Business Process Reengineering is a complex process that intends to bring about radical transformations within an organization. This particular study is a pilot project on BPR that studies a store belonging to Argos, one of UK’s prime retail chains. It interacts with the employees out there and observes various processes in order to come up with a framework for BPR implementation. Before getting into the fieldwork, a detailed literature review has also been undertaken through this study involving various success and failure factors of BPR and related issues like six sigma, benchmarking and importance of total cycle time.
This study consists of mainly qualitative analysis with a bit of quantitative portions wherever necessary. The primary modes of data collection includes a open ended interview involving six questions asked to six respondents working at different levels of the store that was assigned for this purpose. This interview was used as the foundation to proceed with further analysis of various processes within the store with active help from the organization. It was seen through the interview that the employees do have reservations about certain operating issues within the organization. But at the same time they are a bit wary of potential changes and hence are not willing to freely talk about the whole issue. It basically shows two main areas of improvement namely in supply chain and inventory management and also in the field of customer relationship management.
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Further analysis of the processes has shown that due to the usage of multiple outdated legacy software, the supply chain has become slow and unable to handle the recent growth. That is why Argos is working with Oracle and Accenture to overhaul the software system. Along with these technological modifications, some strategic changes have been proposed through this study regarding the inventory replenishments strategy. It has proposed a more frequent replenishment backed by cutting edge business forecasts and other related measures. As far as customer service issues are concerned, a problem with delays in delivery has been observed and hence more automation in the process along with some amount of outsourcing is suggested in order to save costs as well as increase efficiency by reducing cycle time.
Throughout this study, it has also been seen that the proposed BPR processes can meet with employee resistance owing to their own insecurities and practical problems. That is why it has been advised to have a more compassionate HRM policy ensuring proper training and support for the employees. Nevertheless, it has to be accepted that due to time and resource constraints a few important aspects could not be analyzed or implemented in through this study including the implementation of a Six Sigma process and its implementations. A longer duration for implementation and observation of these issues could have generated more insights. Nevertheless, this study has provided with an opportunity to venture into this complex topic of reengineering a retail outlet and we hope that it would be a good foundation point for the future researchers.
Introduction
Business Process Reengineering (BPR) is a complex process that calls for almost a radical redesigning of the core business processes inside an organization in order to achieve rapid developments in terms of productivity, quality as well as cycle times (McAdam and Donaghy, 1999). In this process, companies start with an open mind without any presumptions and rethink the whole process in an effort to deliver better value to the clients. They bring about revolutionary changes in their value system and put extra emphasize on the customer needs. They also restructure the organization and do away with unproductive activities especially in two important areas. Firstly, the functional organizations are redesigned into different cross-functional teams. Second, modern technologies are used to improve dissemination of knowledge as well as decision making.
Business Process Reengineering proposes five major steps to be taken by the managers to achieve dramatic changes in their organizations. These steps include, refocusing on the company values based on customer needs, redesigning the core processes using modern information technology, reorganizing the teams across function by attributing end-to-end responsibility to them for a whole process, rethinking existing organizational as well as people issues, improve business processes across the organization (Peppard and Fitzgerald, 1997). Business Process Reengineering is used by the companies in order to achieve certain results that reduce costs as well as cycle time. Business Process Reengineering reduces costs and cycle times by eliminating the activities as well as the employees who obstruct productivity (Ranganathan and Dhaliwal, 2001). When the teams are reorganized, it decreases the layers in management and removes hierarchical boundaries thus accelerating information flows which reduce defects and errors in the whole process. It also helps in improving overall quality by decreasing fragmentation of work by establishing clear responsibilities as well as ownerships of processes. So, the workers at every level get responsibility for respective outputs and can also measure their own performances based on regular feedbacks.
For this particular study, UK based retail chain Argos is being used as the subject upon which the principles of BPR will be tested. Argos is a fully owned subsidiary of Home Retail Group, UK. Argos is the pioneer of Multi channel business retail. With 33,000 employees working to support over 700 stores in UK and Ireland, Argos is a ?4.3 billion company. The intention is to see how operational efficiency can be improved within the organization through BPR and for this purpose a certain Argos store was picked up for the preliminary study. It was done with active support from Argos’ side and for last few weeks I have worked with close cooperation with the store manager. The retail industry is a business that is fast moving, complex, and constantly changing. It is an industry where only the most innovative and well managed organisations can survive and succeed (Ranganathan and Dhaliwal, 2001). The retail industry generates revenues through the sales from supermarkets, cooperatives, convenience stores and nowadays even through online stores etc. Traditionally, there were various marketing strategies that allowed the retailers to continually promote their companies by attracting new customers. But the fierce competition in the contemporary markets has necessitated better consumer relationships and the capacity to follow up with them (Peppard and Fitzgerald, 1997). The increase in disposable income as well as the changes in lifestyle of these consumers have opened new vistas in retailing and have also increased competition. The managers in the retail sector must be innovative as well as prudent enough to survive in this cut throat environment making sure that every necessary step towards managing change has been taken and they should be ensuring delivery of quality standards in customer service so that the firm builds strong brand loyalty among the consumers towards them.
