Introducing Business Process Reengineering Concepts In .

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Introducing Business Process Reengineering Concepts In Construction EducationHazem M. Elzarka, Ph.D.University of Cincinnati, Cincinnati, Ohio, USAelzarkhm@email.uc.eduAbstractTo be winning competitors in a global economy, manymajor construction and engineering companies areutilizing business process reengineering (BPR) techniquesto change their internal corporate structure and businessprocesses. The objective of BPR is to improve theefficiency of administrative procedures, reduce errors andfacilitate the internal and external integration of projectinformation among engineers, contractors, owners,subcontractors, vendors and others. Realizing theimportance of BPR, a course module has been developedat the University of Cincinnati to introduce seniorstudents to business process reengineering concepts. Thispaper discusses the importance of BPR in constructionand describes the course module mentioned above. Acase study on analyzing and improving the materialsmanagement process in the construction industry ispresented.1. IntroductionThe construction of a facility typically requires theapplication of many business processes.Businessprocesses are a set of activities that transform a set ofinputs into a set of outputs (goods or services) for anotherperson or process using people and tools. Examples ofconstruction processes include architectural rocurement, subcontractor procurement, construction andstartup. Each of these processes is usually performed by adifferent discipline/organization, which has to workclosely with other disciplines/organizations for thesuccessful completion of the construction project.In the past, each discipline has attempted to optimizeits own process without paying much attention to otherprocesses. This has created what has been referred to as“islands of automation”.An example from theconstruction industry deals with the separation of thedesign and procurement departments. The procurementdepartment orders materials that are specified by thedesigners. Usually the computer systems supporting bothdepartments are separated. As a result of this separation,if the design is changed and the procurement agents arenot promptly notified, materials that may no longer beneeded might still be ordered. This results in materialsurplus and increases the overall project cost.Over the last 10 years several factors have acceleratedthe need to improve business processes. The mostimportant is technology. New technologies (like theInternet) are rapidly bringing new capabilities tobusinesses. Another factor is the opening of worldmarkets and increased free trade. Such changes bringmore companies into the marketplace, and competingbecomes harder and harder. As a result, companies havesought out techniques for rapid business processimprovement. One approach for rapid change anddramatic improvement that has emerged is BusinessProcess Reengineering (BPR). BPR requires completeanalysis and design of information-flows and processeswithin and between departments and/or organizations.Before re-engineering a process, a model for the businessshould be developed. The model specifies how businessis conducted before being re-engineered.At the University of Cincinnati, a course module hasbeen developed to introduce senior students to businessprocess reengineering concepts. The objective of thismodule is to teach students how to model existingprocesses, identify their problems and develop strategiesto improve them using available information technologies.A case study on analyzing and improving the materialsmanagement process in the construction industry ispresented as part of the module to enable students to applythe BPR techniques they have learned. Student teams arethen asked to choose another construction process,analyze it and recommend strategies for improving it.Students are required to present their findings at atechnical exposition held yearly at the University ofCincinnati.The remainder of this paper will describe the differenttopics covered in the course module as they relate tomaterials management in the construction industry. Thesetopics start with a description and an analysis of thematerials management process. An enabling technology isthen evaluated and recommended to improve the process.The enabling technology in this case is an integrateddatabase management system. The author has developeda materials management database tutorial to illustrate the

capabilities of the enabling technology. Factors requiredfor successful implementation of the technology are alsodiscussed. The paper ends with a discussion of futurework that can improve the materials management processeven further.2. Materials Management ProcessMaterials management is the process of planning andcontrolling all necessary efforts to make certain that theright quantity and quality of materials and equipment areappropriately specified in a timely manner, are obtained ata reasonable cost, and are available when needed [1]. Thematerials management process is comprised of differentfunctions that are usually performed by differentdepartments within a company. These functions includequantity takeoff, requisition, purchasing, expediting,transportation, field material control and warehousing.Plemmons and Bell 1995, have developed a genericprocess model for the materials management process inthe construction industry. As shown in Figure 1, the modelillustrates the flow of data, information, and documentsbetween primary and secondary suppliers and customers.The diagrams also illustrate and communicate thefunctional boundaries of the process. The activities of thematerials management process are as follows:2.1. PlanningThe purpose of planning is to identify who isresponsible for materials management and to develop thevarious MM strategies. Basic input from the project teamis required before the planning goes underway. Inputusually includes description of the facilities, projectlocation, job site conditions, local climate, and existingfacilities. A result of the planning process is the materialsmanagement project book, which describes the variousMM strategies agreed upon.2.2. Material takeoff and engineering interfaceThe purpose of takeoff is to define and quantify allmaterials for the project. Initial takeoffs may be executedfrom plot plans or flow sheets so bulk material orders canbe placed as soon as possible. The material takeoffprocess may be repeated as more definitive designinformation becomes available.2.3. Vendor inquiry and evaluationThe purpose of this activity is to evaluate potentialvendors. Both technical and commercial evaluations ofvendor proposals are performed. The vendor should beevaluated in a number of key areas, such as capability,price, quality, delivery and service.The relativeimportance or weight of these factors will vary amongcompanies and between projects.2.4. PurchasingThe duties of purchasing are to identify potentialsuppliers, issue request for bids, prepare commercialevaluations, negotiate, develop terms and conditions forPO, commit project funds for the supply of goods andservices and administer the purchase order or contract.2.5. ExpeditingThe purpose of expediting is to provide timelyinformation regarding anticipated materials deliveries toall concerned project personnel. The level of expeditingrequired will depend on market economic conditions andshop loads. To maximize expediting efficiency, theproject expeditors should receive information pertainingto projected or actual material shortages in some order ofpriority. This priority can be conveyed from a trialallocation report.2.6. ShippingThe purpose of shipping is to establish materialshipping plans early in the project.Alternatetransportation methods are investigated and routesinspected for potential obstructions.Transportationplanning becomes especially critical when materials arebeing shipped overseas.2.7. Warehousing,DistributionReceivingandMaterialThe purposes of these activities are to receivematerial on site, inspect them for quality, store themadequately and distribute them to the crafts. Whenmaterial is received at the warehouse, it is inspected and aformal material-receiving report is completed. Nonconforming materials are photographed upon receipt todocument back-charge claims. The status of receivedmaterial is communicated to other interested parties assoon as possible.

