8 part A UNDERSTANDING BPR FOR e-BUSINESS time the process is enacted (an order entry process is an example). Other business processes have much more fluidity and cannot be tightly determined in advance(a new product development process is an example). Business processes that include intensive knowledge work are typically more difficult to tightly structure than businesses processes that consist of mainly clerical or production work. Redesign tactics will dif While processes have other properties, the ones listed above are adequate at this point to help us appreciate the three examples below and continue through the progression of the book. Other properties will be introduced as needed along the way 1-5-2: Three Generic IT-Enabled Ways for Redesigning Business Processes Each of the thrcc generic types of process redesign heuristics is illustrated through a case example below. In each of the examples, information technologies enable new vays of carrying out the process Example #1: Restructuring and Reconfiguring Processes(Restructure It LL. Bean is the largest mail order catalog company for outdoor camping gear and sporting apparel in the U.S.A. In 1996 its revenues were $1. 2 billion and it sold 16,000 different items from 24 separate catalogs. LL. Bean employed 3, 100 customer service representatives who took 80 percent of the company's orders over the phone; the bal- ance of the orders was received through mail, fax, and some through L L. Beans Inter net Web site. The yearly call volume was 14 million phone calls and averaged about 50,000 phone calls a day. They shipped 12 million packages for the year with as many as 150,000 orders arriving per day in peak season. In 1994 L L. Bean decided to redesign their order fulfillment process. It was be- coming much too slow and inflexible for their growing volume and product line omplexity, global expansion($210 million in international orders from 150 differ ent countries), and growing customization(monogramming, custom tailoring, spe cial embroidering). The project involved many teams of employees who worked to- gether to reinvent the process and also to benchmark the process with companies that were leaders in the order fulfillment area. Basically, they took the old process apart and put it back together in a new way. They restructured it and at the same time changed the infrastructural environment around the process The old order fulfillment process was a batch process. Orders coming into L L Bean through telephone were entered into the computer. Every 12 hours the computer ent the orders to the order fulfillment center. The order fulfillment center is a hu warehouse where pickers fill the orders. They pulled carts, going from bin to bin, until they assembled an entire order for one customer. They then would stow each order in one of 25 slots in the cart. When pickers had assembled 25 orders, they would deliver them to packers who would pack each order for shipping. It was a slow, cumbersome process that perhaps provided good physical exercise for the pickers as they moved from area to area of the warehouse but otherwise quite inefficient
1 8 PART A: UNDERSTANDING BPR FOR e-BUSINESS time the process is enacted (an order entry process is an example). Other business processes have much more fluidity and cannot be tightly determined in advance (a new product development process is an example). Business processes that include intensive knowledge work are typically more difficult to tightly structure than businesses processes that consist of mainly clerical or production work. Redesign tactics will differ depending on the degree of structure of a process. While processes have other properties, the ones listed above are adequate at this point to help us appreciate the three examples below and continue through the progression of the book. Other properties will be introduced as needed along the way. 1-5-2: Three Generic IT-Enabled Ways for Redesigning Business Processes Each of the three generic types of process redesign heuristics is illustrated through a case example below. In each of the examples, information technologies enable new ways of carrying out the process. Example #1: Restructuring and Reconfiguring Processes (Restructure It) L.L. Bean is the largest mail order catalog company for outdoor camping gear and sporting apparel in the U.S.A. In 1996 its revenues were $1.2 billion and it sold 16,000 different items from 24 separate catalogs. L.L. Bean employed 3,100 customer service representatives who took 80 percent of the company's orders over the phone; the balance of the orders was received through mail, fax, and some through L.L. Bean's Internet Web site. The yearly call volume was 14 million phone calls and averaged about 50,000 phone calls a day. They shipped 12 million packages for the year with as many as 150,000 orders arriving per day in peak season. In 1994 L.L. Bean decided to redesign their order fulfillment process. It was becoming much too slow and inflexible for their growing volume and product line complexity, global expansion ($210 million in international orders from 150 different countries), and growing customization (monogramming, custom tailoring, special embroidering). The project involved many teams of employees who worked together to reinvent the process and also to benchmark the process with companies that were leaders in the order fulfillment area. Basically, they took the old process apart and put it back together in a new way. They restructured it and at the same time changed the infrastructural environment around the process. The old order fulfillment process was a batch process. Orders coming into L.L. Bean through telephone were entered into the computer. Every 12 hours the computer sent the orders to the order fulfillment center. The order fulfillment center is a huge warehouse where pickers fill the orders. They pulled carts, going from bin to bin, until they assembled an entire order for one customer. They then would stow each order in one of 25 slots in the cart. When pickers had assembled 25 orders, they would deliver them to packers who would pack each order for shipping. It was a slow, cumbersome process that perhaps provided good physical exercise for the pickers as they moved from area to area of the warehouse, but otherwise quite inefficient
