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　 Business Process Analysis - A Letter from America

　Professor V. Arunachalam

　Distinguished Service Professor,

　 Departments of Material Science and Engineering

　 Robotics and Engineering Public Policy

　 Carnegie Mellon University

　 Pittsburgh, PA, 15217

　 and

　 Dr. Eswaran Subrahmanian

　Senior Research Scientist,Engineering Design Research Center

　 Carnegie Mellon University

　 Pittsburgh, Pa, 15217

　 August, 1995

　 A report to Engineering and Scocial Science Research Council, UK

　 To enable the reader to access this BPRC report speedily and flexibly, it has been organised into the following separate sections:

　 Contents Page

　 Abstract

　 Introduction

　 Reengineering

　 Corporations and Reengineering

　 The Chrysler Corporation

　 Caterpillar

　 Jet Propulsion

　 Innovation in Defense: Hughes Aircraft

　 Innovation in Technologies

　 Government Initiatives

　 Methods and Tools for BPA

　 IT and BPR

　 Japan and Reengineering

　 Human Resources in BPR

　 Problems in Reengineering

　 A Few more lines

　 References

　 A report to Engineering and Scocial Science Research Council, UK

　Section 1: Abstract

　This report is on the recent innovations implemented by American companies in the way they manage their business and by the US government in supporting the industrial and technological base in the country. American corporations visible to outsiders are generally very large, with annual budgets running well above the national budgets of many countries, and with a range of diverse operations transcending divisional, organisational and national barriers. In responding to changes in the global market place, they are continually introducing innovations in process and product technologies and in product development and manufacturing cycles. It is difficult to enumerate, let alone discuss, all the innovations that are seen in US business today. Instead, we shall focus on innovations that are significant and generic for improving business processes. This is relevant as more than fifty percent of US firms are medium or small sized, and the general competitiveness of US industry depends on them as well. In this report, we do not discuss the recent trends in financial, merger, ROD and marketing strategies and processes. Instead, we discuss only those issues related to business processes that impact the ability of US business to meet the identified market demands in cost, quality and time.

　 A phrase, now increasingly in vogue, to describe the efforts in process improvements is Business Process Re-engineering (BAR). Hammer and Champ define BAR as "the radical rethinking of the business processes to achieve dramatic improvements in critical contemporary measures of performance as cost, quality and speed." This characterisation of re-engineering is often interpreted in multiple ways resulting in different models and methods of implementation of business process re-engineering. Reported failure rates of about forty to seventy percent for BAR applications in achieving stated goals can indeed be attributed to the differences in perceived definition of what constitutes re-engineering and the level of implementation.

　 In practice, implementations of re-engineering span from re-engineering local process to a complete restructuring the entire organisation. Business process re-engineering for local improvements have led to the development of analytical models for optimisation of existing processes through simpler procedures and incorporation of Information technology. Activity based accounting, an American invention, is also used in conjunction with process re-engineering projects efforts. The drive towards BAR in American industries has spawned an industry of consultants and process mapping and simulation tools. A brief review of the state-of-the art in analytical methods and tools such as IDEFO, SAT, BPMAT and Design Process Matrix is also provided in this report.

　 At the other end, there are examples of well established organisational structures and processes being totally replaced by new structures and flexible processes. Such total re- structuring efforts may well include use of cross functional teams, retraining and activities related to the management of innovation as integral parts of the business processes, well beyond the conventional activities of design, manufacture, and service of products. The difference between successful and unsuccessful firms that use BAR appears to lie more on the scope and coverage of the BAR efforts than on the mere application of tools and methods. We illustrate the above inferences by discussing the various models used by some US firms and the experience of a few select industries in adopting BAR. There are examples of a laboratory re-engineering itself and others from defence industries re-engineering themselves to accommodate ending of the Cold War and declining defence budgets.

　 Re-engineering depends on people: the way they learn their jobs, work and collaborate with their colleagues. Often, this involves learning new trades and work practices, and embracing a new work ethic that transcends the narrow specialization that the workers find themselves in. Past industrial innovations, successful as they had been, practiced division of labor on the work force to a degree that almost eclipsed the need for human ingenuity and innovation. BPR has brought changes in the way the work force is perceived for effecting organizational changes. Most successful examples of BPR are therefore from the corporations that practice retraining programs. While bigger corporations have the resources to re-engineer their processes and re-train their work force, their successes also depend on how effective their suppliers in the value chain are in practicing BPR. The problem of implementing BPR and the training of the work force in supporting firms is generally believed to be the responsibility of the individual firms. Contrary to general belief, the US government is not a passive observer of the restructuring of business processes that are now underway in the country. It is intervening actively by providing initiatives and inducements to all firms for continuing education and retraining programs.

　 The US govemment is also intervening actively in an innovative fashion to fill the gaps seen in US companies, specially in processing and manufacturing stages. These are considered essential to keep American products globally competitive. The US federal and university laboratories, large and successful as they are, have been singularly ineffective in transferring these technologies to US industries. Existing laws in place and concerns about patent rights and public knowledge have discouraged close collaboration between the laboratories and industries. The US government has introduced multi-agency (Defense, Commerce, NASA, NSF and ARPA, and Transportation) programs in defense, dual-use and civilian sectors supporting short term programs of research in high risk, high value manufacturing process technologies. The major condition of support of such programs is that the program should be commercially relevant to industry and jointly pursued by laboratories and industries, with leadership and matching financial contributions from industry. In this report, we discusses these initiatives, known as ATP (Advanced Technology Program) and TRP (Technology Re-investment Program) and their performance to date.

　 The success of Japanese firms in capturing a significant part of the US automobile market in the 70's and 80's and their ability to adapt to changing economic conditions, without undue changes in unemployment, triggered the rethinking of the nature of business operations in American industry. A serious search for new models of business began with the scrutiny of Japanese automobile industry by US companies and business theorists. This involved studies on process innovations, quality management and lean production technologies as practiced by the Japanese. Meanwhile, Japanese firms are introducing information technology in their work practices that not only preserves much of their organizational and cultural advantages but also incorporates a few US innovations. In this sense both are learning from each other.

　 The definition of Business Process Analysis is continually changing. It is, in the economic jargon, both macro and micro: details of every process matter as also the overall organizational objectives. Technology is not the only driving force for re- engineering. Economic and cultural practices are relevant as well. Knowledge generated by individual companies and business theorists and the experience gained by its application will be the BPR tools and methods for tomorrow. Even with a limited repertoire of techniques and relative inexperience in applying them to business practices, BPR, currently, is proving to be powerful approach for organizations wanting to be competitive.

　Section 2: Introduction

　The United States of America is branded as a Superpower when it comes to military strength, but the context can indeed be wider. In practically all areas of human endeavor it stands on top: it has the largest GNP, biggest industrial and manufacturing base and an impressive, efficient and enviable scientific and technological infrastructure. Its output in as traditional an area as agriculture or in as modern a field as information technology is prodigious. It is not only a granary for the world but also a demonstration and proving ground for harnessing new technologies or innovations for creating wealth or improving the quality of life. Among the world’s 500 largest corporations, the magazine Fortune lists 151 as American owned, larger than any other country. In 1994 alone, these corporations earned a profit of more than $ 140 billion, a record among other competitors.

　 As impressive as this is, it was actually better, especially after the Second World War and in the 1950s and 60s. Since then, this lead has eroded away in some key manufacturing industries such as iron and steel, automobiles and consumer electronics. Meanwhile, the deficit in trade balance in these areas between total value of exports and the total value of imports by the US has actually increased. Since the seventies, more areas have been lost to competition; many new countries, considered in the past as less advanced, are emerging as strong competitors.

　 Formerly, the US tended to ignore these challenges and attributed the competitiveness of other countries, most notably of Japan, to their low wages, homogeneity of population, authoritarian culture, work-ethic and low technology contents. It also rationalized the loss by arguing that as the world’s largest technological power, it was forever looking for new manufacturing opportunities relegating less technology- intensive or labor-intensive manufacturing to other countries.

