While Ford was aspiring to a 400-person department, Mazda’s accounts payable organization consisted of a total of 5 people. Management thought that by rationalizing processes and installing new computer systems, it could reduce the head count by some 20 %.įord was enthusiastic about its plan to tighten accounts payable-until it looked at Mazda. Accounts payable in North America alone employed more than 500 people.
In the early 1980s, when the American automotive industry was in a depression, Ford’s top management put accounts payable-along with many other departments-under the microscope in search of ways to cut costs. Ford has reengineered its accounts payable processes, and Mutual Benefit Life, its processing of applications for insurance. Businesses like Ford Motor Company and Mutual Benefit Life Insurance have reengineered their processes and achieved competitive leadership as a result. Some large, established companies also show what can be done. They develop products twice as fast, utilize assets eight times more productively, respond to customers ten times faster. Japanese competitors and young entrepreneurial ventures prove every day that drastically better levels of process performance are possible. Enough businesses have successfully reengineered their processes to provide some rules of thumb for others. Fortunately, managers are not without help. For many, reengineering is the only hope for breaking away from the antiquated processes that threaten to drag them down. Still, most companies have no choice but to muster the courage to do it. It’s an all-or-nothing proposition with an uncertain result. Reengineering cannot be planned meticulously and accomplished in small and cautious steps. Only then can we hope to achieve quantum leaps in performance. From our redesigned processes, new rules will emerge that fit the times. It involves recognizing and rejecting some of them and then finding imaginative new ways to accomplish work. “Credit decisions are made by the credit department.” “Local inventory is needed for good customer service.” “Forms must be filled in completely and in order.” Reengineering strives to break away from the old rules about how we organize and conduct business. We should “reengineer” our businesses: use the power of modern information technology to radically redesign our business processes in order to achieve dramatic improvements in their performance.Įvery company operates according to a great many unarticulated rules. Instead of embedding outdated processes in silicon and software, we should obliterate them and start over. Yet the watchwords of the new decade are innovation and speed, service and quality. They are geared toward efficiency and control. Many of our job designs, work flows, control mechanisms, and organizational structures came of age in a different competitive environment and before the advent of the computer. They leave the existing processes intact and use computers simply to speed them up.īut speeding up those processes cannot address their fundamental performance deficiencies. In particular, heavy investments in information technology have delivered disappointing results-largely because companies tend to use technology to mechanize old ways of doing business. The usual methods for boosting performance-process rationalization and automation-haven’t yielded the dramatic improvements companies need. In a period when asset utilization is critical, inventory levels exceed many months of demand. In an age of the customer, order fulfillment has high error rates and customer inquiries go unanswered for weeks. In a time of rapidly changing technologies and ever-shorter product life cycles, product development often proceeds at a glacial pace. companies are still unprepared to operate in the 1990s. Despite a decade or more of restructuring and downsizing, many U.S.
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