Continuous Improvement It Pay$

Transcription

1 Continuous Improvement It Pay$ Penny Weller, PhD, CMA The Hackett Group

2 Continuous Improvement It Pay$ Whether you are considering or already have a continuous improvement program this session is for you. You will learn: a variety of quick tips to engage staff in submitting ideas the power of measurement which tools are most commonly used and easiest to understand. Insights will also include: the value of continuous improvement how to get started by measuring something the secret to great suggestions how to have a mustang attitude when it comes to promoting your achievements. 2

3 Penny Weller, PhD, CMA Global Business Services Advisory, North America Operations Leader Phone: The Hackett Group Advisory services and research Global Business Services and Shared Services 30 year Shared Services executive with Pfizer (formerly Pharmacia) Director of Performance Management Six Sigma Motorola-certified Black Belt 3

4 Contents Hackett Overview Why Continuous Improvement Matters How to Get Started and Sustain a Program Nuggets, nuggets, nuggets Opportunity to Participate 4

5 93% of the Dow Jones 86% of the Fortune % of the Dow Jones Global Titans 87% of the DAX 30 52% of the FTSE % of the CAC 40 5

6 Peer Group Practice or Outcome Practice Practice Practice Practice Practice Practice Practice Practice World Class (% of revenue) Process Taxonomy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Vision Dimension Supply Assurance Supply Assurance Supply Assurance Supply Assurance Supply Assurance Supply Assurance Purchased Cost Reduction Purchased Cost Reduction SDM Component Process Design Process Design Process Design Process Design Process Design Process Design Process Design Process Design Peer Group World Class (per end user Equivalent) Capability / Enabler Degree to which a sourcing strategy exists Breadth of supplier universe Degree to which supplier risk is measured and managed within the sourcing process Degree of contingency planning performed to assure supply Degree of supplier qualification in place Degree of effectiveness and efficiency of price refresh process Level of rationalization of supply base size Maturity of use of supply market intelligence Peer Group World Class (per employee) Peer Group World Class (% of spend) Perspective on World-Class Finance Accelerating GBS Lagging 2 - Achieving 3 - Exceeding 4 - Leading Sourcing strategy is ad hoc or nonexistent. Supplier selection is based on historical or personal relationships; suppliers often selected prior to Procurement s involvement in a project. Risk not considered as part of sourcing decisions or supplier management. No supply contingency planning exists. No formal supplier qualification process. Quoting and price refresh process is undefined and performed manually and on an ad hoc basis. Large number of suppliers due to short-term, one-off relationships. Supply market knowledge is ad hoc and incomplete. Sourcing strategies reflect and are aligned with overall business strategy and objectives, including high level risk requirements. Historical spend analyses are regularly and routinely conducted by market and across markets - i.e. by specific commodity, service, location and business. Projects are initiated to limit the total number of suppliers and bundle the spend volume. Procurement is involved in the supplier selection process. Suppliers are often considered on a regional or compartmentalized basis. Supply risk is considered as part of category-specific sourcing efforts and supplier performance management processes. Contingency plan exists in case of supply shortage; alternate suppliers and alternate locations identified. Simple processes in place to register suppliers and inspect supplier qualifications at time of registration or category review. Quoting and price refresh process is defined and audited manually. Organization has identified the need to rationalize the number of suppliers in order to create leverage. Process, tools, and sources established to gather and organize data on most categories. In-house Colocation Commodity management and sourcing strategies define appropriate purchasing and payment processes and tools. Contract terms, lengths, and conditions are defined to drive optimal benefits to the enterprise; in terms of total life-cycle cost, service, and quality. Supplier universe is considered by major commodity or service area rather than in aggregate. Suppliers are considered for bundled and/or extended services that may extend to multiple