Business Process Improvement for Supply Management

Business Process Improvement – Today’s Source of Competitive

Advantage

How Logistics and Supply Management can Tap the Power of Process

Improvement

A presentation by:F. Michael Babineaux, CPSM. C.P.M.

President/CEOBabineaux Educational Services and Training, Inc.

www.BESTraining.com901.413.8893

Who Am I?

F. Michael “Mike” Babineaux, CPSM, C.P.M.Experience

– 40 years Supply Chain Management Experience– 30 year FedEx Veteran

SCM Educator and Trainer– Babineaux Educational Services &Training, Inc.– www.BESTraining.com– 901.413.8893

Business Process Improvement – Today’s Source of Competitive

Advantage

How Logistics and Supply Management can Tap the Power

of Process Improvement

Why’s Business Process Improvement Important?

Global Supply Chain: Balancing Cost Reduction and Performance Improvement

Ernst & Young | March 18, 2009

Working with the Economist Intelligence Unit, Ernst & Young surveyed more than 250 senior executives from the world's largest corporations to get a sense of how businesses are approaching cost reduction efforts, and what is expected of their supply chains.

Overwhelmingly, senior executives expect to achieve savings by improving the business processes of their operations.

Why Now?

This is a great time . . .– to think about Business Process

Improvements!

Anytime offers opportunity . . .– to take on projects that you would (in

normal and prosperous times) just throw more money at it!

“Profit hides a lot of sins”

Agenda and DirectionBusiness Process Improvement

Process Basics– What’s it all about– Where to start

Process Management– The Need for Management– Performance Management– Performance Constraints

Process Improvement– Selection, process and “Best

Practices”

Agenda and DirectionBusiness Process Improvement

Process Basics– What’s it all about– Where to start

A business process consists of a group of logically related activities that use the resources of the organization to provide defined results in support of the organization’s objectives

Business Processes -Definition

Inputs Value-Adding Activities Outputs

Business Processes -Objectives

1. Easy to use – and understand

2. Optimize use of resources– Idle assets = expensive

3. Eliminate errors– and duplications

4. Minimize delays– Cycle time focus

Business Processes - Thirty Thousand foot level

CustomerRequirements

NEW PRODUCT INTRODUCTION

ORDER FULFILLMENT

Design/Develop Market

Procure Produce Distribute

Supply Base

Supply Base

CustomerSatisfaction

Corporate Strategy

Infrastructure, People, and Culture

Forecasting

Supply/Demand Planning

Base business philosophy

Getting and keeping customers

Staying on the leading edge

Order Fulfillment Process – Key Supply Chain Management Processes

OPERATIONS DEMAND

• Operations Planning and Scheduling

• Capacity Planning• Material Handling• Insourcing/

Outsourcing

• Demand Planning and Forecasting

• Sales• Order Entry• Outbound Logistics• Finished Goods

Inventory Management

DEMAND

Order Fulfillment Process – Key Supply Chain Management Processes

OPERATIONS DEMAND

• Demand Planning and Forecasting

• Sales• Order Entry• Outbound Logistics• Finished Goods

Inventory Management

DEMAND

SUPPLY

• Supply Planning and Scheduling

• Strategic Sourcing• Supplier Selection• Supplier

Development• Invoicing/Payment

Order Fulfillment Process – Key Supply Chain Management Processes

OPERATIONS

• Operations Planning and Scheduling

• Capacity Planning• Material Handling• Inbound Logistics• Warehousing• Inventory

Management

DEMAND

• Demand Planning and Forecasting

• Order Entry• Outbound

Logistics• Finished Goods

Inventory Management

Supplier Selection – Key Process Example

Specification Development

Requirement ReviewSource IdentificationSource QualificationRequest PreparationSource SolicitationResponse Evaluation

Business Process LevelsWhere do you start?

Getting & Keeping Customers– Order Fulfillment

• Supply Supplier

Selectiono Source

Identification

Business Process LevelsWhere do you start?

Getting&

KeepingCustomers

OrderFulfillment

Supply

SupplierSelection

SourceIdentification

SourceIdentification

SupplierSelection

Supply

OrderFulfillment

Getting &Keeping

Customers

Business Process LevelsWhere do you start?

