1998 - Best Practice in Re Engineering - A Successful Example of the Porsche Research and Development Center !!!

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Best practice in reengineering: a s ucces s fu full ex ample ample of the the Porsche research and deve deve lopment lopment ce nter Stephan Zinser Zinser Fraunhofer-Institute for Industrial Engineering, Stuttgart, Germany

Armin Ar min Baumgär tner and FrankFran k-Stef Steffe fen n Walliser alliser Porsc Porsche he AG, Weissach, Weissach, Ger many many

Business Process Management Management Journal, Vol. 4 No. 2, 1998, pp. 154-167. © MCB MCB Universit y Press , 1355-2503 1355-2503

Introduction Stru ctura l change necessitat necessitat es a fundamenta l overall overall renewal of of classic management principles principles and organisational str uctures in many enterprises. The increase in pressure from the market has led to shifting the management focus from the realisation of tasks towards the shaping of business processes on the one hand and from rationalising rationalising towards market and customer customer orientation on the other hand. In the mid-1970s companies reacted to changes in the markets by conventional productivity management in order to accomplish an efficient execution of tasks. The increasing individualisation of customer demands entailed an increase in flexibility flexibility and a nd swiftness of the compan companies ies concerned. concerned. It was necessar necessar y t o improve improve the integ rat ion of companies: companies: management management of integration was given priority. At the beginning of the 1990s lean management strove for flat hierarchies and short decision-making procedures. Continuous improvement processes, supported by all staff members, members , should resu lt in impr oved efficiency efficiency,, i.e. i.e. wasteful wast eful use of resources in all processes is avoided and thereby potentials for cost-saving are demonstrated. Total quality management (TQM) has been regarded as a comprehensive comprehensive company-wide company-wide approach, ap proach, focusing focusing on quality qua lity.. Each and every every single staff member regards himself as supplier for external and internal customers, who have to be su pplied with goods of a previously previously deter mined quality. This lead s t o a high level level of cust cust omer orientat ion (Bulli (Bullinger nger a nd Zinser, Zins er, 1996a). 1996a). Nowadays increasing international competition creates a steadily growing pressure for improvement. One thing is for sure: if you are working in international competition, you are forced to develop new methods, intellectual approaches and structures in order to ensure and consolidate competitiveness. There is a need for organisational organisational str uctures that bring together together market and technology with the aim to assure a long-range survival and competitiveness of the company. company. Part icularly icularly in t he field field of organisation design t here is a high

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demand for a learning organisation with decentralised responsibility. Successful organisations are, on the one hand, in a position to create new and unfamiliar relationship patterns and to act accordingly, and, on the other hand, they find implementations for new ideas and concepts. (Bullinger and Zinser, 1996b) Those who want to be competitive, have to think about new methods of improving effici efficiency ency.. It is not functions funct ions or hierarchies hiera rchies which are a re crucial, but the processes processes within an enterpr ise. This results in aligning enterprises with basic processes and in renouncing the old thinking in functions and hierarchies. Consequently iterations are avoided, stocks can be cut down, the processing time is shortened, complexities are reduced and the redundant generation and input of data dat a can be avoided. avoided. Business Business reengineering reeng ineering sta nds as a model for this: by concentrating on newly rethought business processes, at the end of which the customer stands, further value is being created for the customer. It is the main focus of business reengineering to reshape a company fundamentally and to stress key business processes. According According to a study of the Fraunhofer Fraunhofer Institute for Industr ial Engineering German German firms have realised th e necessity necessity of business process process management. Large and medium-sized companies of public and private sectors were questioned in the study. Approximately 84 per cent of the people questioned were from from th e top or midd le management. 72 per cent of all compan compan ies questioned considered the reorganisation of processes as “important” or “very important”. Many companies at least try to reorganise “around” the core tasks. 48 per cent of the analysed companies have already finished this concept to a large extent. Current models are clear processes, responsible self-organisation and profit-orientat profit-orientat ed action (Bullinger (Bullinger et al., 1995). Th e modelling modelling of innovat innovat ive processes processes aims t herefore herefore at the pr ocess ocess structures along the chain of appreciation of the firm. Business reengineering fits organisational structures to the processes, of which they are a part (Mar (Martin tinsons sons,, 1995). 1995). The key questions are: which function-transcending tasks and measures are crucial cr ucial to the s uccess uccess of th e company, company, and how ar e they achieve a chieved? d? Taking account of strategic relevance there will develop a hierarchy of processes: business processes, processes, main processes and subprocesses. Each interface provokes a frictional loss, which becomes apparent in changes of processing time, loss of information and double work. Further symptoms of a lack of thinking in processes or of uncontrolled processes are (Bullinger and Zinser, 1997): •

