CASE STUDY ASSIGNMENT 2: ABZA BANK

By
Kenneth Padre

Student number: 214033953

Full Time

Research Report

Submitted in fulfillment of the requirements for the

Subject:

INFORMATION SYSTEMS 4

Qualification:

BTECH: INDUSTRIAL ENGINEERING

In the

Faculty of Engineering

Department of Industrial and Systems Engineering

At the

CAPE PENINSULA UNIVERSITY OF TECHNOLOGY

Lecturer: Mr. W Ngetich

Cape Town: Bellville Campus

Submitted: 21st March 2017

CONTENTS

I. LIST OF FIGURES……………………………………………………………..i

II. SUMMARY……………………………………….……………………………..ii

1. INTRODUCTION…………………………………………………………………...1

2. OBJECTIVES OF BUSINESS PROCESS REENGINEERING……………….2

3. CASE STUDY: ABZA BANK……………………………………………………...3

3.1. COMPREHENSIVE STUDY…………………………………………………..3

3.1.1. Discussion of the old process…………………………………………………4

 Problem found…………………………………………….…………….4

3.1.2. Why the entire process needs to reengineered……………………………..5

4. THE INFLUENCE THAT HAMMER’S PROCESS MANAGEMENT MODEL

(DESIGN AND APPLICATION) STEPS WILL HAVE ON THE ABOVE

MENTIONED PROCESS………………………………………………….…..5 to 7

5. SOLUTION TO PROBLEM FOUND IN ABZA BANK BUSINESS

PROCESS…………………………………………………………………..….7 to 8

5.1. How this ‘’ One-step service’’ diagram will work…………………………….8

5.2. The difference between the vertical structure organization and Cross-

functional structure……………………………………………………………..9

6. The impact of application of Business Process Reengineering technique in

ABZA business process……………………..……………………………………10

7. RECOMMENDATIONS…………………………………………………………...11

8. CONCLUSIONS……………………………………………………………………11

9. REFERENCES……………………………………………………………………..12
 I. LIST OF FIGURES

Figure 1: ABZA bank old process…………………………………………………………4

Figure 2. Hammer’s process management cycle model………………………………..6

Figure 3: One-stop service for all three enquires………………………………………..7

Figure 4: Difference between Vertical organizational structure and Cross-functional

structure………………………………………………………………………………………9

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 II. SUMMARY

This report is conducted to do a case study of the ABZA Bank business process where
a new customer wants to apply for a loan, ATM card and open a savings account.
Currently, the customer must speak with various members of the organization and be
on many waiting lines in order to get done with his enquires which may take most part
of the day. Therefore, the author as an Industrial engineer will analyze the situation,
describe where the problem is and then the author will be able to show why this
process needs to be redesigned and retooled through applying Business Process
Reengineering technique (BPR) based on Hammer’s approach (Design and
Application) as well as the importance of Business Process Reengineering (BPR) for
the current problem.

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 1. INTRODUCTION

Business process re-engineering (BPR) is a strategy of business management,

originally pioneered by Michael Hammer and the firm he was affiliated in the early
1990s, focusing on the design and analysis of workflows and business processes with
an organization. BPR aimed to help organizations specially rethink how they do their
work in order to improve customer service, cut operational costs, improve quality,
speed and obviously become a world class competitor (Office, 1997, p. online).

Business Process Reengineering strongly includes changes within business

environment’s structures and processes resulting in a possible change in the entire
technological, human and organizational dimensions by Business Process
Reengineering (BPR). The author has come to know that Information Technology (IT)
plays an important role in Business Process Reengineering (BPR) because it allows
the business to be conducted in different areas, it also provides office automation,
flexibility in manufacturing, permits quicker delivery to customers and supports rapid
and paperless transactions (Sotiris Zigiaris, 2000, p. online).

ABZA bank is the organization to be analyzed by the author. Throughout this

document, the author is going to apply Business Process Reengineering (BPR) to
improve the delivery of the service offered by ABZA bank and reduce lead time of the
same operation.

