As the backlash of the economic slowdown reaches China, a Chinese white goods manufacturer that sells to the US has come up with a novel way of saving costs. When the ship sets off from Shanghai, it has onboard only a few of the raw materials that go into the final product. Instead of the route traditionally taken by North America bound vessels, it stops at ports depending on where it needs to pick up the next set of components from, till it finally reaches North America. The raw materials are converted into appliances onboard this ‘floating factory’. Not only does this mean savings on factory costs, but the company is also making optimal use of the travel time, normally the most unproductive part of the whole distribution process. This company declines to reveal its name which is working on how to boost efficiency.
This, management thinkers say, is what the new face of business process reengineering (BPR) has to be all about. BPR as a means of boosting productivity has been around since the early 90s and has a loyal fan base. But given that the current slow down is unlike anything seen before, companies will have to take steps unlike anything done before to be able to ride this one out and come out on top. One of the earliest advocates of BPR, the idea of process reengineering is far more relevant today than it ever was, but companies don’t seem to be picking up on it. Companies today are slower to act, even though they know they need to do certain things. They are afraid to invest even if they have the cash and this is dangerous.
Even for companies that have been constantly re-inventing themselves, this slowdown poses a unique challenge. Companies undertaking any kind of BPR must remember that there are huge discontinuities in the market. The fundamental nature of industries is changing. Before undertaking a restructuring, companies need to look at processes and ask if they are needed at all. Having decided what processes are dispensable, the next step would be prioritisation. When auto-maker Maruti Suzuki decided to find out what the non-value adding processes were and how to boost efficiency, it, along with Ernst & Young, came up with an online tool called ‘Controls Manager’. This led to a host of benefits for the company. Since the non-value adding activities were removed, it provided cost savings and improved turnaround time.
Of course BPR is not always about finding a new-fangled way of doing business, but at times just sifting out what has really worked over the years. That is what shipping-to-telecom major Essar realised a few years ago. Its projects division had almost a dozen orders to execute with a purchase budget of $2.5 billion and that is when it decided to go back to something that had worked for it in the past. In the mid-90s there was a similar team in place which handled procurement for all group projects. Once those projects were completed, the team was disbanded and split between the individual locations. When things slumped about a decade later, the group decided to reassemble this team. Since the volumes are significantly larger, this enables the team to get special deals with suppliers.
Anyone who has been involved with a successful BPR implementation can’t stress enough on the importance of working across functions. The most important thing to keep in mind while implementing any such exercise is to eliminate ‘functional fiefdoms’ and work across processes and not functions. Equally important is to have a strong internal team that is working on the implementation. The external team (consultants) can facilitate the process, but it has to be led by the internal team.