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Institute for Industrial EngineersOffice Depot Business Process Improvement

Vince Pierce, Laura Wells, and Don MearsJuly, 2011

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Office Depot Company Overview

North American Retail (43% of 2010 Sales)

• 1,100+ stores in U.S. and Canada• Largest concentration of stores in

California, Texas and Florida

North American BSD (28% of 2010 Sales)

• Catalog, contract and e-commerce

• Dedicated sales force works with medium sized to large customers

• Orders serviced through 16 distribution centers

International (29% of 2010 Sales)

• Catalog, contract, e-commerce and retail

• Sell to customers directly and through affiliates in 51 countries outside of the U.S. and Canada

• 40+ websites and 400+ stores

• Office Depot is a leading global provider of office products and services:

– 2010 sales of $11.6 billion

– North American Retail Division 43%

– North American Business Solutions Division 28%

– International Division 29%

• One of the world’s largest e-commerce retailers – $4.1 billion in sales in 2010

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Business Process Improvement - Cause for Action

Office Depot benchmarking efforts highlighted a significant opportunity to improve service levels (effectiveness) while reducing SG&A costs (efficiency).

Senior Leaders also recognized the competitive advantages that would accumulate from building a cultural focus on Continuous Improvement.

Office Depot created the Business Process Improvement Organization (BPI) to help us achieve world class execution by effective alignment of people, process and technology in the service of our business objectives and operational priorities.

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BPI 2010 – Proof of Concept

During our first year, we demonstrated our ability to partner with business leaders, engage process owners and associates, and deliver meaningful results

Expectations Outcomes

Partner with Business Leaders • Defined a Partnership Model

• Established around joint accountability for results

• Enabled Business Leaders without abdicating their responsibility for results

Engage Process Owners and Associates • Positioned Process Owners as owners in design, decision-making and change management

• Positioned BPI as facilitators and coaches first and within carefully selected delivery roles

• Engaged associates as SMEs to identify problems and countermeasures

• Involved associates in implementation of solutions and CPI Fundamentals to sustain results

Deliver Meaningful Results • Delivered detailed current state analysis

• Delivered integrated transformation plan and business case

• Transitioned ERP integration responsibility with improved performance

• Exceeded targets by a margin of $MM, accretive to P&L and Balance Sheet

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BPI Dual Strategies

Our dual strategies are designed to deliver near-term results by addressing critical problems while deploying process improvement principles and practices across the

organization to create a management culture of continuous improvement

Dual Strategies

Process Transformation Continuous Process Improvement (CPI)

Surgery – Tactical near-term focus to achieve world-class SG&A efficiencies:

• Reduce Indirect Spend

• Restructure our Service Delivery Model

• Improve Process Efficiency

Lifestyle Change – Strategic long-term platform to increase competitive advantage:

• Optimize our customer Value Streams

• Deploy CPI Fundamentals

• Build capability for Continuous Improvement

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BPI Integrated Centers of Excellence

Program/Project Management

Change Management

ERPIntegration

ContinuousProcess

Improvement Integration

Our mission is to drive superior execution that accelerates associates, customers, and shareholder value

Continuous Process Improvement

Partner with Business to apply Process

Improvement principles and practices

to deliver best-in-class process

performance and build the capability for

continuous improvement

ERP Integration

Partner with Business and IT to deliver

maximum ERP value through best-in-

class governance, deployment, and user

adoption

Program/Project Management (PPM)

Partner with Business to drive superior program/project execution

through best-in-class management disciplines and stakeholder

adoption of new behaviors, processes, and technologies

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PPM Deployment Strategies

Program/Project Management Deployment Strategies

PMO Operations PPM Capability Development PPM Execution

Govern the portfolio of Strategic Initiatives to achieve the ROI defined

in Strategic and Annual Operating Plans

Deploy standard Project and Change Management Methods, Tools,

Training, and Support to enable Project Managers to deliver

significant business outcomes

Staff Program, Project, and Change Managers on strategic initiatives (augmenting Business Unit and