areas of competency. Supply base risk is explicitly factored into broader business continuity objectives. Supplier risk is considered beyond the specific good or service being sourced. Alternative supply sources are developed in conjunction with current suppliers for key purchases. Established supplier training program on enablement strategies and buyer s technologies. Formal program exists to identify key qualification metrics with stratification based on category criticality and supply alternatives. Quoting and price refresh processes are structured to minimize enterprise financial impact to all parties. Supply base rationalization is complete. Few new suppliers are needed and an added supplier typically results in a removed supplier (equilibrium). Strong relationships developed with current suppliers focusing on JPI in critical or large dollar spend areas. Supply market intelligence / knowledge captured to identify when a supply strategy needs to be re-visited. Customer Responsibility Provider Responsibility SaaS Applications Sourcing strategy is reviewed and updated annually (or more frequently) to reflect direct linkage to the company's strategic growth plans, market changes and product innovations, production plans and business M&A/ventures. Supply universe is global and not limited to traditional commodity suppliers. Procurement works with other risk management staff, ensuring alignment between internal risk/return preferences, business objectives, and both general and specific supply market risks. Back-up suppliers are required for critical or strategic categories and items, including formalized contingency plans to ensure seamless supplier transition and application of penalties and liabilities with supplier(s) at fault. Annual review of at risk suppliers and suppliers of key categories. Quoting and price refresh processes are automated, nearly error-proof,, with appropriate controls in place.. Structured process is in place that benchmarks the marketplace and ensures continual supply base assessment. Supply market intelligence / knowledge captured, modeled, and utilized for pro-forma simulations done during strategic planning, design, sales, etc. Complete Outsourcing Current State Assessment Priority Future State Target Average Gap 2 - Achieving 2 - Medium 3 - Exceeding Lagging 2 - Medium 2 - Achieving Exceeding 3 - High 4 - Leading Exceeding 2 - Medium 3 - Exceeding Achieving 2 - Medium 2 - Achieving Achieving 2 - Medium 2 - Achieving Achieving 2 - Medium 2 - Achieving Achieving 2 - Medium 2 - Achieving 0.66 Membership Advisory & Research (Provides insights into World-Class Performance) Benchmarking (Defines World-Class Performance) Hackett The World-Class Advantage Finance World-Class organizations always find a way to get there 1.12% 46% 22% 23% 19% $7.7K $2.2K 0.73% 0.60% $6.0K 0.59% $1.7K Finance Cost IT Cost HR Cost Procurement Cost 2014 Cost of Finance by Process Category (as a % of revenue) 0.39% 0.21% 0.23% -59% 0.16% 0.17% -23% -46% 0.11% Transacting Control & Risk Planning & Strategy Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett Certified Best Practices through the Best Practice Intelligence Center Unlimited inquiry access for members to Hackett experts for transformation steering Peer-to-Leader Best Practices sharing, and Best Practices networking events Enterprise, functional and process-based performance studies & value accelerators Gold Standard Benchmark over 10,000 conducted, the empirical backbone for your transformation at the SG&A Enterprise, Functional, and Process level. World-Class, Peer, and Custom Peer comparative metrics and best practices Ability to provide multiyear World-Class Program view of performance over time Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP) Strategy & Business Transformation (Transforms Performance into World- Class) Governance & Organization Skills & Talent Enabling Technology Information Service Delivery Components Process Design Service Placement / Scope Process Sourcing / Location Strategy Finance Human Resources Information Technology Procurement Supply Chain and Operations Enterprise Performance Management Shared Services, Global Business Services & Outsourcing Merger Integration Working Capital Management Best Practice Technology Enablement (Implements Technology to enable World-Class) Oracle EPM (Platinum Partner) SAP ERP (Gold Partner) Hyperion Kronos Workforce Management Application Managed Services Functional Application Support Technical Application Support Cloud and Hosting Remote Development 6

