Operations managers are increasingly concerned with the management of business processes in organizations. These processes are any of a number of linked activities that transform an input into the organization into an output that is delivered to the customer or other member of the supply chain. Emphasizing business processes enables the organization to be more flexible, optimize the responsiveness of the organization to the demands of the marketplace, reduce costs, and address issues of quality, consistency, and capability. Some of the most well-known approaches to business process management include business process reengineering, Total Quality Management, and Six Sigma programs. When applied correctly, these tools can be invaluable for optimizing the effectiveness of the organization.
Operations management comprises those areas of management that are concerned with productivity, quality, and cost in the operations function (i.e., the activities necessary to transform inputs such as business transactions and information into outputs such as completed transactions) as well as strategic planning for the organization. The discipline of operations management covers not only manufacturing processes, but support processes that add value to the product or service and the management of the entire supply chain. Increasingly, operations managers are looking at this function in terms of business processes. These are a number of linked activities that transform an input into the organization into an output that is delivered to the customer or other member of the supply chain. Business processes include management processes, operational processes (e.g., purchasing, manufacturing, marketing), and supporting processes, (e.g., accounting, human resources). These processes are typically interrelated and cross functional boundaries with both inputs and outputs. Business process management is the process of managing these processes on a continuing basis. A number of businesses have successfully implemented business process management, including Rank Xerox, Nortel, Texas Instruments, and Hewlett-Packard.
There are a number of reasons that operations managers are increasingly concerned with the management of business processes. First, viewing the operations of an organization as a series of business processes allows organizations to be more flexible in meeting the changing demands placed upon them by the marketplace. Second, conceptualizing the operations of an organization in terms of business processes can help optimize the speed of bringing new products and services to market and the responsiveness of the organization to the needs of the marketplace. Further, the emphasis on business processes that cross functional lines can also facilitate the reduction of costs as well as the increased reliability of delivery. Finally, an emphasis on business processes helps the organization address product and service quality issues by focusing on their consistency and capability.
Business processes have been categorized in a number of different ways. As shown in Figure 1, one empirically-based approach divides business processes into four types: Operational, support, direction-setting, and managerial. Operational processes include those processes that enable work to get done; in particular, the production of products or services including product development and order fulfillment. Operational processes are also integral to integrated supply chain management and just-in-time manufacturing. It is operational processes that are most often targeted in business process reengineering efforts (see below). Support processes within the organization comprise those processes that enable the operational processes to run smoothly. Support processes may provide support technology (e.g., information technology and systems), personnel-related processes (e.g., human resources management), and accounting skills (e.g., billing) to enable the effective performance of the organization. Direction-setting processes are those processes concerned with organizational strategy, marketing, and change management. Managerial processes comprise the decision-making and communication activities of the organization. In this categorization, direction-setting and management are broken into separate processes for two reasons: Not only has this approach proven a successful strategy in many practical models, but the literature tends to regard strategy as a process in its own right and not just a subset of management processes. It should be noted, however, that although this categorization -- like most models -- may not be a perfect fit for all instances in the real world, it does present a worthwhile framework for considering business process management research.
One of the most well known aspects of business process management is business process reengineering. This is a management approach that strives to improve the effectiveness and efficiency of the various processes within an organization. Business process reengineering is intended to be a radical rethinking and redesign of business processes so that they achieve dramatic improvements in critical organizational performance criteria such as cost, quality, service, and speed. To do this, organizations need to reexamine the assumptions underlying their business operations and to question why they do things the way that they do. Frequently, this analysis reveals obsolete, erroneous, or inappropriate practices or procedures that do not add value to the product or service being offered by the business. Once the root of any business process problems that the organization is experiencing has been determined, the process can be reinvented -- not just modified -- to meet the needs of the organization to make it more effective, efficient, and flexible.
Since business process reengineering requires a total revamping of business processes, it is appropriate where more traditional methods fail or where there is a major discrepancy between where the organization is and where the organization needs to be. There are three types of organizations that can benefit from this type of major change effort. Businesses that are in serious trouble (e.g., have costs that are significantly higher the competition's, customer service that is causing the organization to lose a significant number of customers, or failure rates that are significantly above those for the industry) often need a major retooling of their business processes. Organizations that find themselves in this situation have little choice than to perform a major overhaul of their business processes if they want to be viable. In addition, organizations that are not yet in such dire straits but that are headed on such a trajectory can often profit from business process reengineering. This situation can arise from any number of factors, like: Increased competition; competitors that have significantly improved their offerings; or new customer needs that cannot be adequately met by the current business processes. Business process reengineering may make it possible for such organizations to avoid falling into...