Here, we have to see that the process of BPR is closely associated with project management and hence we should also take an overview of project management before getting into further details. A project is a temporary business activity, one having a well defined beginning and ending. They are undertaken to accomplish particular goals and objectives (McAdam and Donaghy, 1999). The temporary nature of a project, as against the more repetitive functions like operations, requires a different management approach. Project Management is a management discipline concerned with the planning, organization and managing resources for successful implementation of a business strategy which meets all its goals and aims. This particular study is also a project that has been undertaken to see the impact of the business process reengineering process on the supermarket chain Argos.
The primary objective of Project Management is to achieve all the project goals within the pre defined resource constraints. As such, it shares many tools and techniques with Business Optimization and Modelling (Peppard and Fitzgerald, 1997). The generic constraints of any project are time, scope and cost; also referred to as the project triangle. For my project, the constraints are time: 3 months, scope: a specific utility within the operations function which is yet to be allocated to me by the company and cost: I would have to work incurring no financial costs for the company; as such the only costs incurred are my time and efforts. I would be working under these constraints to optimise the reengineering project. Business Process Reengineering (BPR) is a management approach that aims at implementing improvements by elevating efficiency and effectiveness of the business processes. The fundamental strategy adopted by organizations in this area by looking at their operations from ‘a clean state’. More specifically, they are looking at what can be done in a better way if the whole process function were to start from scratch.
Reengineering is the fundamental rethinking and the radical redesign of business processes to achieve dynamic improvements in the areas of cost, speed and quality of service (McAdam and Donaghy, 1999). Many of the recent developments in the management sphere can be attributed to reengineering. The cross functional team is one such illustration, developed out of an effort to reengineer the separate functional departments to a mutually coordinating and interdependent process utilities. The Management Information Systems, ERP, Supply chain management, Knowledge management and many others have been developed by reengineering (Ranganathan and Dhaliwal, 2001). BPR derives its existence from various interdisciplinary components, though the four most affecting areas are: Strategy, Technology, People and Organization (Peppard and Fitzgerald, 1997). A process is viewed as common framework, considering these dimensions.
Michael Hammer and James A Champy were the first proponents of this concept. They began by criticizing the rigid departmental approach in many organizations. In a series of publications: The Agenda, Reengineering the Corporation, Reengineering the management, they argued that a single team that works under diluted responsibility and reporting structure would be more useful to the organizations. The result was the development of Cross Functional Teams. They later expanded their arguments to include Suppliers, Customers and distributors. Reengineering is very difficult to implement in an organisation. It causes widespread discomfort among the employees and usually experiences a strong resistance to change. The primary reason being that, over the years, BPR has been used effectively by organizations, however, the first thing that BPR results in is the layoffs. BPR, though a powerful organizational thinking, has not been able to achieve the expectations for the following treasons:
The primary assumption of the BPR system is that the single most factors affecting an organizational performance is the inefficiency of its operations. True, processes can always be improved at any level, but that doesn’t mean that they are inefficient.
It disregards the ‘status quo’ by looking at an organization from a ‘clean state’.
It is not an effective tool to focus the improvement strategies on the organizational constraints.
As a matter of fact today most organisations are facing great challenges in this regard and they are feeling the need to become more and more competitive through a special focus on organisational design, knowledge management, hierarchical structures performance management as well as quality control. It has always been difficult to find a strategy that encompasses every aspect of this issue. Experts have suggested a number of strategies to manage changing times in organizations. The concept of BPR is one of the latest in this league. We have seen various facets of BPR earlier. Collectively, we can now define BPR as the fundamental rethinking as well as radical redesigning of the business processes that intends to achieve revolutionary improvements in critical aspects of the business with contemporary measures to improve various aspects of performance such as quality, service level, cost and speed (Hammer and Champy, 1993). As this definition suggests, it is desirable on part of the organisations to do away with their archaic practices as well as processes, policies, principles as well as structures that negatively affect the performance of the organization. That is why BPR is primarily about redesigning the processes within an organization (Balle, 1995). BPR can also be defined as the re evaluation or redesign of the firm’s business processes as well as organisational structures in an effort to achieve marked improvements in certain critical success factors namely cycle time, quality, productivity as well as customer satisfaction (Tapscott and Caston, 1993). This particular definition differs from the previous one as it makes a specific reference to the process (Poh and Chew, 1994). It can also be defined as the analysis as well as design of workflows and processes inside the organizations.
