Operation Management Strategy and Analysis free essay sample

The globalization of the economy and the liberalization of the trade markets have formulated new conditions in the market place which are characterized by instability and intensive competition in the business environment. Competition is continuously increasing with respect to price, quality and selection, service and promptness of delivery. Removal of barriers, international cooperation, technological innovations cause competition to intensify. All these changes impose the need for organizational transformation, where the entire processes, organization climate and organization structure are changed. Reengineering is one approach for redesigning the way work is done to better support the organizations mission and reduce costs. Reengineering starts with a high-level assessment of the organizations mission, strategic goals, and customer needs. Reengineering may not involve copying but, like benchmarking, is an agent for change. What is Reengineering? The term Re-engineering means re-thinking or reforming or transforming to achieve radical change in order to be competitive, to bring about rapid improvement in performance. We will write a custom essay sample on Operation Management Strategy and Analysis or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page It means to re-engineer something that was engineered long ago in order to achieve desired performance as results. The concept mainly applies to an organization, particularly large organizations that have become inefficient over time that finds it difficult to be competitive using the archaic systems of governance, organizational processes and procedures. For organizational operations, 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. The concept is not about slight improvement or making an existing process better. It is about changing what exists. It is about radical change to achieve significant improvement in performance. Fundamentally it is about bringing change in mindset, and with widespread use it could significantly improve a nations performance. It is not an easy task and should not be tried with inexperienced people. There are proven methods and tools, but it can only succeed with experienced leadership and professionals. Many corporations and institutions, public and private, have successfully utilized this concept to significantly improve their economic performance. * Examples of Reengineering: How much reengineering is helpful for an organization, we can understand it from the following illustrations— * Florida Power and Light Company achieved a reduction in power outage per customer to 32 minutes, compared to 7 hours by its competitor, thorough reengineering. * CIGNA, a leading provider of insurance and related financial services in the United States, reported that each $1 invested in reengineering generated $2-$3 in returned benefits. Corning Asahi Video (CAV) Products won Computerworld’s Annual Reengineering Team of the Year Award for completing a 15-month project costing $570 million that resulted in halving fulfillment time and reducing per order ordering costs for CAV by 75%. * Digital Equipment Corporation successfully eliminated 450 positions through a reengineering project by consolidating 55 accounting groups into just five. * Progressive Insurance, thorugh reengineering, reduced time spent in settling claims from 31 days to just 4 hours. During the period 1987-1992, Banca di America e di Italia (BAI) doubled its revenue and attributed 24% of the increase to its reengineering efforts. * Pacific Bell’s first reengineering project was known as â€Å"Centrex Provisioning,† in which the company reported 36%-50% reduction in cost and over 20% reduction in errors. * C. R. England and Sons, thorough reengineering, was able to reduce its cost of sending its invoice a to mere $0. 15 compared to the average cost of $5. 10 that was incurred during the period 1989-1991. ATamp;T Capital Leasing Services, through reengineering, was able to increase its sales by 20% and decrease its credit approval tome by 39%. * Rank Xerox (U. K. ), through reengineering, reduced its order delivery time from 33 days to 6 days. * Inter-Mountain Health Care of Salt Lake City, through reengineering, reduced infection rates by half, resulting in an annual saving of approximately $750,000, and cut its adverse drug reduction cost by $900,000 per year. What Reengineering Is Not: Careful attention must be given to what reengineering is not, because much misconception exists in the business world today. Many boast of reengineering efforts and projects, but in reality, few fulfill the definition of reengineering. Projects that are not reengineering do not reap the enormous gains and radical changes inherent the methodology. Too often, executives and managers say they have reengineered and, when gains are small or nonexistent, develop a belief that reengineering does not work. This judgement is erroneous and often dissuades others from committing to the reengineering revolution. Reengineering is not about: * Accomplishing incremental or small-scale change. Reducing full-time equivalents (FTEs) to control costs. * Switching vendors or changing products. * Offering