　 However, the danger signs were visible in many areas. The automobile industry was, and still is, very special to the US. In addition to providing mobility to millions of Americans and linking this vast country, it remains the core of American manufacturing and also the crucible for manufacturing and managerial innovations. The moving assembly line and management practices empowering and integrating manufacturing centers with customers and suppliers are all the consequences of automobile manufacture. But when this industry was overtaken by foreign competitors with their delivery of affordable and reliable cars of higher quality on time, concerns were voiced about the productivity and competitiveness of US manufacturing and demands were made for urgent remedial steps. A major study on U.S industrial productivity in 1986 by a distinguished group of sixteen experts, including a Nobel laureate economist from the Massachusetts Institute of Technology {Berger,B., et.al. 1989}, detailed the weaknesses prevalent in US industries, not just in macroeconomics terms, but in terms of the customer satisfaction, quality of products, efficiency of production, speed of manufacture and introduction of new products and costs. This study of 200 companies was the first to identify these gaps in the US system and traced their origin to the age of mass production, antitrust laws, use of workers as mere skilled operators, overemphasis on products rather than on processes and to an environment that has long ceased to exist.

　 This group found these strategies to be outdated in the face of increased global trading, emergence of new technologies and their speedy assimilation by many countries and the growth of sophistication among consumers. Thanks to new technologies, manufacturing and process technologies were making production more flexible, streamlined and efficient bringing in a quality previously thought as unachievable and at a speed considered unattainable. The work-force was no longer a collection of skilled individuals but groups with competence transcending many areas of manufacturing, and motivated by team-spirit, delegated power and vested authority. All these, according to this study, were missing in the American industrial and manufacturing scene. Even in the 1960s, the management guru, Peter Drucker{1969}, in a deeply perceptive book, The Age of Discontinuity, lamented the lack of any change in the structure of industrial organizations in step with the impressive growth of economy and technologies. Small mid-course corrections were introduced in the well established but outdated structures to provide continuity when radical reforms and path-breaking restructuring were in order.

　 This report discusses one major business process innovation that is now sweeping the United States consuming the traditional, but increasingly inefficient, ways of doing business. Reengineering has been the banner of this change in business practices. This innovation is truly a home-grown one, and as we shall discuss later, not an import. As with all things American, its sweep is vast, its opportunities are immense and the dangers of failure real. In this report, we first provide the scope of this innovation its impact on business and the mutations it is undergoing through case studies. This is followed by a summary of analytical tools used in this innovation. Subsequently, we examine its consequences in governmental policies and human resource strategies. We then briefly summarize the differences in the practice of reengineering between Japan and the United States, since the U.S. is concerned--some would say excessively--with the way Japan conducts its business. In summary, we see an evolution, even within a short period of a few years, as reengineering is changing rapidly losing some of its hard-doctrinal stances and learning to work with new technologies. But more changes are needed, some urgently so, in areas such as human resources. Rightly, or wrongly, Business Process Reengineering has come to be identified with Big People Reduction! This image has to be shed if reengineering is to be accepted by the majority.

　 Section 3: Reengineering

　Reengineering is not the first and the only innovation in the business processes. Initially, concepts and practices such as Total Quality Management (TQM), concurrent engineering (sometimes referred to as simultaneous engineering), ‘just in time’ inventories, ‘time-compression’ and lean production have been introduced as remedial measures. Studies by Kim Clark and Fujimoto {Clark K and Fujimoto,P., 1991} on the comparative performance of automobile manufacturing in three continents or the adaptation of Deming’s teachings on quality management {Deming, 1986} or Kaizan, its Japanese version, have helped US corporations to introduce improvements in their manufacturing. These, even when successful, are only of limited applicability and do not substitute a radical restructuring that Drucker advocated or the group from MIT recommended. The paradigm shifts in manufacturing technologies as identified by Jaikumar {1988} have still not been accommodated by the required revolutionary structural changes of industrial organization. Majority of the improvements, as we noted earlier, in spite of effecting continuous improvements in many areas of production, have continued to preserve organizational structures with their divisions, rules of business, command and control systems intact, instead of change. The corporate culture still regards organizational hierarchies as sacrosanct more than its relationship with the customers. It is in this business practice context that re-engineering has emerged as a more holistic alternative.

　 A Definition

　 The goal of reengineering, or, to be exact, Business Process Reengineering (BPR) is its aim to destroy the organization as it exists and recreate a new one that focuses exclusively on business processes. In Schumpeterian terms, BPR is a creative destruction process removing function based vertically structured hierarchies by efficient, process- centered independent and empowered horizontal structures. As a point of reference, we define BPR, offered by Hammer and Champy {Hammer,M. and Champy, J., 1993} in their book Reengineering Corporations, as the radical rethinking of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality and speed.

　 This definition effectively rules out the incremental process improvements brought in by quality management or concurrent engineering as reengineering. Nevertheless, these improvements can be subsets of the entire reengineering process and the incremental improvements they bring in may even turn out to be useful determinants. We shall therefore cite instances of such improvements in this report as part of analysis of the reengineering experience in American corporations.

　 Modeling and Simulation of Processes

　 Reengineering consists of restructuring all the processes in the business so that they become efficient, transparent and integrated with other processes in the system seamlessly. In turn, this requires that every process in the existing system be first scrutinized to assess its performance and to delineate its cross-functional role before it is eliminated, modified or replaced by a new process. For such analysis, versatile and efficient tools and simulation techniques are critical. Many modeling approaches have been used including a recent one based on Systems Engineering{Bhasker,R.,et.al, 1995}. While, most business processes are complex and are not easily amenable to analytic modeling without approximations, simulation models and methods capture complex processes more effectively and can be subsequently validated and optimized. In this report, we therefore discuss various analytic methods, simulation techniques and their tools that are now available for BPR.

　 Information Technology and Reengineering

　 Information Technology (IT) is perhaps the most effective enabling technology for reengineering. It helps in meeting the objectives of reengineering in three ways: by providing information across functional levels and establishing easy communication, improving the performance of the processes itself, and also by helping the reengineering effort by modeling, optimizing and assessing its consequences. The veritable richness of this single technology has led many to interpret reengineering as the application of IT to business processes. We shall discuss the role IT plays in some American reengineering efforts.

　 U.S Corporations and Reengineering

　 In this report, we shall cite three recent examples of U.S. manufacturing firms that have transformed their organizations entirely through re-engineering. In addition, we shall discuss the example of a U.S defense contractor venturing into a civilian areas of business and reengineering the entire process to introduce a new and a competitive product and, service. American business is not exclusively manufacturing; servicing contributes a major component to the GDP and to employment generation. In 1991, 76 percent of U.S output came from services, and the value it added to the U.S economy is about 70 percent. It also contributes some key elements to manufacturing: vendors and customers are served by this industry. We shall therefore include some examples of reengineering efforts in this area that have turned out to be successful.

　 Because of the very scope and size of the efforts demanded by reengineering, the examples are still very few, though there are numerous instances of companies reengineering a process or two, no doubt hoping that the visible success of the efforts would make reengineering more palatable.

　 The Role of Technology

　 Reengineering does not claim to substitute for either a sound business strategy, product or technology. It is only a mechanism for radically improving the performance of the business processes for the vendors, customers and products. But by centering the whole concept on processes, reengineering is inextricably linked to technologies; not just to information technology that provides the necessary tools for the transformation, but also to other technologies that are necessary to the processes. This is of some importance to the U.S because its corporations tend to concentrate more on developing products than on processes {Mansfield, E., 1988}. Anti-trust laws and concerns about cartels and monopolies have also prevented the U.S corporations from cooperating with each other. This is a sore point with many American companies. They complain loudly about the extent to which their foreign competitors are able to get support from their governments or to pursue collaborations with competitors within their national boundaries, to jointly develop new technologies. At last, the U.S government is waking up to this challenge. The perceived difficulty of acquiring semiconductor chip manufacturing equipment from Japan induced the U.S lawmakers, who normally frown on corporations coming close to each other, cooperate in setting up an organization SEMETECH for manufacturing semiconductor processing equipment within the country {Randazzese,L., 1994}. Government intervention has grown further with the two major U.S government R&D organizations, National Institute of standards and technology (NIST) and Advanced Research Project Agency (ARPA, formerly DARPA) contracting research and development programs on manufacturing technologies. A major condition for this support is that these programs be jointly pursued by research organizations and US companies with the companies playing the major role. Even though this initiative may not fit into the structure of reengineering as is perceived today, we believe this collaboration will have profound impact on the future strategies of US corporations during restructuring. In effect, U.S. Companies will have the added bonus of choosing from new sets of process technologies. We shall report on some instances of the initiatives taken by the U.S government in this effort.

