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KMAC– BPM-McCormack Page 1

Business Process MaturityCreating Sustainable Business Results

Dr. Kevin McCormackJune 25, 2008

Advanced Analytics for Business Solutions

www.drkresearch.org


Agenda

• Introduction• What is Business Process Orientation/

Maturity?• BPM Results Overall• BPM in Supply Chain Results• BPM in Procure to Pay Results• BPM and Supplier /Partner Selection • BPM and Supplier Relationship

Management• How do you build BPM?

Dr. Kevin McCormackis President of DRK Research and an Adjunct Professor at NC State University, University of Alabama, and the University of Oklahoma . He also leads a team of business process and supply chain researchers from (6) Universities around the word (China, Brazil, Slovenia, Croatia, Belgium, US). Dr. McCormack has over 30 years of business leadership, teaching, research and consulting experience. His experience covers many national and international industry segments and a broad range of business processes. He has been a member of or has successfully conducted engagements with several government agencies and major companies in the food, forest products, pharmaceutical, chemical, consumer products, high tech and the plastics industry. Some of his clients have been Kraft, Philip Morris, CPC International, Cargill, DOD, USMC, USAF, Texas Instruments, USMC, Phillips Petroleum, Chevron-Phillips, Shell, Columbia Forest Products, Dow Chemical, Warner-Lambert, Standard Charter Bank, Microsoft, Intel, Tektronix, several state governments, Borden Chemical, California Public Employees Retirement System (CalPERS), Wal-Mart, Campbell’s, General Mills, Fairchild Industries and PepsiCo. He has written five books and numerous articles on Supply Chain Management and business strategy.


DRK

SCRD

Percipio

Profit Point

17th Floor

iCognitive

LeanInstitute

Process Management Research Center

Tom Davenport

ShanghaiConsulting

Supply Chain Resource

Consortium

NC StateUniversity

ESRI

SAS

Vlerick Leuven Gent Management School

Belgium

IndependentsAssociates

IACCM

ISM

QUTAustralia

BabsonCollege

MA

University of OK

Supply Chain Council

SCMClub

Neurametrics

Singapore

Shanghai

Europe

Portland, OR

Phil. PA

TX

NC

TBD

BPM Network

University of LjubljanaSlovenia

UMFGBrazil

Hilbert

OrionNJNIPE

Advanced Analytics for Business SolutionsAdvanced Analytics for Business Solutions

On DemandAnalysis

University ofZagreb,Croatia

CAM-I


이론이란 무엇인가 ?

“

”


좋은 이론(A Good Theory)이란?

② , (SME; Subject Matter Expert)(face validity)

③


프로세스 성숙도를 전략적으로 활용하고 있는세계적 기업 및 기관

• Shell• Suncor Energy• Prudential• Intel• Dow Chemical• Chevron Philips• Exxon Mobil• Galaxo Smith Kline• Corning• Air Products• John Deere• GM• Bank of America• Allied Signal• Avon

• US Marine Corp.• US Air force• US Navy• Boeing• Texas Instruments• HP• Siemens• Raytheon • Dow Corning• United Space Alliance (shuttle)• Weyerhaeuser• Honda • Toyota• Visteon• Whirlpool


Agenda




The Business Process Orientation concept developed from 1990-1999.

“상하관계(hierarchies)보다는 프로세스 또는 프로세스 지향적 사고와성과, 고객만족을 강화하는 조직”

Business Process Orientation: Gaining the E-Business Competitive Advantage.McCormack, K.P. & Johnson. W., CRC Press, Jan, 2001.