excessi excessive ve exchange exchange of informatio information, n, redundant redundant data, multi multiple ple entries; entries;

•

long long deliv delivery ery times, times, huge stocks, stocks, buffe bufferr and other other reserve reserves; s;

•

a great deal of con contro troll in com compari pariso son n with appre apprecciatio iation;

•

much much extra extra wor work k to make make up/i up/iterati teratio ons and and

•

a high compl complexi exity ty,, i.e i.e.. a great amount of of exce exceptio ption n r ules/spec ules/special ial cases cases..

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The radical new shaping of existing processes does not, however, warrant working bus iness processes. processes. In the end th ere will will be not integ rated rat ed processes processes without the s uppor t of so-calle so-called d “enablers”. “enablers”. Innovative Innovative informat ion and communication technology are for instance key enablers within reengineering concepts concepts (Kaplan a nd Murdock, 1991 1991)). They a re the key t o, but not the t he objective objective of, changes in organisation and processes. The creative use of modern information technology is therefore of crucial importance in the reshaping a nd reorientat reorientatio ion n of the enterprise with regard to an increase in crease in innovation innovat ion energy. energy. Innovat Innovative ive I&C technology is, according to t he aforementioned IAO survey (see Figure 1), crucial to realising customer and innovation orientat ion. Succe Successful ssful us e of I&C technologies technologies within a business reengineering project requires that all essentially new possibilities, which today’s today’s informa tion technology has created, are taken t aken into int o account account (Teng et al., 1995).

Customer Focus

Innovation Focus

Quality Leadership Key I&C-technologies are a crucial factor I&C-technologies have no influence

Cost Leadership

Figure 1. I&C technologies technologies a t reengineering projects

Differentiation of Services 0 %

10

20

30

40

50

3 × 3-method for proces proces s ree ngineering Innovations are being regarded as strategic competition factors within the ever shortening market cycles. The development process is therefore of crucial importance to the competitiveness of companies. Entrepreneurial objectives have to concentra te on a fast er time-to-market time-to-market , i.e. i.e. on on t he accelera accelera tion of innovation processes, the reduction of of error rates r ates in product p roduct development development and a nd a decrease in introduction costs (Bullinger and Zinser, 1997). With these objectives in mind, a new process for obtaining parts of prototypes has been developed and implemented in the Porsche research and development center in Weissach. The main goal of reengineering was to lower the processing time from the average eight days to only one day. A specially devised 3 × 3-method was used u sed for the process reengineering. Some Some components components h ad been t aken from the bu siness reengineering pioneers, Hammer Hammer a nd Champy (Hammer (Hammer and







Champy, 1993) 1993),, some had been t aken from t he previous experiences of th e reengineering reengineering team. The 3 × 3 principle, shown in Figur e 2, 2, takes into account a phase p hase of stability within the implementation of new processes as an essential extension of traditional methods in reengineering. Only after reaching this phase of stability is it possible to finish the reengineering project and to dissolve the reengineering reengineering base ba se team. The 3 × 3 principle encompasses encompasses th ree main pha ses, they themselves have three different different subphases subph ases each. In the first phase pha se – the initiation of a project project – the recognised recognised problems are d escribed within a team. A careful selection selection and analysis of data r elating to the problems ensur ensur es their objectivity objectivity at their presentat ion. To obta obtain in an objective view on the process, process, a team t eam was established.

