Click here to read this Six Sigma and Benchmarking infomation.ppt

Benchmarking with Peers to Achieve Cost-saving Efficiencies

Global Lean, Six Sigma and Business Improvement Summit

Orlando, FloridaOctober 14 - 15, 2009

Barbara PetersonGIO Six Sigma ChampionSix Sigma Black Belt Lead

Agilent InnovatesAward Winner

Purpose & Agenda

Agenda• Breakthrough Results• Benchmarking

– Standard of Excellence– Types– Benefits

• How to Benchmark• Benchmarking Mistakes• Tips and Tricks

PurposeThis presentation demonstrates how Agilent effectively used benchmarking to create breakthrough results, and reviews how to benchmark to improve current processes by incorporating new ideas.

Agilent ProfileJuly 7, 2009Page 3

Agilent at a Glance

$5.8 billion FY 2008 annual revenue

18,000 employees

Customers in 110+ countries

70-year heritage of invention and innovation

Page 4

Agilent Market FocusA $44 Billion Measurement Market

Bio-AnalyticalMeasurement•Life science•Chemical analysis

•Communications•Aerospace/Defense•General purpose

ElectronicMeasurement

Bio-AnalyticalMeasurement

•Applied research•Breakthrough technologies•Measurement synergies

Agilent Laboratories

Six Sigma is a Key Focus

SALES PRODUCTS

• Yield is Continuous Process Improvement • Used in All Phases of Customer Experience• >40% of Employees have Six Sigma Training• Over $34M hard cost savings in last 12 months

Result: improved Customer Satisfaction and increased Operating Efficiency.

• Information availability• Quote process• On-time delivery

• Performance• Quality• Service and support

Accrual Project: Problem Statement

• Multiple, conflicting business rules and policies for accrual thresholds

• Lack of information regarding owner/ invoicing/ receiving

• Lack of consistency, audit trail, skills and accountability

• Purchase orders created after invoice date

• Lacking control edits at data entry

• Incorrect need-by dates

• Accrual process is complex, and highly manual

Agilent’s accrual process, or the process of determining expenses for services received by Agilent but not paid for during the month of the service, was complex, manual, and lacked consistency:

Benchmarking Led to Quantifiable Results

Estimation Lines

Lines in Workflow

Manually reviewed linesManually reviewedopen PO lines

By applying the benchmarking concepts I’ll share today, we eliminated the need to review 70% of the 34,000 open PO lines for accruals.

The solution to estimate accruals under $50K (based on history) resulted in $1M annual hard cost savings over the past 12 months.

All PO lines required manual review for accruals before applying benchmarking concepts

Estimationeliminatedreview of70% of the34k openPO lines

Lines inWorkflow

Manuallyreviewedopen POlines

30% PO lines required manual review for accruals after applying benchmarking concepts

Why Should I Benchmark?

• Benchmarking is all about answering the following key questions:– Which company is the best in class?

– Which one is setting the standard? And what is that standard?

– How did that company become the best? And what will it take for our company to equal it?

• If you don’t know what the standard is, how can you compare yourself to it?

Benchmarking Examples: Learned Standards of Excellence

• Learned standards of excellence for several Six Sigma projects:

– Average # days from change request submission to approval should be <3 days

– Average # days from invention disclosure to patent filed should be <165 days

– PCs returned late or not at all should be <5%

– % discrepant letters of credit should be <3%

– % sales reps achieving quota should > 60%

– Payroll accuracy should be >99.9%

Types of Benchmarking

• Pure comparative analysis: practitioners investigate what others are doing and what results they are getting

– Used for market intelligence purposes

• Corporate learning: concerned with what others are doing– Equally concerned with how activities are being undertaken and why

they achieve their results

• Performance improvement: organizations are searching for examples of better practices that can be applied to their own situation – How can our specific business process be best in class?

Benefits of Performance Improvement Benchmarking

• Helps to prioritize improvement opportunities• Identifies specific problem areas and eliminates guesswork

– Builds confidence when "gut feel" assumptions are validated

• Enables innovation• Serves as an excellent baseline "report card" • Makes it easier to increase performance expectations and

"raise the bar" • Creates a sense of competitiveness and a real desire to

improve • Challenges people to "work smarter" instead of "working

harder"

Benchmarking as MOC Tool

• The process of benchmarking can be just as important as the results, especially if you plan to engage several people to help implement improvements

• By including executives and other key stakeholders throughout the benchmarking process, you minimize resistance to change, and win their support

– Accelerates understanding and agreement on the real problem areas

– Educates on the latest practices being used and performance being achieved

– Motivates the team to work collaboratively internally to surpass external benchmarks

– Removes emotion from the discussion

How to Benchmark

• Establish a benchmarking network (5 – 10 companies in and out of your industry)

– Attend industry quality conferences– Google your process improvement topic; find white papers /

companies / contacts with best in class practices; contact them• Don’t be afraid to ask for help; they have the same needs as you

and it’s a give and take!

