CHALLENGE: need for business process reengineering in Ford Motor Company
Ford Motor Company is the world’s second largest manufacturer of cars and trucks with products sold in more than 200 markets. The company employs nearly 400,000 people worldwide, and has grown to offer consumers eight of the world’s most recognizable automotive brands.
With inherent large-scale growth issues, more demanding customers, and mounting cost pressures, Ford needed to transform from a linear, top-down bureaucratic business model to an Internet ready, nimble organization that engages and integrates customers, suppliers, and employees.
Working with Cisco, Ford integrated and leveraged their supplier base by designing Covisint, an end-to-end infrastructure that enables an online, centralized marketplace connecting the automotive industry supply chain. Ford also enhanced the customer buying experience through redesigned and more user friendly Web sites.
Ford is enjoying an increase in customer satisfaction, sees huge revenue opportunities for developing and retaining loyal product advocates, and has taken both complexity and cost out of the supply chain.
BUSINESS PROCESS REENGINEERING
Business process reengineering (BPR) is a management approach aiming at improvements by means of elevating efficiency and effectiveness of the processes that exist within and across organizations. The key to BPR is for organizations to look at their business processes from a "clean slate" perspective and determine how they can best construct these processes to improve how they conduct business.
Michael Hammer, the management expert who initiated the reengineering movement, defines reengineering as “the fundamental rethinking and redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed. It uses many of the tools just discussed to achieve these goals. It is a redesign and reorganization of business activities that results from questioning the status quo. It seeks to fulfill specific objectives and can lead to breakthrough improvement. It is often associated with significant cultural and technological changes.
Methodology of reengineering
Envision new processes
Secure management support
Identify reengineering opportunities
Identify enabling technologies
Align with corporate strategy
Set up reengineering team
Outline performance goals
Describe existing processes
Uncover pathologies in existing processes
Develop alternative process scenarios
Develop new process design
Design HR architecture
Select IT platform
Develop overall blueprint and gather feedback
Develop/install IT solution
Establish process changes
Performance measurement, including time, quality, cost, IT performance 2.
Link to continuous improvement
In the early 1980s, when the American automotive industry was in a depression, Ford’s top management put accounts payable- along with many other departments- under the microscope in search of ways to cut costs. Accounts payable in North America alone employed more than 500 people. Ford was enthusiastic about its plan to tighten accounts payable- until it looked at Mazda. While Ford was aspiring to a 400-person department, Mazda’s accounts payable organization consisted of a total of 5 people. The difference in absolute numbers was astounding, and even after adjusting for Mazda’s smaller size, Ford figured that its accounts payable organization was five times the size it should be. The Ford team knew better than to attribute the discrepancy to calisthenics, company songs, or low interest rates.
THE EXISTING SYSTEM
First, managers analyzed the existing system. When Ford’s purchasing...
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