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 19 The new order fulfillment process was changed from a batch process. Now when an order is received, it is no longer held for 12 hours. Instead the computer sends it di rectly to the order fulfillment center. In the new process each order is broken up into its component parts through the use of new information technologies. Each component is assigned to a different picker who is assigned to a particular physical area of the warehouse. Thus one customer order made up of four items(a pair of hiking boots, shing rod, a camping lantern, and a sweater)could be assigned to four different pick ers. Each picker places the picked item on the conveyor belt. The conveyor belt has electronic sensors that read bar codes and automatically sort orders and direct items to packing stations where they come together and are packed for shipping by Federal Ex- press. This new process is faster: L L. Bean can turn around 100 percent of its orders within 24 hours, compared to as long as two weeks several years ago. The picking part of the process has been restructured from a serial batch process into a continuous par- allel process that is coordinated with the help of information technologies. The infor- mation technology-the hardware and software used for bar coding, sorting, picking, moving, sensing, packing, and shipping the items for an order-has enabled a new re- structured process to be possible and effective. L L. Bean compares the process to going from individual swimming in a relay race to synchronized swimming Let us not forget the Leavitt diamond framework in Section 1-2-1. At L.L. Bean it was not only the flow of the process that was redesigned and changed but also the environment around the order fulfillment process. The information technology in- frastructure clearly changed. Furthermore, there is a new order fulfillment center is a larger warehouse(650,000 square feet)with 25 shipping docks, 3.5 miles of ce veyor belts, and a built-in Federal Express operation on site. The way that resources are assigned also changed Now when an order comes in, team leaders are able to track the level of activity of pickers through their computer screens and can quickly decide which pickers are able to more appropriately handle the incoming order. This allows more flexibility and dynamic reallocation, further speeding up the process The change requires new skills from both the team leaders and the pickers. It also meant changing the collaborative team structure of the organization. In short, both the process structure and its environment were changed in this BPR effort Example #2: Changing Information Flows around Processes(Informate It) Similar in revenue size to LL. Bean, Marshall Industries is a $1.2 billion distributor of industrial electronic components and production supplies in the U.S.A. Marshall distributes 125,000 different products manufactured by over 100 major suppliers in the U.S.A. and Japan to over 30,000 business customers. It has a network of 38 sales and distribution branches and three corporate support and distribution centers in North America. It also has a sizeable investment in Sel, one of the largest electronics urope. Over 75 percent of Marshall Indu from semiconductor products, which include passive components, connectors, com- puter peripherals, instrumentation, and industrial production supplies In the 1990s the landscape around their distribution business started changing rap- ly. Large customers were globalizing their business processes and requiring glol
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 19 The new order fulfillment process was changed from a batch process. Now when an order is received, it is no longer held for 12 hours. Instead the computer sends it directly to the order fulfillment center. In the new process each order is broken up into its component parts through the use of new information technologies. Each component is assigned to a different picker who is assigned to a particular physical area of the warehouse. Thus one customer order made up of four items (a pair of hiking boots, a fishing rod, a camping lantern, and a sweater) could be assigned to four different pickers. Each picker places the picked item on the conveyor belt. The conveyor belt has electronic sensors that read bar codes and automatically sort orders and direct items to packing stations where they come together and are packed for shipping by Federal Express. This new process is faster: L.L. Bean can turn around 100 percent of its orders within 24 hours, compared to as long as two weeks several years ago. The picking part of the process has been restructured from a serial batch process into a continuous parallel process that is coordinated with the help of information technologies. The information technology—the hardware and software used for bar coding, sorting, picking, moving, sensing, packing, and shipping the items for an order—has enabled a new restructured process to be possible and effective. L.L. Bean compares the process to going from individual swimming in a relay race to