7 We are the global leader in operations improvement strategies, implementation know-how, and G&A agility We address both efficiency and effectiveness improvements to enable strategic business objectives Our insights are fact based, from over 10,000 performance improvement benchmark engagements Our Best Practices Intelligence Center is a significant differentiator and enabler. It contains: 20,000+ performance metrics updated annually 1,500+ best practices across 95 business processes 1,000+ best practice-based process maps, requirements and configuration guides 1,000+ case studies, implementation examples and research We deliver results through a global team of senior practitioners using a consistent methodology and best practice-based toolset Hackett Value Grid We help companies establish and implement business performance improvements. 7

8 Hackett Purchase to Pay Value Grid Effectiveness Drivers First Pass Match Rate On Time Payment Rate Level of Spend Visibility Streamlined Transaction Strategy Level of GBS/Shared Services Training Investment Compliance to Preferred Suppliers Guided Buying Effectiveness Supply Base Consolidation Efficiency Drivers Cost per Transaction Transactions per FTE Span of Control Order Cycle Time Invoice Processing Cycle Time Percent of Electronic Transactions Level of Automation What are you measuring? How do you compare? What do you want to improve? 8

9 Executive Sponsorship Governance Change Management & Measurement Effective Continuous Improvement Training & Empowered Employees Effective Methodology Communication Plan 9

10 1 2 How do you know you are doing a good job? What s important to your key stakeholders? How and what to improve? 10

11 Step change BIG Continuous improvement SMALL BUT CHANGE THE CULTURE 11

12 Foundation of Continuous improvement Measurement and Encouragement 12

13 Senior business leaders Key stakeholders Operations Your customers will impact what you improve What do you already know you want to improve? Who are your key audiences? What is important to them? Are there some Quick wins? 13

14 Start small; what s stopping you from being effective? Service design; what s irritating your customers? You probably have more control than you think! STOP Automate Something Something Eliminate Start tall; external benchmark -- Pharmacia Example 14

15 $5 million savings opportunity in transaction processing! Key Financial Processes Total Cost Cost per Billion Quartile 1st Quartile Cost/Billion $ Savings Opportunity Transaction Processing $12,955 $ 4,093 3rd $2,431 $ 5,262 Control & Risk Mgt. 5,523 1,745 3rd 959 2,488 Decision Support 3,793 1,198 3rd 607 1,871 Finance Management 1, rd Systems 7,660 2,420 2nd 1,760 2,090 Overhead 6,561 2,072 2nd 1,275 2,523 Total Finance $38,264 $12,088 3rd $7,440 $14,715 15

16 Quality Cost Delivery Customers / Employees Best Practices Value Defect-free processing First-pass yield;% errors Process cost Transactions per FTE Cycle time (days to close) % automated transactions Customer satisfaction Employee engagement % suggestions Process steps add value Organizational alignment % of G&A in GBS/Shared Services Agility factor 16

17 Start Measuring Start Comparing 17

18 Lean eliminates waste 6 sigma eliminates variation Service Design eliminates pain 18

19 Methodologies Rate of adoption of CI tools and methodologies Lean Sigma Lean Six Sigma Deming (PDSA) Cycle Toyota Production System Service Design Total Quality Management (TQM) ISO 9000 Activity based management (ABM) 7% 14% 7% 10% 14% 10% 11% 10% 30% 30% 39% 39% 39% 70% 75% 80% 90% 90% Peer Top Performer Study Question: Which of the following tools and methodologies are used in your GBS CI program? Source: 2016 GBS Continuous Improvement Study 19

20 Effectiveness Voice of the Customer / Stakeholder Process mapping, value stream mapping Pareto analysis Five Whys Kaizen (small, dedicated CI events) Waste analysis Ishikawa (fish bone) root cause diagram Decision Matrix Histograms Scatter diagrams Poka-yoke (mistake proofing) Effectiveness Peer Top Performer Study Question: Which CI tools are in use in your GBS CI program and how effective are they? Low Adoption 97% 97% 86% 85% 77% 75% 73% 62% 61% 53% 53% High 20

