Reengineering Case Studies

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Successful reengineering programs undertaken by large and small corporations in the past have these common themes:

1. A focus on processes rather than organizational boundaries
2. The ambition to create breakthrough performance gains
3. A willingness to break with old traditions and rules
4. The creative use of new information technology

Every company’s reengineering program must be unique if it is to achieve anything substantial. There are no guaranteed-to-work or step-by-step prescriptions that can be followed in reengineering.

Case Study #1–IBM Credit Corporation

IBM Credit finances the computers, software and services sold by IBM Corporation. Processing a finance application used to take between six days and two weeks as the application wound its way from the credit department to the pricing department to an administrator who wrote out a formal quote letter.

When IBM Credit realized that processing an application actually took only about 90 minutes and the rest of the normal processing time was spent with the application sitting on a pile on a specialist’s desk waiting to be looked at, they decided to reengineer the entire process.

Here’s what IBM Credit did:

The four specialists who previously processed the application were replaced by a generalist–called the deal structurer–who processed the application from start to end using templates on a new computer system that provided all the data and tools each specialist commonly used.

For unusual cases, the deal structurer can still call on the specialists to provide additional expertise. The specialist and the deal structurer then team up to develop a customized package as required. This happens only rarely, however.

The results of the reengineering program were:

Turnaround time was reduced from a typical 7 days to 4 hours.

Without any increase in staff numbers, IBM Credit has been able to achieve a hundred-fold improvement in productivity–it can now handle 100 times the number of credit applications handled before reengineering was undertaken.

Case Study #2–Ford Motor Company

In the early 1980s, Ford looked at its 500-person accounts payable department closely.

It was soon realized that the majority of each employee’s time was spent tracking down discrepancies between purchase orders, shipping receipts and invoices. Ford decided to reengineer the entire parts procurement process.

Therefore, the steps Ford took were:

An online database was created of purchase orders. Whenever a buyer issued a purchase order, it was entered into the database.

As goods are received at the receiving dock, someone checks the database. If the shipment matches a purchase order, it is received. If the shipment does not, it is not accepted. Therefore, there are no possible discrepancies between what was ordered and what was physically received.

As soon as the shipment is received, the database is updated and a check is automatically generated and issued to the vendor at the appropriate time.

The results of Ford’s reengineering program were:

Head count in Ford’s purchasing department fell from 500 people to 125 people; at the same time efficiency improved dramatically.

Study #3-Hallmark

Hallmark totally dominates the U.S. greeting card industry. Despite its success, the company decided to embark on a reengineering program with the objective of reducing the time lapse between noting a new niche market to serving it with a card on the retailer’s shelf. (At that time, it took 2–3 years to get a new line of greeting cards from concept to market. The company was making about 50,000 revisions to designs each year, and Hallmark had no accurate way of finding out what was selling well and what was not).

In essence, Hallmark looked to reengineering as a pre-emptive competitive strike rather than as a response to a bad situation.

To reengineer, Hallmark took these steps;

A reengineering team was set up, staffed by some of the company’s best and brightest employees.

Three key objectives were articulated:

1. To reduce new product development time to 1 year
2. Produce products buyers and retailers would love
3. To reduce costs with improvements in quality

100 employees were appointed to nine teams, each of which addressed a specific “leverage point”–the critical parts of the business that needed to be changed. These teams came up with 100 recommendations, 12 of which were chosen for a pilot project.

The pilot program:

1. Captured sales data at the point-sale.
2. Communicated actual sales data throughout the company.
3. Formed cross-department groups to develop new cards.
4. Eliminated entirely old style review processes.

Once it became clear the pilot program was generating impressive results, the reengineering initiatives were put into action company wide.

Case Study #4–Taco Bell

In 1983, the Taco Bell subsidiary of PepsiCo had fewer than 1,500 restaurants and $500 million in total sales. The company had stalled, with little or no growth over the previous five years.

To reengineer, Taco Bell did these things:

The customers were asked what they wanted. The company assumed they wanted bigger and better restaurants. The customers said all they wanted was “good food, served fast and hot, in a clean environment, at a price they could afford.”

A decision was made to reduce the costs of everything about the business except the cost of the food and its packaging.

A vision of the company as a leader in the restaurant business and not just the Mexican food business was articulated.

The management process was completely and dramatically reengineered–three layers were eliminated, including the entire “district manager” supervisory level. Every job in the system was redefined. Restaurant managers were given greater latitude to run their own businesses, and ultimately became “Restaurant General Managers.

Taco Bell reengineered the way its buildings were designed. Before 1983, the typical Taco Bell was 70 percent kitchen and 30 percent customer area. Since 1983, that ratio has reversed–new Taco Bells are 30 percent kitchen and 70 percent customer area.

Taco Bell reengineered its marketing to become value-driven.

Taco Bell developed ways to pre-cook the food centrally so that restaurants could concentrate on retailing rather than manufacturing.

Taco Bell introduced new management information systems using the latest technology to keep track of sales minute by minute.

The company introduced a new performance measurement called “the total share of stomach.” Instead of measuring success as market share of the fast-food market, Taco Bell set the goal of becomeing the value leader for all foods for all meal occasiond. That created a broader vision and stimulated the development of new innovations.

As a result of these reengineering programs:

Taco Bell has grown from 1,500 restaurants in 1983 to 3,600 in 1993.

Turnover has increased from $500 million in 1983 to $3 billion 10 years later–an increase of 22 percent per year.

Profit has grown at a rate of 31 percent per year over the same period.