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Business Process Reengineering

19 January, 2016 - 12:35

So far we have introduced systems development, systems development objectives, and means for controlling the systems development process to ensure achievement of systems development objectives. Now we turn to discussion of an activity that has driven much of the systems development activities undertaken in organizations. Business process reengineering is an activity larger in scope than systems development, as it addresses all of the processes in the organization, including the information systems processes. Rapid developments in the capabilities and applications of IT, such as e-business, present organizations with increasingly difficult business opportunities/challenges. They are being asked—sometimes being forced in order to ensure their very survival—to abandon long-held business beliefs and assumptions and to rethink what they are attempting to accomplish and how they are trying to accomplish it. Business process reengineering has been likened to presenting an organization’s management with a blank piece of paper and asking them to reinvent the organization from scratch. Why would management ever be motivated to engage in such an undertaking? In many cases, they have no alternative. Experiencing the harsh realities of an increasingly competitive environment, they recognize that their companies must make mega-changes in how they operate, or face extinction.


Business process reengineering (BPR) (or simply 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.” 1 The emphasis on four words in this definition focuses on those four key components of BPR.

  1. Fundamental rethinking of business processes requires management to challenge the basic assumptions under which it operates and to ask such rudimentary questions as “Why do we do what we do?” and “Why do we do it the way we do it?” Without fundamental rethinking, technology often merely automates old ways of doing business. The result is that what was a lousy way of doing a job became simply a speeded-up, lousy way of doing the job.
  2. Radical redesign relies on a fresh-start, clean-slate approach to examining an organization’s business processes. This approach focuses on answers to the question, “If we were a brand-new business, how would we operate our company?” The goal is to reinvent what is done and how it is done rather than to “tinker” with the present system by making marginal, incremental, superficial improvements to what’s already being done. Achieving the goal requires forward-looking, creative thinkers who are unconstrained by what now exists.
  3. Achieving dramatic improvements in performance measurements is related to the preceding two elements. The fundamental rethinking and radical redesign of business processes are aimed toward making quantum leaps in performance, however measured. We are not talking about improvement in quality, speed, and the like that is on the order of 10%. Improvement of that order of magnitude often can be accomplished with marginal, incremental changes to existing processes. Reengineering, on the other hand, has much loftier objectives. For example, the Ford Motor Company reengineered their procurement process and reduced the number of persons employed in the process by 75%. 2
  4. Reengineering focuses on end-to-end business processes rather than on the individual activities that comprise the processes. BPR takes a holistic view of a business process as comprising a string of activities that cut across traditional departmental or functional lines. BPR is concerned with the results of the process (i.e., with those activities that add value to the process).

Review Question

What are the key elements and principles of business process reengineering (BPR)?


As an example, let’s look at the discrete activities that may be involved in completing a sale to a customer. These activities might include receiving and recording a customer’s order, checking the customer’s credit, verifying inventory availability, accepting the order, picking the goods in the warehouse, packing and shipping the goods, and preparing and sending the bill. Reengineering would change our emphasis by breaking down the walls among the separate functions and departments that might be performing these activities. Instead of order taking, picking, shipping, and so forth, we would examine the entire process of “order fulfillment” and would concentrate on those activities that add value for the customer. Instead of assigning responsibility for these activities to multiple individuals and organizational units, we might assign one individual to oversee them all. And, just as important, we might change measurement of performance from the number of orders processed by each individual to an assessment of customer service indicators such as delivering the right goods, in the proper quantities, in satisfactory condition, and at the agreed upon time and price.


Having reviewed the core elements of BPR, let’s look at how these elements were applied in a real-world implementation. The late 1990s saw the rapid growth (and decline) of many Web-enabled e-business ventures. One of the more visible ones was Peapod, Inc., an online grocery superstore. “Peapod is America’s largest Internet shopping and delivery service with about 100,000 customers. We have fulfilled over 1,000,000 orders and sold over 45,000,000 products to our customers in Chicago, IL; Boston, MA; Columbus, OH; San Francisco, CA; Long Island, NY; and Houston, Dallas, and Austin, TX.” 3 Table 6.8 summarizes how the Peapod model for grocery delivery differs from that of a traditional grocery store. Notice, for example, the number of times the box of cereal is handled and moved in the two models.


Peapod’s business model is built on the following propositions. First, Peapod uses a distribution model with two formats. In large metropolitan areas, Peapod uses a freestanding distribution center while in their smaller areas, they use fast-pick centers in the supermarkets owned by Ahold. The relationship with Ahold, the “bricks” element of their business model, combined with distribution centers used just for online orders, the “clicks” element of their business model, gives Peapod a lower cost of entry and stronger buying power, allowing Peapod to cut merchandise costs between 5 and 7 percent. The second element of Peapod’s success is their process for picking, packing, and delivering customer orders. Orders pulled off the Web site go immediately into Peapod’s routing system, customized software that uses maps and travel time to determine how many stops each vehicle can make. Meanwhile, a professionally trained Peapod Personal Shopper handpicks and packs the orders. Peapod makes use of zone and batch picking. Some employees pick perishables while others pick dry goods. If the customer orders produce, a Produce Specialist makes sure that the freshest produce available is chosen for the order, and the Quality Control Specialist ensures that the order is complete and that the groceries are expertly packed.

Table 6.8 Reengineering at Peapod
Peapod Traditional Grocery Store
  1. Case of cereal arrives at distribution center
  2. Take cereal off rack
  3. Store cereal in proper location
  4. Pick customer order (place box of cereal in customer tote)
  5. Transfer tote (with cereal and othe items) to loading dock
  6. Load totes in delivery van
  7. Dliver totes to gomes, offices, and other designated locations
  1. Case of cereal arrives at warehouse
  2. Take cereal off rack
  3. Store cereal in warehouse
  4. Load case of cereal on truck
  5. Case of cereal is received at store
  6. Store case in back of store
  7. Place boxes of cereal on shelves
  8. Customer puts cereal in cart
  9. Cashier rings up cereal
  10. Clerk bags cereal
  11. Customer brings bag home

Source: Adapted from Linda Himelstein, “Can You Sell Groceries Like Books?” Business Week E.BIZ (July 26, 1999): EB 46.


The Peapod inventory and delivery model was a fundamental rethinking and radical redesign of the traditional grocery store model. Peapod’s business model is predicated on dramatic performance improvements for personnel and infrastructure. The Peapod model focuses on the end-to-end business process, getting the groceries to the customer and improving the customer’s experience! For example, Peapod’s prices are tied to the current off-line prices of their partnering retail stores, giving their customers the weekly advertised sale prices. Peapod’s customers also get personalized and online coupons, the ability to create and save personal shopping lists, browse aisles, search for specific items, brands or flavors, and the ability to view nutrition labels. Finally, Peapod customers get a choice of delivery times and formats, minimal (and decreasing) time between ordering and delivery, and up-to-the minute information on order status. Peapod is a good example of a successfully reengineered business model.

When asked to identify the critical success factors for reengineering projects, a group of Chief Information Officers (CIOs) cited strong project management, a visible and involved executive sponsor, and a compelling case for change. 4 Organizational resistance to change, inadequate executive sponsorship and involvement, inadequate project management, and the lack of an effective change management program were described as significant barriers to change by this same group of CIOs. The following section describes methods that can overcome resistance to change.