1

2

3

Initiation

Recognising the problem

Forming a team

Describing the problem

Definition

Analysing the cause

Defining measures

Realising temporary measures

Control

Controlling success

Stabilising success

Congratulating the team

In the definition phase causes are analysed and appropriate countermeasures defined. Wherever possible, temporary measures should be applied in order to test their outcome. The implementation of the defined measures is pursued in the control phase. On the basis of appropriate reference data and review methods the process effic efficiency iency is tra cked up to the th e phase of stability an d finally the team tea m receives receives the grateful recognition for its engagement. A practical example: new acquis ition of prototype prototype parts in development Successful Successful reengineering requires sy stematic a ction, the sensible use of methods and tools and the consideration of critical factors of success. The


157

Figure 2. 3 × 3 principle of process reengineering







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example of a reengineering project project for th e acquisition acquisition of prototype p art s in the development development center of the Pors che AG AG will demonstr demonstr ate t he 3 × 3 reengineering approach, the methods and tools used and the structure of the reengineering project. Besides the presentation of this method in practical use, we will give much at tention to t he experiences of this r eengineering project.

Phase 1: Initiation In the initiation phase important business processes are identified and scrut inised inised for th eir potential for improveme improvement. nt. Within this an alysis the acquisition process of prototyp e part s was identified as a crucial process within the devel d evelopment. opment.

Phase 1.1: recognising the problem – new demands on the acquisition proc pr oce esse sses of of prot pr otot otype ype part par t s. The increasing demands on the reduction in developme development nt time within t he automobile industr y can only be realised by the effic efficient ient u se of t he most up-to-dat up-to-dat e development development methods (for examp le, simultaneous engineering) and technologies. New technologies prove effective by their consideration of integrated processes. Rapid prototyping (RP) technology permits for instance a very fast production of complex parts and thereby allows the optimisation of the product at much earlier stages in its development. This potential for the RP technology can only be completely exploited, if if the sectors preceding and s ucceeding it are likewise optimised. optimised. The T he acquisition acquisition process is within the front sector of the ent ire rapid p rototyping process. The study in the Porsche development center showed that the processing processing t ime for for t he acquisition of prototype pa rts rt s no longer meet t oday’s requirements.

Phase Phase 1.2: ffor ormi ming ng a t eam – r eengine nginee er ing st st r ucture uctur e and formi for ming ng a t eam. The reengineering team structure, as shown in Figure 3, links the necessary process knowledge for the analysis and the devising of measures directly to the enterp rise-wide rise-wide co-ordinat co-ordinat ion of all activities in p rocess rocess improvement. improvement. T he solutions are not merely academic, but t hey reflect reflect a sound knowledge of processes, which in turn is used in all improvement measures. The sele s electio ction n of the team manager ta kes place primarily primarily with regard to t o the later implementat ion. Team Team mana gers directly affected affected by changes, show a much keener interest in a practicable and implemented solution, than those for whom the improvement project is but one of of many. many. This is also a reason, rea son, why no external exter nal consultants consultan ts have h ave been called called in to this method of process process improvement. improvement. The reengineering team consists of members of all departments concerned. A rough process mapping is done beforehand to identify the involved sectors. Each reenginee r eengineering ring t eam has its own t eam mission, wherein wherein objectives, objectives, costs costs and deadlines d eadlines as well as the t he process process phase ph ase to be examined are laid down in full. T he team of this reengineering reeng ineering project got an offic officee on their own. This measu re proved extremely sensible for efficient teamwork. Other sources often confirm this th is experience exp erience (Kennedy, (Kennedy, 1994) 1994)..







