Managing your internal suppliers - NESCON 2020 your internal suppliers.pdf · management systems...

1

2006 Northeast Supply Chain Conference &

Educational Exhibition

Managing your internal

suppliers

Michael O’Connor Ph.D.



Contents

• The internal supply chain

• The transformation process

• Current enablers

– Balanced scorecards

– Six Sigma

– Lean

2



The internal supply chain



The Transformation Process

1.Working together.

2.Fixing your manufacturing processes.

3.Winning back the spare parts business.

4.Marketing existing products.

5.Revamping new product development.

3



The internal supply chainThe steps for fixing your manufacturing processes are:1. Identify shaker/mover (not a bobble head).2. Baseline present performance.3. The build and test procedures, the defect collection system, and status of build procedures.4. Optimizing the build process. 5. Source inspection procedure.6. Install and warranty start processes.7. Process support.8. PO spec review process.



Customer/

Shareholder/

Stakeholder

Requirements

C

T

Q

s

Business

Strategy

(S1)

Business Process

Business

Results

Process

Performance

Measures

(Capabilities)

Performance

Core and

Enabling

Process Goals

Tools for

Managing Performance

•Process Management (BPMS)

•Quality Systems (ISO)

•Design (DMADV)

•Improvement (DMAIC)

•New Product Introduction (NPI)

Resources for

Driving Performance

•Business Quality Council (BQC)

•Champions

•Master Black Belts

•Black Belts

•Green Belts

Critical Elements In The Drive For Excellence

4



Customer

CTQs

Process

Performance

Goals

Required

Process

Capabilities

Strategic

Objectives

Maximizing The Impact Of Core ProcessesHow Improvement Priorities Were Developed



Process

Performance

Goals

Required Process

Capabilities

Outcomes that will

contribute to the

accomplishment of

one or more of the

CTQs Process performance

attributes (cycle

time/accuracy) that will

contribute to the

accomplishment of Process

Performance Goals

CTQs Are Drivers Of What We Seek To

Achieve In A Core Process

• Considered critical to

customer satisfaction

and retention

• Are stated in

objective, measurable

terms

• Are defined in the

process SIPOCs, for

example:

-Defect-free

-Delivered when

promised

-Timely response

-100% complete,

clean, on-time

service

Customer

CTQs

5



Legal

14.0

Financial

Support

Services

3.0

Site

Initial-

ization

13.0

Business

Develop-

ment

12.0

Staffing

7.0

Training

8.0

IT

9.0

Market-

ing

11.0

EXTERNAL CUSTOMER CTQs -Core Processes

INTERNAL CUSTOMER CTQs - Enabling Processes

ORDER TO IN-SERVICE

2.0

OPERATIONAL SUPPORT SERVICES

4.0

REMARKETING

6.0

MAINTENANCE & REPAIRS

5.0

Core Processes And Key Enabling Processes

SALES

1.0



Productivity

Order to

Inservice Cycle Time

120 days by 1999

Speed of Providing

complete deals to

contract admin

2.1 Contract Prep

Cycle Time

5 days

2.0 STRATEGY

PROJECT

Teams 37,43

Speed of

Processing

executable

contract package

Speed of Order

Fulfillment

2.2 Deal Approval

Cycle Time

2.3 Issue P.O.

Cycle Time

7 days 5 days

Speed of OEM

build, in-service

center and

delivery

Able to Inservice

a unit to

customer in 1 day

2.4 Build & Deliver

Cycle Time

2.5 Inservice Unit

Cycle Time

100 days 1 day

PROJECT

Teams 2,3,21,33

PROJECT

Team 2

PROJECT

Team 12,22,46

PROJECT

Teams 10,23,36,37,54

Delivery of new unit,

to district,from OEM

not requiring

district capitalized

repair orders

District capitalized

Repair Orders

<5% of district

Inserviced Vehicles

Market GrowthShare Growth

New Unit cost

equal to rated cost

95% of units

delivered at rated

cost by 4th qt 1999

Non Executable

deal cycle time

14 days from

receipt in Contract

Admin by end 1999

Speed of correcting

non executable

deals

2.2.2 Record Approvals

Cycle time

14 days

PROJECT

Team 2,33

PROJECT

Team 12,54

∗ Team 7 DMADV touches all cycle time measures.

