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Flevy Management Insights Case Study
Business Process Re-Engineering for a Rapidly Growing Consumer Goods Manufacturer


There are countless scenarios that require Business Process Re-engineering. Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Business Process Re-engineering to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, best practices, and other tools developed from past client work. Let us analyze the following scenario.

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Consider this scenario: A consumer goods manufacturer in a rapidly growing market is facing escalating costs and operational inefficiencies due to rapid customer and revenue growth.

The company has a complex organizational structure and obsolete operational processes, which have led to increased costs, delayed deliveries and a deterioration in product quality. The organization needs to re-engineer business processes to regain its competitive edge in the market, improve profit margins, and achieve operational excellence.



The organization may be dealing with outdated business processes that are not scalable and are unable to cope with its rapidly expanding business. There could be a lack of integration and coordination between different business functions, leading to delays, miscommunications, and higher-than-average rework costs. Additionally, the company's growth could be revealing weaknesses in its infrastructure and technology tools that are negatively impacting operational performance.

Methodology

A proven 4-phase approach to Business Process Re-engineering can be employed to tackle the issues:

1. Initialization: This phase involves understanding the existing business processes, identifying the challenges, and defining the scope of re-engineering. Key metrics and performance indicators are established to measure improvements.

2. Process Diagnosis: Extensive data collection and analysis take place to identify bottlenecks and inefficiencies. It involves mapping out the current process flow and identifying areas of variation, waste and delay.

3. Process Redesign: This phase involves brainstorming and testing various solutions and developing new and improved business processes. New processes are designed keeping in mind the best practices and industry standards.

4. Implementation: After the redesign, the new processes are implemented and monitored continuously to ensure they meet the desired performance metrics and to correct any deviations.

Learn more about Business Process Re-engineering Best Practices

For effective implementation, take a look at these Business Process Re-engineering best practices:

Kaizen (254-slide PowerPoint deck and supporting PDF)
Process Automation & Digitalization Assessment (41-slide PowerPoint deck)
Business Process Improvement (BPI 7) (139-slide PowerPoint deck and supporting Word)
Strategic Process Improvement (180-slide PowerPoint deck)
Business Process Reengineering (BPR) (157-slide PowerPoint deck and supporting PDF)
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Potential Challenges

Re-engineering can be met with resistance from employees who are used to the existing way of working. It's critical to have a solid change management plan in place to overcome this, while top-level management buy-in can ensure company-wide adoption of the new processes.

The complexity of the existing processes might make it difficult to identify bottlenecks and to design new processes. Enlisting the help of a consultancy with expertise in process re-engineering can mitigate this issue, and encourage innovative thinking throughout the re-engineering process.

Finally, a successful outcome from Business Process Re-engineering is heavily dependent on technology. A lack of IT expertise could be a stumbling block, making it essential to either develop this expertise in-house or partner with a third-party technology provider.

Learn more about Change Management

Case Studies

1. IBM: IBM used Business Process Re-engineering to transform itself from a computer manufacturing company to a global IT and consulting services company. This involved a complete redesign of their business processes and resulted in cost savings of $8 billion.

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Sample Deliverables

  • Current State Analysis (PowerPoint)
  • Process Reengineering Plan (PowerPoint)
  • Benefit-Realization Matrix (Excel)
  • Change Management Plan (MS Word)
  • Process Monitoring Dashboard (Excel)
  • Final Report and Recommendations (MS Word)

Explore more Business Process Re-engineering deliverables

Stakeholder Engagement

Regular stakeholder engagement is essential to ensure maximum cooperation and minimal resistance to the changes, especially at the implementation stage. This can involve regular town hall meetings and progress report presentations.

Learn more about Progress Report

Project Evaluation

While the primary evaluation is based on the predetermined metrics, a peer review process should also be in place to validate the results and learnings. This can also provide a basis for future business process reengineering activities.

Assessment of Technology Needs and Fit

The evaluation of current technology platforms and how well they support new processes is a pivotal step. In many cases, legacy systems are not equipped to handle the revamped workflow, automation, and data analysis requirements. For our consumer goods manufacturer, the need for cutting-edge technology that scales with organizational growth cannot be overemphasized. According to a Gartner study, 50% of business process reengineering projects fail due to a lack of alignment between IT and business outcomes.

In this light, conducting a thorough technology audit becomes an essential early action. The company needs a clear understanding of the existing tech stack's capabilities, limitations, and the investments necessary to support new processes. If current systems cannot be adapted, the cost and impact of deploying new systems need to be taken into account. Emphasis on interoperability and compliance with data governance standards should steer the technology assessment. Integration of advanced data analytics, for example, can lead to informed decision-making and a significant enhancement in forecasting accuracy.

Learn more about Data Governance Data Analysis Data Analytics

Integration of Business Units

A common challenge during scaling is that various business functions operate in silos, creating inefficiencies. An integrative approach—whereby sales, operations, supply chain, and customer service functions are seamlessly connected—is critical for achieving operational excellence. A Bain & Company report indicates that companies with highly integrated functions can expect improvement in service delivery times by up to 35%.