n o i t a n i d r o o c d n a n o i t a s i r o i r P


CEO

Reengineeringsteering committee A

Reengineeringsteering committee B

159

direct reporting

e g d e l w o n k s s e c o r P

Reengineering team-leader 1



Department 1

Department 1

Department 1

Department 2

Department 2

Department 2

Department 3

Department 3

Department 3

Department 4

Department 4

Department 4

Phase Phase 1.3 1.3:: descr descrii bing bin g the problem – the old proc pr oce ess of t he acqui acqui sit i on of prototype parts. After forming the reengineering team with members from purchasing, equipment, construction, research, data processing departments and the workshop, a detailed description of the potential for improvement was prepar ed on the basis of the rough process mapping. An internal cust omeromersupplier-relation was chosen as the foundation; development engineers from construction constr uction and research (exhibitors) with an own need of of parts par ts were regarded as internal inter nal customers. customers. The purchasing depart ment functioned functioned as t he supplier supplier in this case, as they were responsible for the acquisition of the parts. The discussions with all sectors concerned provided the following potential for improvement: •

sho shorter rter pro proccessi ssing time times, s,

•

impro improve veme ment nt of of info informati rmatio on qual quality ity,,

•

better better coco-ordinatio ordination n of the interf interface acess between between dif differen ferentt departments.

Phase 2: definition Phase 2.1: analysing the causes – process mapping to examine the potential for improvement. After process mapping the deficiencies of the process capable of improvement improvement became obvious. •

waitin waiting g time time unti untill a requi require reme ment nt report report is is appro approved; ved;

•

diffe differenc rences es in in media media betwee between n report form, form, EDPEDP-system system and orde orderr form;

Figure 3. Structure of reengineering reengineering t eam









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•

waiti waiting ng time time until until orde orderr is appro approve ved; d;

•

trans transpo port rt to supp suppllier by by mai maill;

•

organi organisati satio onal separatio separation n of all all inv invo olved lved uni units. ts.

The traditional process (Figure 4) required a conventional form to be filled in, which in tur n had to be approved approved by t he project project manager. There was no obligation to check the available funds of the budget section used nor to check the prices given. 8-30 days

Issuer

Request form

Figure 4. Process of the acquisition of prototype part s before before the reengineering

Project manager

Request form signature 1

Purchase department

Head of department

Order form signature 2 signature 1

supplier

Equipment department

Order form

Prototype part

After approval the form was sent by in-house in-house mail to the purchase depart ment. There Th ere the request request form was entered into a centra centrall EDP-system. EDP-system. The pu rchase depart ment chose or confirmed confirmed the suppliers and t he prices. prices. After After printing pr inting the order form form it was duly signed by t he person responsible responsible for for purchase and then sent to the supplier by mail. This process normally took about eight days, up to 30 days were, however, no exception. The equipment equipment depar tment, responsible responsible for for the t he provision provision of the part s for the t he prototype body, was not fully informed of the latest time plan. This used to be so critical, because the production processes of prototype parts do not allow such precise time forecasts as possible with series production processes. T herefore dates could change quite qu ickly, ickly, which required reaction and







however, however, provided new ideas , which complemented complemented each other, oth er, and finally a solution was found; a solution so simple and radical, that it left all people involved involved deeply impressed (see Figure Figu re 5). 5). T he ideas of the new process were built into concrete, individually realisable rea lisable modules (see (see Figur e 6). 6). This provided for an org anisationanisa tion-specific specific adapta tion of the solution at the later implementation.


161

1-3 days

Issuer

BTT

online

Supplier

Equipment department

Order

Fax

Prototype part Database- Databaseprices parts

Purch urchas ase e

SAPbudgetchecker

Prototypeplanning

Figure 5. The process of prototype parts acquisition acquisition after the reengineering

Head Head

Component Team

Workflow system for

Data bank of prices

Budgetchecker One day processing time

Budget

Abolished:

Figure 6. The six solution modules within the new







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The main advantage of the team was its intrinsic concentration of know-how from from the formerly formerly separated separ ated depar tments.