contests, slogans, or gimmicks. * Providing quality improvement initiatives. * Remodeling the physical plant. * Restructuring the organization. * Improving processes. * Developing new services. * Automating existing processes. * Improving systems. * Decreasing services. * Marketing. * Initiating mergers or joint ventures. Alt hough many of these items may well be techniques or outcomes of reengineering, in and of themselves, they are not essential features. The key to successful reengineering is to stay focused on the core features and elements of the process. The greatest mistake is to focus on the peripheral organizational elements. Confusion and frustration will generally result, and the overall objective of making radical changes and quantum leaps in performance will never be realized. * Types of Reengineering: There are different types of reengineering in business, such as— * Performance Management Productivity Analysis: Procedure analysis is a technique developed by industrial engineers to give the most accurate and reliable information about what a specific work or position is. Also it gives us a fair explanation of how a work can be performed to obtain desired results, and how much it costs. * Organization and Method Analysis: Procedure analysis finds areas that need improving and ways and ways of making improvements. The type and scope of procedure survey will vary depending on the purposes of the investigation and the size and nature of the instituion. In most cases an individual systems investigation would be aimed at solving one particular problem or analyzing one particular aspects of the systems of the institution. * System and Procedure Analysis and Design: While company policy and personnel procedures must exist within the framework of a business, many companies create written policy manuals to use as management guides for personnel procedures and company policy. * Formal Definition of Business Process Reengineering (BPR): BPR is concerned with the conversion of business process and not of computer processes. Reengineering is also known as Business Process Reengineering(BPR). Reengineering is â€Å"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. (Hammer and Champy, 1993) The definition contains four key words: * Fundamental * Radical * Dramatic * Processes * Fundamental: In doing reengineering, business people must ask the following most basic questions about their companies and how they operate: * Why do we do what we do? * Why do we do it the way we do? Asking these fundamental questions forces people to look at the tacit rules and assumptions that underlie the way they conduct their businesses. Often, these rules turn out to be obsolete, erroneous, and inappropriate. Reengineering begins with no assumptions; in fact, companies that undertake reengineering must guard against the assumptions that most processes already have embedded in them. Reengineering first determines what a company must do, and then how to do it. Reengineering ignores what is and concentrates on what should be. * Radical: Radical, derived from the Latin word â€Å"radix†, means â€Å"root†. Consequently: * Radical redesign means getting to the root of things: not making superficial changes or fiddling with what is already in place, but throwing away the old. Radical redesign means disregarding all existing structures and procedures, and inventing completely new ways of accomplishing work. * Reenginerring is about business re-invention—not business improvement, business enhancement, or business modification. * Dramatic: Reengineering is not about making marginal or incremental improvements, but about achieving quantum leaps in performance. Marginal improvem ent requires only fine tuning; dramatic improvement demands replacing the old with something new. Reengineering should be brought in only when a need exists for heavy correction. Three kinds of companies undertake reengineering— * Companies that find themselves in deep trouble, that is, who are desperate. * Companies that are not yet in trouble but whose management has the foresight to see trouble coming. * Companies that are in peak condition and seek to consolidate and improve their position. * Processes: Process is a collection (set) of activities that take one or more kinds of input and create (produce) an output that is of value to the customer. It addresses the following questions— * How do you develop a new product? * What can we do what we do faster? How can we do what we do better? * How can we do what we do at a lower cost? * Why do we do what we do at all? Business Process Reengineering (BPR) is driven by the three Cs of customers, competition, and change. * Customers want products and sevices that fit their unique needs delivered to fit their schedules and priced to fit their budgets. Once a customer becomes acquainted with a higher level of quality or service, there is no going back. * Competition is becoming more intense, with successful companies offering a superior package of price, quality and service. Change is inevitable, and the pace of change in technological innovation is quickening. This means that companies have to move faster just to stand still. * History of Reengineering: Early Stage: The concept of