Pride Procurement Lean
Transcript of Pride Procurement Lean
Applying LEAN
TO NONMANUFACTURING
SUPPLY CHAIN
Purchase Order to Pay
Optimization
Elm Valle, Pride International, Process Improvement Lead
• Introduction
•
| Our World is Getting Deeper
Agenda
Company Overviews
PRIDE INTERNATIONAL
Headquartered in Houston, Texas, Pride International,
Inc. is one of the world's largest offshore drilling
contractors. Pride provides contract drilling and
related services to oil and gas companies
worldwide.
With approximately 4,000 employees, Pride offers a
multinational workforce with offices in the United
States, Angola, Brazil, and Saudi Arabia. We have
positioned our fleet in some of the world's largest
and most active exploration and production
basins. In 2010, Pride had $1.5 billion in
revenues.
Our fleet and operations currently consists of the
following:
5 Deepwater drillships
2 Deepwater drillships under construction
6 Deepwater Semisubmersible
6 Midwater Semisubmersible
7 Jackups
2 Managed deepwater units
UHY ADVISORS
Headquartered in Houston, Texas, Pride International,
Inc. is one of the world's largest offshore drilling
contractors. Pride provides contract drilling and
related services to oil and gas companies
worldwide.
With approximately 4,000 employees, Pride offers a
multinational workforce with offices in the United
States, Angola, Brazil, and Saudi Arabia. We have
positioned our fleet in some of the world's largest
and most active exploration and production
basins. In 2010, Pride had $1.5 billion in
revenues.
Our fleet and operations currently consists of the
following:
5 Deepwater drillships
2 Deepwater drillships under construction
6 Deepwater Semisubmersible
6 Midwater Semisubmersible
7 Jackups
2 Managed deepwater units
The Background (timeline)
Brought on as a Consultant for Pride International – to “Fix”
their Received Not Voucher backlog.
Hired on Full Time as the Process Improvement Lead
Myriad of Opportunities in the Procure to Pay Process
Enlisted Aid from UHY Advisors
Requested Full Blown Project to be initiated
The Challenge
Oil & Gas Company
Non Manufacturing
Vague or No Documentation of Processes / Procedures
Siloed Work
No Process Improvement Culture or Experience
Strategy Overview
PDCA
Plan
Do
Check
Act
DMAIC
Define
Measure
Analyze
Improve
Control
Control
ACTION
What is the
problem?
How are we
doing?
Fix It
Hold & Sustain
Gains
Project Mgmt
• Identify
Opportunities
• Scope Project
• Analyze the
Process
• Define Outcomes
• Prioritize
• Refine
• Implement
• Measure Outcomes
• Acknowledge
Plan, Do, Check, Act
Identify Problem Statement / Challenges
Benchmark against Industry & Best Practice
Acquire Support from Leadership
Validate and Continue Data Gathering
Define Current State & Metrics
Create Key Performance Indicators
Evangelize and Socialize at all levels
Create Future State
Document the Future State – Process Maps
Pilot and Validate
Implement the Future State
Activity
Requirements Gathering
Planning & Analysis
Design
Workshop
Develop Future State
Pilot
Implement & Monitor
2010
APRJAN FEB MAR
2011
JUL AUG SEP OCT NOV DEC
Note: Business Gathering was over a span of 1 year prior to Project
Timeline
Marketing Strategy
Understand Agree Document
Problem Statement - Cost
Pride International: $30/ Invoice
In 2009, Pride had an opportunity to save over $8MM in prompt pay discounts.
Actual Prompt Pay Discount Taken: $0.00
The 30% rework cost Pride additional $50 per invoice
In 2009, Pride’s First Pass Yield for Purchase Order to Pay transactions was 70%.
CategoryAnnualized 2010 Invoices
to be Processed
PSC 16,432
Brazil 67,627
Angola 9,830
All Others 41,455
TOTAL 144,070
15% of Purchase Orders are Cancelled
20% go through Change Order process
32% of PO Receipt fell into OS&D
20% of All Invoices Lost
Clearly Defined Process Map or Procedures did not exist
Lack of SOP’s or Desktop Procedures Transaction Oriented (Firefighting)
Problem Statement - Waste
Lacking Knowledge or Culture for Process Improvement / LEAN / Six Sigma
20% Re-Work Rate
Additional Costs
PO MgmtPO
ApprovalPublish
POReceive Material
Invoice Receive
Voucher PO
Pay
PO
Requisition
Queue
Understand Agree Document
Overall Cycle Time - Inefficiency
2 Days
Days a
Req sits.
Metrics are in “average” days.
7 Days
Conversion of
Req to PO
15 Days
Time to Approve & Publish 90 Days
Time Supplier
receives
approval to
Pride
receives
material at
K&N
24 Days
Supplier’s
Date of
Invoice vs.
Invoice
Received
Date logged
in E1
15 Days
Invoice
Received
Date vs. Date
Vouchered
7 Days
Lead Time for
Batching
Process &
Physical
Payment
Total Average Cycle Time = 160 Days
First Pass Yield = 70%
| Our World is Getting Deeper
Scope of Project
PO Mgmt
POApproval
Publish PO
Receive Material
Invoice Receive
Voucher PO
Pay
PO
Level 1 Process Steps are denoted “LX.0”
L1.0 L2.0 L3.0 L4.0 L5.0 L6.0 L7.0
PO
Mgm
t
•Manual
•Auto
•Portal
•Change
•Cancel
•Blanket?