OrderFulfillment

Supply

SupplierSelection

SourceIdentification

Net ResultEach improvement in a sublevel processimproves the next higher level process

Key Point – Process Basics

Focus on Business Processes

BECAUSETHAT’S HOW

THE WORK GETS DONE!

WorkOrders

WorkOrders

IN OUT

Agenda and Direction

A Beginning– What’s it all about– Where to start

Process Management– The Need for Management– Performance Management– Performance Constraints

Process Improvement– Selection, process and “Best

Practices”

Business Processes- The Need for management

Effective Processes– are not an accident – have no process autopilot

Must be well Designed and Managed

Process Performance Management Driven by Customer Requirements

Process performance should be driven by customer requirements– Direct Customers– Customers of Customers

Process Performance Management Constraints

CUSTOMERREQUIREMENTS

PROCESSPERFORMANCE

TARGETS

REQUIRED PROCESS CAPACITY

REQUIRED PROCESS

CAPABILITIES

Process Performance Management Constraints & Required Process Capabilities

CUSTOMERREQUIREMENTS

PROCESSPERFORMANCE

TARGETS

REQUIRED PROCESS CAPACITY

REQUIRED PROCESS

CAPABILITIES

Process Performance Management Required Process Capabilities Capability determines . . .

– What a process can do– How well it can perform

Capability range determines . . .– Upper and lower performance limits

REQUIRED PROCESS

CAPABILITIES

Process Performance Management Determinates of Process Capabilities

PROCESSCAPABILITY

People• Skills• Experience• Training

Methods• Work flow• Decision

making

Technology• Equipment• IS/IT

Inputs• Information• Materials

Process ManagementProcess Capability

Process management must insure that . . .– process performance requirements are feasible

given process capability

– Or that process capability is adequate given performance requirements

PROCESSCapability

PROCESSPERFORMANCE

TARGETS

Process Performance Management Required Process Capacity Constraint

CUSTOMERREQUIREMENTS

PROCESSPERFORMANCE

TARGETS

REQUIRED PROCESS CAPACITY

REQUIRED PROCESS

CAPABILITIES

Process CapacityDefinitions

There are different ways of defining the capacity of a process:– Design capacity -- maximum output that can

possibly be attained– Effective capacity -- maximum output given

practical issues of scheduling, quality factors, maintenance, etc.

– Demonstrated capacity -- the rate of output actually achieved

Process CapacityDeterminants

PROCESSCapacity

People• Skills• Training

Downtime• Planned• Unplanned

Product/Service Mix

Technology• Equipment• IT/IS

Process CapacityVolume Determinates

Capacity determines . . .– the upper bound of the rate

of output and– the volume of work that

can be performed by a process during a specified time period

Process CapacityTime Constraint

From a time perspective, overall process capacity is determined by the slowest activity or step in the process

Need to focus improvement efforts on these “bottleneck” activities

Supply3 step

Operations Demand

“Bottlenecks” Limit System Capacity

“Bottlenecks” Limit System Capacity

Step 1 Step 2 Step 3

Capacity:250 units/day

Capacity:105 units/day

Capacity:300 units/day

If Customer requirements are 210 units per day, is the process capacity adequate?

Parallel Operations

Step 1

Step 2a

Step 3

Capacity:250 units/day

Capacity (each):105 units/day

Capacity:300 units/dayStep 2b-210 90

-210 40

Process ManagementProcess Capacity

Process management must insure that . . .– process performance requirements are feasible

given process capacity

– Or that process capacity is adequate given performance requirements

PROCESSCapacity

PROCESSPERFORMANCE

TARGETS

Process Performance Management Drivers and Constraints

CUSTOMERREQUIREMENTS

PROCESSPERFORMANCE

TARGETS

REQUIRED PROCESS CAPACITY

REQUIRED PROCESS

CAPABILITIES

Key Points – Process Management

Processes must be managed to remain effective and efficient– Processes do not improve on

their own Process Performance must be

customer driven Process capabilities and

Capacities must fit with performance requirements

Agenda and Direction

A Beginning– What’s it all about– Where to start

Process Management– Need for management– Performance Management– Performance Constraints

Process Improvement– Selection, process and

“Best Practices”