reengineering originates from management theories developed as early as the 19th century. The purpose of reengineering is to make all business processes ‘best-in-class’. Frederick Taylor suggested in the 1880s that managers use process reengineering methods to discover the best processes for carrying out work, and that these processes be reengineered to achieve optimum productivity. BPR echoes the classical belief that there is one best way to conduct tasks. In Taylor’s time, technology did not allow large companies to design processes in a cross-functional or cross-departmental manner. Specialization was the state-of-the art method to improve efficiency, as per the technology of the time. BPR was first introduced to the business world by Frederick Taylor when he published his article, â€Å"The Principles of Scientific Management†, in the 1900s. Criticism: Scientific Management was the first step to the introduction of BPR, which turned out to be unsuccessful due to the many issues which were not resolved. During Taylor’s time, not many knowledgeable workers were employed in manufacturing, which was the main wealth generator. Scientific Management involved breaking the manufacturing process down to a ‘thoughtless’ cycle of simple sequences, which were to be carried out in the least amount of time possible with the minimum amount of effort. This often raised the factory workers’ salaries but also caused the workers to work extremely hard in backbreaking manual labour. This practice of improving efficiency in manufacturing often raised the concern of ‘dehumanization of the workplace’. The Scientific Management method gave birth to Total Quality Management in Japan after World War II, which eliminated many of the discrepancies that the previous method of improving the business structure had. William Deming and Joseph Juran helped Japan become an economic superpower by taking over market share from North American businesses with quality goods and services. Total Quality Management’s main goal is to improve manufacturing operations. In the early 1900s, Henry Fayol stated the concept of reengineering: To conduct the undertaking toward its objectives by seeking to derive optimum advantage from all available resources. The applicability of classical management theories, such as division of labour was widely duplicable and portable. These ideas stimulated increases in productivity, output, and income, that led to the creation of the middle class. Although the technological resources of our era have changed, the concept still holds. Criticism: About the same time, another business engineer, Lyndall Urwick, stated: â€Å"It is not enough to hold people accountable for certain activities; it is also essential to delegate to them the necessary authority to discharge that responsibility. Although Hammer and Champy are eager to declare that classical organization theory is obsolete, classical ideas such as division of labour have had an enduring power and applicability that reengineering has so far failed to demonstrate. BPR does not appear to qualify as a scientific theory because, among other things, it is not duplicable and it has limited scope. Development Stage: In the 1990s, Michael Hammer and Jame s Champy introduced their book ‘Reengineering the Corporation’, which gave birth to the term business process reengineering. Michael Hammer once said, â€Å"Serving the customer is not a mechanical act but one that provides an opportunity for fulfillment and meaning. †   Michael Hammer, a former professor of computer science at the  Massachusetts Institute of Technology  (MIT), published an article in the  Harvard Business Review, in which he claimed that- the major challenge for managers is to obliterate forms of work that do not add value, rather than using technology for automating it. This statement implicitly accused managers of having focused on the wrong issues, namely that technology in general, and more specifically information technology, has been used rimarily for automating existing processes rather than using it as an enabler for making non-value adding work obsolete. BPR is supposedly not a theory, but a technique. Hammer and Champy are, however, rather vague about the details. Despite their vagueness, Hammer and Champy are clear about the party to blame when reengineering atte mpts fail; it is the fault of the individual company. To the reengineering team, this will sound like a variation of ‘blaming the victim. ’ Cyert and March, among others, point out that conflict is often a driving force in organizational behaviour. BPR stresses teamwork, yet paradoxically, it must be â€Å"driven† by a leader who is prepared to be ruthless. It is good practice not to assume that one can simply issue directives from the headquarters and expect them to be carried out. Hammers claim was simple: Most of the work being done does not add any value for customers, and this work should be removed, not accelerated through automation. Instead, companies should reconsider their processes in order to maximize customer value, while minimizing the consumption of resources required for delivering their product or service. A similar idea was advocated by  Thomas H. Davenport  and J. Short in 1990,  at