synchronized swimming. Let us not forget the Lcavitt diamond framework in Section 1-2-1. At L.L. Bean it was not only the flow of the process that was redesigned and changed but also the environment around the order fulfillment process. The information technology infrastructure clearly changed. Furthermore, there is a new order fulfillment center that is a larger warehouse (650,000 square feet) with 25 shipping docks, 3.5 miles of conveyor belts, and a built-in Federal Express operation on site. The way that resources are assigned also changed. Now when an order comes in, team leaders are able to track the level of activity of pickers through their computer screens and can quickly decide which pickers are able to more appropriately handle the incoming order. This allows more flexibility and dynamic reallocation, further speeding up the process. The change requires new skills from both the team leaders and the pickers. It also meant changing the collaborative team structure of the organization. In short, both the process structure and its environment were changed in this BPR effort. Example #2: Changing Information Flows around Processes (Informate It) Similar in revenue size to L.L. Bean, Marshall Industries is a $1.2 billion distributor of industrial electronic components and production supplies in the U.S.A. Marshall distributes 125,000 different products manufactured by over 100 major suppliers in the U.S.A. and Japan to over 30,000 business customers. It has a network of 38 sales and distribution branches and three corporate support and distribution centers in North America. It also has a sizeable investment in SEI, one of the largest electronics distribution companies in Europe. Over 75 percent of Marshall Industries' sales are from semiconductor products, which include passive components, connectors, computer peripherals, instrumentation, and industrial production supplies. In the 1990s the landscape around their distribution business started changing rapidly. Large customers were globalizing their business processes and requiring global
20 PART A UNDERSTANDING BPR FOR e-BUSINESS sourcing ofelectronic components. Time-based competition and time-to-market were compressing product life cycles to unprecedented levels(some as short as three months)requiring much faster response from distributors. It became crucial to share information rapidly along supply chains and to develop effective coordination. Con- currently, the power of new information technology networks with distributed archi tectures, bandwidth proliferation, and increasing user friendliness were providing new opportunities for conducting operations in the distribution business. Marshall In- dustries realized that there was both a need and an opportunity to redesign their busi- ness processes by changing the information flows around them and taking advantage of new information technologies Marshall realigned their organizational design so that they could redesign their business processes for this new business environment. In terms of the business processes themselves, the redesign thrust was driven by changing the information flows around them through the use of Internet technologies and the world wide web Marshall redesigned the supply chain processes mainly through informating them differently. Yes, of course restructuring of the processes also occurred to take ad- vantage of the new information flows, but that was secondary For example, Marshall redesigned its sales and marketing process to be an end-to- end closed loop system with intensive information flows through the use of Internet technologies. Their intranet(an internal Web-enabled information system accessible through Internet browser software) supports 400 field sales employees equipped with laptop computers who travel to customer sites. It enables them in real time to check inventory and product specification datasheets, quote orders, communicate with other employees, collaborate on projects, and make presentations. a key feature of the in- tranet that informates the sales and marketing process is what they call a marketin encyclopedia. It consists of 2,500 different documents, containing details about sup- pliers and product lines. Field salespeople can prepare and make presentations to cus- tomers on the fly and customize them to the needs of both engineering customers and corporate buyers. Furthermore, if the customer is interested in buying products from more than one supplier at the same time, the field sales employee can seamlessly in- tegrate presentations from different suppliers. The marketing encyclopedia also in- forms salespeople about key programs, new products, and advertising campaign de tails. The sales and marketing process is intensively informated in near-real time, and thus becomes much more iterative, faster, and more effective. The process is still me- diated by salespeople and occurs in the physical premises of the customers' offices, but informating it differently results in a very different process The sales and marketing process was further redesigned by linking it more di- rectly into the order fulfillment process in a self-service mode. Marshall Industries has made its product information available directly through its Internet site, which gets about I million hits per week from 60 different countries. The Internet channel provides another sales and marketing route that further informates the sales and mar keting process. The Web site contains information about 170,000 part numbers and real-time inventory pricing from over 100 suppliers. It also contains product adver isements from different suppliers. The site allows customers to request samples