　 Human Resources

　 The role of human operators is radically altered in reengineering. Instead of specialized skills, a broad range of competence is called for. A keyword in reengineering is flexibility, and this applies to humans as well. Functionally based vertical hierarchies are replaced by horizontal structures where the position-based power is replaced by participation-based authority. This shift provides the scope for extensive delegation of power and responsibility in reengineering; this is one of the reasons for the present U.S administration coming forward with fiscal incentives for worker retraining, called re-skilling.

　 In spite of the promises of empowerment, there is a genuine concern among workers about reengineering. While a flat hierarchical structures with minimum designations appear to be good for generating the enthusiasm of workers, it also frightens them as there appears to be few avenues for promotion and growth. Only lateral displacements are visible as also the spectre of downsizing. We shall discuss the consequences of this concern in some instances of reengineering and the after effect of this feed-back among the proponents of reengineering.

　 What is Japan Doing?

　 Companies opt for reengineering to restore their competitive edge in their line of business. But this experiment is performed in many countries with techniques suitably altered to take into account the different environments in which they operate. A major question usually discussed among the U.S academics in business management is the performance of Japan. We shall briefly discuss how the Japanese corporations restructure their business in relation to what is happening in the U.S. This is of some relevance as rightly, or, wrongly, U.S perceives Japan as its principal competitor in many areas of high technology, where it wants to remain on top. Hence, trade disputes are not easily resolved and are taken to the highest levels of political leadership seeking favourable settlement.

　 Section 4: Corporations and Reengineering

　We shall first discuss three specific examples of reengineering, mainly in manufacturing. Each of these cases exemplify the need for radical restructuring of the organization with attendant emphasis on information technology, human resources, open communication flow, supplier re-engineering and education. The first, the Chrysler Corporation, one of the big three of the U.S auto giants, probably is the most studied and visible example of radical structuring in the auto industry that included a completely redesigned workplace to accommodate the new process and philosophy. The second case is Caterpillar, once an unchallenged earth moving equipment manufacturer. In 1984, this company found itself with a billion dollar loss and intense competition from the Japanese companies, Komatsu and Hitachi that challenged its previously assured old home-market. Caterpillar had to restructure its whole organization radically, and the results have been very successful: it reaped a record profit in 1994. But the routes followed in this restructuring by Caterpillar and Chrysler have been very different. The third case is a government space research laboratory, Jet Propulsion Laboratory, that has restructured itself in the face of extensive cuts in defense and space programs. We shall analyse these cases using a structure that traces the history of the firm, the focus of re-engineering and the routes adopted for its implementation. Theses will include restructuring both at the organizational and workplace levels, use of information technology and human resource management.

　 Section 5: The Chrysler Corporation

　The history of the Chrysler Corporation, one of collapse and revival through reengineering, has provided a major impetus for this business innovation. After a well publicized government bail out when its bankruptcy was imminent in the 70's, the initial turnaround of Chrysler was mainly fueled by sales, the marketing strategies of Lee Iacoca and the fortuitous demands for its mini vans. All these took place without major changes in the structure or the functioning of the company. In spite of these changes, the component based approach to automobile design and manufacture, still required a 4.5 year cycle. More, it was burdened was with too many car designs and no ownership of the models within the firm. To understand its problems, Chrysler undertook an eighteen month study, similar to that of Xerox {Jacobson, G. and Hillkirk, J., 1987}, first by benchmarking Honda's development cycles, Mitsubishi's strategies through the diamond-star (Mitsubishi-Chrysler) collaboration and later, the successful Jeep operations of the newly acquired American Motors.

　 Learning from these bench-marking experiments, Chrysler embarked on a creative-destruction process by instituting dramatic cultural changes that destroyed the functional silos-based vertical organization and creating a re-engineered workplace. This workplace, centered around the four cross functional platform teams for large cars, small cars, mini vans and Jeep vehicles and trucks. The objective was further sharpened to address only the American market, a market that was lost to the Japanese and its US rivals, especially the Ford.

　 The results of the re-engineering efforts were beginning to show in 1992. In 37 months from design, Chrysler had in production the LH series of cars using the platform team organization. This was done with 740 people as opposed to 1400 previously for similar size cars. The engine development time for a 3.5 liter option was reduced from 240 weeks to 187 weeks {Gardner, G., 1993, IMB, 1993}. Chrysler then embarked on a development of a compact car, Neon as a direct competition to the Japanese imports. Chrysler developed Neon on its own, without any foreign collaborator-- a first for an American car company in the small car category. The car was in production in 31 months. It is reported that the next generation LH car would take only 24 months. In 1994, Chrysler was adjudged as the lowest cost producer of cars in the world.{Taylor, A., 1994}.

　 Design and Production

　 One of the corner stones of Chrysler's reengineering program is the 1.5 billion dollar Technology Center at Dearborn, Michigan. Chrysler used this center to perform its first cross functional team experiment for the sports car Viper, with a goal to reduce the design-to-production time to 36 months. With this experience, Chrysler Technology Center (CTC} became the hub of Chrysler's new re-engineered corporation. The layout and architecture of the Center's building was designed with the objectives of breaking functional barriers by increased face-to-face contact of the members working in product platform teams and by the inclusion of in-house manufacturing and testing facilities, similar to those in the production plants. The building was organized by a floor per product platform, with a common manufacturing facility at the ground floor. The layout plan for the floor corresponding to each platform is identical. Thus, for every person responsible for a functional task in a platform, his/her counterparts in other platforms were spatially located, either exactly above or below, in their corresponding platforms {Gardner, G., 1993}. The workplace design catered to this unique arrangement. A major objective of reengineering was to encourage and maximize communication between the team members from all functional specializations. This was achieved by them sharing the same floor and through the existence of technical clubs. Other common needs across platforms were met by the setting up of three centers--for scientific testing, data and information integration and technology and management.

　 In effecting this radical cultural change, Chrysler encouraged the teams to challenge the system and try out new ideas without fear of failure. In the new environment, Chrysler empowered the process teams to undertake simultaneous development, delay decisions until the last, identify critical paths and eliminate non-work elements in the processes. The implementation strategies included benchmarking, re-delegation of decisions to appropriate levels and requiring that all decisions at the interfaces be made by consensus.

　 Supplier relationships

　 Following the Japanese model, Chrysler insisted that its suppliers were co-located, allowed to participate from the start of the design and were also provided with the parts requirements right from the layout. While designing the LH series, Chrysler reduced the number of suppliers to a mere 200, from a previous 600-700, and the total supplier base from a few thousand vendors to less than 1500. To maintain continuous communication with the suppliers, for improving product quality and cost, the purchasing department instituted a program with suppliers for cost reduction ideas. Chrysler, thus realized over $400 million as permanent annualized savings.

　 Advertising and Marketing

　 With the overall changes in the structure and operation of the company, to reduce cost, it is also necessary to reengineer all the local processes. Chrysler, for instance, reduced the number of steps in its approval process for artistic, media and research and reduced the approval time from 6-8 weeks to 2 weeks {Serafin,1993}.

　 Information Technology and Re-engineering

　 Chrysler has been steadily introducing information technology even before the completion of radical restructuring {Seigal, 1986} . It first began by implementing an integrated information system for sales, supply and design with a parts distribution scheme, that allows a dealer to enter a part request on a computer that automatically forwarded it to the corporate computer. The depot computer received these orders and turned them into work assignment directly to each workstation. Directed by a personal computer, individual workers fill 16 orders simultaneously, by picking parts from three horizontal conveyors and a sorting station.

　 For design and analysis, Chrysler is extensively using CAD/CAM systems that are integrated not only within the company but also with the outside suppliers as well. A combination of super computers, mainframes and, workstations provide the computing environment to perform a range of design analysis activities including finite-element analysis, aerodynamic and impact simulation programs, assist and test NC programs, solid modeling and aerodynamic analysis {Mills, 1987}.

　 Chrysler integrated its IT in manufacturing with advice and assistance from Caterpillar and Boeing. Some innovations in this area include an automated storage and retrieval system to handle vehicle bodies in sequence and just-in-time at two plants that produced Dodge Dakota pickup {Forger, 1993}. For the LH series cars, the Bramelea assembly plant in Canada installed a mono rail system with diagnostic equipment that tracks with cars, greatly increasing quality and flexibility {Auguston,1989} . It has also provided computer based diagnostics systems to its service dealers to help remedy problems in the first attempt itself.