that time a member of the  Ernst amp; Young  research center, in a paper published in the  Sloan Management Review. This idea, to unbiasedly review a company’s  business processes, was rapidly adopted by a huge number of firms, which were striving for renewed  competitiveness, which they had lost due to the market entrance of foreign competitors, their inability to satisfy customer needs, and their insufficient cost structure. According to Thomas Davenport, â€Å"classical reengineering† repeats the same mistakes as the classical approach to management, by separating the design of work from its execution. Typically, a small engineering team, often from outside the company, designs work for the money. The team is fuelled by assumptions such as- â€Å"There is one best way to organize work; I can easily understand how you do your work today; I can design your work better than you can; There is little about your work now that is worth saving; You will do your work the way I specify. † Davenport suggests that the engineering model or analogy that BPR is based upon is flawed, both in terms of process design and information technology. He proposes an â€Å"ethnographic† approach to process design and an â€Å"ecological† approach to information systems. Even well established management thinkers, such as  Peter Drucker  and  Tom Peters, were accepting and advocating BPR as a new tool for re-achieving success in a dynamic world. During the following years, a fast growing number of publications, books as well as journal articles, were dedicated to BPR, and many consulting firms embarked on this trend and developed BPR methods. However, the critics were fast to claim that BPR was a way to dehumanize the work place, increase managerial control, and to justify  downsizing, i. . major reductions of the work force,  and a rebirth of  Taylorism  under a different label. Despite this critique, reengineering was adopted at an accelerating pace and by 1993, as many as 60% of the  Fortune 500  companies claimed to either have initiated reengineering efforts, or to have plans to do so. This trend was fueled by the fast adoption of BPR by the consulting industry, but also by the study  Made in America, conducted by MIT, that showed how companies in many US industries had lagged behind their foreign counterparts in terms of competitiveness,  time-to-market  and  productivity. Development after 1995 With the publication of critiques in 1995 and 1996 by some of the early BPR proponents, coupled with abuses and misuses of the concept by others, the reengineering fervor in the U. S. began to wane. Since then, considering business processes as a starting point for business analysis and redesign has become a widely accepted approach and is a standard part of the change methodology portfolio, but is typically performed in a less radical way as originally proposed. More recently, the concept of  Business Process Management  (BPM) has gained major attention in the corporate world and can be considered as a successor to the BPR wave of the 1990s, as it is evenly driven by a striving for process efficiency supported by information technology. Equivalently to the critique brought forward against BPR, BPM is now accused of focusing on technology and disregarding the people aspects of change. Reengineering Assumptions: A number of assumptions are associated with reengineering. The fundamental assumptions include: * Reengineering is top-down directed; * Reengineering leads to radical change; Reengineering focuses on end-to-end processes; * Reengineering assumes clean-state change; and * Reengineering is information technology enabled. Key Elements of Reengineering: Critical Processes: The emphasis of reengineering should be on core business processes rather than on functional departments such as purchasing or marketing. By focusing on processes, m anagers may spot opportunities to eliminate unnecessary work and supervisory activities, rather than worry about defending turf. Because of the time and energy involved, reengineering should be reserved for essential processes such as new-product development or customer service. Normal process-improvement activities can be continued with the other processes. Strong Leadership: Senior executive must provide strong leaderhip for reengineering to be successful. Otherwise, cynicism, resistance (â€Å"we tried that before†), and boundaries between financial areas can block radical changes. Managers can help overcome resistance by providing the clout necessary to ensure that the project proceeds within a strategic context. Executives should set and monitor key performance objectives for the process. Top management should also create a sense of urgency, making a case for change that is compelling and constantly refreshed. Cross functional Teams: A team, consisting of members from each functional area affected by the process change, is charged with carrying out a reengineering project. For instance, in reengineering the process of handling an insurance claim, three departments should be represented: customer service, adjusting, and accounting. Reengineering works best at high-involvement workplaces, where self-managing teams and employee empowerment are the rule rather than the