Byrne

Rummler-Brache

OD

Narver / Slater

Kohli / Jaworski

Day

Marketing

DruckerDeming

Imai

Hammer

Davenport

Taylor

ShortMelan

Porter

TQM Strategy IT

Background Behind the BPO Maturity Theory


FO – 프로세스 보다는 상하관계를 강조하며특히 직무와 상명하복의 보고 관계에 중점을 둠

BPO – 상하관계 보다는 프로세스를 강조하며, 특히 성과에 고객만족에 중점을 둠


BPO Components1차 요소프로세스적 관점(Process View)•

review

maintenance change control

프로세스 업무(Process Job)•

프로세스 평가(Process Measure)• , , ,

2차 요소프로세스 조직구조(Process Structures)•

프로세스 가치 및 사상(Process Values and Beliefs)•


Background of BPOBPO의 수백 여 기업에 대한 평가 결과는 다음과 같음.

• BPO

“ (connectedness)”

• BPO .

• BPO (esprit de corps)


BPO의 주요 성과BPO Outcomes

조직 단결력 (esprit de corps)

•

•

•


BPO Maturity


Definition

프로세스 성숙도는 다음을 전제로함:

•

• (Ad-hoc)

(Defined (Managed) (Leveraged)

(Optimized) (Evolutionary Phases)

Key Impacts of Process MaturityMaturity Relationships

BPO Maturity Levels –Generalized Results and Distribution

Ad Hoc

Defined

Linked /Managed

Integrated

10%

40%

30%

20%(Integrated)

(Defined)

5-10% over Ad Hoc

10-20% over Ad Hoc

Data Set: 1500 companies, world wide,from 1997 to 2008 (all industries)


Maturity Levels and Descriptions

확장단계

통합단계

연결단계(관리단계)

규정단계

Pro

cess

Mat

uri

ty

임시단계

BPM Model

정책

방법론

전략적 연계성

정보기술(IT)

인적자원

조직문화

프로세스성숙도Score

업무 기능간 갈등

업무 부서간 연결성

조직단결력

비즈니스성과

Self Assessed MeasureSelf Assessed v. CompetitorsAnnual Revenue Growth (%)Cost of Goods Sold (COGS) (%)Process Performance

-

+

-

+

++

+

독립변수 종속변수

InterimDependent Variables


프로세스 경영을 위한 6가지 주요 성공요인

전략적 연계(Strategic

Alignment)

문화 및 리더십(Culture &

Leadership)

인적자원(People)

정 책(Governance)

방법론(Method)

정보기술(IT)

Xxx – denotes BPO measures Xxx – denotes new measures

Survey Assessment MeasuresBusiness Process

Management Maturity

Methods People

(Business Process Management: BPM)

Culture

(input), (output),(process owner)

“social networks”(Business Process

Management)

Strategic Alignment

(operating strategy)

Xxx – denotes BPO measures Xxx – denotes new measures

Proposed Survey Assessment Measures

Business Process Management Maturity

Governance Information Technology

Demographics –DataExecutiveSr. ManagerMangerIndividual Contributor

(cross-functional)Co. Business Unit

Industry Type

Global Location (North America, Europe, etc.)


BPM Maturity Path and Actions Components Level 1 Level 2 Level 3 Level 4

Methods

Governance

Extended / OptimizedIntegrated

Level 5

Ad Hoc

IT

Process Change Management

Culture

People

Strategic Alignment

Process Roles

Process Defined

Process language /view

begins

Continuous Improvement

Customer Involvement in

process

Process Stable

Process Orientation

Realized

Broad / empowered

/learning oriented jobs established Process

Awareness

CF Collaboration Established

BPM knowledge established

Process language

established

Basic process

measures defined

Process goals in place

Process outcomes measured Resources

allocated based on process

Process Owners

establishedLeadership support

process improvement

Team based structure

Leadership view process

improvement keyOrg structure realigned by

process

IT supports CF Teams

IT supports / aligns with process

IT flexibility

IT integrated

Defined Linked Managed


BPM and Analytics

People

Broad / empowered

/learning oriented jobs established

Process Awareness



Process language

established

Methods


Process Roles

Process Defined

Process Stable

Process language / view

begins



process

Process Orientation

Realized

Culture



IT flexibility

IT integrated

IT

Basic process

measures defined

Process goals in place (Score Cards)