FROM DESIGN- Design Documents- Project Requirementsand ProceduresFROM VENDOR- Past Experience- Shop Load Capacities- Financial DataFROM VENDORS- Status Reports- Materials- Advanced ShippingNoticesFROM VENDORS- BidsFROM CRAFT- Rejected or SurplusMaterials- Returned Tools- Trial AllocationsVendor Performance FeedbackPrioritized Requirements& InquiriesINPUTSFROMPROJECTTEAMPLANNINGTO PROJECT TEAM- Materials ManagementProject BookMATERIAL TAKEOFFAND DESIGNINTERFACEVENDORINQUIRY ANDEVALUATIONPURCHASINGEXPEDITING ANDTRANSPORTATIONWAREHOUSINGFIELD CONTROLISSUEMATERIALSEQUIPMENTAND TOOLSTO THE CRAFTWORKERTO VENDORS- PO s For Shortagesand Field Purchases- Damaged, Incorrect, orSurplus MaterialsTO VENDORS- RFQs- POsTO ACCOUNTS PAYABLE- Materials Receiving ReportTO PROJECT TEAM- Materials StatusReportsTO ACCOUNTS PAYABLE- PO dataTO OTHERS- Surplus MaterialsFigure 1. The materials management process model [4]3. Process Improvement Using IntegratedDatabase TechnologyMany construction firms have invested in thedevelopment of computer-based integrated materialsmanagement systems (MMS). Integration of materialsmanagement (MM) activities using a relational databaseimproves the accuracy and speed of the MM process.Integration simplifies the process of summarizing takeoffsheets into purchase requisitions, which is probably themost time-consuming effort in the materials managementcycle. With an integrated system, engineering requisitionscan be easily downloaded by the purchasing agents tofacilitate the generation of purchase orders.Integration also provides the ability to exertmaximum control over material acquisition anddistribution. Effective material control is enabled bysystem integration in a number of ways: When the crafts request material that is not availablefor distribution, the system can rapidly determine thestatus of that material before a backorder is placed. An integrated system can produce a history of theunavailable material from material takeoff throughpurchasing, expediting, and shipping. An integrated system provides field controls formaterial issues by flagging instances when the crafts request materials that have already been issued andensuring that materials is only issued to thedesignated subcontractor.An integrated system can rapidly determine requiredquantity, requisitioned quantity, purchased quantity,received quantity and issued quantity of any materialfor ultimate material control.An integrated system can rapidly perform a trialallocation report. A trial allocation report arrangesdrawings in some priority order and then allocates thematerials on hand to the drawings with the highestpriority. Materials not yet received are then assigneda priority in the order in which they will be neededAn integrated system can provide expeditors andpurchasing agents with timely on-line informationneeded to effectively perform their work. Thisinformation includes the number of partial deliveriesper purchase order and the number of late deliveries.4. MMS tutorialTo demonstrate the integration capabilities, an Accesstutorial has been developed by the author. The tutorialintegrates the materials-related functions of quantitytakeoff, requisition, purchasing, expediting, vendorperformance, receiving, warehousing and labor planning.The main menu of the tutorial is shown in Figure 2.