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 2. OBJECTIVES OF BUSINESS PROCESS REENGINEERING

It is important to emphasize that Business Process Reengineering strives to improve

the organization’s operational activities in many areas and sectors and it helps the
company to become more competitive by improving overall process rather than just a
task improvement. When applying Business Process Reengineering in a company the
implementation team effort is focused on several factors (Chapter, 2017, p. 18):

 Customer service: Creation of customer service oriented processes aiming

to eliminate customer complaints.
 Speed: It compresses the time it takes to complete a task for key business
processes. It can cut down average cycle time to half an hour.
 Compression: It strongly cuts major tasks of cost and capital throughout the
value chain. To organize the process a company develops transparency
throughout the operational level reducing cost.
 Flexibility: Adaptive processes and structures to changing conditions and
competition.
 Quality: Bringing the best quality products to customers which will obviously
bring customer satisfaction at the end of the day. Levelling of quality always
controlled and monitored by the processes and does not depend mainly on the
person who is busy serving the customer.
 Innovation: Leadership through imaginative change providing to organization
competitive advantage.
 Productivity: It extremely improve effectiveness and efficiency (Chapter, 2017,
p. 18).

Competition is always improving with respect to price, quality, speed, services and
promptness of delivery. Removal of barriers can cause competition to intensity.
Therefore, all these changes impose the need for organizational transformation
whereby the entire processes and organization structure are changed. ‘‘MICHAEL
HAMMER’’ defines Reengineering as the fundamental rethinking and radical design
of business processes to achieve dramatic improvements in measures of performance
such as cost, service, quality and speed.

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 3. CASE STUDY: ABZA BANK

Explain Hammer’s process management cycle/model design & application by

discussing each step of the process relevant to the company process below.

Abza bank business process:

ABZA, with a vertical organizational structure offers the following service. Customer
‘A’ wants to apply for a loan, ATM card and open a savings account. Currently he must
speak with the Loans advisor to check if he is credit worthy before a loan approval,
then move on to the ATM clerk and finally complete his process with the Savings
account clerk. This takes the better part of a day.

Task: As an Industrial Engineer, tasked with applying BPR to improve the delivery of
this service and reduce the lead time, motivate a solution.

3.1. COMPREHENSIVE STUDY

The above case study was given to the author to analyze, describe the limitation of
the old process, explain and draw the flow process of the model and apply BPR to
improve the delivery of this service and reduce lead time. Based on Hammer’s process
management cycle/model design and application the author is going to develop a well-
structured discussion on how reengineering will be relevant for the company to get a
suitable outcome for this process.

As it can be seen in the above ABZA business processes statement, business

processes are normally categorized by three elements: the inputs (data such
customer enquiries and available materials), the processing of the data which
normally go through several stages or steps and sometimes has to stop, what turns
out to be money and time consuming, and thirdly the outcome (the delivery of the
result). The author will spend more time in the processing part which is the most
problematic part and it will be reengineered so it can consume less time.

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 3.1.1. Discussion on the old process

According to ABZA business process, the new customer wants to

1. Apply for a loan.

2. ATM card and
3. Open a savings account

Allow the author to break it down as it is shown below:

Step 1: Currently the ‘‘customer A’’ must speak with loan advisor to check if he is
credit worthy before a loan approval.

Step 2: move on to the ATM clerk

Step 3: finally complete his process with Savings account clerk. To emphasize that
this three steps takes the better part of the day.

Enquire1 (waiting line 1) Enquire 2 (waiting line 2) Enquire 3 (waiting line 3)

APPLY FOR A ATM CARD SAVINGS

LOAN ACCOUNT

Figure 1: ABZA bank old process

The customer A has to visit three different desks in order to be serviced.

 Problem found: The problem with this process above in vertical organization
structure is that the customer have to speak with various member of the staff
for different enquires and it consumes a lot of time (better part of the day) which
causes customer dissatisfaction, late delivery of service, poor quality and
speed-less performance.

This author has decided that this entire process needs to be rethought and redesigned
due to the amount of time it takes and also to improve the delivery of this service.
Using BPR technique to overcome this situation, the author can simply define BPR as
the logical and fundamental rethink and redesign of the business processes to achieve
improvements of performance such as cost, quality, speed and service.