Process outcomes measured

Resources allocated based

on process

Strategic Alignment

Process Owners

established

Leadership support process

improvement



improvement key

Org structure realigned by

process

Governance

Optimized (Networked)

Integrated

Ad Hoc

Defined

Linked -Managed

Basic Process Analytics


Advanced Process

Analytics

Advanced Process

Analytics

Integrated Process

Analytics

Reporting

Score Cards

Broad Process Models

Predictive ModelsAnalytics OrientedAnalytics Oriented

Aligned models

Process Analytics

knowledge

Analytics DrivenProcess

Analytics Experts


BPM, Lean & Six Sigma Convergence

•Organize structures and Jobs around process

• DMAIC – Focused problem solving

• Sigma Level• Reduce Variation• Hypothesis Testing• Statistical Sampling

L E A N

BPM

S I X S I G M A

• Reduce Cycle Time• Pull• Inventory Reduction• Load Leveling• JIT Manufacturing

•Quality focus•Visual Control•Problem Solving•Eliminate Waste

•Process Hierarchy and Decomposition

•Manage by fact

•Build a process language and culture•Manage Process as an Asset

•Strategic Alignment through linked measures and goals

•Enterprise view , cross functional•Continuous

Improvement•Reduce Non Value Added work


BPM Analytics and Six Sigma

People

Broad / empowered


Process Awareness



Process language

established

Methods


Process Roles

Process Defined

Process Stable

Process language / view

begins



process

Process Orientation

Realized

Culture



IT flexibility

IT integrated

IT

Basic process

measures defined

Process goals in place (Score Cards)

Process outcomes measured

Resources allocated based

on process

Strategic Alignment

Process Owners

established

Leadership support process

improvement



improvement key

Org structure realigned by

process

Governance

Optimized (Networked)

Integrated

Ad Hoc

Defined

Linked -Managed



Advanced Process

Analytics

Advanced Process

Analytics

Integrated Process

Analytics

Reporting

Score Cards

Broad Process Models

Predictive ModelsAnalytics OrientedAnalytics Oriented

Aligned models

Process Analytics

knowledge

Analytics DrivenProcess

Analytics Experts

Six Sigma – an important part of the Managed Level


Agenda





Statistical Evidence


• Return on Investment (ROA)• Value added per employee• Relationships with suppliers• Net fluctuation of employees -

turnover (inverse)• Work productivity of employees• Trust in leadership• Employees mutual trust• Work organization of employees• Commitment of employees• Employees prepared to go the extra

mile

• Cost of work• Absenteeism (inverse)• Satisfaction with work conditions• Learning ability and adaptability• Risk taking• Customer complaints (inverse)• Customer complaints speed of

solving the issue• Retaining clients• Reputation of company in

customers eyes

29

Data: University of Zagreb and University of Ljubljana.European Study 2006, multi-industries

Organizational Results Statistically Related to Process Maturity


OPTOTAL

2624222018161412108

BPM

TOTA

L180

160

140

120

100

80

60

40 Rsq = 0.3367

ec

403020100

bpo

70

60

50

40

30

20 Rsq = 0.2516

Esprit de CorpsBusiness Performance

16.6% increase in BPM relates to 19.4% performance improvementFor example: a $200 million Profit will increase by $40 million.

30


Air Products’ Road to Business Process Maturity

KPIDashboard.

ProcessManager.

Air Products U.By Process

BPMS?ProcessLibrary

IT Rep.

