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Transcript of © The Delos Partnership 2007 page 1 Integrated Enterprise Leadership A workshop carried out for...
© The Delos Partnership 2007 page 1
Integrated Enterprise Integrated Enterprise LeadershipLeadership
A workshop carried out for Trinity Biotech
© The Delos Partnership 2007 page 2
ABC CompanyABC Company“We want to be market leader through providing the best levels of customer service in the industry, which
means delivering the highest quality products, competitively priced, delivered on time. We will provide a continuous stream of new products. We will achieve this through a genuine partnership with suppliers, who will be part of our team. Our employees are empowered to make the most of their skills, and will operate in a fun environment, satisfied with their work. We will take a responsible attitude to the environment, ensuring that we contribute positively to the sustainability of the planet. In this way we will achieve superior long-term returns for our stakeholders.” said the mission statement at the entrance.
Marketing is in the middle of a special promotion, which has suddenly been arranged to meet year-end targets. The artwork – as usual - is having to be arranged at short notice for the packaging. Sales have just quoted for a big contract which will mean significant extra business above the business plan. It is two months until year end, and if they get the order then the Sales and Marketing Director will get a bonus for exceeding her target. Customer Services will be working late tonight to catch up with the backlog of orders, shipping whatever can be shipped, having been chased by the Sales Director and the Operations director, keen to meet this month’s targets.
The Operations Manager had heard the rumour about a 'big order‘ in the canteen at lunch. But they've heard about these before. So they are proceeding with their plans to cancel overtime. The Operations Director meets monthly, individually, with the marketing managers to get a feel for the market. Then he meets with his Production Planner, compares his ideas with past history and they finalise the forecast and production plan, largely based on history.
© The Delos Partnership 2007 page 3
ABC Company.. ABC Company.. Cont’dCont’d
Corporate are short on cash flow, and hence have told the division to implement a cost reduction programme, and to reduce inventory by 20%. The Finance Director is working on ways to do this, however is reluctant to make any write-offs of current obsolete inventory, so is wanting to restrict any further purchases. Suppliers’ payment terms are being lengthened.
The Manufacturing Manager has just come back from a course with ideas on Total Productive Maintenance, and Operating Equipment Effectiveness. He wants a smaller product range and bigger batches. His basic manufacturing philosophy is that lower costs are achieved through maximising utilisation of machines, keeping direct labour at maximum levels of output. The Distribution manager believes that demand is increasing, so is going to open a large new Central Distribution centre.
The Development department are working on a massive increase in the product portfolio, and are in the middle of developing a revolutionary new product, that will dramatically increase market share. However, a minor modification to the product will reduce costs, and enhance the quality. Customer response so far is excellent. Unfortunately it will delay the launch to Quarter 3 of the next year.
The Chairman and the Chief Financial Officer just met with a key group of Stock-market analysts, and have said that cash-flow will improve this year through a radical cost reduction and inventory management programme. Sales and Profit will rise by 20 % next year, which should mean an increase of 25 % in Earnings per share, due to an exciting new product to be launched in Quarter 1 next year.
What are your observations on this company ?What are your observations on this company ?