21 Effectiveness Adoption Failure Mode and Effects Analysis (FMEA) 44% Statistical process control 42% Stratification 35% Production leveling 23% Uni-variate statistical analysis (ANOVA, t-tests) Multivariate statistical analysis (MANOVA, regression analysis) Chi-Square 22% 20% 17% Design of Experiments 15% Effectiveness Peer Top Performer Study Question: Which CI tools are in use in your GBS CI program and how effective are they? Low High 21

22 Voice of the Customer Rule #1: If you submit an idea you don t have to fully develop it. 22

23 Pareto Analysis 23

24 The 5 Whys 24

25 Kaizen Events Kaizen Events are easy to run since the whole point is to plan, start and end within a limited time frame, such as a few dedicated days of work. Suggestion: Set a goal for each department that requires 100% of employees to participate in at least one event per year, including all new hires. Brainstorm ideas to pick the best projects. Examples of successful events Workspace improvements like organizing the mail, fax, scan or office supply areas Employee-related, such as safety, new hire orientation Specific business processes or procedures Manual billings Procurement card Journal entries Aged invoices Unclaimed property Traveler central billing Cell phone billing 25

26 Process Mapping Financial Close Process Preliminary Close Adjusting Entries Run Assessment Process Prepare Special Ledger Final Close Reverse Assessment Process Run Final Assessment Process Run Consolidation jobs Entry into Hyperion #1 CI Tool over 90% 26

27 27

28 The Land of Month End 28

29 PUSH 29

30 The patient is waiting... 30

31 Mom says, if no one s in charge.you are! Payment terms $326,000 savings 31

32 Having a Mustang Attitude We don t know how to market ourselves 32

33 Recommendations Be patient, yet diligent, to ensure your CI program is effective and embedded in the culture of your GBS Review tools and methodologies to ensure your focus includes appropriate tools for differing situations, Top performers tend to leverage more tools than peer Focus on data quality as a key driver for successful projects; build respect for incorporating quality early and throughout processes; managing defects and ways to improve outshine other improvement areas Align with strategic transformation initiatives where possible to enable greater success Staff for success; where possible have dedicated resources Become the hub for continuous improvement; if not already offering services outside GBS consider doing so may also enhance value of GBS offering Expand training to build understanding and staff engagement Incorporate service design principles as a methodology to gain customer acceptance and clear understanding of their pain points Review control mechanisms to mitigate improvement losses both top performers and Peer acknowledged caution in this space Promote improvements by acknowledging success and branding for CI effort Expand GBS services offered 33

34 Executive Summary; the Continuous Improvement Leadership Performance and Capability Gap Performance Gap Annual efficiency improvement of CI initiatives (against baseline performance) Top performers: 14% 19% Peer: 6%-7% Annual effectiveness improvement of CI initiatives (against baseline performance) Top performers: 12% 20% Peer: 7% - 9% Percentage of top performing programs exceeding business expectations Top performers: 40% 50% Peer: 0%-8% CI program staff as a percentage of total GBS program staff Top performers: 1.8% Peer: 1.3% Percentage of GBS staff trained in CI methodology Top performers: 62% Peer: 42% # CI methodologies adopted (out of 9) Top performers: 7.2 Peer: 3.3 Capability Gap Average Age (years) of top performing CI Programs Top performers: 4.9 Peer: 2.6 # CI tools with high adoption rate and effectiveness (out of 19) Top performers: 6 Peer: 2 Critical Success Factors with high capability gap: Top performer: # 1 Culture Peer: # 1 Executive support, #2 CI Resource competency, #3 adequate staffing levels, #4 sustaining improvement implementation challenges with high capability level gap (out of 4 max): Top performer: # 1 Data quality Peer: # 1 Process standardization #2 Data quality 34

