Summary by Terry Kuhn
Master of Accountancy Program
University of South Florida, Summer 2003
Many companies strive to reorganize, revamp and streamline the internal processes within their companies in order to become efficient - to reduce costs, reduce waste, remove repetitive activities, and to improve the quality of their products and services. The question is, is that enough? The purpose of this article is to identify opportunities for companies to go beyond that level of efficiency - to take the next step of becoming “Superefficient.”
To become superefficient, companies should identify opportunities to share with each other in various processes that will give each company the best results. “Because cross-company processes are not coordinated, a vast number of activities are often duplicated” (p.84). An example provided in the article identifies a procurement process in which the same functions of a purchasing agent on the order side are duplicated on the supplier end by an order entry clerk. Because of the technology available, companies should be working together to streamline cross-company processes.
Tearing Down the Walls
An example illustrated by the author cites how three different companies, each with its own unique strength combined their talents and streamlined the processes of their procurement and order-fulfillment process into a single managed process. While it may appear to be just a simple matter of connecting companies through the power of the internet, the larger idea is that companies are changing the way they think and the way they work.
In 1999, Hewlett-Packard recognized a supply-chain problem with their monitors so they took on the task of integrating the entire supply chain. “The integrated process has dramatically enhanced the performance of the supply chain” (p.87). Now, if HP has a change in an order for monitors, the effect of that change is instantaneously “rippled” through the chain so that everyone can react quickly. In both examples the major focus was on the supply chain because the supply chain is usually the most damaging and costly when it is failing, and also the most rewarding when fixed. As the future unfolds, the author points out that the next major wave of integration will be in the product-development process, allowing a company, its suppliers and its customers to share information that will enhance the speed of the design and the odds of market success (p.88).
Coordination to Collaboration
A good example of moving forward is detailed in the efforts of General Mills and Land O’ Lakes. By collaborating their distribution efforts, they were able to integrate their deliveries of Yoplait yogurt and Land O’ Lakes butter on the same trucks and storing products in the same warehouse. The result of this shared network was fewer deliveries, less stops, greater accuracy and lower costs to both. From Hammer's perspective “Streamlining cross-company processes is the next great frontier for reducing costs, enhancing quality, and speeding operations". But the leap to super efficiency requires a rigorous, structured approach such as the one illustrated in this example. (p. 89).
|Activities||Keys to Success|
|Scoping||Identify the appropriate
business process to redesign.
Select a partner.
|Offer substantial opportunities to
enhance overall business performance; should already be operating at peak
Partner should have a strong interest in the initiative; be experienced with internal design; make quick decisions; have a collaborative culture.
|Organizing||Establish an executive
Convene a design team.
|Convene early; include leaders from
both companies; define each company’s investments, roles, share of
benefits; establish procedures for resolving disputes; establish
performance measures and goals.
6-12 members; committed full-time to the project; members from both companies; experts in existing processes, process redesign, and change management.
|Redesigning||Design the new, integrated process in a way that fulfills performance goals.||Follow these principles: Final customer comes first; design entire process as a unit; activities performed only once; work done by company in best position to do it; the process should operate with only one database.|
|Implementing||Roll out the new process.
|Clearly defined stages; focus on
achieving benefits early and move quickly to gain momentum.
Communications should occur regularly; reach both companies; emphasize rationale and expected benefits; define expectations for every employee.
To make that leap from efficiency to super efficiency – to gain a competitive edge, streamlining intercompany processes appears to be vital for survival in the future.
Related publications and summaries:
Hammer, M. 1990. Reengineering work: Don't automate, obliterate. Harvard Business Review (July-August): 104-112. (Summary).
Hammer, M. 2001. The Agenda: What Every Business Must Do to Dominate the Decade. Crown Pub.
Hammer, M. 2002. Process management and the future of six sigma. MIT Sloan Management Review (Winter): 26-32.
Hammer, M. 2004. Deep change: How operational innovation can transform your company. Harvard Business Review (April): 84-93.
Hammer, M. 2007. The process audit. Harvard Business Review (April): 111-123. (Note).
Hammer, M. and J. Champy. 1993. Reengineering the Corporation. Harper Business. ("The core message of our book... It is no longer necessary or desirable for companies to organize their work around Adam Smith's division of labor. Task-oriented jobs in today's world of customers, competition, and change are obsolete. Instead companies must organize work around process."... "Companies today consist of functional silos, or stovepipes, vertical structures built on narrow pieces of a process. ... The contemporary performance problems that companies experience are the inevitable consequences of process fragmentation." p. 28).
Swank, C. K. 2003. The lean service machine. Harvard Business Review (October): 123-129. (Summary).