exception. Top-down and bottom-up for deciding how to achieve them. Information Technology: Information technology is a primary enabler of process engineering. Most reengineering projects design processes around information flows such as customer order fulfillment. The process owners who will actually be responding to events in the marketplace need information networks and computer technology to do their jobs better. The reengineering team must determine who needs the information, when they need it, and where. Clean-Slate Philosophy: Reengineering requires a â€Å"clean state† philosophy-that is, starting with the way the customer wants to deal with the company. To ensure a customer orientation, teams begin, with internal and external customer objectives for the process. Often, teams first estblish a price target for the product or service, deduct profits desired, and then find a process that provides what the customer wants at the price the customer will pay. Reengineers start from the future and work backward, unconstarined by current approaches. Process analysis: Despite the clean-state philosophy, a reengineering team must understand things about the current process: what it does, how well it performs, and what factors affect it. Such understanding can reveal areas in which new thinking will provide the biggest payoff. The team must look at every procedure involved in the process throughout the organization, recording each step, questioning why it is done, and then eliminating everything that is not really necessary. Information on standing relative to the competition, process by process is also valuable. Core Features and Philosophy of Reengineering: Reengineering follows some core core features and philosophy which are shown in the following: 1. Radical Change: The focus is on radical change in processes and systems. 2. Discontinuous Thinking: It involves a radical departure from dysfunctional ways of doing and thinking; it means breaking old assumptions and rules. 3. Innovation: The emphasis on creativity and recreation, going where no one has gone before. 4. Dramatic Improvements: The major imperative is realization of quantum leaps in defined outcomes, yielding dramatic not just incremental improvements in processes and systems. 5. Start-From-Scratch Initiative: The focus on what can be, rather than what is. 6. Genesis Effect: It is a birth, a new beginning, a time of creation. 7. Cross-Functional: This is a synergistic process, crossing multiple functions and boundaries. . Futuristic: The emphasis is on future operations, not on the present or past, which demands visionary thinking and leadership. 9. Driven from The Top Down: This effort requires the absolute commitment and continuous support of top-level management to be successful. 10. Organization Focused: All elements of the organization are readily involved and po sitively affected. Objectives of Reengineering: When applying the BPR management technique to a business organization the implementation team effort is focused on the following objectives: Customer focus: Customer service oriented processes aiming to eliminate customer complaints. Quality: Obsession with the superior service and value to the customers. The level of quality is always the same controlled and monitored by the processes, and does not depend mainly on the person, who servicing the customer. Speed: Dramatic compression of the time it takes to complete a task for key business processes. For instance, if process before BPR had an average cycle time 5 hours, after BPR the average cycle time should be cut down to half an hour. Compression: Cutting major tasks of cost and capital, throughout the value chain. Organizing the processes a company develops transparency throughout the operational level reducing cost. For instance, the decision to buy a large amount of raw material at 50% discount is connected to eleven cross checkings in the organizational structure from cash flow, inventory, to production planning and marketing. These checkings become easily implemented within the cross-functional teams, optimizing the decision making and cutting operational cost. Flexibility: Adaptive processes and structures to changing conditions and competition. Being closer to the customer the company can develop the awareness mechanisms to rapidly spot the weak points and adapt to new requirements of the market. Innovation: Leadership through imaginative change providing to organization competitive advantage. Productivity: Improve drastically effectiveness and efficiency. In order to achieve the above mentioned adjectives the following BPR project methodology is proposed. Tools amp; Techniques: The various definitions of BPR suggest that the radical improvement of processes is the goal of BPR, but when we have a look at the literature we see that they do not refer specifically to the tools and techniques used in reengineering business processes. The result of this void is that some authors and consultants alike have pursued the use of many different tools in the search for the best reengineering application. These tools and techniques can be listed as below: * Tools of BPR: BPR tools are used more frequently on methodology- based BPR projects than on