20 PART A: UNDERSTANDING BPR FOR e-BUSINESS sourcing of electronic components. Time-based competition and time-to-market were compressing product life cycles to unprecedented levels (some as short as three months) requiring much faster response from distributors. It became crucial to share information rapidly along supply chains and to develop effective coordination. Concurrently, the power of new information technology networks with distributed architectures, bandwidth proliferation, and increasing user friendliness were providing new opportunities for conducting operations in the distribution business. Marshall Industries realized that there was both a need and an opportunity to redesign their business processes by changing the information flows around them and taking advantage of new information technologies. Marshall realigned their organizational design so that they could redesign their business processes for this new business environment. In terms of the business processes themselves, the redesign thrust was driven by changing the information flows around them through the use of Internet technologies and the World Wide Web. Marshall redesigned the supply chain processes mainly through informating them differently. Yes, of course restructuring of the processes also occurred to take advantage of the new information flows, but that was secondary. For example, Marshall redesigned its sales and marketing process to be an end-toend closed loop system with intensive information flows through the use of Internet technologies. Their intranet (an internal Web-enabled information system accessible through Internet browser software) supports 400 field sales employees equipped with laptop computers who travel to customer sites. It enables them in real time to check inventory and product specification datasheets, quote orders, communicate with other employees, collaborate on projects, and make presentations. A key feature of the intranet that informates the sales and marketing process is what they call a marketing encyclopedia. It consists of 2,500 different documents, containing details about suppliers and product lines. Field salespeople can prepare and make presentations to customers on the fly and customize them to the needs of both engineering customers and corporate buyers. Furthermore, if the customer is interested in buying products from more than one supplier at the same time, the field sales employee can seamlessly integrate presentations from different suppliers. The marketing encyclopedia also informs salespeople about key programs, new products, and advertising campaign details. The sales and marketing process is intensively informated in near-real time, and thus becomes much more iterative, faster, and more effective. The process is still mediated by salespeople and occurs in the physical premises of the customers' offices, but informating it differently results in a very different process. The sales and marketing process was further redesigned by linking it more directly into the order fulfillment process in a self-service mode. Marshall Industries has made its product information available directly through its Internet site, which gets about 1 million hits per week from 60 different countries. The Internet channel provides another sales and marketing route that further informates the sales and marketing process. The Web site contains information about 170,000 part numbers and real-time inventory pricing from over 100 suppliers. It also contains product advertisements from different suppliers. The site allows customers to request samples
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 21 order products, and track their orders online. Besides offering customers valuable product information, the site provides electronic industry news using streaming audio broadcasts. The sales and marketing process has multiplied its routes and links to other business processes in the supply chain by redesigning the information flows and informating the process differently Example #3: Changing Knowledge Management around Processes (Mind It) Storage Dimensions is a $70 million manufacturer of non-stop disk and tape storage systems for client-server network environments in Milpitas, California. Its computer storage solutions are targeted to organizations with enterprise-wide client-server net- works that must keep mission-critical data protected and available 24 hours a day Their customers are large companies in information-intensive industries that live and die by their data such as airlines, financial services, and retail stores. It is imperative that they respond to their customers' technical problems at lightning speed. This is complicated by the fact that their storage products operate in multivendor network environments where new compatibility issues are generated whenever any of the hardware or software products in the network change to a newer version-and prod uct innovations occur at amazing speeds example, Intel Corporation releases new models of microprocessor chips used in network servers every 90 days compatibility issues and related technical problems at customer sites are genera for Storage Dimensions every 90 days Following a buyout from Maxtor, company management refocused Storage Di- mensions to become a higher-end and faster- response industry player. It was clear that exceptional customer support would be essential to success, and a customer support-focused corporate strategy was put in place. When the customer support process was reexamined, it was apparent that it was becoming inadequate for the growing customer base and expanding product line. Furthermore, with increased globalization customers were dispersed geographically and in different time zones. The