• Define a benchmarking process with these companies

• Develop a list of 8 – 12 questions per benchmark topic; exchange answers prior to the benchmarking session

• Schedule 90 minute benchmarking session to review each company’s process and confirm answers

• Schedule follow up sessions as necessary

Avoid These Benchmarking Mistakes

1. Confusing benchmarking with participating in a survey

– A survey of organizations in a similar industry to yours is not really benchmarking, whatever it may be called. Such a survey will give you some interesting numbers, but benchmarking is the process of finding out what is behind the numbers. In other words, a benchmarking survey may tell you where you rank, but it won't help you improve your position.

2. Forgetting about service delivery and customer satisfaction – Benchmarking stories abound of organizations that have become so

fixated on the cost of providing their product or service that they have failed to take the customer into account. Paring down the costs often rebounds in lesser service delivery. Take a "balanced scorecard" approach when developing your benchmarking metrics.

Source: Anne Evans

Benchmarking Mistakes (Continued)

3. The process is too large and complex to be manageable

– A process is a group of tasks. A system is a group of processes. Avoid trying to benchmark a total system - it will be extremely costly, take ages, and be difficult to remain focused. Better to select one or several processes that form a part of the total system, work with it initially and then move on to the next part of the system.

4. Confusing benchmarking with research

– Benchmarking presupposes that you are working on an existing process that has been in operation long enough to have some data about its effectiveness and its resource costs. Commencing a new process, such as developing a new employee handbook by collecting other people's handbooks and taking ideas from them, is research, not benchmarking.

Source: Anne Evans

Benchmarking Mistakes (Continued)

5. Misalignment– Choosing a benchmarking topic that is not aligned with the overall

strategy and goals of the business; or worse, cuts across some other initiative the organization is already taking. The project lead needs to oversee the benchmarking project and make sure that it is in line with what is happening in the business as a whole.

6. Not establishing the baseline– Going out to make benchmarking visits before you have analyzed your

own process thoroughly. Benchmarking assumes that you already know your own process and its level of performance thoroughly. After all, that information is what you have to offer to your benchmarking partners in exchange for the information you are seeking from them.

Source: Anne Evans

Tips and Tricks to Achieve Breakthrough Results

• Benchmark with at least 3 companies (inside and outside your industry) and 2 vendors in early in the project to discover best in class practice for the process you are improving

– Discovering the best in class process up front can help ensure your project scope and goal are correct

• Include sponsors and key stakeholders throughout the benchmarking process

• Create a stretch goal

• Design and implement the solution knowing it will be expanded and improved over time

• Continue to measure the gain

Appendix

• Common Sense Rules of Benchmarking

• Accrual Project Comprehensive Solution

• Automated workflow process flow

• Accrual Solution Roadmap

• Category to Accrual: Process Mapping

Common Sense Rules of Benchmarking

• Don’t share sensitive data unless both parties have signed a confidentiality disclosure agreement

• Always adhere to the rules outlined in by your legal department. Review this material before participating in a benchmarking session.

• Have fun learning and becoming best in class!

Comprehensive Accrual Project Solution

1. Accrual Policy

– Accountability Matrix – assigned owners

– Roles and Responsibilities

– Month vs. Quarter

2. Estimation Process

3. Tool to gather goods/services received information

Workflow Process Flow

PO Amount Received

Calculated*

March

E-mail Workflow

Notifications Arrives

Workflow Response Submitted

• PO Amount Received = PO Amount Received from PO Start Date through end of current month • “Reminder” Notification will be sent on 24th of the month to the deliver to person for POs missing a Workflow Response• “Escalation” Workflow Notification will be sent on 27th of the month to the deliver to person’s manager if workflow response has not been submitted by 26th of the month.

Finance

Response process

completed

Workflow Notifications sent to PO Deliver To

persons 20th of each month.

PO Deliver To Person

Additional Information

Workflow Response Submitted

Accrue activelyAFM Update / Install PO auto closeTraining of PO owners on Need by Date begins

Keep accruing! for in-scope NA PO>25K & not-in-scope NA

FY07 Oct

FY08 Nov FY08 Q3

Go liveGo live

Estimation Process 78% of Lines covered expand to $50K threshold / and more NA’s added

FY09 June

Accrual Project Solution: Roadmap

Estimation ProcessAccrue per historical accrual rate for all the in-scope NA PO<25K

Individual business analyst in charge (blue)Group centralized person in charge (orange)

Workflow ProcessAccrue based on PO owner’s received info and AP team’s invoiced info for in-scope NA PO >$25K

Accruals only for in-scope NA PO>50K (only 8% of total )& not-in-scope NA (14%)

Go liveNA = natural account

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