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Copyright 2009 Babineaux Educational Services and Training, Inc.
A presentation by:F. Michael Babineaux, CPSM. C.P.M.
President/CEOBabineaux Educational Services and Training, Inc.
www.BESTraining.com901.853.0539
Business Process Improvement – Today’s Source of Competitive
AdvantageHow Supply Management can Tap the Power of
Process Improvement
Copyright 2009 Babineaux Educational Services and Training, Inc.
How Supply Management can Tap the Power of Business Process Improvements to
Reduce Cost
Copyright 2009 Babineaux Educational Services and Training, Inc.
Who Am I?
• F. Michael “Mike” Babineaux, CPSM, C.P.M.• Experience
– 40 years Supply Management Experience– 30 year FedEx Veteran
• SCM Educator and Trainer– Babineaux Educational Services &Training, Inc.– www.BESTraining.com– 901.853.0539
Copyright 2009 Babineaux Educational Services and Training, Inc.
Why’s Business Process Improvement Important Now?
Copyright 2009 Babineaux Educational Services and Training, Inc.
Why Now?Recessions are a great time . . .
–to think about Business Process Improvements!
Recessions offer unique opportunity . . .–to take on projects that you would
(in normal and prosperous times) just throw more money at it!
Copyright 2009 Babineaux Educational Services and Training, Inc.
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.
Copyright 2009 Babineaux Educational Services and Training, Inc.
Agenda and DirectionBusiness Process
Improvement
• Process Basics
• Process Management
• Modeling
• Process Improvement
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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
InputsInputs Value-Adding Activities
Value-Adding Activities OutputsOutputs
Copyright 2009 Babineaux Educational Services and Training, Inc.
Business Processes -Four Prime Objectives
1. Easy to Use
2. Optimize Resources
3. Eliminate Errors
4. Minimize delays
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Business Processes -
Thirty Thousand foot level
CustomerRequirements
NEW PRODUCT INTRODUCTION
ORDER FULFILLMENT
Design/Develop Market
Demand Operations Supply
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
Copyright 2009 Babineaux Educational Services and Training, Inc.
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
Copyright 2009 Babineaux Educational Services and Training, Inc.
Supplier Selection – Key Process Example
• Specification Development• Requirement Review• Source Identification• Source Qualification• Request Preparation• Source Solicitation• Response Evaluation• Source Selection
Copyright 2009 Babineaux Educational Services and Training, Inc.
Business Process LevelsWhere do you start?
• Getting & Keeping Customers
– Order Fulfillment
• Supply Supplier Selection
oSource Identification
Copyright 2009 Babineaux Educational Services and Training, Inc.
Business Process LevelsWhere do you start?
Getting&
KeepingCustomers
Getting&
KeepingCustomers
OrderFulfillment
OrderFulfillment
SupplySupply
SupplierSelection
SupplierSelection
SourceIdentification
SourceIdentification
SourceIdentification
SupplierSelection
Supply
OrderFulfillment
Getting &Keeping
Customers
Copyright 2009 Babineaux Educational Services and Training, Inc.
Key Point – Process Basics
Focus on Business Processes
BECAUSETHAT’S HOW
THE WORK GETS DONE & COST IS
REDUCED!
Copyright 2009 Babineaux Educational Services and Training, Inc.
Agenda and Direction
• Process Basics• Process Management
– The Need for Management– Performance Management– Performance Constraints
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Business Processes- The Need for management
• Effective Processes -– are not an accident
– must be well designed and managed
– have no process autopilot
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Performance Management Requirement
• Process performance should be
driven by customer requirements
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Performance Management Required Process Capabilities
CUSTOMERREQUIREMENTS
PROCESSPERFORMANCE
TARGETS
REQUIRED PROCESS CAPACITY
REQUIRED PROCESS
CAPABILITIES
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Capabilities Determines
• Capability determines . . .– what a process can do– how well it can perform– performance range
• Upper and lower performance limits
REQUIRED PROCESS
CAPABILITIES
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Determinates of Process Capabilities
PROCESSCAPABILITY
People• Skills• Training
Methods• Work flow• Decision
making
Technology• Equipment• IS/IT
Inputs• Information• Materials
Copyright 2009 Babineaux Educational Services and Training, Inc.
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
Copyright 2009 Babineaux Educational Services and Training, Inc.
Performance Management Required Process Capacity
CUSTOMERREQUIREMENTS
PROCESSPERFORMANCE
TARGETS
REQUIRED PROCESS CAPACITY
REQUIRED PROCESS
CAPABILITIES
Copyright 2009 Babineaux Educational Services and Training, Inc.