customer support process was too slow(as much as 2-3 hours to return a phone call in some circumstances), too haphazard (no organized online knowledge base for repeat problem solutions), too expensive (repeat problems frequently escalated to development engineers, long training periods)and stressful to both support person- nel (overloaded) and managers(little visibility for the what, who, why, when). Top management saw the need for a radical solution Storage Dimensions set out to reengineer its customer support process so that they could respond faster in such a breakneck environment. Their biggest payoff in designing the process came from an interactive information system with knowledge capture and synthesis capabilities used in conjunction with their help desk. Tech Con nect, as their system is called, augmented rapid problem resolution by helping to cap- ture new knowledge on the fly through structured customer dialogues without lag time between discovery of a problem and its solution and availability to all in an in- telligently accessible form. It expanded the knowledge-creating capacity of the cus-
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 21 order products, and track their orders online. Besides offering customers valuable product information, the site provides electronic industry news using streaming audio broadcasts. The sales and marketing process has multiplied its routes and links to other business processes in the supply chain by redesigning the information flows and informating the process differently. Example #3: Changing Knowledge Management around Processes (Mind It) Storage Dimensions is a $70 million manufacturer of non-stop disk and tape storage systems for client-server network environments in Milpitas, California. Its computer storage solutions are targeted to organizations with enterprise-wide client-server networks that must keep mission-critical data protected and available 24 hours a day. Their customers are large companies in information-intensive industries that live and die by their data such as airlines, financial services, and retail stores. It is imperative that they respond to their customers' technical problems at lightning speed. This is complicated by the fact that their storage products operate in multivendor network environments where new compatibility issues are generated whenever any of the hardware or software products in the network change to a newer version—and product innovations occur at amazing speeds. As an example, Intel Corporation releases new models of microprocessor chips used in network servers every 90 days. Thus compatibility issues and related technical problems at customer sites are generated for Storage Dimensions every 90 days. Following a buyout from Maxtor, company management refocused Storage Dimensions to become a higher-end and faster-response industry player. It was clear that exceptional customer support would be essential to success, and a customer support-focused corporate strategy was put in place. When the customer support process was reexamined, it was apparent that it was becoming inadequate for the growing customer base and expanding product line. Furthermore, with increased globalization customers were dispersed geographically and in different time zones. The customer support process was too slow (as much as 2-3 hours to return a phone call in some circumstances), too haphazard (no organized online knowledge base for repeat problem solutions), too expensive (repeat problems frequently escalated to development engineers, long training periods) and stressful to both support personnel (overloaded) and managers (little visibility for the what, who, why, when). Top management saw the need for a radical solution Storage Dimensions set out to reengineer its customer support process so that they could respond faster in such a breakneck environment. Their biggest payoff in redesigning the process came from an interactive information system with knowledge capture and synthesis capabilities used in conjunction with their help desk. TechConnect, as their system is called, augmented rapid problem resolution by helping to capture new knowledge on the fly through structured customer dialogues without lag time between discovery of a problem and its solution and availability to all in an intelligently accessible form. It expanded the knowledge-creating capacity of the customer support process
22 PART A UNDERSTANDING BPR FOR e-BUSINESS The Tech Connect system is based on a knowledge-base architecture that adap- tively learns through interactions with users. The unique software-based problem resolution architecture links problems, symptoms, and solutions in a document data- base. All problems or issues are analyzed through incident reports, and resolutions are fed back into the online knowledge base in the form of solution documents. The way that the Tech Connect knowledge base learns is through the very well-structured dynamic feedback loops that are managed by the problem resolution architecture. As problems are analyzed and resolved by technical support specialists, development engineers, and customers, results are integrated into the knowledge base as solution documents and new knowledge is created and synthesized. As a result, solutions are consistent and readily available to support specialists and customers alike. Solutions are fresh(up-to-date), accurate, and based on the latest experience of customers(200 new data points per week). At this writing, support specialists and customers had ac cess to information from over 35 000 relevant incidents In total. 