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Business Process Re-Engineering Through Enterprise Resource Planning

When Ford wanted to downsize its bloated accounts payable department, it looked at the department’s existing business process. Ford’s analysis indicated the process was obsolete, so it reinvented it and successfully cut its accounts payable department by 75%.

This is what business process re-engineering (BPR) is in a nutshell. It involves:

  • Looking at business processes in their entirety;
  • Analyzing why they are set up that way and identifying underlying assumptions
  • Making a judgment call (particularly on whether these underlying assumptions remain valid and whether the process remains the best way to achieve business goals).

Business process re-engineering is a fundamental redesign of business processes for significant performance, efficiency, and effectiveness gains.

It entails a radical overhaul of existing processes, so companies often start the redesign from a blank slate. This ensures the elimination of unnecessary steps, streamlining workflows and leveraging technology to transform operations.

BPR takes a holistic view of the organization’s processes, challenging existing assumptions and seeking innovative solutions. It emphasizes a fundamental shift in thinking and aims to achieve breakthrough improvements rather than incremental changes.

While BPR is a long and tedious process, when it is applied correctly, it is worth it. Its benefits can include:

  • Increased productivity
  • Improved product quality or service delivery
  • Reduced costs
  • Increased customer satisfaction
  • Better competitive advantage

Business Process Re-engineering in Action

In Ford’s case, the accounts payable department’s main job is to pay its vendors — i.e., send out checks to suppliers.

Before doing that, however, it must ensure that the bills and invoices are correct and that the company has received the parts or supplies indicated therein. This entailed many manual checks, with staff chasing records across the purchasing department, verifying receipt by material control, and validating the entries in vendor invoices. Thus, it was inevitable that the department had a headcount of 500.

As part of its improvement initiatives, it evaluated how the accounts payable department paid vendors. Its analysis revealed the current process chokepoints and inefficiencies, and Ford realized it had to change things.

Ford could have improved its processes, perhaps by doing the following things:

  • Installing better inter-departmental communication systems to facilitate the exchange of information among the purchasing, material control, and accounts payable departments
  • Using advanced document scraping and processing software to speed up the staff’s work
  • Instituting new standard operating procedures that will minimize errors in purchasing and material control data

However, Ford realized it required more than business process improvement. Instead, it must change the process itself. And so it did and changed the workflows of three departments.

Ford ensured the accounts payable department staff no longer had to spend time and effort hunting up and validating information from other departments by creating a centralized database that everyone from these three departments could access.

The purchasing department used the database to record its detailed purchase orders. When material control received parts and supplies, it went into the database to match them against pending purchase orders. Whenever a part matched a purchase order, the purchase order would get marked as fulfilled.

In the accounts payable department, the changes were no less drastic.

Computer software checked the centralized database to see if the details of an invoice matched a purchasing department order that the material control department had marked received. If they did, the system automatically generated a check for the vendor, and all the staff needed to do was send it out.

BPR-Enabling ERP

Technology is a primary enabler of business process re-engineering. As a case in point, without the technology that enabled Ford to centralize its data, it wouldn’t have been able to accomplish BPR.

The hospitality industry is another example. Hotels redesigning the customer journey and the guest experience require modern hospitality technology such as the Internet of Things and artificial intelligence chatbots.

ERP is enterprise resource planning. It is a software system that integrates various business functions and departments within an organization in one centralized database, streamlining data flow, enhancing process visibility, and facilitating efficient resource management. It is an important tool as it can facilitate process re-engineering.

How ERP Works?

ERP is a modular system. Organizations can decide which ERP system to get and often pick and choose the modules they want. Given ERPs origins in manufacturing, popular modules include procurement, inventory management, production management, and order management.

It provides value because it can automate processes and significantly increase operational efficiency and productivity.

For instance, order tracking through the order management module means inventory levels can be monitored in real time, and demands may be forecasted. If actual or projected inventory levels fall below a specific number, it may be put in a manufacturing order. This, in turn, may trigger a raw-materials check and, finding it insufficient, induce procurement to order supplies.

Additionally, ERP systems give decision-makers complete visibility over their operations. Anytime they need to, such as when they must decide on outsourcing manufacturing to a third-party provider in China, they can turn to their ERP to get real-time data.

This eliminates the necessity of getting reports prepared and signed off on by individual departments. Anything the leadership wants to know, it can immediately see through the ERP.

How ERP Can Enable BPR?

The following are ways ERP can enable business process re-engineering.

1. Streamlining and Integration

Streamlining and integration are hallmarks of Ford’s BPR. Specifically, it streamlined the accounts payable process by providing an integrated approach that also involved the purchase order and material control departments.

ERP systems are a handy tool for streamlining and integration. They provide a platform to unify disparate processes and functions, eliminating data silos and enabling seamless information flow across the organization. This integration fosters collaboration, reduces manual work, and enhances process efficiency.

Without ERP, a company’s customer support representative may require a customer inquiring about their order to provide all their information, such as their name, address, and order details.

With ERP, the customer support representative will only need to provide a resolution. All the information they need should be available on their screen, courtesy of the linked customer relationship management module in the company’s ERP system.

2. Data Management and Analysis

BPR implementation requires data and business insights. ERP systems offer robust data management capabilities, allowing organizations to capture, store, and analyze vast amounts of data related to different business processes.

This data-driven approach enables organizations to glean valuable business insights, identifying bottlenecks, inefficiencies, and improvement opportunities. AI-powered data analysis tools may even be able to suggest BPR initiatives.

3. Process Automation

BPR often involves automation. Organizations can streamline processes, improve accuracy, and free up resources for more value-added tasks by automating routine or repetitive activities.

ERP systems have automation features that can reduce manual tasks, such as data entry, approvals, and document handling.

4. Standardization and Best Practices

BPR is about standardizing best practices to eliminate inconsistencies, redundancies, and process variations, improving efficiency, quality, and compliance.

ERP systems provide a framework to establish standardized processes and enforce best practices across an organization.

ERP and BPR: The Perfect Match

Business process re-engineering means redesigning current processes and related workflows to drive the organization’s efficiency, productivity, and competitive advantage, but one needs to use technology to accomplish BPR.

Enterprise resource planning is one such technology, and it can enable business process re-engineering by guiding a company’s BPR direction and implementation.