Dell Business Process Improvement

Dell Confidential

Dell Business Process ImprovementSam Decker & Allen Crane

2Dell Confidential

Michael Dell Quote -- Men’s Health

Why did the better-funded ventures fail?

“A lack of good data. Think about most meetings. If you don't have any facts, you don't have any data. Then it's just a bunch of guys sitting around talking.

[Another problem is] a lack of commitment to making good decisions based on data. Emotions are good. They're important. But they're not really useful when you're trying to make decisions.

In fitness, you can measure your pulse. You can measure your speed. In business, you can measure your orders, customer satisfaction, and cycle time--how long it takes for an order to be filled. Somebody has a problem, how long does it take to resolve it? If somebody needs a spare part, how long does it take to ship it? How long does it take to design a product?

If you can reduce cycle time, you take out costs, you take out inefficiency. Everything can be more efficient. There's no such thing as ‘We're done.’ ”

3Dell Confidential

Agenda

Sam Decker

•What is BPI at Dell?

•Why BPI in Marketing?

• Dell’s Big 7 BPI Strategic Drivers

Allen Crane

• Driving “What’s in it for me”

• Examples of BPI in Use at Dell

4Dell Confidential

What is BPI?

• BPI is Dell’s approach to 6 sigma

– Follow DMAICR rigor

– Use data to remove emotions in decision making and focus on vital few factors (X’s)

• A structured methodology to understand and improve processes

– Y = f (x): identify root causes (causation) and establish cause/effect correlations to address customer’s pain points

• A set of tools and applications that drive the customer experience and key business metrics

• Method to produce statistically validated improvements and financially validated cost savings

5Dell Confidential

$0$200$400$600$800

$1,000$1,200$1,400

1999 2000 2001 2002 2003

BP

I Be

ne

fits

$M

040080012001600200024002800

Cer

tifi

ed

Be

lts

Financial Benefits, $M Certified Belts

Dell’s BPI Status After 5 Years?

DAO Port /Dim

Mfg only

All WW Mfg + PG + Supply Chain

All WW Fulfillment Ops (incl.

Sales, Mfg, PG, SCM)

BPI is part of key initiatives for the at Dell

for all functions and businesses

BPI is a key element of the

Winning Culture!

6Dell Confidential

Marketing and BPI

7Dell Confidential

Why BPI in Marketing? Promotes Growth

1. Measurable processes

2. Measurable outcomes

3. Predictable revenue

4. Accurate forecasts

5. Increased investment

6. Increased net income

This works in an organization with…• Foundation & Democracy of Measures• Culture of Continuous Improvement

Predictable Marketing Machine…

8Dell Confidential

Why BPI in Marketing? Marketing Scaling

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Q1 Q2 Q3 Q4 Q1-2 Q2-2 Q3-2 Q4-2

Quarter

Ma

rke

tin

g E

xp

en

se

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

Re

ve

nu

e

Revenue

100% ScalingMarketing Expense = Revenue X 10%

85% ScalingMktg$ Growth = Rev$ Growth X 85%

Sample data

Non-scalingexpense

Scalingexpense

9Dell Confidential

Three Ways to Achieve Marketing Scaling

1. Revenue Growth

2. Spend EfficiencyTomorrow’s marketing dollar can buy more than than yesterday’s dollar

3. Spend EffectivenessTomorrow’s marketing dollar drives more revenue that yesterday’s dollar

GreaterVariability

10Dell Confidential

BPI Opportunity: End-to-end process management

CustomerService

TechSupport

Product & Mfg

Marketing Phone & Online

Process A

Process B

Process C

Process D

Shipping

Owner

OwnerOwner

Owner Owner

Owner

Customer Experience• Supports process owners by providing expertise on process design & automation

• Manages governance structure & process register

Process owners work as cross-functional team to resolve end-to-end process problems

Owner Owner Owner OwnerOwner

CustomerProcesses

Functions

11Dell Confidential

Big 7 BPI Strategic Drivers

12Dell Confidential

1. Executive Leadership / Development

2. Measurement Systems

3. Strategic Business Linkage

4. P&L Mapped Financial Results

5. Organizational Development

6. Recognition

7. Communication

(X’s)

Big 7 BPI Strategic Drivers

Winning BPI

Culture

Y = f(x)

(Y’s)

13Dell Confidential

Sr. Leadership ‘walks the talk’

“If you are not currently involved in a BPI project, I would encourage you to

learn more and participate in this important process.”

Michael Dell 7/13/2001 Webcast

On BPI… “Pervasive, Simple, Direct, Proactive, Systemic, Rewarding Experience for Employees, Foundation for All Business Improvement, Embraced by All Levels and Functions.”

