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Business Process Re-Engineering:

A Case Study of Ford Motor


CHAITANYA DEO (CM14211)
Dr. S. S. Bhatnagar University Institute of Chemical Engineering & Technology

I. INTRODUCTION
Business process re-engineering (BPR) is a business management strategy,
originally pioneered in the early 1990s, focusing on the analysis and design
of workflows and business processes within an organization. BPR aimed to
help organizations fundamentally rethink how they do their work in order to
dramatically improve customer service, cut operational costs, and become world-
class competitors.
BPR seeks to help companies radically restructure their organizations by focusing
on the ground-up design of their business processes. According to early BPR
proponent Thomas Davenport (1990), a business process is a set of logically
related tasks performed to achieve a defined business outcome. Re-engineering
emphasized a holistic focus on business objectives and how processes related to
them, encouraging full-scale recreation of processes rather than iterative
optimization of sub-processes.
Business process reengineering is also known as business process
redesign, business transformation, or business process change management.
Ford Motor Company was founded in 1903. It was ranked 11th in the fortune
500 companies for the year 2018. It has eight automotive brands (Aston- Martin,
Jaguar, Volvo, Lincoln, Mercury, Ford, and Mazda) and four service divisions
(Ford Credit, Hertz, Quality Care, and Quik -Fit).
Ford has its presence in more than 200 countries and territories, with a workforce
of 400,000 approximately and 140 manufacturing plants. The Ford Motor
Company, at least until World War II, was also occupied in “human engineering”.
Gradually, Ford was able to go from a creative idea to near to optimum
assessment of demand, to engineering, manufacturing, and logistics, to the
relationship with the customers. Ford used e-commerce internally to start with,
which they called it internet inside. Then, they used internet in traditional B2B
applications and B2C applications, and also to facilitate the ongoing relationship
with customers. Ford also applied technology inside their vehicles, through
Telematics initiatives, which created the internet on wheels. In due course of time,
Ford allied with the best technology partners.
Business Process Re-engineering implementation can be characterized as the
implementation of purposeful and basic change in business processes to achieve
sudden improvements in performance. Companies are re-engineering their basic
business processes to improve quality, service and efficient performance of the
company. After re-engineering of vital business processes, new ways of company
management are required. This paper gives an understanding through a contextual
investigation research into the relationship between strategic planning and BPR
of an automobile major Ford. Organizations have experienced major change. The
impetus for these changes comes as a reaction to competitive pressures and
proactive action to improve corporate responsiveness. Change of overall process
is very complicated as it includes the manipulation of interactive relationships
among organizational sub-components such as management, people, structure,
technology and rewards. Drawing from a huge number of literature on
implementation with innovation, socio-technical design and the management
information systems.

II. OBJECTIVES OF THE STUDY


The case study encircles the following objectives:
1.To critically evaluate the BPR activities of Ford’s Accounts Payable process.
2. To analyse the impact of BPR on the efficient performance of the company.

III. PROBLEM IDENTIFICATION


In the early 1980s, when the American automotive industry was in a depression,
Ford’s top management put accounts payable- along with many other
departments- under the microscope in search of ways to cut costs. Accounts
payable in North America alone employed more than 500 people.
Ford was enthusiastic about its plan to tighten accounts payable- until it looked
at Mazda. While Ford was aspiring to a 400-person department, Mazda’s
accounts payable organization consisted of a total of 5 people. The difference in
absolute numbers was astounding, and even after adjusting for Mazda’s smaller
size, Ford figured that its accounts payable organization was five times the size it
should be.
IV. PROBLEM DESCRIPTION
THE EXISTING SYSTEM

First, managers analysed the existing system. When Ford’s purchasing


department wrote a purchase order, it sent a copy of the receiving document to
accounts payable. Meanwhile, the vendor sent an invoice to accounts payable. It
was up to accounts payable, then, to match the purchase order against the
receiving document and the invoice. If they matched, the department issued
payment.
The department spent most of its time on mismatches, instances where the
purchase order, receiving document, and invoice disagreed. In these cases, an
accounts payable clerk would investigate the discrepancy, hold up payment,
generate document, and all in gum up the works.
THE PROCESS FLOW CHART

Before:
SYSTEM DRAWBACKS:

The drawback in this system was that ford’s accounts payable organization was
performed by so many people. The department spent most of its time on
mismatches, instances where the purchase order, receiving document, and invoice
disagreed. In these cases, an accounts payable clerk would investigate the
discrepancy, hold up payment, generate document, and all in gum up the works.
Its process was not efficient.