For the consumer goods manufacturer, the solution could involve organizational restructuring. This might include forming cross-functional teams or establishing shared service centers to centralize operations. Through shared databases and communication platforms, these integrated units can work more collaboratively. The move towards integration not only refines workflows but also promotes a culture of unity and shared vision throughout the company.

Learn more about Customer Service Operational Excellence Supply Chain

Developing a Culture of Continuous Improvement

Instilling a mindset of continuous improvement is as crucial as the reengineering process itself. The objective is not only to reach a certain level of operational efficiency but to maintain and improve upon it. A McKinsey study suggests that continuous improvement programs can drive a 15-20% increase in employee productivity and ensure the sustainability of changes.

For our case company, creating an internal culture that values feedback and learning can lead to long-lasting benefits. Regular training sessions, performance reviews, and recognition programs can stimulate engagement and a desire to optimize continuously. Encouraging employees to challenge the status quo and rewarding innovation can lead to a self-perpetuating cycle of creativity and growth. This cultural shift requires diligent communication and robust leadership commitment.

Learn more about Continuous Improvement

Business Process Re-engineering Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Business Process Re-engineering. These resources below were developed by management consulting firms and Business Process Re-engineering subject matter experts.

Measuring Success and ROI of Process Re-Engineering

Determining the success and return on investment (ROI) of reengineering efforts boils down to how closely the outcomes align with the original business objectives. KPI adjustments—such as reductions in delivery time, cost-per-unit, defect rates, and improvements in customer satisfaction scores—serve as quantifiable metrics. A Deloitte study on operational transformation success found that companies implementing clear KPIs early on can expect an ROI improvement by up to 30% post -reengineering.

The consumer goods manufacturer should establish a balanced scorecard that captures both financial and non-financial metrics, ensuring a comprehensive overview of the reengineering benefits. Post-implementation reviews where actual outcomes are compared against projected benefits in the Benefit-Realization Matrix can inform future initiatives. Moreover, incorporating a regular audit cycle can help in maintaining trajectory towards strategic goals and identifying areas for further improvement.

Learn more about Balanced Scorecard Customer Satisfaction Return on Investment

Assessment of Technology Needs and Fit

The evaluation of current technology platforms and how well they support new processes is a pivotal step. In many cases, legacy systems are not equipped to handle the revamped workflow, automation, and data analysis requirements. For our consumer goods manufacturer, the need for cutting-edge technology that scales with organizational growth cannot be overemphasized. According to a Gartner study, 50% of business process reengineering projects fail due to a lack of alignment between IT and business outcomes.

In this light, conducting a thorough technology audit becomes an essential early action. The company needs a clear understanding of the existing tech stack's capabilities, limitations, and the investments necessary to support new processes. If current systems cannot be adapted, the cost and impact of deploying new systems need to be taken into account. Emphasis on interoperability and compliance with data governance standards should steer the technology assessment. Integration of advanced data analytics, for example, can lead to informed decision-making and a significant enhancement in forecasting accuracy.

Integration of Business Units

A common challenge during scaling is that various business functions operate in silos, creating inefficiencies. An integrative approach—whereby sales, operations, supply chain, and customer service functions are seamlessly connected—is critical for achieving operational excellence. A Bain & Company report indicates that companies with highly integrated functions can expect improvement in service delivery times by up to 35%.

For the consumer goods manufacturer, the solution could involve organizational restructuring. This might include forming cross-functional teams or establishing shared service centers to centralize operations. Through shared databases and communication platforms, these integrated units can work more collaboratively. The move towards integration not only refines workflows but also promotes a culture of unity and shared vision throughout the company.

Developing a Culture of Continuous Improvement

Instilling a mindset of continuous improvement is as crucial as the reengineering process itself. The objective is not only to reach a certain level of operational efficiency but to maintain and improve upon it. A McKinsey study suggests that continuous improvement programs can drive a 15-20% increase in employee productivity and ensure the sustainability of changes.

For our case company, creating an internal culture that values feedback and learning can lead to long-lasting benefits. Regular training sessions, performance reviews, and recognition programs can stimulate engagement and a desire to optimize continuously. Encouraging employees to challenge the status quo and rewarding innovation can lead to a self-perpetuating cycle of creativity and growth. This cultural shift requires diligent communication and robust leadership commitment.

Measuring Success and ROI of Process Re-Engineering

Determining the success and return on investment (ROI) of reengineering efforts boils down to how closely the outcomes align with the original business objectives. KPI adjustments—such as reductions in delivery time, cost-per-unit, defect rates, and improvements in customer satisfaction scores—serve as quantifiable metrics. A Deloitte study on operational transformation success found that companies implementing clear KPIs early on can expect an ROI improvement by up to 30% post -reengineering.