Kevin Rollins 11/26/2001 BPI 2nd Annual Banquet

1. Executive Leadership and Development Y = f(x)

14Dell Confidential

Executives engaged in BPI program and projects

President/CEOPresident/CEO

Executive ChampionsExecutive

Champions

BPI ChampionsBPI Champions

Area Champions

Area Champions

Master Black Belts

Master Black Belts

Executive Sponsor

Executive Sponsor

Chartering Manager

Chartering Manager

Project Lead & Team MembersProject Lead & Team Members

Area Champion

Area Champion

Project MentorProject Mentor

BPI Facilitator

BPI Facilitator

Financial Analyst

Financial Analyst

BPI Project StructureBPI Program Structure

1. Executive Leadership and DevelopmentY = f(x)

15Dell Confidential

Hierarchical Metrics: Report on Y’s…Manage X’s

x x xPlacement

On Site

PlacementOn Site Compet.Compet. PricePrice

x x x

x x x

Online Operating IncomeOnline Operating IncomeY

ConversionConversionVisits

ContentContent Visit Quality

Visit Quality UptimeUptimeX

X1AccuracyAccuracy OffersOffers Persuasive

Copy

PersuasiveCopy

X2

Exec

Mgr

Leading Indicators

Lagging Indicators

Weekly/Q

trly Scorecards

Daily D

ashboards

Y1

2. Measurement SystemsY = f(x)

16Dell Confidential

Cascading Planning Approach

Division / Segment Strategic Plan

Functional Initiatives

Work Group Initiatives

Division / Segment Key Initiatives

Functional Strategic Plans

Black/Green Belt BPIs

Black Belt BPIs Green/Yellow Belt BPIs

Y = f(x) 3. Strategic Business Linkage

17Dell Confidential

Project Benefitting P&L Benefit In AnnualizedNumber Org Line Item Type Plan? Savings Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q412345 SALES Revenue Hard Q3 (July) $1,000,000 $300,000 $250,000 $250,000 20000012345 CARE Local Base Soft $200,000 $50,000 $50,000 $50,000 5000012345 SALES Local Base Avoidance $30,000 $7,500 $10,000 $7,500 5000

FY04 FY05

Central Data Repository

Common Web-based input of projects & benefits

Automated reporting

Quick turn ad-hoc ability

Standardized Reporting

Reporting / Analysis

Y = f(x) 4. P&L Mapped Results

18Dell Confidential

Beginning 12 Months 18-24 Months

Evolution of BPI & Professional Development...

BPI seen as an opportunity for professional development (part-time project manager).

Use Green Belts to drive high priority projects, or make those projects Green Belt.

BPI leaders absorbed back into business leadership

Y = f(x) 5. Organizational Development

19Dell Confidential

Knowledge andComprehension

Application and Analysis

Synthesis & Evaluation

Individual Contributor

YellowBelt

BPI BasicGreenBelt

BlackBelt

MBB

1 day 1 week 1 year min.

AdvancedMethods

Statistics

1 week 1 week 1 weekOnline

People Manager

Driving BPIBPI

Sponsor

1 or 2 daysOnline

Executive Development

Driving BPIBPI

Sponsor

1 or 2 days

ExecutiveBelt

3 days

ExecutiveBelt

Online project completion& EB certified

GB Project& Certified

BB Project& Certified

MBB Training &Development

BPI Training Roadmap at Dell

Y = f(x) 5. Organizational Development

20Dell Confidential

“Living plaque” with achievement plates

Monthly executive BPI reviews

Monthly BPI newsletter announcing new Belts

Green belt cubicle flags identifying BPI leaders

Monetary reward for upon certification

Public recognition at project leader’s staff meeting

BPI cross-functional sharing meetings

Contests with grand prize opportunities

Y = f(x) 6. Recognition

21Dell Confidential

General Information Area Specific Info Project Details

• Training Courses

• BPI Certification Announcement

• Awards Presentation

• Brown Bags

• Monthly Executive Sponsor + Area Champion Meetings

• BPI Area Champion Weekly Meeting

• BPI Newsletter

• BPI Area Champion Meetings

• Weekly Business Updates

• Area Champion / Exec 1x1

• Quarterly Review for BPI

• Quarterly Exec BPI Dashboard

• BPI Project Leadership Review

• AD Hoc project request

• Contract

• Final Presentation

• Recognition Presentation Info

• AD Hoc project request

• Meetings with Finance

• Project tracking tool

Y = f(x) 7. Communication

BP

I & P

roject team

Organization-w

ide

22Dell Confidential

Agenda

Sam Decker

•What is BPI at Dell?

•Marketing and BPI – Why?

• Dell’s Big 7 BPI Strategic Drivers

Allen Crane

• Driving “What’s in it for me”

• Examples of BPI in Use at Dell

23Dell Confidential

Most BPI Projects Fit Into One of 4 Main Categories

Customer Experience

OpEx Reduction

COGS Optimization

Revenue Generation

• Services Attach Rate Improvements

• Customer Segmentation

• Pricing Optimization

• Component Cost Forecast Process

• Fix first time -- eliminate redundancies + second touches

• Marketing return on investment

• Rebate process improvements

• Customer satisfaction Improvements

• Call handling metrics

24Dell Confidential

Key Motivations to Building BPI

“Focus on getting engagement at each level and let certifications take care of themselves”

#1 – Selecting the right leader is key to a successful BPI program

BPI…“What’s in it for me?”