Functional capabilities) to deliver significant business outcomes

We operate a three-channel deployment strategy to drive superior program/project execution that delivers the required ROI on strategic initiatives

Our PPM Strategies drive program/project execution excellence throughout the organization

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ERP Integration Strategy

We operate in partnership with the Business and IT to align ERP investments with strategic priorities and deploy integrated solutions that deliver significant business outcomes

ERP Integration

Design and Integrate Solution Architecture

• ERP Integration partners with IT and Business to:

– Build Release Schedule– Design Solution (Functional)– Integrate Solution– Drive User Adoption

Information Technology

Build, Deploy, and Support Solution

• IT partners with the Business to:– Design Solution (Technical)– Build and Test Solution– Deploy Solution– Support the Solution

Business

Identify Business Case and Requirements

• Business identifies Need• ERP Integration partners with Business to

define Business Case• ERP Integration partners with Business to

define Business Requirements

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CPI Deployment Strategies

Continuous Process Improvement (CPI) Deployment Strategies

Value Stream Transformation Tactical Process Improvement HR Integration

Application of Process Improvement principles and

practices in an entire Value Stream to achieve breakthrough

improvement sustained through CPI Fundamentals

Application of selected Process Improvement principles and

practices to discrete processes to deliver a minimum of 5% quality,

cost, speed, or growth improvement sustained through

CPI Fundamentals

Integration of Process Improvement principles and

practices into the organizational management culture through HR

programs and processes

(Training Curriculum; Performance Expectations; Hiring and Promotion

Criteria; Competency Models; Incentives, Rewards and Recognition)

Our CPI Strategies apply Process Improvement principles and practices to deliver best-in-class process performance and build the capability for continuous improvement

We operate a three-channel deployment strategy to realize significant process improvements while building the long-term capability for Continuous Improvement

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CPI – An Inclusive Approach

A3 Problem Solving

Total Quality ManagementFord 8D

Six Sigma Toyota Production System

PDCA – SDCA Lean

Strategy Deployment

Office Depot Continuous Process Improvement

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CPI Goals

• Meaningfully improve process performance

• Deploy “CPI Fundamentals” to sustain results

• Use the CPI Fundamentals to build team capability for continuous improvement

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Process Ownership

Continuous Improvement Capability

Leadership Alignment

Process Excellence

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BPI Approach to Culture Change

A culture is the repertoire of mutually reinforcing beliefs & assumptions, behaviors & practices, and values shared by a community of people

Beliefs & Assumption

s

Val

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Behavio

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Pra

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CULTURE

Readjusted Values drive changes in Behavior/Practice

Different Behaviors/Practices demonstrate and reinforce

changed Beliefs/Assumptions

Changed Beliefs/Assumptions lead to readjustment of Values

The culture cycle can be entered and changed through any of its drivers

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Culture Drivers

X Beliefs & Assumptions X Values Behaviors & Practices

• Difficult to influence directly and slow to change

• Difficult to influence directly and slow to change

• Can be influenced directly and changed quickly

• Not directly observable and measurable

• Not directly observable and measurable

• Can be directly observed and measured against a desired standard

• Cannot be influenced by direct order or requirement

• Cannot be influenced by direct order or requirement

• Can be influenced by direction or requirement

• People can be brought to believe that it is in their best interests to adopt the new behaviors

• Add Value to new behaviors by rewarding them and sanctioning old behaviors

By focusing on Behaviors and Practices we deliver Value and reinforce Belief

BPI Approach to Culture Change – 2

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BPI Partnership Model

Our imperative is to enable and support the Business without removing their responsibility for delivering results