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
Copyright 2009 Babineaux Educational Services and Training, Inc.
Determinates of Process Capacity
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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“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?
Copyright 2009 Babineaux Educational Services and Training, Inc.
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
Copyright 2009 Babineaux Educational Services and Training, Inc.
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
Copyright 2009 Babineaux Educational Services and Training, Inc.
3 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
Copyright 2009 Babineaux Educational Services and Training, Inc.
Agenda and DirectionBusiness Process
Improvement
• Process Basics
• Process Management
• Modeling– Alternative Models– Design Concepts
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Modeling
• Reality Representation• Models Types
– Physical– Mathematical– Schematic / graphical
• We will focus on schematic or graphical modeling
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Business Process Modeling
• Important part of process improvement efforts
• Tool for understanding– individual business process– relationships between business processes
• Flowcharting is the most commonly used
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FlowchartsFlowcharts
A graphical model of an existing process or proposed new process that uses simple symbols, lines, and words to pictorially display the activities and their sequence in a process.
Copyright 2009 Babineaux Educational Services and Training, Inc.
Types of Flowcharts
• Block diagrams– Advantage: Simplicity
(only two activity types - action and flow)
Action Action
Action
Action
Copyright 2009 Babineaux Educational Services and Training, Inc.
Block Diagram: Stores Requisition Process
User completes requisition
Requisition waits in
internal mail
Deliver requisition to
Stores
Requisition waits in Stores
in-box
Clerk enters order
If in stock, pick order
Check order for
correctness
File the requisition
Deliver order to user
Copyright 2009 Babineaux Educational Services and Training, Inc.
Flow Process Chart:Stores Requisition Process
Stores Requisition: Details of method
Op
erat
ion
T
ran
spo
rt
Insp
ecti
on
Del
ay
Sto
rag
e
1. User completes requisition
2. Wait in internal mail
3. Deliver requisition to Stores
4. Wait in Stores in-box
5. Clerk enters order
6. If in stock, pick order
7. Check order
8. File requisition
9. Deliver to user
Copyright 2009 Babineaux Educational Services and Training, Inc.
Types of Flowcharts
• Block diagrams
• Flow-process charts
• American National Standard Institute (ANSI) flow– Six activity types
UserCompletesRequisition
Wait inInternal Mail
ClerkEntersOrder
InStock?
NotifyUser
N
Y
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Standard ANSI Process Flow Chart
Activity Types
Operation
Transport
Storage
DecisionInspection/Approval
Delay
Copyright 2009 Babineaux Educational Services and Training, Inc.
ANSI Process Flow Chart:Stores Requisition Process
UserCompletesRequisition
Wait inInternal Mail
Deliver toStores
Wait inStores In-Box
ClerkEntersOrder
InStock?
NotifyUser
N
YPickOrder
FileRequisition
CheckOrder
Deliver toUser
Operation Delay DelayTransport Operation
OperationInspectionStorageTransport
Copyright 2009 Babineaux Educational Services and Training, Inc.
ANSI Process Flow Charting –
Additional Dimensions• Time element
– Operations & Delays• Average and range
• Transport– Distance moved
• Resources required & Capacity
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Flow Chart:Stores Requisition
UserCompletesRequisition
Wait inInternal Mailave: 2 hrs (0-4 hrs)
Deliver toStores
ave: 1 hr(0.5-1.5 hrs)
Wait inStores In-Box
ave: 1 hr(0-2 hrs)
ClerkEntersOrder
InStock?
NotifyUser
N
YPickOrder
FileRequisition
(0.1 hrs)
CheckOrder
(0.1 hrs)
Deliver toUser
ave: 2 hrs(1-3 hrs)
(0.1 hrs)
ave: 0.4 hrs(0.2 - 1.5 hrs)
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Flow Charting – 3 Considerations
• Document – how the process is, not as it’s supposed to be
• Scope - how much of the process do you want to look at?
• Detail - how finely do you want to break down the process?
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Flow Charting - Benefits
• Gain a clear understanding of how the process actually works– Capacities & Capabilities– Cycle times
• Highlight potential improvement opportunities– Unnecessary steps– Redundant steps– Inefficient sequencing of steps– Identification of bottlenecks
Copyright 2009 Babineaux Educational Services and Training, Inc.
Key Points – Process Modeling
• Important part of process improvement efforts
• Tool for understanding– individual business process– relationships between business processes
Copyright 2009 Babineaux Educational Services and Training, Inc.