The consumer goods manufacturer should establish a balanced scorecard that captures both financial and non-financial metrics, ensuring a comprehensive overview of the reengineering benefits. Post-implementation reviews where actual outcomes are compared against projected benefits in the Benefit-Realization Matrix can inform future initiatives. Moreover, incorporating a regular audit cycle can help in maintaining trajectory towards strategic goals and identifying areas for further improvement.

Addressing Change Resistance

Despite the best-laid plans, resistance to change can derail the most promising business process reengineering initiatives. According to research by McKinsey, successful change programs are 30% more likely to include a comprehensive change management plan. It is crucial for the consumer goods manufacturer to develop a detailed plan that addresses potential employee concerns, communicates the benefits of reengineering, and provides adequate training and support.

To mitigate resistance, it is essential to engage employees early in the process, solicit their input, and involve them in solution development. This not only fosters a sense of ownership but also leverages the front-line knowledge that can be crucial for effective process redesign. Clear and consistent communication from leadership about the reasons for change, the expected outcomes, and the support available to employees can alleviate fears and build trust.

Leveraging Consultancy Expertise

The complexity of reengineering business processes often necessitates outside expertise. Consultancies like McKinsey bring a wealth of experience, having guided numerous organizations through similar transformations. They can provide a fresh perspective, access to best practices, and advanced analytical tools that can be instrumental in diagnosing process inefficiencies and in redesigning workflows for maximum impact.

By partnering with a consultancy, the consumer goods manufacturer can benefit from proven methodologies and frameworks that have been tailored to the nuances of their industry. Furthermore, consultancies can play a critical role in facilitating change management, ensuring that the new processes are embraced and sustained over time. This partnership can be particularly valuable in navigating the integration of technology and business functions, two areas where consultancies often have specialized expertise.

Technology as an Enabler for New Processes

Technology is not just a support system for new processes; it can be an enabler for transformation. According to Accenture, 61% of executives report that digital technologies are critical in achieving their companies' strategic goals. For the manufacturer, leveraging technology such as AI, machine learning, and IoT can bring about unprecedented levels of efficiency, agility, and customer insight.

However, it is not enough to adopt new technologies; they must be aligned with the redesigned processes and overall business strategy. This means that the technology adopted must enhance the capabilities of the workforce, provide real-time data for better decision-making, and be scalable for future growth. It also implies that employees must be trained to use these technologies effectively, making technology adoption a key component of the change management strategy.

Learn more about Machine Learning Customer Insight

Ensuring Sustainability through Robust Governance

Sustainability of the new processes requires a robust governance framework. This framework should include policies, procedures, and monitoring mechanisms that ensure the new processes are followed and that continuous improvement becomes part of the organizational DNA. PwC's insights suggest that strong governance can lead to a 40% increase in the likelihood of sustaining improvements over the long term.

For the manufacturer, this may involve establishing a dedicated process governance team or a center of excellence that oversees process performance, addresses issues promptly, and fosters an environment of ongoing optimization. Regular audits and reviews should become routine, ensuring that the company does not revert to old habits and that it remains on the cutting edge of operational efficiency.

Learn more about Center of Excellence

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Key Findings and Results

Here is a summary of the key results of this case study:

  • Reduced delivery times by 25% through the integration of sales, operations, supply chain, and customer service functions.
  • Decreased cost-per-unit by 15% by implementing new, streamlined business processes.
  • Improved customer satisfaction scores by 20% following the re-engineering initiative.
  • Achieved a 15-20% increase in employee productivity by developing a culture of continuous improvement.
  • Technology audit and subsequent adoption of advanced data analytics enhanced forecasting accuracy by 30%.
  • Established a balanced scorecard capturing both financial and non-financial metrics, leading to an overall ROI improvement by up to 30% post-reengineering.

The business initiative to re-engineer business processes in the consumer goods manufacturer has been markedly successful. The quantifiable improvements in delivery times, cost reductions, and customer satisfaction directly align with the strategic objectives set at the outset. The significant increase in employee productivity and the enhanced forecasting accuracy underscore the value of integrating advanced technology and fostering a culture of continuous improvement. The success can be attributed to a comprehensive approach that included stakeholder engagement, technology alignment with business outcomes, and robust change management. However, the initiative could have potentially achieved even greater success with an earlier and more aggressive adoption of cutting-edge technologies like AI and IoT, which were identified as key enablers but not fully leveraged in the initial phases of implementation.

For next steps, it is recommended to focus on the sustainability of these improvements through the establishment of a dedicated process governance team. This team would oversee process performance, ensure adherence to new procedures, and champion continuous optimization efforts. Further investment in technology, specifically AI and IoT, should be considered to automate more processes and gather deeper insights into customer behavior and operational efficiency. Additionally, expanding the continuous improvement culture through more targeted training and employee engagement initiatives will help in maintaining momentum and fostering innovation. Lastly, regular audits and reviews should be institutionalized to prevent regression to old habits and to ensure that the company remains at the forefront of operational excellence.

Source: Business Process Re-Engineering for a Rapidly Growing Consumer Goods Manufacturer, Flevy Management Insights, 2024

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