• Bold outlined Capability represents current BPMS measures.

ORDER TO INSERVICE STRATEGY / CTQ DRILL DOWN CHART

Applying SalesNet

to every deal

submitted

2.6 SalesNet

Communication

TBD

PROJECT

Team ?

All Information

In SalesNet

TBD

100% of time

PROJECT

Team ?

Percent of deals

coming through

SalesNet

100% SalesNet

Usage

by end 1999

Strategic

Objective

Dashboard

Goal

Capability

BPMS Measure

Process Goal

Projects

Total Excess Cost

.05% of rated cost

cost by 4th qt 1999

6



The Process Management Chart Is The Primary Tool For

Managing Planned Improvements

Guarantee delivery on CTQs and achieve strategic objectives

profitably

• Standardizes and documents

the base process

• Communicates desired

capabilities and performance

standards

• Identifies measures used to

evaluate process performance

• Tracks process performance

and improvement efforts

against targets

• Serves as vehicle for process

reporting and improvement

Process Management Chart Example



Company-wide Area

Staff and BB

Deployment Team

Preparation Workshop

(Regional Meetings)

Lessons Learned

Company-wide Deployment

Approach

Initial Site Area Staff

and BB attend

Deployment Team

Preparation

Workshop May 4-5

AVP conducts

BPMS Field

Deployment Work-

shop for District

Staff

AVP conducts

BPMS Field

Deployment Work-

shop for District

Staff

AVP conducts

BPMS Field

Deployment Work-

shop for District

Staff

AVP conducts

BPMS Field

Deployment Work-

shop for District

Staff

Company-wide Area

BPMS Field Deployment

Workshops

(Area Meetings)

Initial Site Deployment

Lessons Learned

From District Offices

DM/GB and

District Staff

Deploy BPMS

DM/GB and

District Staff

Deploy BPMS

DM/GB and

District Staff

Deploy BPMS

DM/GB and

District Staff

Deploy BPMS

BQC & PMT

Initial Site

Deployment

Decisions

Targeted Company-

wide Deployment

Company-wide District

BPMS Deployment

Workshops

(District Sites Only)

7



The transformation process –

The Flawless Execution ModelFuture Picture

Strategy

Leader’s Intent

Plan – Brief – Execute - Debrief

Standardize

Training

People



Financial

Perspective

Customer

Perspective

Internal

Perspective

Learning

and Growth

Perspective

Brand Image

8 Metrics

Human Capital

6 Metrics

Best in Class Cost

Structure

1 Metric

Improve Operating

Margins

3 Metrics

Grow Faster than the

Market

11 Metrics

Customer

Management

Strategies

8 Metrics

Product and

Portfolio

Strategy

13 Metrics

Operational

Management

Strategies

10 Metrics

Delivery

Management

Strategies

21 Metrics

Long-Term Shareholder Value

Information Capital

2 Metrics

Organization Capital

0 Metrics

The Balanced Scorecard

Client Intimacy

25 Metrics

Seamless Service & Support

3 Metrics

Effective

Proposals

1 Metric

Partner

Management

Strategies

15 Metrics

(15 metrics)

(37 metrics)

(67 metrics)

(8 metrics)

8



Breakthroughs in performance require major change,

including changes in the measurement and

management systems used by an organization

• The real power of an Balanced Scorecard executive dashboard is in its

ability to:

– Translate mission and strategy into tangible objectives and measures to

all levels of the organization

– Measures organizational performance across four balanced

perspectives: financial, customers, internal business processes, and

learning and growth

– Align individual, organizational, and cross-departmental objectives to

drive positive behavioral changes

– Uses measurement to inform employees about the drivers of current

and future success

“If you can’t measure it, you can’t manage it”



