic ID and tracking systems

    High performance computing High performance computing

Common themes in re-Common themes in re-engineered processesengineered processes Several jobs are combined into oneSeveral jobs are combined into one Workers make decisionsWorkers make decisions Processes have multiple versionsProcesses have multiple versions Work is performed where it makes the most Work is performed where it makes the most

sense.sense. Checks and controls are reducedChecks and controls are reduced Reconciliation (consolidating redundant Reconciliation (consolidating redundant

papers) is minimized.papers) is minimized. Hybrid centralized/decentralized operations Hybrid centralized/decentralized operations

are prevalent.are prevalent.

Changes in re-Changes in re-engineered business engineered business processesprocesses Work units changes – from functional departments to Work units changes – from functional departments to

process teamsprocess teams Jobs change – from simple to multi-dimensional workJobs change – from simple to multi-dimensional work People’s role change – from controlled to empoweredPeople’s role change – from controlled to empowered Job preparation changes – from training to educationJob preparation changes – from training to education Focus of performance measures and compensation shifts Focus of performance measures and compensation shifts

– from activity to results– from activity to results Advancement criteria change – from performance to Advancement criteria change – from performance to

abilityability Values change – from protective to productiveValues change – from protective to productive Managers change – from supervisors to coachesManagers change – from supervisors to coaches organizational structures change – from hierarchical to organizational structures change – from hierarchical to

flatflat Executives change – from score keepers to leadersExecutives change – from score keepers to leaders

What re-engineering is What re-engineering is NOT:NOT: AutomationAutomation

– More efficient way of doing wrong thingsMore efficient way of doing wrong things Software re-engineeringSoftware re-engineering

– Use more sophisticated computer system)Use more sophisticated computer system) DownsizingDownsizing

– Reduce capacity to meet lower demandReduce capacity to meet lower demand Other re-sOther re-s

– RestructuringRestructuring– re-organizingre-organizing

FlatteningFlattening De-layeringDe-layering

Quality improvement (TQM)Quality improvement (TQM)– Kaizen: continuous incremental improvementKaizen: continuous incremental improvement

Who re-engineerWho re-engineer

1.1. leaderleader

2.2. steering committeesteering committee

3.3. reengineering czarreengineering czar

4.4. reengineering teamreengineering team

5.5. process ownerprocess owner

Three criteria to identify Three criteria to identify re-engineering re-engineering opportunitiesopportunities DysfunctionDysfunction

– the processes that are in deepest troublethe processes that are in deepest trouble ImportanceImportance

– the processes with the greatest impact the processes with the greatest impact on the company’s customerson the company’s customers

FeasibilityFeasibility– the processes most susceptible to the processes most susceptible to

successful redesignsuccessful redesign

Broken processes (1)Broken processes (1)

ObservationObservation– extensive information exchange, data extensive information exchange, data

redundancy, and re-keyingredundancy, and re-keying ProblemProblem

– arbitrary fragmentation of a natural arbitrary fragmentation of a natural processprocess

SolutionSolution– consolidate fragmented tasks, when consolidate fragmented tasks, when

feasiblefeasible

Broken processes (2)Broken processes (2)

ObservationObservation– inventory, buffers, and other assetsinventory, buffers, and other assets

ProblemProblem– system slack to cope with uncertaintysystem slack to cope with uncertainty

SolutionSolution– structure processes such that suppliers structure processes such that suppliers

and customers plan and schedule their and customers plan and schedule their respective work together.respective work together.

Broken processes (3)Broken processes (3)

ObservationObservation– High ratio of checking and control to value High ratio of checking and control to value

addingadding ProblemProblem

– FragmentationFragmentation SolutionSolution

– Eliminate managers’ mistrust and Eliminate managers’ mistrust and incompetence that come from incompetence that come from fragmentationfragmentation

Broken processes (4)Broken processes (4)

ObservationObservation– rework and iterationrework and iteration

ProblemProblem– inadequate feedback along chainsinadequate feedback along chains

SolutionSolution– eliminate mistakeseliminate mistakes

Broken processes (5)Broken processes (5)

ObservationObservation– complexity, exceptions, and special complexity, exceptions, and special

casescases ProblemProblem

– growth onto a simple base (simple growth onto a simple base (simple process grows complex).process grows complex).