　 Human resources and training

　 Radical cultural changes require that work-force also adjust to changes in the workplace and the process. While designing and producing Neon, Chrysler extended its retraining program to over 200 assembly workers, three years before production {MD, 1994} , to educate them on empowerment. As the demands for training grew, Chrysler contracted external firms to run structured training programs for its workers in newly automated assembly plants {Green and Spencer, 1993} . Recently, it has also expanded the training program to include its suppliers and dealers, using some of the newly available IT training aids.

　 In the characterization of Womack and Jones{1994}, Chrysler is moving towards a lean enterprise that incorporates all aspects of re-engineering from the lowest level, where the number of steps in the process are reduced, to creating a radically new process by the clever use of information technology. It is a holistic process that Chrysler has embarked on and this has clearly produced dividends, with record profits in 1994. The strategy of combining empowerment through training, delegation of decisions and open and rapid communication flow between concerned parties in design--both horizontally and vertically--has indeed worked. In the words of the CTC director, "We did not just imitate the Japanese, but brought it to a high polish" {Moskal, 1994}.

　 Section 6: Caterpillar

　The re-engineering of Caterpillar, a giant in the earth moving machinery, is 10 years old and was triggered by a billion dollars loss in 1984, after three year run of record profits from 1981{Hooker,93}. In the past, Caterpillar’s expansion and profits came with the introduction of new products and was essentially growth driven: the company’s products increased from a modest five to a record three hundred in 1985. But the Japanese competition eroded the profits first by offering quality products at lower costs and later by the opening of a number of centers for distribution and service in U.S.

　 Caterpillar met this challenge by a radical restructuring of the entire company that included all its business processes. Caterpillar’s strategy can be rationalized under three broad headings: downsizing the vast and widespread business empire; investments in new technologies, both for manufacturing and for increased and efficient communication, and implementing the new business process to replace the old function-based structures.

　 The ‘Creative Destruction Phase’

　 The first stage was a painful process and Caterpillar tried to implement that fast to minimize demoralization. This involved a closure of nine plants and laying off 28,000 workers in four years. By 1993, there was a further reduction of 10,000 workers. Caterpillar’s operation was comprised of 36 manufacturing plants, 7 product engineering design control centers, and 22 parts distribution centers located in 10 countries. To manage restructuring effectively, the structure was first reorganized to include only 13 product centers and 4 service centers distributed worldwide.

　 The Technology Investment Phase

　 Caterpillar’s strategy was an emphasis on technology as an integral part of its work and the workplace and so invested about $1.8 billion in plant modernization and introduction of new technologies both in manufacturing and in information technology systems. The new manufacturing systems included, for instance, computerized flame-cutters, unmanned cranes and other process innovations that reduced the time to fill orders from 20 to 8 days, inventories by 50 percent and manufacturing space by 21 percent. The IT systems included integrated shared-data management systems to facilitate communication among cross-functional teams and a global communication network that linked the service centers effectively.

　 Using computers, Caterpillar developed a number of analytical techniques that effectively reduced the costly and time consuming physical testing and also shifted the testing phase during the early stages of development when costs would be lower. For instance, a full scale fatigue testing is expensive both in cost and in time and could take anywhere between 6 to 8 months, and the test had to wait until the models were ready. By resorting to analytical techniques, Caterpillar was able to reduce the number of full scale tests from 45 in 1980 to 3 in 1993. The costs have also reduced with analytical techniques costing less than 50% of the full scale testing. Caterpillar has also introduced "virtual reality" to solve some of the ergonomic problems in the cabin compartments, such as visibility, ease in the use of controls, and other user driven requirements.

　 The New Business Processes

　 Caterpillar used concurrent engineering as its main theme in restructuring and identified six critical success factors (CSF) for its reengineering. These included the creation of a concurrent environment, free flow of information among teams, implementation of an electronic master for products and processes, changes in policies and procedures, predictive cost methods, and management of cultural change and team dynamics.

　 The shared electronic data system facilitated increased communication among cross-functional team members even though they were not co-located. The team members were fully empowered and were encouraged to arrive at decisions that involved various functional elements through consensus.

　 A major test for this approach was to reduce the time involved in designing and manufacturing a new product from the then period of about seven years, to about twenty months. The success can be assessed from the fact that in 1994, Caterpillar reduced this period to a thirty nine month cycle. Another test is the number of changes introduced in the new product initiative. Changes when introduced in the initial stages are not very costly, but become very expensive in the final stages. That is also the period when a large number of changes are forced into the design; for instance, in the last three months of development, every change costs, on an average, about 1,000 dollars and the development team had to deal with about three hundred changes. With the new concurrent engineering initiative, these changes have reduced significantly.

　 A major component of reengineering is training, and Caterpillar took a major initiative in integrating its suppliers as allies in the CPPD program. By educating its suppliers in quality improvement methods as a part of its Quality Initiative and by organizing formal and structured seminars that were customized to the needs of suppliers Caterpillar extended its restructuring to its supplier base as well. With a similar initiative, it also instituted dealer training to improve its customer services. By structuring their reengineering initiative to center around technologies and by encouraging a total team connectivity through IT, Caterpillar has been able to provide a unique American example that is different from Chrysler, which learned its first restructuring lessons , at least initially, from Japan.

　 Section 7: Jet Propulsion Laboratory

　Jet Propulsion Laboratory (JPL) located in Los Angeles is a premier space research laboratory and was responsible for some major advanced space spectacles such as Mariner, Voyager, the Hubble telescope and the Galeileo space flight systems. JPL executed these programs on a requirements-driven basis with sequential stages. The project teams were organized hierarchically and functionally. This model of design worked well when the budgets for space flight programs were in billions of dollars, and the allocations appeared almost inexhaustible. This situation, in recent years, has changed dramatically with large cuts in the budget and increasing criticism of NASA’s manner of managing such programs. These changes have forced JPL to re-evaluate its role in the design and production of space exploration vehicles. JPL has taken a major initiative altering its strategic sights from the mega projects of the past to defining and executing a series of small and moderate space missions that are scientifically exciting, publicly engaging and financially affordable {Casini, 1993}.

　 JPL, much like Chrysler, is pursuing re-engineering by a radical cultural change and workplace design. The theme for change was to move away from engineering the performance-based requirements to one based on capability, and executed by empirical and budget driven designs. To institute these changes, JPL created an implementation development office with a mandate to improve its capability to execute low cost, rapid development projects by developing innovative technical and management processes. This department was also entrusted to build and manage a Flight Systems Testbed and Project Design Center that would become the future workplace. This project was started in the early 90's and the Design Center scheduled for completion in 1996. The other objectives of this initiative include a mission focused structure, introduction of major cultural changes in work and a redistribution of functional roles. The organization was flattened with design teams configured as small-sized functional teams and co-located in the same physical floor. The design was now to be driven more by costs and a total systems approach as opposed to requirements directed component based approach.

　 The physical architecture of the Flight System Development Center at JPL, as in Chrysler, is meant to reflect the new organization--replacement of the old functional silos with multi-disciplinary cross functional teams. The physical design of the Center is being fitted with the latest communication equipment and computer network to facilitate the communication paths between project members and computer-resident tools and data bases. Workspace for each module of the spacecraft reflects the composition of the disciplines needed for the module (e.g., telecom, avionics, mechanical) and is physically arranged as a pentagon seating five persons. These workspaces for the modules are in the same physical floor of the Center and are very well connected to the communication and computer networks. The Center also hosts many prototyping facilities for the Flight Systems Test Bed; a virtual test bed with an array of interconnections with functional and testing laboratories.

　 A main objective of the process analysis at JPL is to identify, acquire or develop the software tools required for the new parallel Project Design Center Process. The approach adopted was based on an input/output description of the products used and products created by each functional node. A critical parameter is the timing of inputs from other nodes to a particular node, and this is being identified for the processes. This analysis will serve as the basis for the integration of computer aids and information system for a smooth flow of information. This, when in place, will facilitate a path-breaking parallel capabilities-driven design process.

　 The process at JPL is still underway and the results of this dramatic process and work practice changes are yet to be known. If Chrysler's experience of workspace integration were to be a reference point, then, JPL's new flight systems development center, with its parallel processing capabilities, will succeed in producing cost effective space crafts.