•Emergency?
PO
Appro
val
•Initial
•Changes
•AFE
•Non-Capital AE
•Budget Mgmt
Publish P
O •Manual
•Portal
•EDI
• Supplier Acknowledgement R
eceiv
e M
ate
rial
•K&N Process
•Pride Process
•Recon
•PO Status/Ship In
voic
e R
eceiv
ed
•Indexing
•Accruals
Voucher
PO •Voucher Log
•Normal
•3 Way Match
•No Match
•No Invoice
•No PO
Pay P
O
•Batching
•Approving
•Releasing
•Confirmation
• Direct Objectives:
Cycle Times – Reduce Cycle Times in the P2P process
First Pass Yield – Reduce rework or recycle of work (70%)
Streamline – Remove unnecessary steps or steps that can be
consolidated
• Indirect Objectives:
Reduced Costs (Rework of $300K)
Import Export Compliance
Increased Efficiencies (Lowest Credit Rating DnBi among
Competitors)
Meet Commercial Obligations (55% On Time Pay)
Improve Savings (2% Prompt Pay Discount $8MM)
Aligned with Internal Controls & Policies
| Our World is Getting Deeper
Project Objectives
| Our World is Getting Deeper
•Example Map
•Session Work
•Consolidation
Day 1-Current State
•Example VSM
•Session Work
•Consolidation
Days 2,3-
Value Stream
• Session Work
• Internal Controls
• Consolidation
Days 4,5-
Future State
Obje
ctives
Understand Agree Document
Spir
itTim
eline
Off-Site Workshop
| Our World is Getting Deeper
Service Team Maturity Model
Characteristics of the business process at each maturation
level include:
1. Initial
Initial learning phase for the team is determined.
Formal documented processes may not exist.
2. Repeatable
Informal, ad-hoc paths of communication are established.
A certain level of repeatability is attained.
3. Defined
Processes are well defined, documented, and standardized.
Repeatability and consistency is more commonplace.
4. Predictable
Integrated service management is present (e.g. quality controls, audit controls, preventive measures).
Focus is on measuring and communicating processes at the business level.
5. OPTIMIZING (targeted goal for a service department)
Departmental efficiencies are gained through refined processes.
Errors are almost non-existent.
Initial
Repeatable
Defined
Predictable
Optimizing
| Our World is Getting Deeper
Identify Value/Waste
Using the
Current State
Map. Identify
activities within
the process that
can be
“improved”.
Level 1
Level 2
Level 3
| Our World is Getting Deeper
Current State Result Mapping
Current State Mapping & Analysis
Value Stream Analysis Results
Minimize
Non-Value Add
Required A
ctivity
Eliminate
Improve
Monitor
Value Add
Non-R
equired
Activity
AUTOMATE
Required as checks due to number of exceptions
Required due to immature processes
Required due to lack of closed processes
Required due to lack of communication
Required due to lack of policy enforcement
Total Activities Identified - 120
Required/Value Add 42%
Non Required/Value Add 0%
Required/Non Value Add 53%
Non Required/Non Value Add 6%
Total of 173 Improvements were identified to support our Process Maps and
Future State.
Shared Ownership with split responsibilities for Voucher Log and Received
Not Vouchered.
Training! Training! Training! Lack of knowledge/ enforcement on Policies
and Procedures has caused delays in the process or rework.
Poke Yoke – Error Proofing on front end rather than mid-stream checks and
reviews.
Close the Loop – Understand and own the process.
Ongoing Project Discovery
Policy Requirements – Integration into new SOP
Desktop Manual – Complete End to End
Process Maps – 23 New Process Maps
Sarbanes-Oxley 404 – New Controls & Integration
Training Requirements – Process / Technology
Pride Platform – Training Guides
The Test Pilot
Three Buyers / 2 Expeditors / 2 Accounts Payables
Random population of Purchase Orders
Track them against old metrics
Period of One Month
KPI Improvements
Comparison to YTD 2010 vs. 2011 YTD Running JAN FEB
P2P Metric % Improvement % Improvement
REQ to PO Time (Days) 30% 15%
Approval Time (Days) 67% 57%
Supplier Shipment Time (Days) 51% 47%
Invoice Date vs. Received Invoice Date (Days) 79% 79%
Received Invoice Date to Voucher (Days) 80% 80%
Total Cycle Time % Improvement % Improvement
First Pass Yield [No Change PO, No Voucher Log] 37% 36%
Received Not Vouchered (in Millions) 60% 56%
Voucher Log (in Millions) 50% 67%
KPI Description % Improvement % Improvement
Line Items on Purchase Order that has uses a GIM number 2% 1%
Items in GIM that has classification data required for Export 39% 42%
Total Average Days Passed % Improvement % Improvement
NO Touch PO [Auto PO] 100% 100%
PO's with 3 Bids - exclud. Auto PO 60% 43%
| Our World is Getting Deeper
Instill the Culture
Current State
Future State
Q1 - Work Plan &
Implementation
Q2 - Work Plan &
ImplementationQ3 - Work Plan
& Implementation