Benefits of Balanced Scorecard are evidenced across

many companies and industries

30%71%Information

shared

openly and

candidly

8%60%Communication

of strategy

37%93%Agreement on

strategy

CULTURE

55%97%Success in last

major

change

effort

52%83%Financially

ranked in

the top

third of

their

industry

44%74%Industry leader

over the

past three

years

PERFORMANCE

Non–Measurement

Managed

Organizations

Measurement

Managed

Organizations

Measure of

Success

Performance Management Gets Results • Early adopters have

shown significant results

– Mobil NA became the

industry leader in

profitability per gallon

within 2 years

– CIGNA Property &

Casualty returned to

profitability and

improved its

performance during each

of the next four years

– Chemical (Chase) Retail

Bank improved its 19-

fold four years after

deploying scorecards

strategically

9



Business Unit scorecards and operational reports should

complement the Executive Dashboard



Lessons from Lean

10



Lessons

from

Lean



Six SigmaSix Sigma

Champion

Black Belt

Sponsor

Leadership TeamVisionPriorityPath

Define

TeachSupport

ConsultMeasure

MeasureAnalyze

ImproveControl

Communication

and Coordination

Finance

Yellow

Belt

White

Belt

TEAMS AND BELTS

Process Owners

SMEs

Yellow

BeltWhite

Belt

SMEs

Green Belt

Master

Black Belt

Green Belt

11



Six Sigma Fireworks



Change

12



Change



Appendix

13



Transforming the Production

Line



Transforming the Production Line

Step 1:

Document “as-is” process (what are you building? Does it work at each

phase? Learn how the tool is built (positive and negative attributes)

Perform the task with the individual – As you are doing this you are

asking Why 5 times.

Fix the process. How should it be done? Integrate a measurement

system.

14




Step 2:

Identify defects – you now know what has to be addressed




Step 3:

Fix defects, fix the problems, step to step , success rate at each stage

15




Step 4:

What is a simple coherent way to collect data – real time defect database –

kiss, you want the people who have the problems to be able to run their own

reports




Step 5:

Internal supplier and customer to own it – is it legit, how do you rate it?

Review it, make sure it is correct, pick your battles (define your scope –

management decision, don’t stop the process because there is one big

gotcha), fix all the little stuff first

16




Step 6:

Employees are now part of the quality system




Step 7:

That was the beginning of your measurement system. Now you have a

quality performance of each internal supplier.

17




Step 8:

Now you can branch out.




Step 9:

What are you going to measure? Management understands money,

everyone else understands the parts.

18




Step 10:

Defects by department. Defects repaired, Associated cost of non-quality.



Balanced Scorecard

Examples

19



NCR- 2001 Balanced Scorecard

- WCS capture rate

Drive core competencies

- Revenue from India (emerging market)

- Revenue from China (emerging market)

Penetrate new markets

- Revenue in targeted new solutions

Grow new solutions

Grow Aggressively

Primary Metrics

- Resolved remotely

Re-engineer business processes

- Global sourcing savings

Execute global sourcing strategy

- Percentage of field equipment inventory > 90 days

- High-impact project PS gross margin leakage

- Operating income

Nature core competencies

Improve Profitability

Primary Metrics

- Upward mobility (percentage of females at D-band or above)

- Upward mobility (percentage of minorities at D-band or above)

Improve leadership bench strength

- Invention disclosures

Manage intellectual property

- Customer-facing PMs with internal PM certification

- Customer-facing PM turnover percentage

- Total customer-facing PMs

Leverage PM resources to manage execution

- Six Sigma projected annualized benefit of completed projects

- Six Sigma projects completed

- Six Sigma potential benefits of projects when started

- Six Sigma projects initiated

Transform culture through Six Sigma

Invest in the Future

Primary Metrics



A Fashion Retailer’s Strategic Map and Metrics

20



United Way of Southeastern New England’s Balanced

Scorecard



Duke Children’s Hospital Balanced Scorecard

21



Brown & Root Energy Services’ Balanced Scorecard

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