35 CI program efficiency improvements CI program effectiveness improvements Cost 7% 19% Defect rates 7% 20% Working capital 6% 16% Service quality 8% 12% Productivity 7% 16% Customer satisfaction 9% 18% Cycle time 6% 14% Regulatory compliance 8% 13% Peer Top Performer Peer Top Performer Study Question: What is the average level of actual efficiency performance improvement (relative to baseline process performance) across all formal CI initiatives executed in your GBS over the past 12 months? Study Question: What is the average level of actual effectiveness performance improvement (relative to baseline process performance) across all formal CI initiatives executed in your GBS over the past 12 months? 35

36 CI staffing level as percentage of GBS size (FTEs) 1.8% 1.3% Peer Top Performers Study Question: What is the total staffing level of your GBS CI program? Include ONLY CI resources serving the GBS, and count actual headcount, including part-time staff. 36

37 Average AGE of Continuous Improvement program (years) Peer Top Performers Study Question: What is the average level of actual efficiency performance improvement (relative to baseline process performance) across all formal CI initiatives executed in your GBS over the past 12 months? 37

38 Percentage of GBS staff Trained in Continuous Improvement program 62% 42% Peer Top Performers Study Question: What percentage of your GBS staff are trained in the CI methodology used in your organization? 38

39 Average number of active CI Projects Average CI Project duration (months) Top Performers 14.6 Top Performers 4.3 Peer 9.0 Peer 4.9 Study Question: What is the average number of active formal CI projects in your GBS? Study Question: What is the average duration of a formal GBS CI project in your GBS organization in elapsed months? 39

40 Continuous improvement program critical success factors Importance Level Capability Level Gap Peer TP Executive support Competent CI resources Adequate CI staffing levels Adequate level of training of CI Culture; quality focus and Deploying the right CI Governance, accountability, RACI Performance measurement Incentive / reward structure Ability to sustain improvements Low High Low High Peer Top Performer Study Question: What is the level of importance and your capability level of each of the following factors for success of your GBS CI program? 40

41 CI implementation challenges Importance Level Capability Level Peer Gap TP Process standardization Data quality Technology platforms standardization Control over outsourced processes Low High Low High Peer Top Performer Study Question: What is the level of importance and your capability level regarding each of the following challenges to implement and sustain your CI program? 41

42 CI performance reporting practices Soft financial benefits (incl. cost avoidance) of CI projects are measured Hard financial benefits of CI projects are measured Non financial benefits (e.g. quality, cycle time) of CI projects are measured Benefits realization is measured for all CI projects Financial returns (e.g. ROI, IRR, Payback) of individual CI projects are measured Benefits realization is consistently reported to all CI project stakeholders Peer 14% Top Performer 79% 100% 61% 90% 68% 90% 39% 60% 54% 60% 60% Study Question: Please select the options related to measurement and reporting of benefits of CI projects that are applicable to your GBS CI program? 42

43 Six Sigma (reduces variation and defects) Definition Six Sigma is a methodology that uses statistical analysis to measure and improve a company s performance. Customer requirements, design quality, metrics and measures, employee involvement and continuous improvement are the main elements of Six Sigma practice. Advantages/ Benefits Lean: 1. Reduce process variation 2. Continuous quality improvement techniques 3. Customer satisfaction (Voice of the Customer) Note: Hackett research & Issues And Insights/Articles publications/documents/lean-six-sigma.pdf 43

44 Define Measure Analyze Improve Six Sigma DMAIC Methodology Develop Project Charter Determine Customers & Critical to Quality (CTQs) Map High-Level Process Establish and Measure Ys Plan for Data Collection Validate Measurement System Measure Baseline Sigma Identify Possible Xs Test Hypotheses List Vital Few Xs Select the Solution Design Solution, Controls, and Design for Culture Prove Effectiveness Control Note: Hackett research & Juran.com Identify Control Subjects Develop Feedback Loops Develop Process Control Plan to Hold the Gains Implement, Replicate 44