Process Improvement SelectionCritical Factors

Customer impact– High makes the list

Ability to change– High makes the list

Business or supply chain impact– High makes the list

Current performance– Low makes the list

Frequent customer problems/complaints– internal or external

High-cost processes– More opportunity to reduce

cost High-variability processes

– Consistency Opportunity Long cycle time processes

– Quicker can be beneficial

Process Improvement SelectionOpportunity Keys

Process Improvement Process Five steps and a map

1. Establish process improvement team

– You can’t do it all yourself

– Two heads are better than one

– Ownership

Process Improvement Process Five steps and a map

Map processAnd

analyze data

Process Improvement Process Five steps and a map

2. Understand current process

– As Is – Not as should be– You can’t change what

you don’t understand

Process Improvement Process Five steps and a map

Map processAnd

analyze data

DevelopProcess

Knowledge

Process Improvement Process Five steps and a map

3. Identify initial improvement efforts

– Cost/Benefits Analysis – Big, quick gains first

Process Improvement Process Five steps and a map

Map processAnd

analyze data

DevelopProcess

Knowledge

SelectProcess

Improvementtargets

Process Improvement Process Five steps and a map

4. Understand how people deal with change– Analytical Focus

• Give them DetailsAs long as they know

the facts

Process Improvement Process Five steps and a map

4. Understand how people deal with change

– Stability Focus• Give them security

As long as everybody gets along

Process Improvement Process Five steps and a map

4. Understand how people deal with change– Involvement Focus

• Get them involvedAs long as they can

have fun doing it ;-)

Process Improvement Process Five steps and a map

4. Understand how people deal with change– Results Focus

• Give them control A few dead bodies

won’t hurt anything

Process Improvement Process Five steps and a map

ChangeProcessMap process

Andanalyze data

DevelopProcess

Knowledge

SelectProcess

Improvementtargets

Process Improvement Process Five steps and a map

5. Establish controls and measurements

– Provides manageability and adaptability

– You can’t manage what you don’t measure

Process Improvement Process Five steps and a map

ControlProcess

ChangeProcessMap process

Andanalyze data

DevelopProcess

Knowledge

SelectProcess

Improvementtargets

Process Improvement ProcessFive steps and a map

Map processAnd

analyze data

DevelopProcess

Knowledge ControlProcess

ChangeProcess

ImprovedPerformance

SatisfiedCustomers

ShareholdersEtc.

InputsActivities

Outputs

SelectProcess

Improvementtargets

Process Management“10 Best Practices”

1. Customer-related objectives– Direct

Customers– Customer’s

Customers

Process Management“10 Best Practices”

2. Accountability for process performance– Need a “Process

Owner” – Who to go to if the

process doesn’t work– There must be

accountability

3. Well-defined process boundaries – Not walls– Boundaries established or

defined– For accountability

• Responsible for a package delivered to the dock and then lost inside the building?

Process Management“10 Best Practices”

Process Management“10 Best Practices”

4. Well-defined interfaces and responsibilities– For Understanding

and Accountability– Must know how our

process interfaces with others

Process Management“10 Best Practices”

5. Documentation– Policies– Procedures – Training requirements

• SKA’s• Fast employee

onboarding

Process Management“10 Best Practices”

6. Formal performance measurement– If you can’t measure

it . . .– Universally

compelling metrics– Scorecards

• Internal• External

Supplier

Process Management“10 Best Practices”

7. Formal feedback controls that includes . . . – Monitoring– Reporting– Evaluating– Adapting

Process Management“10 Best Practices”

8. Known cycle times– Benchmark– Survey– Observation

Process Management“10 Best Practices”

9. Formal change procedures– Introduces process

discipline– Maintain currency

• Keeping up with changing Customer requirements

Process Management“10 Best Practices”

10.Process performance that is customer driven– The only way to ensure

successful results• Customer,

Stakeholder, etc. Satisfaction

Key Point – Process Improvement

Where best practices have been

established, don’t try to reinvent the wheel….use them

Ask The Consultant

I can tell you what to do,

but the doing is up to

YOU

Business Process Improvement – Today’s Source of Competitive

Advantage

How Logistics and Supply Management Tap the Power of Process Improvement

A presentation by:F. Michael Babineaux, CPSM. C.P.M.

President/CEOBabineaux Educational Services and Training, Inc.

www.BESTraining.com901.413.8893