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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
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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
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Business Process Improvement – Today’s Source of Competitive
Advantage
How Logistics and Supply Management can Tap the Power
of Process Improvement
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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.
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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”
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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”
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Agenda and DirectionBusiness Process Improvement
Process Basics– What’s it all about– Where to start
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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
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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
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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
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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
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Order Fulfillment Process – Key Supply Chain Management Processes
OPERATIONS DEMAND
• Demand Planning and Forecasting
• Sales• Order Entry• Outbound Logistics• Finished Goods
Inventory Management
DEMAND
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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
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Supplier Selection – Key Process Example
Specification Development
Requirement ReviewSource IdentificationSource QualificationRequest PreparationSource SolicitationResponse Evaluation
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Business Process LevelsWhere do you start?
Getting & Keeping Customers– Order Fulfillment
• Supply Supplier
Selectiono Source
Identification
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Business Process LevelsWhere do you start?
Getting&
KeepingCustomers
OrderFulfillment
Supply
SupplierSelection
SourceIdentification
SourceIdentification
SupplierSelection
Supply
OrderFulfillment
Getting &Keeping
Customers
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Business Process LevelsWhere do you start?
OrderFulfillment
Supply
SupplierSelection
SourceIdentification
Net ResultEach improvement in a sublevel processimproves the next higher level process
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Key Point – Process Basics
Focus on Business Processes
BECAUSETHAT’S HOW
THE WORK GETS DONE!
WorkOrders
WorkOrders
IN OUT
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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”
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Business Processes- The Need for management
Effective Processes– are not an accident – have no process autopilot
Must be well Designed and Managed
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Process Performance Management Driven by Customer Requirements
Process performance should be driven by customer requirements– Direct Customers– Customers of Customers
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Process Performance Management Constraints
CUSTOMERREQUIREMENTS
PROCESSPERFORMANCE
TARGETS
REQUIRED PROCESS CAPACITY
REQUIRED PROCESS
CAPABILITIES
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Process Performance Management Constraints & Required Process Capabilities
CUSTOMERREQUIREMENTS
PROCESSPERFORMANCE
TARGETS
REQUIRED PROCESS CAPACITY
REQUIRED PROCESS
CAPABILITIES
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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
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Process Performance Management Determinates of Process Capabilities
PROCESSCAPABILITY
People• Skills• Experience• Training
Methods• Work flow• Decision
making
Technology• Equipment• IS/IT
Inputs• Information• Materials
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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
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Process Performance Management Required Process Capacity Constraint
CUSTOMERREQUIREMENTS
PROCESSPERFORMANCE
TARGETS
REQUIRED PROCESS CAPACITY
REQUIRED PROCESS
CAPABILITIES
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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
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Process CapacityDeterminants
PROCESSCapacity
People• Skills• Training
Downtime• Planned• Unplanned
Product/Service Mix
Technology• Equipment• IT/IS
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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
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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
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Supply3 step
Operations Demand
“Bottlenecks” Limit System Capacity
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“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?
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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
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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
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Process Performance Management Drivers and Constraints
CUSTOMERREQUIREMENTS
PROCESSPERFORMANCE
TARGETS
REQUIRED PROCESS CAPACITY
REQUIRED PROCESS
CAPABILITIES
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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
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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”
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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
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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
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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
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Process Improvement Process Five steps and a map
Map processAnd
analyze data
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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
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Process Improvement Process Five steps and a map
Map processAnd
analyze data
DevelopProcess
Knowledge
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Process Improvement Process Five steps and a map
3. Identify initial improvement efforts
– Cost/Benefits Analysis – Big, quick gains first
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Process Improvement Process Five steps and a map
Map processAnd
analyze data
DevelopProcess
Knowledge
SelectProcess
Improvementtargets
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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
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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
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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 ;-)
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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
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Process Improvement Process Five steps and a map
ChangeProcessMap process
Andanalyze data
DevelopProcess
Knowledge
SelectProcess
Improvementtargets
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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
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Process Improvement Process Five steps and a map
ControlProcess
ChangeProcessMap process
Andanalyze data
DevelopProcess
Knowledge
SelectProcess
Improvementtargets
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Process Improvement ProcessFive steps and a map
Map processAnd
analyze data
DevelopProcess
Knowledge ControlProcess
ChangeProcess
ImprovedPerformance
SatisfiedCustomers
ShareholdersEtc.
InputsActivities
Outputs
SelectProcess
Improvementtargets
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Process Management“10 Best Practices”
1. Customer-related objectives– Direct
Customers– Customer’s
Customers
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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
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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”
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Process Management“10 Best Practices”
4. Well-defined interfaces and responsibilities– For Understanding
and Accountability– Must know how our
process interfaces with others
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Process Management“10 Best Practices”
5. Documentation– Policies– Procedures – Training requirements
• SKA’s• Fast employee
onboarding
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Process Management“10 Best Practices”
6. Formal performance measurement– If you can’t measure
it . . .– Universally
compelling metrics– Scorecards
• Internal• External
Supplier
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Process Management“10 Best Practices”
7. Formal feedback controls that includes . . . – Monitoring– Reporting– Evaluating– Adapting
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Process Management“10 Best Practices”
8. Known cycle times– Benchmark– Survey– Observation
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Process Management“10 Best Practices”
9. Formal change procedures– Introduces process
discipline– Maintain currency
• Keeping up with changing Customer requirements
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Process Management“10 Best Practices”
10.Process performance that is customer driven– The only way to ensure
successful results• Customer,
Stakeholder, etc. Satisfaction
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Key Point – Process Improvement
Where best practices have been
established, don’t try to reinvent the wheel….use them
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Ask The Consultant
I can tell you what to do,
but the doing is up to
YOU
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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