Selected features included in the tutorial are discussed inthe following sections.4.1. Takeoff Module2 inch pipe. The “CONS CODE” field displayed on thetakeoff line item screen (Figure 3) denotes whether or notthat takeoff entry has been consolidated and incorporatedinto a requisition.As shown in Figure 3, the tutorial takeoff moduleequates required material quantities to a specific drawingnumber, process line number and construction category(e.g. underground electrical, lighting electrical, etc.). Theinformation is attached separately to each line item in thebill of materials for maximum control. Once the takeoff isexecuted, materials requirement for any combination ofcode number, material category, need date, drawingnumber, subcontractor responsibility, work area, can beestablished as shown in Figure 4.Figure 4. Sorting takeoff data by drawing numberFigure 5. Requisition ScreenFigure 2. MMS Tutorial main menu4.3. PurchasingFigure 3. Takeoff module screen4.2. Requisition ModuleOnce the takeoff data is stored in the takeoff file, theuser can use the requisition screen (Figure 5) toconsolidate takeoff data and generate a requisition. Forexample, assume there is 200 ft of 2 inch pipe on drawing42, and 300 ft of 2 inch pipe on drawing 43 that has beenentered into the takeoff file. The tutorial will combine thequantities and generate a requisition line item for 500 ft ofTo help with the generation of the purchase orders, thetutorial can display requisitioned items that have not beenordered as shown in Figure 6. Purchase order quantitiescan be compared to requisitioned quantities as shown inFigure 7. When an approved requisition is converted intoa purchase order, the purchase order information isentered into a separate computer file as shown in Figure 8.Information typically entered includes the PO number, theitem stock number, item description, order quantity,received quantity, vendor name, need date, promised date,requisition number, the status with respect to partialdelivery and expeditors remarks. Once the PO file iscreated, the status of any purchase order or group ofpurchase orders can be examined. Purchase orders can besummarized by vendor, by type of material, by status(whether the PO is open or closed) and by the materialneed date.

Figure 6. Screen showing requisitioned items that havenot been orderedFlexibility: the system must be able to adapt to thespecific data handling, material coding, and reportgenerating requirements of different owners andengineers.Compatibility with other accounting, cost estimating,and project control computer systems.Security provisions for controlling access toinformation.6. Future Improvements to the MaterialsManagement ProcessThe course module ends with describing otherintegration models and technologies that can help improvethe materials management process even further. Theseinclude:6.1. Integrating MMS with Design and SchedulesystemsFigure 7. Screen comparing PO quantities torequisitioned quantitiesIntegration with design produces faster and moreaccurate takeoff and allows design changes to be directlycommunicated to the procurement department to stopordering materials that are no longer required. Integrationwith scheduling notifies procurement with new need datesof material resulting from schedule changes. It alsoenables just-in-time (JIT) scheduling of procurement,which improves cash flow and eliminates double handling.6.2. Using Expert Systems TechnologyExpert systems technology can be used to automatethe most labor intensive and knowledge intensiveprocesses in the MM cycle. It can be used to generatecommodity codes, compute material lead time,intelligently generate purchase order, select vendors, andautomatically generate expediting reports.Figure 8. Purchase order screen5. Key Factors for Successful Implementationof TechnologyBased on previous research done on materialsmanagement, several important factors necessary forsuccessful implementation of an integrated databasesystem are identified and dicussed with the students.These factors include: Performing a cost and benefit analysis to documentthe economic feasibility of the proposed technologyand help getting top management support. Adequate training in all aspects of materialclassification, inspection and computer data entry.6.3. External integration of information amongall process participantsThis model integrates all MM activities, not onlywithin an organization, but among the variousorganizations involved in the process. The externalintegration can be achieved using technologies such asweb-based e-commerce; electronic data interchange (EDI)and bar coding. Inter-organizational communicationimproves the timeliness and efficiency of informationtransfer, improves data accuracy and minimizes reworkoccurrences.7. Conclusion

Understanding of business processes is extremelyimportant in today’s market, where companies areconstantly changing their processes to compete in a globalmarketplace. The paper presented a course module thatintroduces senior construction management students tobusiness process reengineering. The main objective of themodule is to make students aware that the construction ofany facility involves a large number of business processesand that these processes need to be optimized andcontinuously improved. Several information technologiesthat have been associated with process improvement arediscussed as part of the course module and a computertutorial has been developed to demonstrate capabilities ofthese technologies.8. References[1] The Business Roundtable, “Technological progress in theconstruction industry.”A construction industry costeffectiveness project report, B-2, New York, N.Y., 1982[2] Bell, L., and G. Stukhart, “Attributes of materialsmanagement systems.” Journal of Construction Engineering andManagement, ASCE, 112 (1), 1987[3] Back, W.E. and L. Bell, “Monte Carlo Simulation as Toolfor Process Reengineering.”Journal of Management inEngineering, ASCE, 11(5) pp. 46-53, 1995[4] Plemmons, J. K. and L. Bell, “Measuring Effectiveness ofMaterials Management Process.” Journal of Management inEngineering, ASCE, 11 (6), pp. 26-32, 1995.

Figure 2. MMS Tutorial main menu Figure 3. Takeoff module screen 4.2. Requisition Module Once the takeoff data is stored in the takeoff file, the user can use the requisition screen (Figure 5) to consolidate takeoff data and generate a requisition. For example, assume there is 200 ft of 2 inch pipe on drawing

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