© The Delos Partnership 2007 page 4
Conflicting objectivesConflicting objectives
Inventory
Customer Service
ManufacturingCosts
ManufacturingFlexibility
© The Delos Partnership 2007 page 5
Conflicting objectivesConflicting objectives
Finance
Marketing
Manufacturing Sales
© The Delos Partnership 2007 page 6
Vertical Functional OrganisationVertical Functional OrganisationMD
Sales Marketing Technical Operations Finance HR
R& D
MKTG
SALES
OPS
ACCTS
HR
Directors
Managers
Supervisors/Team Leaders
© The Delos Partnership 2007 page 7
Functional MeasuresFunctional Measures
Actual Volumevs Budget
Actual Salesvs Budget
InventoryLevel
ProjectCosts
Leads to Silo Management Mentality
Manufacturing Director
Sales Director
Finance Director
Development Director
ManagingDirector
© The Delos Partnership 2007 page 8
Disintegrated Business PlanningDisintegrated Business Planning
Long termplan
Short termPlan
Medium TermPlan
© The Delos Partnership 2007 page 9
Lack of VisibilityLack of Visibility
05
101520253035404550
Sales Cont'n Net Profit
Last YrBudgetYTD
Year to date is below budget and last year, and therefore there is an urgent need to cut costs, and reduce inventory, in order to improve cash flow…
© The Delos Partnership 2007 page 10
The informal companyThe informal company• Multiple sets of numbers• Multiple spreadsheets• Multiple ways of working• Confusion over real objectives• Defensive functional behaviour• Rumours around the corridor• Ad hoc communication• Short-term focus• Heroes are favourites
Silo Silo ManagementManagement
© The Delos Partnership 2007 page 11
Objectives of Integrated Enterprise Objectives of Integrated Enterprise LeadershipLeadership
• Vision and Strategy supported by :• One set of numbers at all times• Integrated Plans• Realistic Plans
• Visibility and transparency• Teamwork• Decisions made in timely fashion• More planning, less fire-fighting• Consistent performance measures• Delivery of the strategy• Top Down and bottom up
© The Delos Partnership 2007 page 12
Prerequisites for effective IELPrerequisites for effective IEL• Integration of systems• Accurate data• Adherence to formal processes• Process not function• Long-termism and not short-termism• Realism• Honesty and trust• Commitment
If you say you will do it, you will If you can’t do it say so.
• Genuine focus on adding value to the customer
© The Delos Partnership 2007 page 13
The Delos ModelThe Delos ModelFor Business Integration For Business Integration
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
© The Delos Partnership 2007 page 14
An Alice in Wonderland World?An Alice in Wonderland World?
“Cheshire Puss” – said Alice – “ Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to” said the cat.
“I don’t much care where, so long as I get somewhere” said Alice
“Then it doesn’t matter which way you go” said the Cat.
© The Delos Partnership 2007 page 15
Vision and StrategyVision and Strategy
• Vision Clear statement of direction Understood by all
• Strategy Means of getting there Requires clear focusfocus
© The Delos Partnership 2007 page 16
Setting the VisionSetting the Vision
•Simple•Owned by the Chief Executive•Understood by everyone•Visible•Relevant
© The Delos Partnership 2007 page 17
A Vision or…A Vision or…
“We don’t so much have a vision,more a hallucination, really.”
Anonymous senior manager, anonymous Anonymous senior manager, anonymous multinationalmultinational
© The Delos Partnership 2007 page 18
Suppliers’ Suppliers’ BargainingBargaining
PowerPower
Threat o
f
Threat o
f
NewNew
supplie
r
supplie
r
ss
Customers’ Customers’ BargainingBargaining
powerpower
Industry Industry competitive competitive
situationsituation
The forces of competitionThe forces of competitionProduct
Product andandServiceService
substituti
substitutionon
Freedom
FreedomOfOfEmployee
Employee
movement
movement
Governme
Governme
ntnt
Legisl
ation
Legisl
ation
© The Delos Partnership 2007 page 19
Leverage our Product P
and Product L assets
Protect and expand our
Product Family F
franchise
Grow our Product Family B business
Develop / acquire
innovative products and technologies
Achieve a profitable leadership position in
key countries
Derive 70% of company sales from top 10 markets by 2006
Maintain our leading position in S. America & France, Canada, UK, and Italy
Optimize public policy, regulatory, and communications to drive growth
Finalize Corea market strategy by 2003
Articulate a new Branding strategy
Meet timelines on bulk mfg. facility and packaging outsourcing for Bd
Acquire market knowledge in key countries
Develop/acquire Product Bk
Ensure launch of Bd Child by 2008
Develop ATO strategy
Develop Product P end-game strategy that maximizes Industrial utilisation
Accelerate the conversion from extP to intP
Consolidate and optimize ATO strategy to support Product P end-game and extP conversion
Slow competitor XX uptake in US
Develop comprehensive product delivery strategy
Institutionalize the Technology Visioning process
Ensure appropriate upstream / downstream balance
Ensure full alignment of Sales, Development, Legal Affairs and Marketing activities
Implement Goodwill optimization organization
Maximize existing assets for Product Fa and Fc
Ensure leadership in Family F delivery systems
Ensure optimal
capacity, quality and customer
satisfaction
Develop/ Upgrade Quality systems to ensure 50% yearly reduction in rejects and rebuild
Maximize utilization of existing capacity
Achieve Delos Platinum level at all sites
Implement Delos Global Integrated Enterprise Leadership
Explore continuous improvement approaches
Defend, and then expand, our leadership position through sustainable profitable growth.