intuitive ones (Unless the user counts a piece of paper, a flow chart template, and a pencil as tools). In fact, some of the methodologies are based on the use of specific tools. Benefits of using BPR Tools: By using tools, the BPR practitioner expects to improve productivity, finish projects faster, produce higher quality results, and eliminate tedious housekeeping work in order to concentrate on value added work. To produce these benefits, BPR tools should be usable by businesspeople (managers and professionals), not technicians. They should enhance the clarity of the BPR team’s vision. They should enforce consistency in analysis and design, and they should ideally, permit iterative, top-down refinement from the BPR project goals to the solution. If the solution includes a computer system, the refinement should end with a working system. Finally, as with any investment, BPR tools should produce an acceptable return on investment. * Six Categories of BPR Tools – * Project Management: These tools are used for planning, scheduling, budgeting, reporting, and tracking projects. Some, such as Texas Instruments’ IEF/Project Manager, are integrated with other categories of tools, such as modeling, analysis, and systems development. Other project management tools, such as Harvard Project Manager or Microsoft Project for Windows, are standalone. Coordination: These tools are used to distribute plans and to communicate updated details of projects. The primary subcategories are E-mail, scheduling applications, shared spreadsheets, bulletin boards, and groupware. Some of these tools, such as Microsoft Excel or Lotus 1-2-3, support a single subcategory. Others, such as Lotus Notes or WordPerfect Office, support multiple subca tegories. * Modeling: These tools are used to make a model of something in order to understand its structure and workings. Most of the tools in this category are integrated computer-aided software engineering (ICASE) toolsets for integrated analysis, design, and development of computer systems. These include Texas Instruments’ IEF. Knowledgeware’s IEW, Popkin System Architect, and S/Cubed DAISYS. There are useful partial solutions, including spreadsheets. * Business Process Analysis: These tools are used for the systematic reduction of a business into its constituent parts and the examination of the interactions among those parts. In general, the same tools used for modeling are used for business process analysis. Indeed, analysis is necessary for modeling, although not vice versa. * Human Resource Analysis and Design: Tools used to design and establish the human or social part of reengineered processes are mostly standalone, partial solutions for specific, sometimes overlapping applications. One subcategory of these tools is used for requisition/candidate tracking and position history. Examples include—skills assessment (Performance Mentor), team building (Supersynch), compensation planning (Hi-Tech Employee Evaluation and Salary Manager), and organization charting (Corel Draw, Harvard Graphics). System Development: These tools are used to automate the reengineered business processes. Subcategories include the ICASE tools as well as visual programming (Microsoft Visual Basic), application frameworks (Borland Application Framework, Gupta SQL Base, and SQL Windows), coding workbenches (MicroFocus Cobol/2 Workbench, IBM OS/2 Workframe 2), object reuse libraries (Digitalk Smalltalk V, Borl and Object Vision), and test harnesses (McCabe amp; Associates Codebreaker, Software Research M-Test). * Techniques of BPR: Some common techniques for BPR are— * Process Visualization: While many authors refer to the need to develop an ideal end state for processes to be reengineered, Barrett (1994) suggests that the key to successful reengineering lies in the development of a vision of the process. * Process Mapping and Modeling: Process flowcharting, IDEF, role activity diagramming etc. * Change Management: Several authors concentrate on the need to take account of the human side of reengineering, in particular the management of organizational change. Some authors suggest that the management of change is the largest task in reengineering. Kennedy (1994) on the other hand, incorporates the human element of reengineering due to the perceived threat it has on work methods and jobs. * Benchmarking: Several authors suggest that benchmarking forms an integral part of reengineering, since it allows the visualization and development of processes which are known to be in operation in other organizations. * Process and Customer Focus: The primary aim of BPR, according to some authors, is to redesign processes with regard to improving performance from the customer’s perspective. Problem Solving and Diagnosis: Pare to diagramming, cognitive mapping etc. * Process Prototyping and Simulation: Simulation has proven to be an effective tool in just about all facets of the reengineering process. It allows BPR practitioners to determine which processes should be reengineered and if proposed changes will have a productive impact. Simulation provides a structured environment in which they can better understand, analyze and improve their processes. * Project Management: Budgeting, project scheduling etc. * Process Measurement: Activity-based costing, statistical process control etc. It should be noted that few authors refer to any single technique when discussing BPR. Most incorporate and integrate a mixture of tools and techniques for change effectively and for the success of BPR project. Resource Person for Reengineering: The implementation of reengineering needs people who have different roles in the reengineering horizon. The selection of people who will reengineer is a critical success factor in reengineering. The roles played by people in reengineering are as follows: 1. Leader: The leader is a senior executive who authorizes and motivates the overall reengineering effort. 