1.700 solution doc uments were available electronically. Because 80 percent of incoming calls are re- peat problems, existing solution documents often provide resolutions within minutes. Another key feature of the TechConnect system is the Bubble-Up solution management technology that enables the Tech Connect knowledge base to adaptively learn through its interaction with users. It automatically prioritizes solution doct ments based on"usefulness-frequency of use"in resolving specific problems; the higher priority ones rise to the top of the list. This helps less experienced inquirers to see the most useful solutions and speeds up problem resolution. The Bubble-Up process also adaptively changes the structure of the knowledge base and adapts it continuously to new knowledge The TechConnect system in effect changed knowledge management around the customer support process by creating a near-real-time knowledge base that took ad vantage of the knowledge of all customers, other vendors, and support staff. This en- abled the customer support staff participating in the process to learn more quickly and consequently to experience faster problem resolution. The customer support process was creating new knowledge and learning at a much faster rate while at the same time capturing and organizing this knowledge from all who interacted with it In effect, the customer support process is smarter and more" learningful"and has a mind"of its own through the use of Tech Connect. Furthermore, the way that a cus- tomer call is handled has changed There is no need to escalate the call quickly to the person with the greatest expertise. With the help of the Tech Connect system, the less experienced technical support people can be much more effective. The customer support process was redesigned primarily through the TechConnect system that changed the way knowledge was managed around the customer support process The three examples are meant to give the reader a basic understanding of different process redesign heuristics and the role of information technologies in enabling and shaping new ways of working. The order of the three examples should help the reader ealize that in BPR for e-business, it becomes increasingly the case that business process redesign will occur through changes in information (lows and changes in
22 PART A: UNDERSTANDING BPR FOR e-BUSINESS The TechConnect system is based on a knowledge-base architecture that adaptively learns through interactions with users. The unique software-based problem resolution architecture links problems, symptoms, and solutions in a document database. All problems or issues are analyzed through incident reports, and resolutions are fed back into the online knowledge base in the form of solution documents. The way that the TechConnect knowledge base learns is through the very well-structured dynamic feedback loops that are managed by the problem resolution architecture. As problems are analyzed and resolved by technical support specialists, development engineers, and customers, results are integrated into the knowledge base as solution documents and new knowledge is created and synthesized. As a result, solutions are consistent and readily available to support specialists and customers alike. Solutions are fresh (up-to-date), accurate, and based on the latest experience of customers (200 new data points per week). At this writing, support specialists and customers had access to information from over 35,000 relevant incidents. In total, 1,700 solution documents were available electronically. Because 80 percent of incoming calls are repeat problems, existing solution documents often provide resolutions within minutes. Another key feature of the TechConnect system is the Bubble-Up solution management technology that enables the TechConnect knowledge base to adaptively learn through its interaction with users. It automatically prioritizes solution documents based on "usefulness-frequency of use" in resolving specific problems; the higher priority ones rise to the top of the list. This helps less experienced inquirers to see the most useful solutions and speeds up problem resolution. The Bubble-Up process also adaptively changes the structure of the knowledge base and adapts it continuously to new knowledge. The TechConnect system in effect changed knowledge management around the customer support process by creating a near-real-time knowledge base that took advantage of the knowledge of all customers, other vendors, and support staff. This enabled the customer support staff participating in the process to learn more quickly and consequently to experience faster problem resolution. The customer support process was creating new knowledge and learning at a much faster rate while at the same time capturing and organizing this knowledge from all who interacted with it. In effect, the customer support process is smarter and more "learningful" and has a "mind" of its own through the use of TechConnect. Furthermore, the way that a customer call is handled has changed. There is no need to escalate the call quickly to the person with the greatest expertise. With the help of the TechConnect system, the less experienced technical support people can be much more effective. The customer support process was redesigned primarily through the TechConnect system that changed the way knowledge was managed around the customer support process. The three examples are meant to give the reader a basic understanding of different process redesign heuristics and the role of information technologies in enabling and shaping new ways of working. The order of the three examples should help the reader realize that in BPR for e-business, it becomes increasingly the case that business process redesign will occur through changes in information (lows and changes in