SolutionSolution– develop simple processes with develop simple processes with

decision pointsdecision points

Important business Important business processesprocesses

From customer’s point of viewFrom customer’s point of view– product quality and featuresproduct quality and features – product costproduct cost– on-time deliveryon-time delivery– Customer serviceCustomer service

Product life cycle Product life cycle

Factors for choosing Factors for choosing feasible processes for re-feasible processes for re-engineeringengineering Likelihood of successLikelihood of success

– Commitment of the process ownerCommitment of the process owner– Strength of the re-engineering teamStrength of the re-engineering team– CostCost– Lead timeLead time

The re-engineering The re-engineering processprocess identify a process to reengineeridentify a process to reengineer understand the current process understand the current process

– what and why including input & output, what and why including input & output, but not how but not how

understand how the customer uses the understand how the customer uses the output of the processoutput of the process– by watching how it does by watching how it does

Redesign Redesign – try to avoid benchmarking, as it may limit try to avoid benchmarking, as it may limit

the team’s innovationthe team’s innovation

BPR PrinciplesBPR Principles

Work is best organized around Work is best organized around outcomes, not tasksoutcomes, not tasks

As few people as possible should As few people as possible should be involved in the performance of be involved in the performance of a processa process

Identify and destroy assumptionsIdentify and destroy assumptions Look for opportunities for creative Look for opportunities for creative

application of information application of information technologytechnology

Additional BPR Additional BPR principles as role principles as role playersplayers You don’t need to be an expert to redesign a You don’t need to be an expert to redesign a

processprocess Being an outsider helpsBeing an outsider helps Your have to discard preconceived notionsYour have to discard preconceived notions It’s important to see things through the It’s important to see things through the

customer’s eyes.customer’s eyes. Redesign is best done in teams.Redesign is best done in teams. Your don’t need to know much about the Your don’t need to know much about the

current processcurrent process It’s not hard to have great ideasIt’s not hard to have great ideas Redesign can be fun.Redesign can be fun.

Avoidance in BPR (1)Avoidance in BPR (1)

Try to fix a process instead of changing itTry to fix a process instead of changing it Don’t focus on business processesDon’t focus on business processes Ignore everything except process redesign (as it affects Ignore everything except process redesign (as it affects

others).others). Neglect people’s values and beliefsNeglect people’s values and beliefs Be willing to settle for minor resultsBe willing to settle for minor results Quit too earlyQuit too early Place prior constraints on the definition of the problem Place prior constraints on the definition of the problem

and the scope of the reengineering effortand the scope of the reengineering effort Allow existing corporate cultures and management Allow existing corporate cultures and management

attitudes to prevent reengineering from getting started.attitudes to prevent reengineering from getting started. Try to make reengineering happen from the bottom up.Try to make reengineering happen from the bottom up.

Avoidance in BPR (2)Avoidance in BPR (2)

Assign someone who doesn’t understand reengineering to lead Assign someone who doesn’t understand reengineering to lead the effortthe effort

Skimp on the resources devoted to reengineeringSkimp on the resources devoted to reengineering Bury reengineering in the middle of the corporate agendaBury reengineering in the middle of the corporate agenda Dissipate energy across a great many reengineering projectsDissipate energy across a great many reengineering projects Attempt to reengineer when the CEO is 2 years from retirementAttempt to reengineer when the CEO is 2 years from retirement Fail to distinguish reengineering from other business Fail to distinguish reengineering from other business

improvement programsimprovement programs Concentrate exclusively on designConcentrate exclusively on design Try to make reengineering happen without making anybody Try to make reengineering happen without making anybody

unhappyunhappy Pull back when people resist making re-engineering’s changesPull back when people resist making re-engineering’s changes Drag the effort out (should not longer than 12 months)Drag the effort out (should not longer than 12 months)

Nature of the business Nature of the business environmentenvironment Knowledge intensive product/serviceKnowledge intensive product/service

– InnovationInnovation Consumer’s marketConsumer’s market

– IndividualityIndividuality– Mass customizationMass customization

Very dynamic and short product lifecycleVery dynamic and short product lifecycle– Concurrent engineering/operationsConcurrent engineering/operations

Highly mobile labor marketHighly mobile labor market– Agile manufacturingAgile manufacturing

Free product or serviceFree product or service

Enterprise Enterprise characteristicscharacteristics InnovationInnovation First in the market (market pre-emption)First in the market (market pre-emption) Mass customizationMass customization Quick responseQuick response No inventoryNo inventory Virtual resources (collaborative via SCM)Virtual resources (collaborative via SCM) ScalabilityScalability AgilityAgility Process & knowledge managementProcess & knowledge management

Business process & Business process & intelligenceintelligence Business knowledgeBusiness knowledge

– Product & mfg. processProduct & mfg. process– ProductionProduction– Business processBusiness process

Business process knowledge mgt.Business process knowledge mgt.– Knowledge warehouse (& ISO) vs.Knowledge warehouse (& ISO) vs.– Process embedded with knowledgeProcess embedded with knowledge

T2: HomeworkT2: Homework

Identify a problem in FIU operation for Identify a problem in FIU operation for BPR and propose a solution for itBPR and propose a solution for it

Propose a solution approach to the Propose a solution approach to the classic enterprise operation’s classic enterprise operation’s efficiency problem (in hierarchical efficiency problem (in hierarchical control) as per discussion in class. control) as per discussion in class.

Due: next weekDue: next week