Page 98 - DCAP306_DCAP511_E-COMMERCE_AND_E-BUSINESS

Unit 7: Basics of Business Process Reengineering

Case Study Ford Motor Corporation
T
he Ford Motor Corporations’ Accounts Payable department employed more than five
hundred people. Computerization of few of the existing tasks in the division was
estimated to result in twenty percent of manpower reduction.
During an effort to reengineer for dramatic enhancements, it was realized that BPR was related to
reengineering a process and not a division. The process recognized for reengineering was
procurement which involved the following stages:

1. Generation of a Purchase Order: The internal unit of the organization generates a purchase
order which is sent to the supplier externally and a copy is sent to the Accounts Payable.
2. Receiving Items Against the Purchase Order: The receiving division receives items against the
purchase order from supplier along with the delivery notice. Then the Accounts Payable
receives the receiving document from the receiving clerk.
3. Sending an Invoice to the Accounts Payable: The supplier sends an invoice to the Accounts
Payable.

Thus, the Accounts Payable division received three documents namely - a purchase order, a
receiving document, and an invoice. In case all of them matched as was the case of 80% of
transactions, payment was made. Otherwise, enormous amount of manpower and time was used in
tracing inconsistencies and making payment to supplier.

The reengineering process is radically varied and is enabled by Information Technology (IT). A
company wide database with terminals linked to all divisions permits a purchasing unit to enter
details of order into the computer as it is released to the vendor. The receiving division clerk has
accessibility to the same database, who on receiving goods from supplier, logs into their system to
ensure that the received goods is in accordance with the purchase order. If the received goods match
the purchase order list, the clerk admits the delivery and authorizes the payment through system
directly. Otherwise, the clerk does not accept the consignment and returns it to the supplier. Here,
the requirement for an invoice is eliminated.

The reengineering process eliminates the Accounts Payable division. Thus, the number of people
involved was reduced to 125.
Questions:

1. Discuss the process recognized for reengineering in Ford Motor Corporation.
2. Does the reengineering process eliminate the Accounts Payable Division in Ford Motor
Corporation?

Source: http://ezinearticles.com/?Ford-Motor-Company---Case-Study&id=1420478
7.1.4 Issues in BPR

Carr and Johnson, in 1995, identified that there exists two kinds of risk while implementing BPR. They
are technical risk and organizational risk. Technical risk is the fear that the changes in process will not
work and organizational risk is the possibility of reaction of corporate culture against the changes.

The other methodology suggested by Carr and Johnson in reduction of risk is to establish successful
reengineering by implementing precisely targeted pilot programs. These programs assist in
communication strategy and reinforce the management commitment to create user buy-in.

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