Operation Management Strategy and Analysis

Topics: Business process reengineering, Process management, Business process modeling Pages: 38 (10380 words) Published: May 18, 2013
The globalization of the economy and the liberalization of the trade markets have formulated new conditions in the market place which are characterized by instability and intensive competition in the business environment. Competition is continuously increasing with respect to price, quality and selection, service and promptness of delivery. Removal of barriers, international cooperation, technological innovations cause competition to intensify. All these changes impose the need for organizational transformation, where the entire processes, organization climate and organization structure are changed. Reengineering is one approach for redesigning the way work is done to better support the organization's mission and reduce costs. Reengineering starts with a high-level assessment of the organization's mission, strategic goals, and customer needs. Reengineering may not involve copying but, like benchmarking, is an agent for change.

What is Reengineering?

The term "Re-engineering" means re-thinking or reforming or transforming to achieve radical change in order to be competitive, to bring about rapid improvement in performance. It means to re-engineer something that was engineered long ago in order to achieve desired performance as results. The concept mainly applies to an organization, particularly large organizations that have become inefficient over time that finds it difficult to be competitive using the archaic systems of governance, organizational processes and procedures. For organizational operations, Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as- cost, quality, service and speed. The concept is not about slight improvement or making an existing process better. It is about changing what exists. It is about radical change to achieve significant improvement in performance. Fundamentally it is about bringing change in mindset, and with widespread use it could significantly improve a nation's performance. It is not an easy task and should not be tried with inexperienced people. There are proven methods and tools, but it can only succeed with experienced leadership and professionals. Many corporations and institutions, public and private, have successfully utilized this concept to significantly improve their economic performance.

* Examples of Reengineering:

How much reengineering is helpful for an organization, we can understand it from the following illustrations—

* Florida Power and Light Company achieved a reduction in power outage per customer to 32 minutes, compared to 7 hours by its competitor, thorough reengineering.

* CIGNA, a leading provider of insurance and related financial services in the United States, reported that each $1 invested in reengineering generated $2-$3 in returned benefits.

* Corning Asahi Video (CAV) Products won Computerworld’s Annual Reengineering Team of the Year Award for completing a 15-month project costing $570 million that resulted in halving fulfillment time and reducing per order ordering costs for CAV by 75%.

* Digital Equipment Corporation successfully eliminated 450 positions through a reengineering project by consolidating 55 accounting groups into just five.

* Progressive Insurance, thorugh reengineering, reduced time spent in settling claims from 31 days to just 4 hours.

* During the period 1987-1992, Banca di America e di Italia (BAI) doubled its revenue and attributed 24% of the increase to its reengineering efforts.

* Pacific Bell’s first reengineering project was known as “Centrex Provisioning,” in which the company reported 36%-50% reduction in cost and over 20% reduction in errors.

* C.R. England and Sons, thorough reengineering, was able to reduce its cost of sending its invoice a to mere $0.15 compared to the average cost of $5.10 that was incurred during the period...
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