Launch Product N
and Product M in 2005; >50% of sales
from new products by
2012
Achieve all critical path milestones to ensure 2005 launches
Complete Product N and product M pre-launch activities
Upgrade sales and marketing competencies for adult markets
Develop trust and transparency between IO and R&D groups
implement programs to accelerate the product development process.
Maximize our key assets
Continue to develop and implement e-strategies to enhance the effectiveness of Company corporate strategy. Align our capacity and capital investment with our strategy.
Rapidly upgrade our technical and
leadership competencies
Aggressively fill the competency and values gap
Become a truly global organization
Empower through broad spans of control in a flat organization
Differentiate rewards and career opportunities based on performance
Regain our leadership position Regain our leadership position in product development and in product development and
approval approval Reliably supply quality XXX Reliably supply quality XXX Foster a culture that Foster a culture that
demands excellence demands excellence Continue to lead in Continue to lead in
marketing and sales marketing and sales
© The Delos Partnership 2007 page 20
Strategy vs. ExecutionStrategy vs. Execution
““It is not so much the strategy that causes It is not so much the strategy that causes the failure. 80 % of companies fail to the failure. 80 % of companies fail to execute their strategy”execute their strategy”
- - Kaplan and Norton: Kaplan and Norton:
““Strategy Focussed OrganisationStrategy Focussed Organisation””
© The Delos Partnership 2007 page 21
The Delos ModelThe Delos ModelFor Business Integration For Business Integration
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
© The Delos Partnership 2007 page 22
CCUUSSTTOOMMEERRSS
Processes link customers to suppliersProcesses link customers to suppliers
SSUUPPPPLLIIEERRSS
CoreCore
VisionVisionAnd StrategyAnd Strategy
SupportingSupportingFinanceFinance
Human ResourcesHuman Resources
Information TechnologyInformation Technology
Product DevelopmentProduct Development
Business WinningBusiness Winning
Customer Order FulfillmentCustomer Order Fulfillment
After Sales ServiceAfter Sales Service
© The Delos Partnership 2007 page 23
Management of InnovationManagement of InnovationIntegrated Project Management – Programme Management
© The Delos Partnership 2007 page 24
Forecasting Needs a Simple ProcessForecasting Needs a Simple Process
Filter Filter DemandDemand
ComputeComputeforecastforecast
CaptureCaptureActualActual
C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T
Hold Demand ReviewHold Demand Review
Agree commercialAgree commercial plansplans
AgreeAgreeExceptional demandExceptional demand
AssumptionAssumptions written s written down and down and
agreedagreed
ReviewReviewAccuracyAccuracy
© The Delos Partnership 2007 page 25
Supply Planning processSupply Planning process
Strategy
Master Scheduler
Sales Forecasts
CustomerOrders
ManufacturingPlan
PurchasingPlan
ERPSystem
Balanced Plan
© The Delos Partnership 2007 page 26
Financial supportFinancial supportValue Stream A Value Stream B Total
Product 123 Product 456 Product 123 Product 456 Product123
Product456
Revenue 100 50 50 25 150 75
Advertising etc 10 5 5 3 15 8
Manufacturing Costs 30 15 15 8 45 23
Purchasing Costs 35 20 20 7 55 32
Accounts and Admin 4 1 1 0 5 1
HR and IT 1 1 1 1 2 2
Research and Devel. 6 2 2 0 10 2
Value Stream Contribution
14 6 6 6 20 12
Non Value Stream costs 3 3 3 2 6 5
EBITDA 11 3 3 4 14 7
© The Delos Partnership 2007 page 27
Today’s Value ?Today’s Value ?Time is money ...