BusinessReengineering

GlobalProcess Board

SOX

Lean

Strategic Alignment

Governance

Leadership and Culture

People

Methods

Information Technology

CEO LaunchesProcess

ProcessOwners

Process modelfrom SCOR

MaturityAssessment

ProcessTraining

SAPImplementation

TQM Six Sigma

1980 1990 2000 2001 2002 2003 2004 2005 2006 2007

Source: George Diehl


Strategic Alignment Best Practices Example: Air Products

Inventory Cycle CountAccuracy

% Faultless Invoices

Cash-to-Cash Cycle Time

Forecast Accuracy

% Complaints Closedby Target Date

Average Days to Pay minus Average Terms

Inventory Days of Supply

% Orders ReceivedOn Time to Demand

P&L Impact

% Data AccuracyProduction Master

AverageTerms


SiemensBuilding Process, Technology and Metrics


Governance Best Practices Example: Global Oil Company

Process Executive

CEO

Process Executive

Process Executive

프로세스 간부회의(Process Executive Council)

Process Owner

Process Owner

Global Process Program Manager

Process Owner

프로세스 담당자 회의(Process Owners Council)

Process Owner

ProcessExecutive

FunctionalManager

Process CIO

FunctionalManagerFunctional

Manager

프로세스 영역 회의(Process Area Council)


Nokia

• (Core Process)•

(session)

Management& Support

Product/ServiceCreation Delivery

Customer Engagement

관찰(Observations)• (senior

managers)

•

•

Source: Sami Lotvonen


Field Experience 1:Results and Observations at Nokia

결과(Results)

• (tool)

• Delivery Process

• Demand Fulfillment

• Care

Observation

•(senior managers)

•

•

Source: Sami Lotvonen


Agenda


Maturity?• BPM Results Overall• BPM in Supply Chain Examples• BPM in Procure to Pay Examples• BPM and Supplier /Partner Selection • BPM and Supplier Relationship


SCM Maturity Model -Financial Factors470

S OC

R

UE M A K E

DA

EL

I VE

R

LPN

SS

SS C

CC

CAd Hoc

Defi ned

Linked

Integrated

Extended

SOURCESOURCE

SOURCESOURCE

MAKEMAKE

MAKEMAKE

DELIVERDELIVER

DELIVERDELIVER

PLAN PLANPLAN

SUPPLIERSCUSTOMERS

SOURCE MAKE

PLAN

DELIVER

PLAN PLANSUPPLIERS CUSTOMERS

SOURCE MAKE DELIVERPLAN

CUSTOMERSSUPPLIERS

PLAN

SUPPLIERS

CUSTOMERS

SOURCE MAKE DELIVER

112

0

227

338

416

Average Performance of the Top Three Maturity LevelsSCM Costs % of Revenue = 9.6%COGS % of Revenue = 58.6%Profit % of Revenue = 8.7%Sales Growth (99-00) = 24%

Average Performance of the Bottom Two Maturity LevelsSCM Costs % of Revenue = 12.3%COGS % of Revenue = 70.1%Profit % of Revenue = 6.8%Sales Growth (99-00) = 6%`

Measuring Maturity of SCM ProcessesGerman Automotive Company

SCS

SCDSS

PM

SRM

Business Strategy

DM

Core SC Processes

SC ManagementProcesses (Operational)

CM

PSRMRP

OrdersRP

MDM

Signal

SCPln

CI RM

PTCA

SC Supporting Processes

ENQM

AP

SC ManagementProcesses (Strategic)

LP

> 60% - key strength

50- 60% - Opportunity

SCM Maturity and Associated Performance

0

0

0

0 Ad Hoc

Defined

Managed(Linked)

Leveraged(Integrated)

Optimized

7700No. of SuppliersPer $B Spend 1.0

2.0

3.0

4.01700

No. of SuppliersPer $B Spend

1% of SpendProcurement

Costs

0.7% of SpendProcurement

Costs

104No. of FTEs

Per $B Spend

54No. of FTEs

Per $B Spend

RM ProcessesLT=1SS=1PO=1

RM ProcessesLT

SCM Maturity and Associated PerformanceConsumer Goods Companies

Source: Grosspietcsch, J. and Kupper, J. “Supply Chain Champs” (2004). The McKinsey Quarterly. 2004. No. 1

0

0

0

0 Ad Hoc

Defined

Managed(Linked)