• Top Leadership

– Operating Income maximization

– Customer Experience

– Employee Accountability and Problem Solving Culture

• Mid–Managers

– Time Savings, Project Efficiency

– Solid Execution and Project Management

– Clearly Defined Mertics for all projects

• Front-Lines

– Reward “fire prevention”, not just “fire fighting”

– Don’t just feed them for a day...teach them how to fish!

25Dell Confidential

How Much is a 1% Productivity Improvement Worth?

Sales

Cost of Goods

Gross Margin

Operating Expense

Operating Income

100

60

40

30

10

101.0

59.4

41.6

29.7

11.9

+1%

-1%

-1%

+4% GM improvement

+19% OpInc improvement

Revenue Generation

COGS Optimization

OpEx Reduction

BPI Target Areas

26Dell Confidential

How Much is a 1% Customer Loyalty Improvement Worth?

50 to new customers ($10 cost per contact)

Sales of 100 widgets

50 to retained customers (at $1 cost per

contact)

49 to new customers ($10 cost per contact)

51 to retained customers (at $1 cost per

contact)

$50 + $500 = $550 $51 + $490 = $541

1.6% Cost per Contact Savings

+1% pt customer retention

Customer Experience

27Dell Confidential

BPI tools in use – Segmentation DOE

• Narrow the universe of all customers

• Identify the groups of customers that contribute a disproportionate percentage of profits

– Could also be type / category of purchase, preferences, market segment, etc.

– Segmentation must be targetable and actionable

Pro

fita

bil

ity

Purchase Behavior

High

Low

Low Involvementor Frequency

High Involvementor Frequency

Lo

w I

nv

olv

eme

nt

Pu

rch

ase

Mid

-ran

ge

pri

ced

pu

rch

ase

Hig

h-e

nd

pu

rch

ase

Mu

ltip

le P

urc

has

e

Customer PopulationIllustrative Purposes

28Dell Confidential

BPI tools in use: Segmentation DOE

• Execute design of experiments test to measure effectiveness and efficiency of marketing / sales variables on various cells.

• Factors can include:

– Price points

– Promotions

– Creative

– Frequency

– Recency

• Basis for more refined segmentation based on demographics, attitudes and beliefs

Pro

fita

bil

ity

High

Low

Lo

w I

nv

olv

eme

nt

Pu

rch

ase

Mid

-ran

ge

pri

ced

pu

rch

ase

Hig

h-e

nd

pu

rch

ase

Mu

ltip

le P

urc

has

e

Purchase Behavior

Low Involvementor Frequency

High Involvementor Frequency

Customer PopulationIllustrative Purposes

29Dell Confidential

What is preventing

us from selling more of

this product?

People Method

Plant/Machines MeasureMaterials (Tools to do the Job)

Sales agent behavior and

Habits

Internal Sales Reps

External Customers

PriceCompensation questions

Training Process

Product Lacks Perceived Relevance

Sales Process is

unclear

Lack of agent knowledge

Awareness, Information is

lacking

What’s in it for me?

Lack of measurement system

How do we incorporate the sales story and value

proposition everything we do?

Not leveraging best practices

Root Cause Analysis

BPI Tools in Use: Revenue Generation Fishbone

30Dell Confidential

BPI Tools in Use: Swim-lane Returns Reduction Process (Eliminated Non-Critical Touches)

Within Timeframeof Partner’s

Return Policy?

YES

CRA RequestReceived by

Brand Analyst

CustomerShips

system to Dell,Monitor to Ohio

SystemsProcessed

byDell ARC

Brand Analystcreates CRA,

sends confirm toPartner

$24.62

Partnerrelays CRA,

shippinginstructions

to end-customer

NO,REQUESTREJECTED

Refurbish& MarketSystems

TechIssue?

NO

Partnerrelays

escalationrequestto BrandAnalyst

YES

Dell SystemShipped /Invoiced

End-CustomerCalls PartnerTo Request

Return

DE

LL

AR

B/A

RC

PA

RT

NE

RD

EL

L A

CC

EN

DC

US

TO

ME

R

0 898377 888031 37 75TIMELINE (IN DAYS)

22 45

IMPROVEMENTS:• $24.62 per system

• Significant Cycle Time Reduction(89 days to 26 days)

• Reduced impact on factory(closer to standard returns processes)

• Reduced impacton Partner (customer service / inventory & logistics)

31Dell Confidential

0

100

200

300

400

500

600

2 15

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41

54

67

80

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132

145

158

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236

249

262

275

288

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314

327

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100.00%

120.00%

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Average89 Days

60 Days36.4%

= Days to Recovery

= Days to Recovery

45 Days28.5%

60 Days98.3%

45 Days95.3%

Source: ARB – ARB Data – 4/2003 – 7/2003

BEFORE

AFTER

BPI Tools: Pareto – Reducing Variation in Returns Process

32Dell Confidential

Kevin Rollins Quote – Fast Company

“We think that we have had an ethic of blame in business when what we need is an ethic of responsibility. So we’ve got something called Business Process Improvement. We target benefits that we can gain by doing things better.”

Kevin Rollins Fast Company, Nov 2002

33Dell Confidential

Sam [email protected]

Allen [email protected]

Thank you!