BPR is basically a tool for planning as well as controlling change (Morris and Brandon, 1993). It offers redesigning and improvement both in depth (i.e. organizational roles and responsibilities, organisational structure, use of technology, appraisal and incentives, shared values as well as skills) and in breadth (i.e. activities that are performed with long term goals in mind) (Hall et al., 1993). Some of the experts take it a step further and explain that BPR is just a part of the necessary steps in the radical alteration of processes (Davenport, 1993). So, there is a need for “process innovation” in BPR that can lead to new strategies and designs and mobilize both people and technology towards a singular objective (Poh and Chew, 1994). So, we can see that definitions of BPR vary for person to person but overall it involves a renewal of existing processes and involvement of technology as well as strategic thinking.
Research Objective:
The primary objective of this study is to analyse how implementing BPR can improve process efficiency. BPR involves revamping a process function to a great extent. The process architecture and the associated quality manuals are changed. Implementing such an extensive strategy comes with high initialization costs and time. Customer Service will also be affected during the transition period. I would be performing a cost benefit analysis of the proposed BPR implementation. Secondly, many organizations have been using Business Modelling software based on the concept of Six Sigma. Six Sigma, though very instrumental in being able to improve operational efficiency, is very technical in nature. It is often criticized that it neglects the human factor in a business process and totally focuses on process automation. I have tried to show that BPR and Six Sigma can go hand in hand. These strategic initiatives are to be used by organizations in a complimentary fashion.
Research Problem:
The research problem that this particular study wished to investigate was to see how process efficiency can be improved within Argos. For that purpose, I worked in the operations function in one of the retail stores of Argos which was allocated to me by the company. I have adopted the principles of Project Management and Business Process Reengineering during this study in order to analyze and then suggest modification in the existing structure. I have prepared a To- Be architecture of the process function, and compared it with the as -Is and proposed recommendations on how the process can be improved with the help of these understandings.
Research Questions:
Throughout this study, I have sought to answer the following research questions:
What are the current drawbacks in the process utility within Argos?
Argos has been successful and has done well over the last couple of decades in its field of operations. But that does not mean it has nothing to improve. With time, everything changes and hence even the successful organizations must make certain changes. Moreover, the initial observation of the existing system and interaction with some of the employees there has given some ideas about what is lacking in the situation.
How can BPR be used to improve process efficiency within Argos?
Here the study will explore the fields that can be targeted for a BPR initiative. This can be the supply chain or the store layout or the organizational structure. It has to be seen which requires it the most and which would suite these procedures.
What are the challenges involved?
This study would also see the possible difficulties in this implementation procedure and if possible, would try to suggest remedies for the same.
How to manage service delivery during the transition stage?
Another important issue is to ensure that the system does not become unproductive while going through a transition because it will have significant negative impact the business. So, it would be seen how to manage these issues.
About Argos:
Argos serves over 130 million customers growing at an annual rate of 20%. 26% of these transact online or through the phone. 18 million families or about two thirds of the English population have an Argos catalogue. It is amongst the most respected Brands of the UK and before being acquired by Home Retail Group, even featured in the FTSE 100 league (Antony and Banuelas, 2002). With over 170 different product groups, Argos is a revolution which has single handedly changed the meaning of cost effective retailing over the past decade. Offering home enhancement and general merchandise products, Argos works on an innovative business model. Customers can browse through the entire catalogue online, buy and pay online. Alternatively, they visit any of the 700 branches, browse through the physical catalogue, check the product availability via the in house kiosks with the product ID, order, pay and collect over the counter. Business turnaround at Argos happened in March 1999, when it was acquired by GUS plc (Antony and Banuelas, 2002)… At that time, Argos was primarily a single channel, store based retailer, selling a smaller range of general merchandise, concentrated primarily on toys, jewellery, house wares and electrical. In 2000, Argos, the GUS home shopping business, Reality UK operations were restructured to form the current business model. In 2000, a financial services wing was set up to offer credit and warranty products to the customers of Argos.