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 3.1.2. Why the entire process needs to be redesigned/reengineered

It is because Business Process Reengineering will force the ABZA Bank to rethink on
small changes that can be meaningless and rather than fixing just one portion, better
setting out to redesign the entire process. There are a lot of improvements that will
happen under the business after applying Business Process Reengineering (BPR) for
the above mentioned problem such as:

Efficient process teams;

Empowered employees;

Compensation of results;

Education of employees;

Advancement based on performance;

Cross-functional teams;

Productive organizational structure;

4. THE INFLUENCE HAMMER’S PROCESS MANAGEMENT

MODEL (DESIGN AND APPLICATION) STEPS WILL HAVE ON
THE ABOVE MENTIONED PROCESS.

Based on Hammer’s concepts Business Process Reengineering (BPR) is an

applicable technique of business restructuring focusing on business processes. This
approach implements organizational change based on the close coordination of a
methodology for rapid change, employee empowerment and support by Information
Technology (IT) (hammer, 2012, p. online). In order to implement Business Process
Reengineering to an organization some actions need to take place:

 Selection of strategic process for redesign.

 Simplify new processes (in this above problem we will be able minimize the
steps, optimize efficiency by using a model).

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  Organize a team of employees for ach process and assign a role for process
coordinator.
 Organize the workflow (document transfer and document control).
 Assign responsibilities and roles for each process.
 Automate processes using Information technology.
 Providing training to process team to effectively and efficiently manage and
operate the new implemented process.
 To then later introduce the redesigned process into the business organizational
structure.

Figure 2. Hammer’s process management cycle model.

In other words, when applying Reengineering one can notice that most of the
methodologies share common elements, but small differences can have a strong
impact on the success or fail of the business. As it can seen, after the project area can
be identified, the methodologies for reengineering the business process can be can
be used. The author breaks it up in general model stages:

The envision stage: review of existing strategy and business processes;

The Initiation stage: Project teams are assigned, performance goals, project
planning;

The Diagnosis stage: Documentation of processes and sub-processes takes place;

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The redesign stage: New process design is developed by devising process design
alternatives and through brainstorming and creativity techniques.

Reconstruction stage: that is where the management changes occur to ensure

smooth migration to the new process responsibilities to determine if goals are met and
examine total quality programs.

5. SOLUTION TO PROBLEM FOUND IN THE ABZA BANK

BUSSINESS PROCESS

After mentioning above that the entire process needs to be reengineered and
redesigned, the author has given a complex illustration in the concept of BPR by
explaining why it must be redesigned and how reengineering will improve Abza bank’s
business process and relative operation through implementation of that technique.
Now it is time to come up with a solution.

Solution

ONE-STOP SERVICE FOR ALL THREE ENQUIRIES

APPLY FOR A
LOAN

CASE
MANAGER ATM CARD

SAVINGS
ACCOUNT
(Customer)

Figure 3: One-stop service for all three enquires (functional teams)

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The implementation of One-Stop shopping as a customer service innovation, requires
the close coordination with a staff team assigned to a process powered by Information
Technology for the exchange of information and documents in order to service the
customer request.

5.1. How this one-stop service diagram will work

The customer who is applying for a loan will be directed to a team of staff assigned to
service for a loan application. Where the customer will only talk to one person named
as ‘‘case manager’’ for all three enquires. That manager completes the application for
the loan in electronic form which in turn is submitted to the next team member, named
as ‘‘Credit Control Director’’ who examines the credit status of the customer.

Noticing that the credit status of the customer is satisfactory, the application is
submitted electronically to the next team member who calculates the interest rates
and payment tables. The application is then submitted to a ‘‘credit manager’’ for
approval using a digital signature. The approval of the application along with the
payment table is delivered to the customer by the case manager.

While the loan application team was processing the loan application, the case
manager contacted the account team to open a savings account and the ATM team
to give the customer an ATM card. Resulting in customer leaving the bank having a
response for his loan application, an ATM card and a new savings account.

It impacts positively because the customer did not have to move around the desks for
signature and documentation. Customer’s requests were completely satisfied at the
same time in parallel motion.

NB: In case of ‘’Not satisfactory credit status’’ the rejection of the loan is approved by
the credit manager and rejection form is filled and is returned to the case manager
who then explains to the customer the reason why the application was denied or
rejected.

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5.2. The difference between the vertical organization structure (first one) and
the Cross-functional organization structure (Second one).