　 Section 8: Innovations in Defense Conversion: Hughes Aircraft Co.,

　Hughes Aircraft Co., owned by General Motors, is a major defense contractor working on projects related to aerospace and electronics. When there was a downward trend in defense contracts, Hughes restructured its core competencies to identify a niche in the civilian market and chose satellite-based digital TV. Hughes assessed that it had all the necessary technologies for this venture such as digital data compression, coding and decoding of signals. Even though Hughes could have sourced many of the necessary technologies and components for the system from in-house, it chose outside vendors because of the cost advantages a civilian producer would have over its own divisions.

　 Hughes thus formed a collaboration with an antenna and TV company RCA- Thomson as its exclusive supplier for decoding boxes and small satellite dishes. It also entered into a contract with Sony for manufacturing digital video tape machines for which Hughes did not have the expertise. These machines were still under trickle production at Sony, but the demand for these machines in numbers accelerated their production and brought their costs down. Further contracts with film distributors such as Walt Disney ensured that there would be programs for its 175 channels. Starting this project in 1990, Hughes Aircraft has shipped 700,000 systems valued at $ 750 million in just four years. Hughes estimates that by the end of this decade, there would be 10 million sets with a revenue of $ 4 billion and an operating profit of about $ 1 billion.

　 This initiative by Hughes has all the ingredients of reengineering. The company assessed its core competence as satellite based systems and not as defense manufacturing and clearly assessed the process boundaries where it was competent. Instead of using its own divisions that would have driven up the costs and reduced the output, it chose at its principal collaborator a company that had all the necessary expertise in manufacturing antennas and decoders for the civilian market. Similar collaborations with Sony, Walt Disney and Parent Studio programs ensured excellent quality transmission and rich program options to choose from. This has proved to be a unique example of the company achieving its competitive advantage over cable networks that are still handicapped by limited program options and mediocre quality of images and a lone satellite based rival, Primestar, that also did not have a large repertoire of programs or digital imaging. Since, eventually this service would be taken over by a terrestrial optical fiber cable network (because of the quality and range of options available to the consumer), it was essential that a satellite based digital TV be made available as quickly as possible. With a subscription of $30 per month, Hughes has already enlisted 500,000 subscribers. If Hughes had not taken this initiative and restructured its business process for the civilian market, it would have joined the ranks of other defense manufacturers, waiting to bid for infrequent contracts from the Pentagon.

　 Section 10: Innovations in Technologies

　Technologies in Business Processes are used in two areas: in the offices and in the workplace. Technology, it is said, is knowledge and information technology is knowledge of how to produce and use knowledge more effectively {Simon, 1977}. As we mentioned earlier in the report, information technology is often perceived to be just an enabling technology for reengineering businesses and is occasionally criticized for its excessive involvement in process reengineering. But its contributions can be far reaching including areas associated with redesigning the processes. Hammer and Champy {Hammer, M. and Champy, J., 1994}, discuss the reengineering experience of Kodak when it developed a new model to challenge Fuji’s single-use camera. To cut the development time, Kodak developed an integrated product design data base in its Computer Aided Design and Computer Aided Manufacture {CAD-CAM) system that allowed the entire design team to be aware of all changes made to the design by individual designers. This constant updating enabled all members of the design team to respond to such changes as and when needed without waiting for individual alterations to be complete.

　 Boeing prides itself in calling its latest 777 aircraft a paperless design. The entire design, modeling and simulation was done on computer thus doing away with reams of paper drawings and specifications. This was made possible by the use of advanced CAD/CAM software packages such as Catia. Components are designed using computer drafting tools and stored in a central design database. These designs are then analyzed for structural and aerodynamic loads using finite element and analysis software. The part geometries stored in the design database are used to create a digital mockup of the entire aircraft revealing to the designers the integration of the different subsystems. This has eliminated the need to make costly wooden mockups, until now an essential part of the design process, and reduced months in the design and development phase, when various individual parts are redesigned or suitably altered to integrate smoothly in the mock-up. The manufacture of components is simplified by the automatic generation of NC part programs from the geometries stored in the design database.

　 Varian, a high technology electronics and vacuum systems firm, has had mixed results in implementing reengineering {Business Week, August, 1994, pp. 54-59} to it operations. We shall be discussing its experience in a different section. Here, we would like to cite that Varian has saved about 95 hours in the set-up time by redesigning the parts that incorporate better technologies to make them fit easily in its medical radiological equipment, and by learning to package the systems better,. This alone in savings is worth $50,000 per hospital and Varian itself has saved about $1.8 million.

　 The Customer Service Division of the Ford Motor Company {Jacob, 1995a} is reengineering its entire organization to focus on increasing customer satisfaction. Among the various core processes identified for reengineering, the division has chosen to concentrate on designing and manufacturing easy-to-repair cars and has doubled staffing in upstream engineering, an unusual response for a reengineering need.

　 Most of often the examples quoted of reengineering are from the office, vendor and customer ends of the business, and a major concern of American industries in manufacturing viz., the unavailability of uptodate process technologies, has not been discussed until now in any detail in the business literature. However, things are not still and a great deal of changes are happening. The U.S government’s intervention through support of R&D programs in areas of manufacturing, is expected to influence, if not actively promote interaction between research organizations and industries in the country. In this section we discuss these initiatives, especially those of the National Institute of Standards and Technology (NIST) and Advanced Research Project Agency (ARPA) in some detail. There is a review on SEMETECH, a consortium established as a collaborative venture between the U.S government and American semiconductor industries, designed to defeat a possible Japanese monopoly in semiconductor chip manufacture {Randazze, 1995}.

　 Section 11: Government Initiatives for Reengineering American Industry

　National Institute of Standards Programs

　 In the late 1980s, the U.S government took a major step by ‘intervening’ in strengthening and reengineering the country’s industrial base using the National Institute of Standards and Technology (NIST) as the agency for directing the change. The initial programs included the now well known Malcolm Balridge Award, established by and Act of the Congress in 1988. By setting out guidelines and the measures required for consideration of this award, NIST encouraged both small-sized and large firms to improve their management of quality, leadership, human resources and information analysis. While this award has had the desired publicity and encouragement, two other programs also run by NIST-- the Advanced Technology Program(ATP), initiated in 1990, and the Manufacturing Extension Program(MEP), started in 1988-- have also been recognized --though less well known to the public--for providing direct help to small, medium and even large-sized industries.

　 The broad objective of ATP is to support the development of future products and industrial processes. ATP is roughly a $500 million cost-shared program with investments specially reserved for the development of pre-product technologies that require companies to invest additional resources for refining and further streamlining their technology for market. For a program that is barely four years old, the results are impressive: over 47 firms participating in the program report that they have reduced the time for the development of new products by over a year; sixty percent of the participants report new alliances between firms --with two to twelve partners--an event rare in the U.S. Over one half of the awards have gone to small firms, and many of them hope to add new employees within five years. The 177 strong project portfolios covers a wide range of technologies from materials and manufacturing to bio-technology, energy and environment. In 1994, the ATP program initiated a focused program strategy that concentrated on industry identified technical and business goals achievable through interdependent R&D projects carried out over several years. Input for these programs was solicited through workshops and white papers submitted by industry, labor unions and universities.

　 The other major NIST program, MEP, is targeted towards providing hard-to-get technical assistance to 381,000 small and medium manufacturers, who account for half the manufacturing output and 12 million jobs. The objective was to restore the declining productivity of the small and medium size industries that have been using outdated technologies and processes and to discourage large corporations transferring such activities to developing countries. The program started with 3 centers in 1988 and has grown in 1995 to 42 centers; the objective is to reach a 100 center network that would cover the entire country. Currently, 34 centers average about 20 partners per center. MEP’s scope of support includes quality inspection (19%), business system management (15%), process improvement (13%), market development (10%), CAD/CAM (7%), plant layout (7%), human resource development (6%), product or design development (6%), EDI/Communication (3%), automation/robotics (2%) and others (6%) {NIST, 1995}. The following excerpt from the NIST progress report {NIST, 1995} is an excellent example of the results achieved by this program: "When the Boeing Co. told Manufacturing Development, Inc. (MDI) that it needed to meet the aircraft maker's stringent D1-9000 quality standards or risk losing its largest customer's business, MDI Vice President Michael Castor knew the company urgently needed outside help. MDI, a 30-person sheet metal fabricator located in Cheney, Kansas, called the NIST Mid-America Manufacturing Technology Center. The extension center's technical staff provided MDI employees with on-site training in statistical process control, and they helped MDI secure a state grant that paid for half of the training costs. MDI earned supplier certification from Boeing, while improving its overall operation. The company estimates, for example, that it will achieve a 50-percent reduction in scrap, reduce rework by 25 percent, and realize annual savings of $132,000. "

　 Since we started writing this report, there is news of NIST closing its ATP programs because of the reluctance of the Republican majority Congress to allocate funds for such programs. The Republicans appear to believe that such programs should be the responsibility of private business and the government should not have a direct role. The ensuing battles in the US Congress promise to be interesting; for this would be a rare instance when private industries--who normally protest against any form of government’s controls or intervention--may be tempted to support the NIST initiative, much against the wishes of the Republicans.