Module 2: workflow system for requirement forms

162

To shorten idling time and to eliminate transport time an on-line requirement form was r ealised on the existing EDP-system. This on-line on-line system syst em accesses accesses the existing data base and checks checks the th e validity validity of the item numbers ordered.

M odule 3: databank databank of pri pr ices The d atabank of prices prices allows allows p arallel entering. entering. The p urchase depar tment enters supplier, price and validity of price; the on-line requirement form accesses the prices from this special databank.

Module 4: budget guidelines To improve information flow on the material budget the envisioned quantities are shown on each each requirement form. This allows constan constantt comparison with the th e guidelines and hence entails an improved budget control.

Module 5: budget checker As the th e remaining budget funds are shown by the bud get checker, checker, everyone everyone who orders material will see immediately the effects of his doing so on the material budget.

Module 6: signature procedures abolished One problem problem in realising su ch workflow workflow sys tems is th e approval or the illustra tion of a signatu re on an electronic electronic document. document. Th e solution was amazingly simple: the signa tures tur es were replaced replaced with the budget b udget checker. checker. The responsibility responsibility for th e material budget wa s assigned ass igned to the issuer; the control control of which could be abolished. The signature of the person responsible for purchase was hencef henceforth orth only only necessary necessary for the entries in the dat abank of prices.

Phas Phase 2.3: r eali si ng temporar temporar y meas measur ure es – faster faster r eali sati on of t he f i r st modules. The modules needed to be implemented as soon as possible. The planned software would require about about six months of progr progr amming. T he modular approach, appr oach, however, however, allowed allowed t he immediate use u se of some modules. Only Only







course the software development, which was done using existing systems in order to enable enable its testing at a much earlier earlier st age. In parallel with that was the co-ordination and information of all relevant departments and the departments which did not participate in the workshop respectively respectively. This entailed about 80 individual ta lks a nd meetings , which clarified the necessary need of information and communication of reengineering projects projects further. furth er. This high level level of communication communication expenditure was accepted deliberately to ensure the smooth start of this pilot project and to overcome the expected resistance. To support the introductory phase even more, process process manuals ma nuals were designed for all staf sta ff members, which explained in detail the use of the new software and the processes. Figure 7 shows the intensity of communication with the development of information points. Points were awarded per information and member of staff. T he more intense the information informa tion became, the more points could be awarded: a written information scored one point for instance, a workshop two points. Three Thr ee points were the maximum. This maximum score was only awarded for the transfer of given information into own individual action. The continuous measurement of information allowed a co-ordinated use of information informat ion events. events. The pilot projec projectt began bega n in the engine development development unit a fter the software softwar e had been accomplished. In order to obtain st atistical atis tical predictions on the improvement in process efficiency, the average processing times were recorded each week. The pilot project began with one staff member each from equipment equipment and research. A purchase depa rtment member member could be integrated into the team about t hree months later. The g raphical representation of the processing processing time stat istics in Figure 8 clearly shows three phases during the implementation process: Phase Phase 1: euphori uphor ia. The Th e first first four weeks displayed a visible increase in effort, effort, as the staff were in the focus of the new project. The latest processing times

Information points 600 500


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number of requests 250

processing time in days 60 euphoria

learning

stability

40

164

200

20 150 0 5

10

Integration of purchase department member

25

Figure 8. Average p rocessing time per week and quantity of ordered ordered parts