Time is waste ...
© The Delos Partnership 2007 page 28
Traditional MeasuresTraditional Measures
• Sales versus budget• Machine Utilisation• Purchase Price Variance• Overhead Recovery• Headcount• Direct Labour Productivity• Inventory Level
© The Delos Partnership 2007 page 29
The Delos Core MeasuresThe Delos Core Measures1.Customer Order Delivery – the “Perfect Order”2.Demand Forecast Accuracy3.Lead Time Reduction - Demand, Supply and
Change4.Quality, Right First Time – Demand, Supply and
Change5.Schedule Achievement – In-house and
outsourced6.New Product Introduction7.Velocity – all processes
© The Delos Partnership 2007 page 30
TeamworkTeamwork
With a common vision and a strategy there is a chance to develop common
Objectives
Commitment
Team direction
© The Delos Partnership 2007 page 31
People ValuesPeople Values
TraditionalTraditional NowNow FutureFutureProcess problemsProcess problems Not my job Ownership Accountability
Management StyleManagement Style Supervise Facilitator/Team Leader
Coach
Working StyleWorking Style Individual Team EmpoweredTeams
Training and Training and EducationEducation
Non-existent Luxury Necessity
KnowledgeKnowledge Ignorant Understands Expert
Attitude to PeopleAttitude to People Liability Cost Asset
© The Delos Partnership 2007 page 32
Suppliers’ Suppliers’ BargainingBargaining
PowerPower
Threat o
f
Threat o
f
NewNew
supplie
r
supplie
r
ss
Customers’ Customers’ BargainingBargaining
powerpower
Industry Industry competitive competitive
situationsituation
Do these forces change ?Do these forces change ?Product
Product andandServiceService
substituti
substitutionon
Freedom
Freedom
OfOf
Employee
Employee
movemen
t
movemen
t
Governme
GovernmentntLegislation
Legislation
© The Delos Partnership 2007 page 33
How do we react to change ?How do we react to change ?
• Panic• Crisis Management• Fire-fighting
• Routine management of crisis• Change identified, agreed and signed-off• Formal and timely decision-making
OR
© The Delos Partnership 2007 page 34
Integration of ProcessesIntegration of ProcessesStrategic Review
IEL Review
Demand PlanMaster ScheduleProject Plan
MRP/CRP/Activities
WTL/Orders/Tasks
How Often Yearly Monthly Weekly Daily Hourly
Who Board Board Managers Computer Computer
Units £’s Families Families/Products
Parts/Activities
Parts/Tasks
Horizon 5 years 3 years 2 years 2 years 2 years
Focus 3-5 years 0-3 years 0 to Cum Lead Time
0 to Cum Lead Time
Part Lead Time
Time buckets
Years Months Weeks Days Hours
DetailDetail
© The Delos Partnership 2007 page 35
Leadership – some quotesLeadership – some quotes"If you do not know where you are going, every road will get you nowhere." - Henry
Kissinger
"Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall." - Stephen R. Covey
“A leader takes people where they want to go. A great leader takes people where they don't necessarily want to go, but ought to be.”-Rosalynn Carter
"As we look ahead into the next century, leaders will be those who empower others." - Bill Gates
"You manage things; you lead people." - Grace Murray Hopper
“Inventories can be managed, but people must be led.” – H. Ross Perot
© The Delos Partnership 2007 page 36
Integrated Enterprise LeadershipIntegrated Enterprise Leadership• A vision and strategy – communicated to everyone and
supported by facts not hopes• Clear focus on strategic competency• All-embracing performance measures• Process not functional “orientation”• Integration of all of the business processes • Teamwork in pursuit of common objectives• Focus on delivery of customer and shareholder value• A process for managing change• Getting people to follow the changed direction without
appearing to launch too many “initiatives”.