　 Department of Defense Programs

　 Traditionally ARPA (formerly, DARPA- Defense Advanced Research Projects Agency) has funded defense industry related research. In 1993, President Clinton unveiled the Technology Re-investment Project(TRP), a first cross departmental program administered through ARPA with a broad objective to "stimulate the transition to a growing, integrated, national industrial capability that provides most advanced and affordable military systems and the most competitive commercial products."{TRP,1995} The TRP funding addressed technology development, deployment and manufacturing education and training. The program has expended 1.2 billion dollars in the last two years. The goals of the TRP project are to encourage industry to form partnerships needed to create a new generation of dual-use products. In effect, the military sector will reap the benefits of economies of scale --generally seen only in the civilian sector of the economy-- and the insertion of new technologies rapidly and cost effectively. It is a truism that military, because of their perceived performance requirements, is slow to accept and introduce new technologies. This is seen specially in information technology where achievements in the commercial sector are far more impressive than in the defense sector. Examples of dual use include infra red sensors for night vision, radar systems, optoelectronics, digital imaging and tele-medicine.

　 TRP, unlike ATP, is a cost-shared program, emphasizing partnerships and industrial commitments. To date, the industry has contributed about 60% of its resources to offset costs. The objectives of the TRP program is to ensure that process and product technologies are available off-the-shelf when needed by the defense industry. TRP, for instance, has spent over $60 million in a manufacturing education training program. The objective is to address the training and retraining needs of the displaced defense workers and improve the overall education emphasizing practice oriented degree programs at the graduate level.

　 Since we started writing this report, ARPA has also begun an internal process that looks very much like reengineering! In order to make its programs acceptable to the new Congress, ARPA is reexamining its priorities between long term goals and short-term objectives. While the picture is yet to become clear, it appears that ARPA’s initiatives in manufacturing processes and use of information technologies are likely to increase. For the present, ARPA is engaged in discussions and meetings with its contractors.

　 Section 12: Methods and Tools for Business Process Analysis

　Restructuring existing organizations to new organizations require an understanding of the current structure and processes of the organization. Understanding the existing process and structure, setting the objectives for the new structure and predicting the effect of the new structure and process have given rise to a number of structure methods covering different aspects of the process re-engineering task. Some methods aid "top-down" approaches to re-engineering, while others use "bottom up" analysis. Many successful re-engineering cases use a combination of methods to set goals, restructure the workplace, select processes for improvement, describe the selected process, quantify the process improvement selection and to implement and institute a continuous improvement process {Elzinga et. al., 1995}. In this section, we review the methods used at different stages of re-engineering and the state-of-the-art tools that have their origins in the U.S.

　 The "top down approach

　 " Benchmarking:

　 Benchmarking is a process for searching new methods, tools and practices to establish operating targets and productivity programs within a company, based on the best practices in any industry {Champ, 1989}. An excellent example of benchmarking as the prompter for process re-engineering is from Xerox {Jacobson and Hillkirk, 1987}. Several firms have used this method to set high level quantifiable goals. As we pointed out in the Chrysler example, that company used extensive benchmarking from its partners, Mitsubishi Motors and Honda motors, in setting its operating targets. This stage led to Chrysler restructuring not only the processes but also the workplace. Xerox, on the other hand, re-engineered the process through small product teams and by restructuring the bureaucracy. Benchmarking is a method that can be used with advantage effecting continuous improvement as well.

　 Critical Success factor (CSF)Methodology:

　 CSF was introduced by Mckinsey and Company in 1950s as means to identify key areas where improvements are necessary for achieving the goals, set through benchmarking {Daniel, 1961, Elzinga, D.L. et.al., 1995}. This approach has two steps: first, to establish and classify CSF through interviews with the top management, and the second, to establish measures to monitor the success factors. These include customer satisfaction, free flow of information, implementation of an electronic master for products and processes, predictive cost methods and the management of cultural change and team dynamics.

　 Identification of critical success factors leads to the next stage in process re-engineering. In all the examples we cited earlier in this report, the identification of overall goals, benchmarks and critical success factors led to radical restructuring of the organizations and creation of entirely new processes. Chrysler and JPL, on the one hand, embarked on the re-design of the workplace in order to achieve the CSF corresponding to free flow of communications. Caterpillar, on the other hand, instituted the goal of creating a shared electronic master of product and process to facilitate free flow of information to compensate for its geographically distributed business.

　 Many firms, instead of adopting such radical restructuring, approach re-engineering by an incremental process-to-process basis. In this approach, the question is one of selection of the process. Methods used for the process selection range from informal approaches such as brainstorming, to formal ones using multi-attribute utility theory or other decision analytic approaches such as Analytical Hierarchy Process (AHP} {Saaty, T., 1980}. AHP has been used extensively in a number of decision making contexts {Zahedi, M., 1986} and allows for the hierarchical structuring of a goal with its attributes, sub-attributes and alternatives corresponding to such sub-attributes. Input data are collected from the participants in the form of pair-wise comparison of decision elements. AHP uses its logical reasoning and other mathematical models in determining the relative order of priority among the alternatives and is available as a software package.

　 The "bottom-up approach"

　 A bottom-up approach to redesigning an artifact (product or process) requires the understanding of the existing structure and its current performance. As the focus of re-engineering is the process, a clear description of its structure (modeling) and an analysis of its performance (simulation) are essential, both to communicate and verify the model and its behavior. Often, the models are purely descriptive (static) and are not amenable for a behavioral simulation of the process. This makes the modeling of the process difficult.

　 Descriptive modeling of business processes

　 The popularity of process modeling, especially the descriptive formalism, can be traced to the efforts of the U.S. Department of Defense as part of its Integrated Computer-Aided Manufacturing Program (ICAM). It was responsible for the creation of a standardized subset of SADT (Structured Analysis and Design Technique, {Marca and McGowan, 1988} under the name IDEF0 (ICAM Definition Method Zero) {SofTech, 1981}. Besides IDEF0, several modeling formalisms have been devised or borrowed from other disciplines to create process modeling tools. These include use of Petri nets, discrete event simulation, object oriented modeling and, data flow diagrams. IDEF0 is one of the popular methods for the process description and there are several commercial tools now available based on IDEF0 formalism {Kalzinga et. al., 1995}. IDEF0 is a graphical representation that allows for the description of activities as boxes and links{SofTech, 1981}. The links are used to represent physical objects or information needed to be produced by an activity. A generic activity in IDEF0 is represented as box with four directional links: input, output, mechanism and control. The position of these links are fixed. For example, input, control and mechanism are incoming links placed on the right, top and bottom the box. IDEF0 has a simple syntax and allows for the hierarchy of processes representation at different levels of abstraction.

　 The Design Process Matrix, originally developed in 1967, has recently been rediscovered and refined {Eppinger, S., et.al., 1994}. The primary representation in this approach is a matrix. The row and columns of the matrix are activities. The entries in the matrix correspond to the flow of information between activities. The activities are not grouped based on functional and organizational boundaries, but only on information inter-dependency. This matrix is necessarily sparse and is re-ordered by the use of precedence ordering and partitioning of the design process (DP) matrix. The objective in this method is to reduce the dependence of information flow from other activities to any given activity so as to allow for the activity to take place in parallel with others. The ideal case would be to have all the processes to be independent of others so that maximum parallelism is achieved. However, this is not possible in real-life situations and hence the goal is to minimize inter-task dependency.

　 Action work flow is a modeling technique that is based on representing commitments between actors in a process {Medina-Mora, R., et. al., 1994}. A graph based descriptive method, action work flow does provide mechanisms to compute work process timing.Simulation of Process behavior There are various techniques available for modeling and simulation that include PetriNets, object oriented modeling, discrete event modeling, rule based modeling and; activity based accounting. tTese have been adequately described in the literature{Peterson, J. L. 1981; Booch, G., 1991; Coad and Yourden, 1990; Cooper, R. and Kaplan, R. L., 1988, Bhasker, 1995; Zeigler; 1991, G2; 1991}. A recent innovation from IBM Watson Research Center is the development of process analysis systems that incorporate object oriented modeling along with discrete event simulation {Bhaskar, R., 1995; Zeigler, B. P., 1991}.

