Business Process Re-engineering: A Panacea for Reducing Operational Cost in Service Organizations

Abstract

Organizations in today's business environment struggle on how to reduce operation cost for generating reasonable profit. In order to reduce Operational Cost, service organizations have been working hard to identify techniques that facilitate business processes improvement. In so doing, the global literature indicates that service organizations adopt BPR technique as a panacea of reducing Operational Cost. Despite a documented potentiality of BPR technique, a mixed empirical results, findings and conclusions regarding the effect of BPR on Operational Cost have been reported. Therefore, this paper aimed at assessing and explaining effects of BPR on Operational Cost. The study used cross-sectional survey design to investigate the effect of BPR on Operational Cost. Intensive literature review enabled the construction of structural measurement model, formulation of testable hypotheses and operationalization of constructs. In order to test the model and hypotheses, data were collected from ninety five (95) service organizations in Tanzania. Results of the study reveal that BPR and delivering speed have no direct effects on Operational Cost; they indirectly affect Operational Cost through the mediations of service quality. Therefore, BPR influences first both service quality and delivery speed in affecting Operational Cost of service organizations. It is now recommended that service organizations should use BPR as panacea of reducing Operational Cost.