2. Process Owner: The process owner is a manager with responsibilities of the process that is reengineered. It is this process that is reengineered. 3. Reengineered Team: The reengineering team is a group of individuals who are dedicated to reengineering of the particular process. 4. Steering Committee: The steering committee is a strategy team, consisting of senior managers who will make the strategy for reengineering in the company and monitor the reengineering effort. 5. Reengineering ‘Czar’: The reengineering czar is the individual responsible for developing reengineering techniques and tools within the company, and achieving synergy across various reengineering efforts that are going on in the organization. The czar has two important functions: a) Enabling and supporting the process owners and reengineering teams, and b) Coordinating all the ongoing reengineering activities in the organization. Principles of Reengineering: Reengineering is about achieving a significant improvement in processes so that contemporary customer requirements of quality, speed, innovation, customization, and service are met. Hammer has proposed seven principles or rules for reengineering and integration. Rule 1. Organize around Outcomes, Not Tasks: Several specialized tasks previously performed by different people should be combined into a single job. This could be performed by an individual â€Å"case worker† or by a â€Å"case team†. The new job created should involve all the steps in a process that creates a well-defined outcome. Organizing around outcomes eliminates the need for handoffs, resulting in greater speed, productivity, and customer reponsiveness. It also provides a single knowledgeable point of contact for the customer. Rule 2. Have Those Who Use the Output of the Process Perform the Process: In other words, work should be carried out where it makes the most sense to do it. This results in people closest to the process actually performing the work, which shifts work across traditional intra-and interorganizational boundaries. For instance, employees can make some of their own purchases without going through purchasing, customers can perform simple repairs themselves, and suppliers can be asked to manage parts inventory. Relocating work in this fashion eliminates the need to coordinate the performers and users of a process. Rule 3. Merge Information-Processing Work into the Real Work that Produces the Information: This means that people who collect information should also be responsible for processing it. It minimizes the need for another group to reconcile and process that information, and greatly reduces errors by cutting the number of external contact points for a process. A typical accounts payable department that reconciles purchase orders, receiving notices, and supplier invoices is a case in point. By eliminating the need for invoices by processing orders and receiving information online, much of the work done in the traditional accounts payable function becomes unnecessary. Rule 4. Treat Geographically Dispersed Resources as Though They Were Centralized: Information technology now makes the concept of hybrid centralized/decentralized operations a reality. It facilitates the parallel processing of work by separate organizational units that perform the same job, while improving the company’s overall control. For instance, centralized databases and telecommunication networks now allow companies to link with separate units or individual field personnel, providing them with economies of scale while maintaining their individual flexibility and responsiveness to customers. Rule 5. Link Parallel Activities Instead of Integrating Their Results: The concept of integrating only the outcomes of parallel activities that must eventually come together is the primary cause for rework, high costs, and delays in the final outcome of the overall process. Such parallel activities should be linked continually and coordinated during the process. Rule 6. Put the Decision Point Where the Work Is Performed, and Build Control into the Process: Decision making should be made part of the work performed. This is possible today with a more educated and knowledgeable workforce plus decision-aiding technology. Controls are now made part of the process. The vertical compression that results produces flatter, more responsive organizations. Rule 7. Capture Information Once-at the Source: Information should be collected and captured in the company’s online information system only once-at the source where it was created.