　 Computer based support for Process analysis

　 Computer based tools for process modeling, in common with other computer based tools are narrowly focused. We shall not list the set of tools, for each formalism described above there exists at least one support tool in the market. We shall however review the current state-of -the-art tools for process modeling.

　 Current tools are based on one formalism or another and this restricts the representations. For example, choosing a IDEF0 formalism restricts its use only to description and communication and not to simulation or modeling the dynamic behavior. On the other hand, because of the adopted formalism, even the tools of simulation are restricted to narrow views of the processes. For instance, tools of activity based accounting, are spreadsheet-based and are not connected with other process modeling requirements. The general lack of an integrated set of tools has been recognized by process modeling practitioners and researchers {Elzinga,D., L., M. et. al, 1995; Moad, T., 1995} and this has led to many US companies crafting their own tools.

　 In the past few years, there have been advances towards the development of an integrated process modeling system. A new system, BPMAT (Business Process Modeling Analysis Tool) has been developed by IBM in collaboration with CACI (a discrete event simulation software shell vendor) {Bhaskar, R., et. al, 95}. This system is an integrated process modeling tool that combine object based-modeling with an embedded discrete event system for process simulation. They are currently integrating activity based accounting to this system. The basic system allows users to describe the process at different levels of abstraction to provide for top down hierarchical decomposition and horizontal process structures representing work groups. An extensive user interface that allows monitoring changes in the process through bar charts, resource level indicators and presentation of relevant parameters of the simulation is present in this model {An, et. al, 1994}.

　 Section 13: Information Technology and Process Reengineering.

　The relationship between information technology and reengineering is often expressed from two perspectives {Davenport, T., 1993, Hansen, G., 1994}. The first perspective approaches the use of information technology for creating automated reengineered processes, while the second views IT as a provider of change, and these two define the approaches used in IT today. When IT is seen merely as a supporter of automation and provider of appropriate tools, its full and radically new capabilities are not recognized; instead, IT provides only the necessary tools and systems for supporting the process initiative. Often, IT ends up merely aiding the automation of existing process-- a far cry from the original objectives of restructuring. This has led to failed expectations, or, at best, to modest improvements {Davenport, T., 1993}. There is also another concern in the use of IT as the prime vehicle for change: many organizations , at least in the past, found it convenient to delegate restructuring to their IT departments that do not normally possess either a total vision of the company, or the required breadth of the business processes. These departments therefore tried to envisage a role for IT on the basis of the tools available to them and on what they perceived of the process--and not on the basis of what was actually taking place and, what indeed should be the changes. This was because of the absence of cross functional teams in the IT programs and lack of adequate knowledge on the capabilities of IT as applied to specific business processes. A typical example comes from the Texas Instrument’s reengineering efforts where their track-record of recent and consistent successes are traced back to several earlier failures which were due to the lack of cross functional representation in IT based teams. TI, since then, has corrected this deficiency by radically restructuring its IT department as a center of excellence and undertaking reengineering only on a project-to-project basis with cross-functional teams.

　 We believe that the use of IT in reengineering is only going to increase with the cross-functional teams becoming familiar with opportunities made realizable with the availability of supercomputers, parallel computers and Artificial Intelligence systems. The capabilities of parallel computing especially in manufacturing have been pointed out in a recent National Research Council study { National Research Council, 1995}. IBM is now reported to be developing robust and more efficient parallel software for its mainframes that are presently used extensively in U.S industries. The company hopes, that this innovation, would keep its main frames efficient and current. Even artificial intelligence systems, after a decade of euphoria and disappointment, are now coming to their own and may provide real-time rationality to independently operating sub-systems with different time constants.

　 Section 14: Japan and Re-engineering

　Some years back, observations were made on how Japanese companies invest in the development of products and processes. Mansfield’s study of the Japanese companies showed that they invest twice as much on developing processes as on developing products {Mansfield, E., 1988}. In contrast, the U.S. companies appear to spend two times the amount on developing products as on processes. The Japanese focus is on engineering and manufacturing, since their functional divisions are well integrated in their human organizational structures. Interest in the performance of Japanese companies and changing market and economic conditions encouraged U.S. companies and the Department of Defense to initiate and practice concurrent engineering {Reddy, Y., et. al, 1991}. Being the technology leader in IT, the focus of U.S. is naturally in harnessing the capabilities of IT in implementing concurrent engineering practices. Japanese firms, understanding the importance of IT beyond engineering and manufacturing, are carefully studying and targeting the IT-based approaches for information integration and work restructuring {JEIPS,1991, Kawamo, K., et. al, 1993}. In fact, many Japanese firms have set up concurrent engineering departments to rethink the whole process {Subrahmanian, E., et. al., 1993; Davenport, T. 1993}.

　 In a recent book, Takeuchi and Nonaka {1995} point out that Japanese companies are reordering themselves to create what they term the "Knowledge Creating Companies". emphasizing the continual creation of knowledge to understand and serve customers better. The Japanese corporations have come to believe that it is not only desirable but necessary to "reallocate" competence to readily respond to changing customer needs. The Japanese corporations are pursuing these changes with, or even without, the use of IT.

　 A major problem facing the Japanese corporations is on the introduction of IT in their workplace without destroying their existing human-based functions and practices that they consider as their unique assets. The human interaction in the workplace is credited with providing them with exchange of information, storing of information, knowledge and experience. Mitsubishi Research Institute, a leading advocate for introducing IT in Japan, believes that it should be done incrementally {Kawamo, K., et. al., 1993}. A recent Japanese publication cites a methodology for the introduction of IT in concurrent engineering with a case study confirming the advantages {Hirata, T., and Utashiro, T., 1993}.

　 On the other hand, a Japanese chemical company, Mitsubishi Kasei Chemical (MKC) , has plunged directly to a radical restructuring program. Wanting to transform itself into a global corporation, it is changing its language of operation to English and plans to hire over 1000 foreign engineers to break the monotony of homogeneity. The core of restructuring consists of a 10 year Information Integration Plan that calls for indexing all information the company has in Japanese language into English, and also to save more than 200,000 man hours of redundant labor by introducing an information network that is flexible, rich and easily accessible. MKC believes that such a network, when once in place, will improve the training, efficiency and even the performance of plants.

　 Not all companies in Japan are as radical about restructuring as MKC is. As a Japanese quality expert pointed out, the Japanese firms are conservative when it comes to introducing changes in the workplace and when they do, they do so incrementally. The picture is different in the U.S, with firms looking for technical breakthroughs, new products and leap-frogging opportunities. In spite of the Japanese caution, IT, with appropriate changes, is expected to make its presence felt in the Japanese workplace in the coming years.

　 Section 15: Human Resources and Reengineering

　One of the visible consequences of reengineering is a large reduction of the work-force. This is because of the elimination of many interfaces with a concomitant reduction of facilitators who are expected to ease the transition between phases. Centering around the processes makes the work-force more versatile thus eliminating the identity of workers with a specific tasks. The hierarchy is also transformed horizontally, for example, the reengineering of GE Medical Systems resulted in a hierarchy with a general manager, a single production manager and about 170 people on the factory floor, forcing people to become more versatile. For instance, an office worker is now using CAD systems regularly to plot production process flow, a job previously reserved only for engineers. Another example is from the GE Plant at Salisbury manufacturing electrical panel lighting boards where by training its workers and clearly defining the performance goals and production schedules, the management ensured that every process worker knew how to use every machine in the plant.

　 There are two major concerns about the impact of reengineering on human resource management. The first relates to professionally preparing the workers for the change, and the second, concerns the problem of reducing the size of the work-force. No other person in the U.S has argued more persuasively about the necessity of retraining and making workers more skilled and adept than the Secretary of Labor, Mr. Robert Reich. In a forceful speech to delegates of the Private Sector Conference in Washington D.C., (Reich, R., 1993) , he appealed for the creation of more jobs of quality rather than mere quantity. He argued that the U.S must face a massive shift in the demand for labor in favor of highly skilled and highly educated workers in contrast to less-skilled and poorly educated ones. Without mentioning reengineering by name, he argued for a versatility and upgrading of skills that would transform work into "high performance" work; the goal for the future of American labor. The U.S Government has introduced plans of assistance for retraining and access to workplace information, and services to those needing their services.