V. RESEARCH METHODOLOGY
The study revolves around the historical challenges, their respective solutions and
impact on the performance of Ford Motor Company in its history of more than
25 years. The study is descriptive in nature.
 Problem definition: To develop a deep understanding of essence of the
process of BPR to maximize attainment of business goals.
 Research Design: The research design employed to satisfy the objectives
in this research is descriptive research.
 Data Collection Methods: Data involves the collection of the secondary
information (with data) regarding evolution of Ford and the accomplishing
business objectives by assuring quality standards, reducing inventory costs
and internal control and checks.
Secondary Data: The data was collected through various magazines, books,
journals and websites (e-journals), Ford Motor Annual reports, financial
statement from stock exchanges, research papers and Ford website.
For analysing the data, SAP-LAP analysis, SWOT analysis, PESTEL analysis
and DEA analysis are being used.
VI. SUGGESTED SOLUTION
The management thought that by rationalizing processes and installing new
computer systems, it could reduce the head counts. One way to improve things
might have been to help the accounts payable clerk investigate more efficiently,
but a better choice was to prevent the mismatches in the first place. To this end,
Ford instituted “invoiceless processing”. Now when the purchasing department
initiates an order, it enters the information into an on-line database. It doesn’t
send a copy of the purchase order to anyone. When the goods arrive at the
receiving dock, the receiving clerk checks the database to see if they correspond
to an outstanding purchase order. If so, he or she accepts them and enters the
transaction into the computer system.
Under the old procedures, the accounting department had to match 14 data items
between the receipt record, the purchase order, and the invoice before it could
issue payment to the vendor. The new approach requires matching only three
items- part number, unit of measure, and supplier code- between the purchase
order and the receipt record. The matching is done automatically, and the
computer prepares the check, which accounts payable sends to the vendor. There
are no invoices to worry about since Ford has asked its vendors not to send them.
Ford dint settle for the modest increases it first envisioned. It opted for radical
change- and achieved improvement.
After:
The new process cuts head count in accounts payable by 75%, eliminates invoices
and improves accuracy. Matching is computerized.

VII. CONCLUSION:
 Ford discovered that reengineering only the accounts payable department
was futile. The appropriate focus of the effort was what might be called the
goods acquisition process, which included purchasing and receiving as
well as accounts payable.
 When Ford reengineering its payables, receiving clerks on the dock had to
learn to use computer terminals to check shipments, and they had to make
decisions about whether to accept the goods.
 Purchasing agents also had to assume new responsibilities-like making
sure the purchase orders they entered into the databases had the correct
information about where to send the check.
 Attitudes towards vendors also had to change: vendors could no longer be
seen as adversaries; they had to become partners in a shared business
process.
 Vendors too had to adjust. In many cases, invoices formed the basis of their
accounting systems. At one ford supplier adapted by continuing to print
invoices, but instead of sending them to Ford threw them away, reconciling
cash received against invoices never sent.

REFERENCES
 Tandon, et.al., Apeejay-Journal of Management Sciences and Technology,
4 (1), October – 2016, Business Process Re-Engineering In Automobile
Industry: A Case Study Of Ford Motor Company
 https://www.youtube.com/watch?v=bca91f2zIJE
 https://en.wikipedia.org/wiki/Business_process_reengineering#Reenginee
ring_Work:_Don't_Automate,_Obliterate,_1990
 https://skybountygarden.wordpress.com/2013/03/27/business-process-
reengineering-at-ford-motor-company-india/

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