Figure 4: Difference between Vertical organizational structure and Cross-functional

structure

The difference between figure 1 and 3 lies in the way businesses operations are
organized internally. The vertical organization is organized based on functional units
(The sales, accounting departments) and in the Cross-functional organizational units
the main organizational unit is the process. Doing business is basically running
processes so it would be very logical to organize companies based on processes
(leahy, 2014, p. online). For example, the ordering process crosses different
departments. Sales department for order taking, the accounting department for credit
control and invoicing, the logistics department for inventory control and distribution
and finally the production department for producing the order.

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6. THE IMPACT OF THE APPLICATION OF BUSINESS PROCESS
REENGINEERING (BPR) TECHNIQUE IN ABZA BANK BUSINESS
PROCESS

Application of Business Process Reengineering will make ABZA bank business

process work more efficiently because it will bring a very high interconnection between
all sectors and points of the organization allowing everyone from the organization to
understand what the others did before the task gets to them.

Based on time measurement, one can clearly see how time was highly compressed
with the restructuring of the entire process by moving from a vertical structure to a
cross-functional structure (Functional teams). It is a task that used to take most part
of the day but after the application of One-stop service (Reengineering tool), what
seemed to be a long and complicate process turned into a very simple situation to
handle.

Quality of service: Good delivery of service is one of the main likes of the customer
causing them to be loyal to the organization by putting all their trust in the company
services and to defend the name of the business wherever they go. In the case of
ABZA bank, Business Process Reengineering (BPR) allowed the banking sector to be
highly competitive and to improve their ability to communicate using the efficient and
appropriate channels to bank clients which became a very great advantage.

Business Process Reengineering has brought lots of benefits including greater

productivity and compact staff teams to deliver against requirements. It is important
to emphasize that this is an on-going process and the organization should always
strive to maintain a high standard implementation in order to be successful and
competitive in the business world.

A well-structured reengineering model or tool can be so impressive that will bring

flexibility and speed work delivery. In the ABZA bank situation, it added value by
providing an ongoing relationship for best practices between people working in the
different sectors using Information Technology (IT) approaches.

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7. RECOMMENDATIONS

This author advises organizations to apply Business Process Reengineering because

of the following factors:

 Business Process Reengineering will open up a new dimension into existing

business;
 BPR improves the quality of service and customers satisfaction;
 It will help the company that is currently running at a loss by changing the
present process through Business Process Reengineering causing a losing
business to certainly make profits;
 It will stabilize a great attitude between employees of all sectors of the business
through continuous improvement;
 BPR dramatically achieves performance improvements through radical change
in organizational processes, rearchitecting of business and management
process;
 It helps organizations to become more competitive through improving the most
key factors of competitiveness such as speed, quality, time of delivery (improve
lead times), flexibility, productivity, efficient use of Information Technology and
innovation (Thilakasiri, 2010, p. online).

8. CONCLUSIONS

After the completion of this report the author can say that the key components of
Business Process Reengineering are redesign, retooling and reorchestrating. These
key components focus on the outcome that it needs to achieve (ambitious outcome).
The author can surely conclude that BPR occurs with the creation and use of models
(physical models, mathematical, computer or structural models). Implementation of
BPR requires visionary thinking to obtain visionary goals. These visionary goals
require rethinking the way most organizations do business in combination with support
of a very sophisticated Information System so it can be transformed from a traditional
organization structure to a new network type organization.

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9. REFERENCES

1. Chapter 2. (2017). BPR measures and indicators.

2. hammer, M. (2012). Summary of What is Business Process Management.

Retrieved from https://catmousavi.wordpress.com/2012/03/21/summary-of-
what-is-business-process-management-by-michael-hammer-my-ideas-
around-it/

3. leahy, B. (2014). Vertical, horizontal and cross-functional organizations . Retrieved

from https://heroictechwriting.com/2014/09/21/vertical-horizontal-and-
matrixed-organizations-and-why-you-should-care/

4. Office, U. S. (1997). Article . Retrieved from United States General Accounting

Office: https://en.wikipedia.org/wiki/Business_process_reengineering

5. Sotiris Zigiaris, M. B. (2000). wikipedia. Retrieved from Business process

reengineering: https://en.wikipedia.org/wiki/Business_process_reengineering

6. Thilakasiri, T. (2010). Retrieved from Importance of business process

reengineering: http://www.ft.lk/2010/11/11/importance-of-business-process-
reengineering

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