Optimized

18%Weekly Measurement

Frequency 1.0

2.0

3.0

4.042%

Weekly MeasurementFrequency

5.3% of SalesLogistics

Costs

4.1% of SalesLogistics

Costs

4.0 DaysDelivery Times


BPM Maturity Path and Actions Example 1: Borden’s

Components Level 1 Level 2 Level 3 Level 4

Methods

Governance


Level 5

Ad Hoc

IT


Culture

People

Strategic Alignment

Process Roles

Process Defined

Process language /view begins



process

Process Stable

Process Orientation

Realized

Broad / empowered


Process Awareness



Process language

established

Basic process

measures defined




Process Owners


process improvement



improvement key

Org structure realigned by process



IT flexibilityIT integrated


Start 2001 2004


Borden’s

단계1• SCM •• IT • (Process Owner)

단계2• metrics

• (global logistics integration)


Borden Chemical (Hexion)Total SCM Scores v. Performance

227

338

112

2001273

1999203

201816141210864

SCM

Mat

urity

400

300

200

100 Ad Hoc

Defined

Managed

Leveraged

Optimized

Performance


Borden (now Hexion) ChemicalSavings from increasing maturity

• 2004 EBIT impacton $1.4 billion in sales

Improved Service& Quality

90% reduction inperfect order failure

rate by 2002

Cycle TimeReduction

20% by 2004

OrganizationDevelopment

Global Structure,Capable Resources

by 2001

Improved SupplyChain Design & Operations

$15 MM Savings*

Leveraged GlobalPurchasing

$25 MM Savings*


BPM Maturity Path and ActionsExample 2: Degussa


Methods

Governance


Level 5

Ad Hoc

IT


Culture

People

Strategic Alignment

Process Roles

Process Defined

Process language /view begins



process

Process Stable

Process Orientation

Realized

Broad / empowered


Process Awareness



Process language

established

Basic process

measures defined




Process Owners


process improvement



improvement key

Org structure realigned by process



IT flexibilityIT integrated


Start 04 06 08


Degussa

단계1• S&OP(sales and operations planning)

••

•

단계 2• metrics• BPM


S&OP Maturity – Degussa

BASICPP

201816141210864

SOPT

OTA

L

300

200

100

0 Rsq = 0.6946

Overall Supply Chain Process Performance

S&

OP

Pra c

t ice

Inst

i tutio

n al iz

atio

n

Foundation

AdvancedNon-institutionalized

AdvancedInstitutionalized

150

105

60

DEC – 922004

BM Mean - 91

DEC - 2003

•• SCM

DEC 1072006

Note: Data represents 55 Supply Chain Council firms, from various industries, that were examined using the SCM best practices survey.


Degussa (Evonick) S&OP Maturity –2008 Integrated Forecast, Planning and Scheduling

BASICPP

201816141210864

SOPT

OTA

L

300

200

100

0 Rsq = 0.6946

Delivery performance v. commit date>89%

89%60%

>75%

S&

OP

P ra c

t ice

Inst

i tutio

n al iz

atio

n

Overall Supply Chain Process Performance

•

Forecast Accuracy Benchmarks(SKU/ Location/ 30 days / Weekly)

60%

BPM Maturity Path and Actions Example 3: USMC


Methods

Governance


Level 5

Ad Hoc

IT


Culture

People

Strategic Alignment

Process Roles

Process Defined


begins



process

Process Stable

Process Orientation

Realized

Broad / empowered


Awareness



Process language

established

Basic process

measures defined




Process Owners


process improvement




process



IT flexibility

IT integrated


Start 01 03 06


USMC Logistics Transformation


Agenda




BPM Maturity Path and Actions Example 3: Forest Products Co.


Methods

Governance


Level 5

Ad Hoc

IT


Culture

People

Strategic Alignment

Process Roles

Process Defined


begins



process

Process Stable

Process Orientation

Realized

Broad / empowered


Awareness



Process language

established

Basic process

measures defined




Process Owners


process improvement




process



IT flexibility

IT integrated


Start 06 2008


Forest Products Co.

