How Can Business Process Reengineering Reduce Costs and Increase Efficiency? A Practical Guide for Business Executives

Currently, enterprises are generally facing the following challenges: rising costs, slow operational response, inefficient cross-departmental communication, fragmented IT systems and other issues. These problems often occur when the enterprise is in the expansion or transformation period, the existing process is difficult to support the rapid development of the business rhythm, resulting in “do more, the busier, the more inefficient. 

Many companies tend to “fine-tune” or “optimize” the process, hoping to improve efficiency through local improvements. However, in reality, patchwork optimization is difficult to solve the problem of structural inefficiency. For example, the optimization of local processes might instead increase the difficulty of cross-departmental collaboration.

At this point, “reengineering” (BusinessProcessReengineering, BPR) becomes a necessary option. Process reengineering is not an addition to the original process, but a fundamental redesign of business processes, so as to achieve disruptive cost reduction and efficiency.

1.The core logic of business process reengineering 

The core of business process reengineering is to “customer value” as the starting point, breaking the original organizational boundaries and process thinking, and redesigning business processes from scratch. It emphasizes the end-to-end flow through, as well as the systematic reconstruction of information, resources and time. 

A few common misconceptions to be aware of include: 

Myth 1: Process reengineering is on the system. In fact, the root cause of process problems lies in management logic rather than IT tools. 

Myth 2: Process reengineering is the business of the operations department. Truly effective BPR must be driven from the top and involve all staff. 

Myth 3: Re-engineering is just efficiency optimization. The goal of BPR is not only to improve efficiency, but also to improve customer experience, enhance organizational flexibility and adapt to strategic transformation. 

Compared with traditional process optimization (e.g. Lean or Six Sigma), process reengineering emphasizes disruptive thinking, cross-functional integration and strategic alignment. It is not limited to improving the status quo, but redefining the way of operation from “how it should be done”. 

2.How to reduce the cost of business process reengineering? –From resource waste to value focus 

There are a lot of “invisible costs” in business operations, which often come from: 

① redundant operations: the same task in more than one link repeated approval, repeated entry 

② Waiting time: Disconnections between upstream and downstream processes lead to longer downtime.

③ communication costs: poor information transfer leads to misunderstanding, rework, tug of war 

Process reengineering effectively reduces the above hidden costs by redesigning process nodes and restructuring information flow and responsibility mechanisms. For example: 

Cancel unnecessary approval processes and shift to “rule-based automated verification”. 

Establishing a unified process platform to reduce data silos and system interfacing costs 

Promote parallelization of tasks to compress overall process time 

In this process, many companies choose to introduce end-to-end business management systems represented by SAP Cloud ERP as the underlying support platform for process reengineering, which not only covers core processes such as procurement, production, sales, finance, and human resources, but also realizes seamless collaboration between different business processes through an integrated data platform, significantly improving process efficiency and data consistency. 

A manufacturing company introduced BPR in the expansion phase, while supporting the implementation of SAP cloud ERP system, with the assistance of senior SAP partners (such as SAP platinum partner Acloudear) to complete the overall landing from process reconstruction to the system on-line. By integrating procurement, production and delivery processes, it eliminated six manual approval processes and introduced process robots for data matching and automatic price comparison. In the end, its operating costs dropped by about 30% and the delivery cycle was shortened by 40%. 

3.How does business process reengineering increase efficiency? -From decentralized execution to end-to-end collaboration 

The essence of low efficiency is often not in the “poor personal execution”, but in the “poor system synergy”. 

When the process is divided by departmental walls, each link only focus on their own duties, the overall efficiency of the process is often greatly reduced. Process reengineering requires breaking down information silos and realizing end-to-end collaboration. 

Key practices include: 

① Design processes based on customer needs, not on internal organizational structure 

② Harmonize process language and standards to ensure seamless integration of cross-functional tasks. 

③Introducing digital tools (e.g., BPM platform, RPA, SAP Cloud ERP) to improve execution efficiency and monitoring capabilities. 

It is worth noting that SAP Cloud ERP system has a large number of industry best practice process templates built-in, which can be used as a reference framework for process reengineering and help enterprises complete process design and on-line execution more quickly and in a more standardized manner. In addition, experienced SAP partners (such as SAP platinum partner Acloudear) often have process optimization consulting capabilities, can be put forward from the business point of view of the landing proposal, to avoid the phenomenon of technology and process “two skins”. 

A large retail group in the order fulfillment process, the original system is scattered, warehouse, logistics, customer service data is not synchronized. After process reengineering, it established a full life-cycle tracking system for orders and carried out multi-module integration based on SAPERP, realizing the integration and synergy of customer orders, inventory matching and logistics arrangements. The order response speed was increased by 70%, and customer satisfaction was significantly improved. 

4.The key role of CEO/executives in BPR: strategy promoter vs. management change agent 

Process reengineering is not a technical innovation, but an organizational-level strategic change. The key to its success or failure lies in the cognition and action of top management. 

Top management support should be reflected in the following four specific behaviors: 

① Clarify strategic intent: Define the core objectives of reengineering and clarify the expected results. 

② Appointment of process owners: the establishment of process owners (ProcessOwner), responsible for the results of cross-departmental processes 

③ Break departmental nativism: promote horizontal integration of processes, and authorize the process reengineering team to make decisions. 

④ incentives and performance alignment: adjust KPIs to avoid “departmental KPIs” to the detriment of the “overall process effectiveness”. 

Common mistakes at the top include: 

Considering process reengineering as a “mid-level project” and lacking strategic leadership. 

Neglecting the cost of organizational change and leaving it halfway through the process. 

Emphasizing systems over processes, deploying systems without adjusting the mechanism. 

5.The path to success of process reengineering map: phased landing program 

Process reengineering must have a clear stage-by-stage path of advancement, the following is a common five-stage landing program: 

①Start-up phase 

Define strategic goals and pain points 

Form a cross-departmental process reengineering team 

Identify key processes and high-cost nodes 

② Design Phase 

Sort out existing process maps (As-Is) 

Design target processes (To-Be) 

Formulate process standards and responsibilities 

③Implementation Phase 

Carry out process pilots and optimize process details 

Deploy IT tools and digital support (e.g. SAP Cloud ERP) 

Organize training and change communication 

④Expansion Phase 

Roll out to the entire company 

Establish process collaboration mechanisms 

Clarify process monitoring and adjustment authority 

⑤Continuous Iteration 

Set up key process indicators (KPIs) 

Establish data feedback and continuous improvement mechanism 

Conduct annual process evaluation and update 

At this stage, the choice of SAP implementation with process understanding and system integration capabilities, can significantly improve the efficiency of the BPR landing, especially for limited resources, hoping to see rapid results in medium-sized enterprises. 

6.Summing up: reengineering is “broken and stand” management wisdom 

Process reengineering is not an “IT dress-up”, but a reconstruction of the logic of business operations. Its value lies not only in “cost compression”, but also in “value chain reshaping”. 

Successful process reengineering: 

①Started from top-level strategic leadership 

②Promote process collaboration with digital tools (e.g. SAP Cloud ERP) 

③ Take end-to-end customer value as the center of reconstruction 

④ Implemented in organizational behavior and performance mechanism. 

In the face of transformation and expansion, only by daring to “break the old path” can middle and senior managers in enterprises truly establish an efficient, collaborative and agile organization that suits the new era.  

This article "How Can Business Process Reengineering Reduce Costs and Increase Efficiency? A Practical Guide for Business Executives" by AcloudEAR. We focus on business applications such as cloud ERP.

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