Argos is a pre-eminent retail brand in the UK and Ireland. The business runs by leveraging on the economies of scale. This is reflected by the fact that the average transaction size is just around ?30, while the transaction numbers are around 5 per customer in a year (Schroeder, 2003). Leadership in multi channel product distribution continues to be the prime forte of Argos and is the key differentiate to the customers’ shopping experience, as compared to the competitors, by enabling the customers to shop the way they want. Around 40% of the total sales are through multi channel – internet and phone/ store for home delivery. The fastest growing channel, over the years, has been the online reservation for in store collection. The feature is available at every store.
Business Process Reengineering:
Having explored multiple definitions of the business process reengineering, now let us see various implications of the same. Simply speaking, BPR is a basically a management approach that intends to enhance organizational performance by enhancing the efficacy of business processes across the organizations (Watson, 1993). BPR looks at the existing business processes remaining unattached to them and tries to determine how these processes can be aligned in order to optimize the ultimate performance of the business.
Impact of BPR on Business:
The prime motive of any business process is to improve productivity and lead to better profitability. BPR is also a way of reorganizing the processes within the business organizations in order to break the traditional barriers in various processes that have been built over the years and hence are very difficult to do away with (Hall et al., 1993). By this process of diluting the functional divisions, BPR makes the businesses more responsive, better’s customer services and improves quality. BPR brings about visible structural changes throughout the organization and often obliterates existing frameworks (Hall et al., 1993, Shin and Jemella, 2002). The conventional hierarchical thinking process is removed from the organizations and a process oriented view takes over the organization with the implementation of BPR. So, the work is now defined in terms of the set of processes instead of the functional boundaries in which they exist. This tactical shift can be attributed to changing business goals in recent times (Tonnessen, 2000). But it has to be noted that a degree of risk can always be associated with these changes. For example diluting the functional barriers within an organization can disturb existing structure, confuse people and also create insecurity in the upper echelons of the organizational hierarchy.
The emergence and prominence of Information Technology has also played an important role in development of BPR process. It has enabled sophisticated re-designing processes which were not possible earlier due to technical or resource limitations (Tonnessen, 2000). So, the business processes must be analyzed with respect to the changes and improvements that IT can provide to them in order to solve existing problems. IT can also increase the value of the information exponentially by making it easier to collect, compose and categorize. Moreover, BPR ultimately redefines the job descriptions in the organization. It might also create a new breed of employees to handle new technologies and make another breed of employees obsolete by replacing the manual systems with technology (Hall et al., 1993, Shin and Jemella, 2002). This is also a cause of concern because it leads to HRM issue like removing or retraining the obsolete employees. So, the employees must work as part of the team and should be empowered to take decisions. So, BPR also necessitates an effort towards building effective teams that work together with close co-operation and for that reason there must a system encouraging socialization and familiarization among the employees at various levels and functions within the organization.
Now, let us have a look at some other important concepts that are closely related to BPR and can be useful in this whole process.
Six Sigma: The concept of six sigma was initiated by the Motorola Corporation in an effort to improve their quality measures by redacting the rate of defect to about 3.4/million. Basically it meant that if they produced a million pieces of a certain item, there can be a maximum of 3.4 defected items in the lot (Linderman et al., 2002). It was a marked improvement and in fact and audacious one considering the previous benchmark of For Sigma, which allowed up to 6,200 defects per million (Linderman et al., 2002). But it is not only limited to reduction of errors and defects but also about the improvement of the process. It goes beyond the statistical tools as well as metrics it uses and becomes a philosophy that encompasses every activity within the organization and brings about overall improvement in productivity as well as profitability. This process generally includes five different stages namely definition and quantification of the problem, measurement of the performance and determination of the defect levels, analysis of data and performance of root cause analysis, improvement of the quantity of defects and controlling the processes in order to ensure continuous sustenance of the improvements that have been achieved.
The success and popularity of this concept can be attributed to several factors. It has received widespread acceptance most because it involves the whole management, makes adjustments according to culture as well as employee attitudes, puts special emphasize on organization structure, boasts of standard training facilities on the six sigma methodology as well as the tools, enhances the skills in project management and links the quality control process to the overall business strategy, HRM strategy and customers satisfaction (Antony and Banuelas, 2002). It is also important to use the structured methods, pick the specific processes for implementation of six sigma improvements, employ specialists to work on it full time and relate the financial results as well as other business benefits to the bottom-line (Schroeder, 2003). Some researchers classify Six Sigma as a method of setting and achieving goals (Linderman et al., 2002) and hence emphasize on the importance of the clear and challenging goals that are strictly specified and made known to everyone involved. This also necessitates other efforts like performance appraisal, rewards, incentives as well as training for the employees to ensure the desired levels of performance.