45 Lean (reduces waste and focuses on value) Definition Lean can be considered as the optimal approach of generating products and services with perfect quality and no waste. These principles were once a fundamental shift from traditional operations practice, but have now become mainstream in promoting the synchronization of flow through processes, operations and supply networks. Advantages/ Benefits Lean: 1. Specify Value - as seen by the Customer 2. Identify and Create Value Streams 3. Make the Value flow from raw material to Customer 4. Pull Production not Push 5. Strive for Perfection Note: Hackett research & Issues And Insights/Articles publications/documents/lean-six-sigma.pdf 45

46 Define Value Measure Value Analyze Process - Flow Improve Process - Pull Control Process Lean Methodology Define Stakeholder Value and Critical to Quality Define Customer Demand Map High-level Process Assess for 6S Implementation Measure Customer Demand Plan for Data Collection Validate Measurement System Create a Value Stream Attribute Map Determine Pace, Takt-time and Manpower Identify Replenishment and Capacity Constraints Implement S1-S3 Analyze the Value Stream Attribute Map Analyze the Process Load and Capacity Perform VA/NA Decomposition Analysis Apply Lean Problem Solving to Solve for Special Causes Conduct the Rapid Improvement Event Design the Process Changes and Flow Feed, Balance, Load the Process Standardize Work Tasks Implement New Processes Stabilize and Refine Value Stream Complete Process and Visual Controls Identify Mistake-proofing Opportunities Implement S4-S6 Control Plan, Monitor Results, and Closeout Project Note: Hackett research & Juran.com 46

47 Lean Six Sigma Definition Lean Six Sigma is a synergized concept of Lean and Six Sigma that results in the elimination of wastes (classified as Defects, Overproduction, Transportation, Waiting, Inventory, Motion and over Processing) and long-term defect levels below 3.4 defects per million opportunities. It combines Six Sigma Quality with Lean production speed to achieve major cost, inventory, and lead time reductions Six Sigma This methodology is based on process analysis and improvement Advantages/ Benefits Lean Six Sigma: 1. Increased customer and employee satisfaction 2. Reduced costs 3. Retained business 4. Enhanced reputation 5. Increased competitive advantage 6. Improved staff morale Note: Hackett research & Issues And Insights/Articles publications/documents/lean-six-sigma.pdf 47

48 Lean Methods Six Sigma The Methods Improve Speed Sustain Performance Achieve Breakthrough Results Higher Quality Lower Costs Culture Change Dashboard Results Six Sigma and Lean are both adaptable improvement approaches, but neither is suited to all problems under all circumstances. Note: Hackett research & Juran.com 48

49 The Deming (PDSA) Cycle The Deming Cycle, also know as the Plan Do Study Act (PDSA) Cycle is a systematic series of steps for gaining valuable learning and knowledge for the continual improvement of a product or process. Also known as the Deming Wheel, or Deming Cycle, the concept and application was first introduced to Dr. Deming by his mentor, Walter Shewhart of the famous Bell Laboratories in New York. The cycle begins with the Plan step. This involves identifying a goal or purpose, formulating a theory, defining success metrics and putting a plan into action. These activities are followed by the Do step, in which the components of the plan are implemented, such as making a product. Next comes the Study step, where outcomes are monitored to test the validity of the plan for signs of progress and success, or problems and areas for improvement. The Act step closes the cycle, integrating the learning generated by the entire process, which can be used to adjust the goal, change methods or even reformulate a theory altogether. These four steps are repeated over and over as part of a never-ending cycle of continual improvement. Source: The Deming Institute 49

50 Hackett Performance Studies define and capture how World-class performing organizations are organized, governed, and their savings potential compared to their Peers. The study covers key concepts including service management, governance, performance achievements, technology, and KPIs to assess your performance objectives. Free Studies Participants in these studies will: Learn how you compare with World-class / Top Performers Receive report with key research findings and assessment of your performance Participate by joining the Hackett Research Community or contact pweller@thehackettgroup.com 50

51 Questions or Comments? 51

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