Business Owner

ProcessOwner

BPI Deployment Lead

BPI Team Lead

CollaborativePartnership

BPI

BPI Enablement

Business Ownership

Business

Joint Accountability for Results

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BPI Delivery Framework

Plan Engage Deliver Sustain

Governance

Enablement

Right Projects and Metrics

Right Leadership and Resources

Right Actions and Results

• Strategy Matrix

• Delivery Objectives

• Delivery Strategies

• Delivery Plans

• Delivery Organization

Right Management and Capabilities

• Business Expectations

• Opportunity Assessment

• Delivery Approach

• Resource Requirements

• Business Alignment

• Project Charters

• People Solutions

• Process Solutions

• Technology Solutions

• Business Results

• Leadership Alignment

• Process Standardization

• Process Metrics

• Management System

• Problem Solving Capability

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BPI Delivery Framework – Process View

Plan Engage Deliver Sustain

Governance

Enablement

StrategicPlan

BusinessRequests

Planning

DemandManagement

Engagement

ResourceAllocation

Delivery Methods

Project andChange Methods

CPI Fundamentals

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BPI Delivery Methods Share a Common Foundation

Analyze Design and Build Validate DeployPlan

Project Management

Change Management

Standard Delivery Lifecycle

Our Standard Delivery Lifecycle establishes a fundamental delivery structure and discipline, but is adaptable enough that it can be tailored to fit a variety of engagements

Value Stream Transformation

Process Improvement

Technology Integration

ChangeManagement

ProjectManagement

Custom Methods

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Project Management: Solution is Designed, Developed and Delivered Effectively

CreateTraining Plan Execute and Monitor Training Plan

Assess Readiness

Execute and Monitor Communication PlanPlan Communications

Build and Manage Change Agent NetworkDefine Change Agent Network

Assess Readiness

Assess Readiness

Create Change Sustainment Plan

Execute Change Sustainment Plan

Create Re-Org Plan

Execute Re-Organization Plan

Conduct Stakeholder

Analysis

Define Change Strategy

Change Management: People Embrace, Adopt and Use the Solution Effectively

Change Management and Project Management work in partnership to deliver desired business results

Change Management Integrated into Every Engagement

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CPI Fundamentals Enable Sustained Process Excellence

• End-to-End / Detailed Process Maps• Desktop Procedures• Standard Work

Process Maps and Standard Work

• Voice of Customer• Customer Success Metrics • Key Input Metrics (Drivers)

Leading and Lagging Metrics

• Daily Performance Huddle• Weekly Process Owner Check• Monthly Executive Review

Management Operating System

• Cross-functional Teams• Basic 5 Step Process (PDCA Cycle)• Why-Why Analysis

A3 Problem Solving

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Process Ownership

Continuous Improvement Capability

Leadership Alignment

Process Excellence

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Business is Accountable to Adopt CPI Fundamentals

BPI Terms of Engagement

The Business will identify and assign “CPI Champions” with clear accountability for adoption of the CPI Fundamentals

BPI will manage the CPI Champions as a community of practice with weekly touch-points, monthly learning sessions, and quarterly training events

BPI will implement 30-60-90 day reviews of the CPI Fundamentals with a simple measurement of adoption, reported to Senior Leadership

Business will conduct routine leadership floor-walks to reinforce adoption and celebrate success

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Key Success Factors

Factor Examples

Effective Senior Level Sponsorship

• Initiative and support of CFO was key• Initiation within the Finance organization provided an avenue of

influence into the businesses

Dual Strategy – Surgery and Lifestyle

• Delivering near-term value proposition to demonstrate value and encourage belief

• Incorporating “lifestyle change” expectation even into “surgery” engagements

• Incorporating clear value proposition even into “lifestyle” engagements

Integration of PPM, CPI,ERP Integration

• Enables wide field of vision across the enterprise• Recognizes the interconnectedness of business drivers

Structured Change Management• Proactively identifies and works to align human factors• Mitigates risk of non-adoption

Business Partnership Model

• Collaborative partnership with joint accountability for results• Business ownership• BPI enablement