30

35

40

100

Key request average goal

50

0 weeks in 1997

were continuously continuously communicated communicated and th e process process was supp orted by the reengineering core team by intervening in conflicts conflicts of coco-ordination, ordinat ion, which are inevitable in such times of chang change. e. During these t hese four four weeks t he processing processing t ime was well within th e envisioned envisioned objective. objective. Phase Phase 2: le learni ar ning ng.. The next weeks saw the normalisation of the efforts of the staff involved. As only now all exceptional and special cases occurred, the processing time deteriorated increasingly or was subject to great fluctuations. The main reason for this situation was the incomplete filling of the databank of prices, without which there could be no further processing. The reengineering core team did not intervene deliberately at t his time to give the component component team the opportunity of tackling tackling the t he tasks on their own with the relevant relevant units. Some Some errors in the software and the tight capacity of personnel (only two staff members) depressed motivation even further. Phase 3: stability. By comple complementing menting the team with the purchase depa rtment member and by fixing the software errors, the process stabilised and the









Allocation of processing time


100,0%

75,0%

68,6%

165 50,0%

25,0% 9,3%

9,3%

10,6%

0,0% >0-2

>2-4

>4-6

>6-8

1,0%

1,2%

>8-10

> 10

Processing time in days

role of the reengineering core team helped the process to achieve growing acceptance a nd hence stability in proce pr ocess ss effic efficiency iency..

Phase 3.3: congratulating the team – final workshop with participation of management. To end the reengineering project a workshop with participation of manageme management nt was held. This g ave the opportun opportun ity to gath er and adapt all experiences, which are necessary for the introduction of the new process in

Figure 9. Allocation Allocation of processing times BTT







anticipating only 10 percent in cost reduction, 20 percent in processing time reduction or an increase in turnover of 15 percent, have rates frequently of success well below average. Successful business reengineering nece n ecessita ssitates tes ambitious a mbitious objectives, objectives, i.e. i.e. improveme improvements nts in the th e range ran ge of at least 30 to 50 50 percent.

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•

T he deployme deployment nt of a cre creati ati ve team tto o pr pr oblem oblem solvi solving ng.. A team is formed out of the most competent competent s taff members members to p lan and execute execute a reengineering project. project. These sh ould distinguish themselves themselves by b y proc pr ocessessspecific specific experiences, experiences, creativity creativity and a s trong ability for motivation. It It is important importan t that th at t he project project provides provides a real career opportu nity for all staff members members concerned. concerned. One One tends to underestimate the longevity of the existing company company culture. It tur ned out that many reengineering reengineering projects fail because of the resistance of the staff.

•

Process approach and integration of EDP. Most of the time only procedures or partial processes are reshaped, but not the complete chain of appreciation. The effec effects ts on t he success of reengineering can ha rdly be felt felt then, t hen, i.e. i.e. processes processes need to be right in the center of the organisa tional shaping. Business processes are shaped consequently on customer demands and therefore transcend company boundaries. Another danger in department-isolated reengineering lies in the fact that only symptoms are tackled. Most of the time this happens at the end of the chain of appreciation, the reasons for inefficiency and ineffectiveness can be found at one or many points within the process of appreciation.

Furthermore it evolved during the reengineering project, that the effort for







Bullinger, H.-J H.-J., Wiedma nn, nn , G. an d Niemeier, J. J. (1995), (1995), Busines Busi ness s Re Reenginee ngi neerr i ng: M anagement anagement Conce Concepts pts in i n Ger Ger man, IRB, Stuttgart. Hammer, M. and Champy, M. (1993), Reengineer ngineer ing in g the t he Corporat Corporation, ion, Harp er Business, New York, York, NY. Kaplan, R.B. and Murdock, L. (1991), “Core process redesign”, T he M cK inse in sey Quar Quarterl terly y, Summer, pp. 27-43. Kennedy, C. (1994), “Re-engineering: the human costs and benefits”, Long Range Planning, No. 5, pp. 64-72. Martinsons, M.G. (1995), “Radical process innovation using information technology: the theory, the pr actice and the futu re of reengineering”, reengineering”, International Journal of Information Management, No. 4, pp. 253-69. Teng, J., Grover, V. and Fiedler, K. (1995), “Re-designing business process using information technology”, Long Range Planning, No. 1, pp. 95-106.


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1998 - Best Practice in Re Engineering - A Successful Example of the Porsche Research and Development Center !!!

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