　 Since we started preparing this report, we understand that the U.S Congress is planning to delegate the $ 6 billion allocation requested by the administration for "reskilling", to the states. It is feared that the states, because of their tight budgets, would reallocate their budget share to paying workers who are on welfare, through programs such as "work-fare" (A recent American jargon to describe those who are on welfare, but are required to work to earn their welfare checks). It appears that at least for now, the budget provision for reskilling would not meet the originally targeted objectives.

　 But the usual problem is one of work-force reduction. As a response to this problem, the strategy adopted by Olin Pool Products (a sanitizing chemical manufacturing company) was to downsize quite early in the process to minimize demoralization and a nagging fear of job security among the remaining workers, the so-called survivors. There is also another concern; elimination of management layers resulting in reduction in opportunities for promotion. The only available transfers are horizontal exchanges. In many reengineering programs, jobs are therefore redefined to make transfers more acceptable.

　 These problems have made even Mike Hammer concede that reengineering is not only about working but also has a critical management angle {Vitello, J., 1993}. Unlike the Japanese companies, U.S corporations focus more on the processes than on people {Cooper, R. and Marcus, M. L., 1995}, but this appears to be changing. There are writings and articulated concerns about not only the workers who have been discarded but also about the "survivors" who have to perform. In a recent analysis, Dr. Ambrose {Ambrose, D., 1995} points out the necessity for retraining those discarded by reengineering for future job opportunities. Jobs in the coming years would only go to those who are skilled and versatile enough to negotiate the rapids of change in the workplace. It is also necessary that the survivors learn to trust their employees and contribute their best to the restructured organization-- a difficult proposition because of the downsizing the company would have gone through. In spite of this very human problem, many in the U.S believe that reengineering is here to stay. For it restores the spirit of community --lost by industrialization--back to society. The future work would no longer be done by individual workers, deskilled and dehumanized by the machines, but by groups and teams that are empowered, skilled and responsible for their actions. It would be interesting to study the dynamics of group formation and their nurturing in the American workplace.

　 Section 16: Problems in Reengineering

　Reengineering involves four major stages that include an environmental review and assessment of the business, identification of core processes, bench-marking with performance target setting, and redesigning the processes and implementation. Reengineering is a major and radical innovation in the business process that very few companies are brave enough to attempt in full because it challenges the very method of doing business, the established hierarchies and functional structures and thus will create serious repercussions among the work-force and in the board room. Reengineering takes time and costs money in lost revenues--at least in the short run--that many companies are reluctant to go through the entire exercise in full. Even when attempted partially, if the targets are not properly set or the whole transformation not properly carried out, reengineering may end as a failure. We cite some recent American examples where target setting has been held responsible for the programs being abandoned.

　 Problems in benchmarking

　 Varian, concentrated so exclusively on improving the delivery schedules of its vacuum systems for computer clean rooms that its workers had no time to respond to customer inquiries and comments. This is an important area of its business, since vacuum systems are often custom-built and the customer comments are critical for its business. There was a significant drop in its growth; in spite of the reengineering efforts, the sales grew by a mere 3 % in 1990 and the company posted a loss for that year (Business Week, 1994).

　 Federal Express had a similar experience when it tried to improve the speed of sorting by its workers to a very high level of efficiency. While it could achieve the speed, the accuracy of sorting suffered, actually delaying instead of speeding the delivery, and costing up to $50 for redirection of every package. Federal Express has overcome this problem finally by investing $100 million for new automated systems for sorting. United Parcel Service introduced a new service for delivering parcels by 10:30 AM. the following day. This involved a major restructuring of its delivery organization, retraining drivers to be prompt and scheduling the routes to minimize delay. They took restructuring to such an extent that the doors of the vans were designed to allow drivers to exit from their vehicles quickly and also increased the supervision of drivers to ensure compliance. Soon, the UPS found that customers were not so much concerned about the promptness of delivery at 10:30 AM as they were about talking to the drivers about the customer services available from UPS. By trying to chase the delivery schedule, UPS seemed to have lost its major advertising asset viz., drivers, and ended up having a poor labor relations in the bargain. Since then, UPS has increased the number of drivers, given them more time for delivering parcels to customers and reduced the supervision; delegating to drivers the ownership of work (Business Week, 1994).

　 To ensure that fear of failure does not lower the targets for reengineering, some companies demand reasonable returns before agreeing to go ahead with the strategy. For instance, AT&T’s CEO Robert Allen insists that there be a drop of 30% in defects in the quality of products and at least a 10% return on investment before agreeing to reengineering strategies. Similarly, L. D. DeSimone CEO of 3M targets that 30% revenue from sales should come from products in the past four years while the previous norm was 25% in five years (Jacob, R., 1995b). Some bench-marks are based on the competitors’ performance. For instance, Global Information Solutions (GIS), an amalgamation of three computer companies formed by AT&T, targets its sales per employee to match its main rival’s ( Hewlett-Packard) performance of $235,000. Some other companies such as Johnson & Johnson believe that bench marking with competition, without considering the involved costs, would be impractical.

　 Function versus Process: Which One ?

　 A major target in reengineering is the elimination of function-based structures and hierarchies since they are held responsible for non-interacting and insular groups with a vertical management style. Without their elimination, it is assumed that reengineering cannot proceed easily in organizations. However, a total elimination of functional structures, especially in large corporations, is difficult because of the stability and power they wield, and also because they are the reservoir of the company’s experience, knowledge and expertise. Their knowledge in such areas as human resources, benefits, science and technology are invaluable and cannot be easily transferred to cross functional teams. Many companies therefore find it optimal to retain some of the functional groups in largely reduced strengths, using them as expert groups for advice and for making available their members for cross-functional program teams.

　 A unique example of reengineering without actually dismantling the functional structures comes from the General Motors Oldsmobile Division. A detailed description of this initiative is given in (Kerwin, K., 1994). Oldsmobile division of GM was suffering for some years with gradual but steady fall in sales. To regain the initiative, Oldsmobile group discussed with over 4000 consumers their expectations from the product. The results of this study showed that customers wanted a sporty four-door luxury sedan. When the environment of the market was thus identified, Oldsmobile, instead of forming a single autonomous product team --as is usually done in reengineering-- formed a group with an overlapping network of small teams located in the functional departments. Each team had its clear mandate and a boss. Thus, a new vehicle program was launched with the design engineers from Flint working together with the marketing group from Lansing and manufacturing from Lake Orion. As the product was to compete with up-market range of cars, the designers chose many desirable features of the competition as benchmarks and evolved a design of a rock-solid body and a large 4.0 liter engine with eight cylinders. The manufacturing group had to work closely with engineers in developing tools and procedures for fabrication and assembly to ensure a seamless fit of parts. The Oldsmobile group spent about $800 million developing this model, named AURORA, and spent another $20 million in dealer training programs and hopes to break even by 1997 with an annual production of about 40,000 cars. Already, Aurora, like the Saturn before, is revolutionizing the workplace at GM. New models, including one from Buick, are planning to incorporate the hard body designs of Aurora. The company believes that, unlike Chrysler or Honda, it is possible to reengineer without disbanding the functional divisions and is using the development of Aurora as a template for its new programs.

　 Section 17: And a Few More Lines

　Business Process Reengineering has come of age. It is truly an American innovation and not an import from the Orient. As Prof. Richard Greene from The University of Chicago points out {Vitiello, J., 1993}, no other society dares to throw out an entire system in full and replace it with a new one. It is, in this sense, a cultural revolution. The external manifestations of this change are a drastic reduction in the labor force, hierarchies getting squashed and becoming horizontal, and processes controlling all activities. But the central theme is more profound: technology and society. Instead of using new technologies and innovations to patch up the existing functional activities, processes, structures and keeping the deskilled work-force intact, reengineering, helped by the burgeoning new technologies, opens up the entire process for a thorough scrutiny and restructuring. Thus viewed, reengineering is the overture for a paradigm shift in the business processes, not dissimilar to the Moving Assembly Line or Taylorism. The coming years will see more companies taking this route for their very survival and growth. More innovations will then be added to this process, and the process itself, with use, will also undergo mutations. As we discussed in this report, signs of these are already visible in the United States. The coming years promise to be interesting.

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