•

•

•

•

•


Procure to PayGeneric High Level Process Map

ForecastPlan &

Coordinate

Need Clarification/Specification

SourcingDecision

Contract / POGeneration

Supplier Need

Fulfillment

Receive Material

& Documents

Settle and Pay

StartStart EndEnd

Projects Maint Operations

Enablers: Finance, Legal, HR, IT

Global Forest Products Co.400,000 PO /yearP2P Cost at Defined Level = $45 mil.P2P Cost at Managed Level = $23 mil.


BPM Maturity Path and Actions Example 4: Suncor Energy


Methods

Governance


Level 5

Ad Hoc

IT


Culture

People

Strategic Alignment

Process Roles

Process Defined


begins



process

Process Stable

Process Orientation

Realized

Broad / empowered


Awareness



Process language

established

Basic process

measures defined




Process Owners


process improvement




process



IT flexibility

IT integrated


Start 04 06 07


Global Canadian Energy Co.

•

•

•

•

•

Global Canadian Energy Co.Implementation Waves v. Savings on $7 bil. In spend per year

Stabilize6-12 Months

Basic Process/Practices

12 -24 Months Primary Returns 5-7%

Advance Practices24-48 Months

Secondary Returns 7-10%

OptimizationOn Going

System Wide Returns 7-10%

Go live

Mat

uri

ty L

evel

1

2

3

4

5

06 07 08

Cu

mu

lati

ve S

avin

gs (

% s

pen

d)

0

0

5

12

20

So far, $350 mil in spend savings to this point


Agenda





Supply Networks

Custom

ersC

CC

C

C

C

C

C C

Orchestrator

Strategic Trading Partner



Trading Partner

Trading Partner

Trading Partner

C

C

C

Custom

ersC

CC

C

C

C

C

C C

Orchestrator




Trading Partner

Trading Partner

Trading Partner

Orchestrator







Trading Partner

Trading Partner

Trading Partner

C

C

C


SCM Supplier Maturity and Associated Performance300+ Suppliers for Daimler Truck Div., Boston Scientific, Shell, Chrysler

LT = LeadtimeSS = Safety StockPO = Perfect Order1. Source: “Procurement: Current Benchmark Findings.” The Hacket Group, 2004

2. “The Quit Revolution in Supplier Management.” Aberdeen Group, 2004

0

0

0

0 Ad Hoc

Defined

Managed(Linked)


Optimized

7700No. of SuppliersPer $B Spend 1.0

2.0

3.0

4.01700

No. of SuppliersPer $B Spend

RM ProcessesLT=1SS=1PO=1

RM ProcessesLT


Agenda





Supplier Relationships and Performance

독일의 세계적 자동차 회사/트럭 부문:

Targetoperation test: OT

63


Medical Devices Company-Materials Inventory

Inventory Turns

0.1 – 3.0 3.0 – 6.0 6.0 – 30.0

Mgmt. Decisions

SpecialCauses

$100

$50

0.00

$48

$18.9

Stable

$24

1.353.75

To-Be

$24

$10$16

216.8

2.7

$91.1 As-Is$51.3 To-Be

•(materials inventory)

Cos

t $

mill

ion

Cos

t $ m

illio

n


Medical Devices Co. Benefits

•

•

•

•

•

•


Agenda





BPM Maturity Path and Actions


Methods

Governance


Level 5

Ad Hoc

IT


Culture

People

Strategic Alignment

Process Roles

Process Defined


begins



process

Process Stable

Process Orientation

Realized

Broad / empowered


Awareness



Process language

established

Basic process

measures defined




Process Owners


process improvement




process



IT flexibility

IT integrated



Natura

l Force

s Lead

ership

Drive

n

•

X You are here

Optimized Level

Ad Hoc

Defined

Managed (Linked)

Leveraged

(Integrated)

Questions?

Thank You,

Dr. Kevin McCormack

It’s About Balancing the Maturity Factors as you move forward.

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