Six sigma was initially introduced in an effort to control the variations as well as the defects in the manufacturing processes. But over the years, even the service industry has employed it with a great degree of success. Especially the financial institutions as well as healthcare organizations have benefited by using this concept. Success of some iconic companies like Motorola and GE has made it a very significant development in the recent decades but it has to be seen that there are still a lot of many other companies have been dissatisfied with the results from their six sigma projects (Hammer, 2002). These failures have been attributed to the lack of involvement of the customers as well as the supplier, lack of coherence with the overall business goals and the use of it just as a tool instead of a complete organizational improvement approach (Velocci, 2002). Also, some of the six sigma processes are not directly linked to the profit making functions of the organizations and hence are overlooked by the people (Velocci, 2002). Nevertheless, some researchers opine that six sigma is too analytical and less creative and hence we might not be suitable in every case.
Benchmarking: It can be defined as the process of continuously measuring and comparing the business processes inside a certain company to the same in one of the leading organizations in the same sector. This is done in order to get a comparative understanding of its own standards so as to identify the problems and implement improvements (Watson, 1993). The American Productivity & Quality Centre (APQC) defines it as a systematic as well as continuous measurement process. It is a process of continuously measuring as well as comparing an organization’s business processes against the business processes of the leaders in that industry anywhere in the world so as to gain information that can help the organization in taking action to improve its own performance.
Benchmarking can be described as a more sophisticated version of reverse engineering of the successful competitive products. Since then, it has evolved as a process of continuous comparison and improvement in the process as well as strategic levels and also with a global point of view. There are several types of benchmarking that are being used in various organizations nowadays namely, internal, external, competitive as well as generic benchmarking (Watson, 1993). Photocopy pioneer Xerox is often credited using this process in the late 1970s when it applied this benchmarked technique with its Japanese partners. Originating in US, benchmarking has gained worldwide acceptance around the world in the last few decades. In the UK, we have seen the initiatives like UK benchmarking index, and Cranfield Best Factory that have worked exclusively on this (Zairi and Ahmed, 1999). The process of benchmarking at its core is a comparison between multiple organizations and their best practices. As a matter of fact it is performing a gap analysis through benchmarking to understand the procedural and strategic differences between itself and another company that it sees as a successful one. Generally it is done between two companies and procedure is generally simple. But in an effort to reduce complexity, it might lose out on the nuances of the trade-offs that might exist between two companies. A spider-web diagram is a method that is more elaborate and it allows multi dimensional analysis and can analyze multiple aspects for different functions (Ahmed and Rafiq, 1998). There are other such tool but they are beyond the scope of this discussion. Irrespective of the tools used in the benchmarking process, some experts allege that it actually limits the levels of ambition. It just aspires to take the company to the level of the best one in the industry but it would not know how to surpass it. Also it is not easy to unanimously define the definition of the best in the industry because the best will depend on what criteria is used to decide and also on which year it is measured (Zairi and Ahmed, 1999). Also, there is an issue with the availability of proprietary information from the companies against which the analyzing farm is benchmarked. They might choose not to disclose specific details in order to maintain their competitive advantage and hence this exercise would not have much value (Pulat, 1994). Nevertheless, a lot of companies have been reported to have achieved significant development in their processes using this practice. Companies like Chevron, Hewlett Packard and Hughes Communications have publicly attributed their success to effective benchmarking processes and consequent transfer of industry best practices.
Reengineering:
We have defined BPR before. But there are many other aspects to the process of reengineering. It differs from most other process improvement approaches as it does not focus on the existing processes but tells us how they should be in order to achieve better performances (Attaran and Wood, 1999). The intention is not to change or fix the errors in the existing processes but to see whether they are necessary at all and if not then come up with a completely different framework (Zinser et al., 1998). So, the key principles reengineering are ambition, focus on the processes, evaluation and questioning of the fundamental assumptions within the organization and the processes, and use of information at a broader level in order to measure the processes (Peppard, 1999). There is also a need for integrating the redesign process with the corporate strategy as well as organizational visions of the underlying business. It has been implemented by several companies in the past with varied degree of success. Nevertheless, both the service sector (Hall et al., 1993, Shin and Jemella, 2002) as well as the manufacturing sector (Hall et al., 1993, Tonnessen, 2000) over the world has applied it. A success story are largely well documented and available easily in the public domain but it is difficult find the details of the failures and hence are very difficult to analyze (Attaran and Wood, 1999, Hammer and Champy, 1993, Zinser et al., 1998). So, we can say that an improper choice of the processes can result in the failure of reengineering. In general, experts suggest a bigger breadth and depth in the process meaning that they should include as many activities as possible to ensure that every aspect of the organization is improved through the process