Agenda and Direction
• Process Basics
• Process Management
• Process Modeling
• Process Improvement– Selection– Process Improvement Process– “Best Practices”
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Process Improvement Selection
Critical 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
Copyright 2009 Babineaux Educational Services and Training, Inc.
• 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 Selection
Opportunity 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– Elephant and the Blind Men
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Process Improvement Team Selection
• Expertise of Process
• Customer of Outputs
• Supplier of Inputs
• Information Systems
• What Others?
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Process Improvement Process
Five steps and a map
•Map process•Collect andanalyze data
•Map process•Collect andanalyze data
Copyright 2009 Babineaux Educational Services and Training, Inc.
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 process•Collect andanalyze data
•Map process•Collect andanalyze data
DevelopProcess
Knowledge
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
Where are the Cost?
• Delays• Duplications• Transports• Inspections• Approvals• Where else?
• Every step in a process could have hidden costs
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Improvement Process
Five steps and a map
Map processAnd
analyze data
Map processAnd
analyze data
DevelopProcess
Knowledge
DevelopProcess
Knowledge
SelectProcess
Improvementtargets
SelectProcess
Improvementtargets
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Improvement Process
Five steps and a map
4. Understand how people deal with change
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"It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things.“
N. Machiavelli -- The Prince.
Copyright 2009 Babineaux Educational Services and Training, Inc.
Stability Focus Involvement Focus
Results FocusAnalytical Focus
Observable Behavior of People Dealing with
Change
Quick to Change Fun Loving
Slow to Change Relationships
Quick to Change In Control
Slow to Change Details
Facts
Feelings
Ask
Ass
erti
veT
ell Assertive
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Process Improvement Process
Five steps and a map
4. Understand how people deal with change– Analytical Focus
• Give them Details
As long as they know the facts
Copyright 2009 Babineaux Educational Services and Training, Inc.
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
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Improvement Process
Five steps and a map
4. Understand how people deal with change– Involvement Focus
• Get them involved
As long as they are part of the solution
Copyright 2009 Babineaux Educational Services and Training, Inc.
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
ChangeProcess
ChangeProcessMap process
Andanalyze data
Map processAnd
analyze data
DevelopProcess
Knowledge
DevelopProcess
Knowledge
SelectProcess
Improvementtargets
SelectProcess
Improvementtargets
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Improvement Process
Five steps and a map
5. Establish Controls and Measurements
– Prior• Budgets
– During• Reports
– Post• Audits
“One Person’s Control is Another’s Bureaucracy”
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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
Controls&
Measurements
Controls&
Measurements
ChangeProcess
ChangeProcessMap process
Andanalyze data
Map processAnd
analyze data
DevelopProcess
Knowledge
DevelopProcess
Knowledge
SelectProcess
Improvementtargets
SelectProcess
Improvementtargets
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Improvement Process
Five steps and a map
Map processAnd
analyze data
Map processAnd
analyze data
DevelopProcess
Knowledge
DevelopProcess
Knowledge
ChangeProcess
ChangeProcess
ImprovedPerformance
ImprovedPerformance
SatisfiedCustomers
ShareholdersEtc.
SatisfiedCustomers
ShareholdersEtc.
InputsActivities
Outputs
SelectProcess
Improvementtargets
SelectProcess
Improvementtargets
Controls&
Measurements
Controls&
Measurements
Copyright 2009 Babineaux Educational Services and Training, Inc.
• Frequent customer problems/complaints• High-cost processes• High-variability processes• Long cycle time processes• A known “best practice” exists
Process Improvement Selection
Opportunity Keys
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Process Management“10 Best Practices”
1. Achieved 4 Prime Objectives Easy to Use Processes Optimized Resources Eliminated Errors Minimized delays
Copyright 2009 Babineaux Educational Services and Training, Inc.
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– Scope Definition
Process Management“10 Best Practices”
Copyright 2009 Babineaux Educational Services and Training, Inc.
Process Management“10 Best Practices”
4. Well-defined interfaces and responsibilities– Must know how our process interfaces with
others– For accountability
• Responsible for a package delivered to the dock and then lost inside the building?
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Process Management“10 Best Practices”
5. Documentation– Policies– Procedures – Training requirements
• SKA’s
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Process Management“10 Best Practices”
6. Formal performance measurement– Universally compelling metrics– Scorecards
• Internal• External
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Process Management“10 Best Practices”
7. Formal feedback controls that includes . . . – Monitoring– Reporting– Evaluating
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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.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….copy them
70 – 80