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Business Process Excellence Strategy

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Presentation on theme: "Business Process Excellence Strategy"— Presentation transcript:

1 Business Process Excellence Strategy
Process Improvement Business Process Excellence Strategy National University Finance and Procurement Conference 26-28 July 2010 Craig Lehman Associate Director, Commercial Services University of Newcastle Karla Stewart Commercial Relationship Manager University of Newcastle

2 Introduction Craig Lehman Associate Director, Commercial Services University of Newcastle Karla Stewart Senior Commercial Relationship Manager Commercial Services, University of Newcastle

3 Procurement Reform Procurement organisations must
balance the desire to leverage purchasing power through complete ownership with the need to maintain the flexibility of the individual business units, functions, and regions. Faculty’s/Divisions Requirements Inputs Timing Procurement Mechanical Process Faculty’s/Divisions Requirements Inputs Timing Procurement Planning Benefits & Risk Outcomes Over the past 2 years the university’s procurement has undergone significant reform. This was to position procurement into a sustainable value add decision support operation for the organisation. The result has been a more balanced approach to procurement with capability across both tactical and strategic requests from the organisation.

4 If Procurement was reformed, why do we need a Process Improvement Strategy?

5 Process Enablers Policy Strategy/ Guidelines Technology Process There are 3 levels of enablers for process, policy, strategy and guidance, and technology. These enablers direct the related process transactions that converts inputs to results or outputs. When variation or change occurs in any of the levels of enablers, this will create process variation or defect.

6 Business Process Excellence Strategy
Process Improvement March 2000 Business Process Excellence Strategy Why does Procurement need a Process Improvement Strategy? Tactical Procurement Support/Purchasing Strategic Procurement Transactional Neglected Decision Support Evolving GAP Process Variance Commercial Services Procurement function has evolved significantly since 2008 and continues to evolve and although the evolution has been one of a strategic nature, the focus has shifted away from tactical and supporting processes. This has created a gap in process and system support of the procurement function which in turn creates inefficient and ineffective business and system process i.e process variance

7 Strategic Procurement
Commercial Services Procurement Excellence Profile Contribution and Influence Process & Controls External and Internal Relationships Supplier Relationship Management Effective Use of Available Technology Staff Capability and Development Structured Approach to Effective Sourcing (DMAIC) Sustainable Procurement Enabling Foundation Strategic Procurement A key to Commercial Services procurement reform was to establish a procurement excellence profile. This represents the essential building blocks necessary to underpin what we believe to be a high performing procurement operation. However, the remaining 2 enablers have generated the gap in supporting processes of the procurement function. To assist in development of these remaining 2 enablers, CS have implemented a Business Process Excellence Strategy

8 Business Process Excellence Strategy
Process Improvement Strategy System Modernisation Strategy Continued & Sustainable Evolution of Procurement The Business Process Excellence Strategy consists of two supporting strategies, Process Improvement Strategy and a System Modernisation Strategy. This is to ensure that the continued development of the procurement function is sustainable.

9 What are our Objectives?
Organise and develop our operations to suit our internal customers and stakeholders Provide increased value and benefits by improving services and offerings available to staff and students. Be recognised as a business excellence centre for continuous improvement How? By aligning the 3 levels of process enablers to meet changing requirements. Policy Strategy/ Guidelines Technology Process

10 Commercial Services Business Process Excellence Strategy
April 1, 2017 Pulse Points Commercial Services Business Process Excellence Strategy Customer Focus Information Driven Robust Methodology The recognised pulse points for the strategies are Customer, Information, Methodology and these ensure that our process improvement efforts are valuable to the internal and external stakeholders and customers. These pulse points feed directly into our improvement framework

11 Improvement Strategy Framework
Enablers Results Personally actively Involved in improvement Establishing Process management System to be used People People Results Competency Productivity Key Perf Results Recognizing People Satisfaction Involvement Stability Sustainability Recognition Aligning Individual & Organisation Goals Implementing Process Measures Encouraging & enabling people To participate in Improvement Response Time to customers Process cycle time Process costs Productivity Developing Team skills Delivery, Value, reliability Utilisation Reduced work in Progress Improving processes to satisfy and Generate value For customers Time to Market Recognizing Individual & Team effort Identifying & designing processes to deliver strategy This ensures that key enablers and pulse points of process as well as outcomes and results are considered and identified. Repurchase satisfaction Defects Errors Improved Control Leadership Policy & Strategy Processes Customer Results

12 Business Process Business process can be defined as a chain of logical connected, repetitive activities that utilises the organisation's resources to refine an object for the purpose of achieving specified and measurable results for internal or external customers. We define Business Process as a logical series of related transactions that converts input to results or output. Process contains a level of value, incidental and waste transactions.

13 New or Aligned Process Value 10/80/10 Rule Waste Incidentals
We view process by a 10/80/10 rule. New and aligned processes generally contain 10% Incidentals, 80% value, and 10% waste.

14 Aged or Misaligned Process
Incidentals Waste Value 10/80/10 Rule 10% Value 80% Incidentals 10% Waste Aged and misligned processes generally contain 10% value, 80% incidentals, and 10% waste. In order to reduce and eliminate waste and variance in process, we had to improve or redesign by way of a process improvement methodology.

15 Process Improvement Methodology
Six Sigma Lean Thinking Theory of Constraints (TOC) ISO 9000 Quality Standards Total Quality Management (TQM) Toyota Production System (TPS) Deming (PDCA) Juran Becker PI To implement our strategies and improvements we needed a robust methodology. There are numerous process improvement methodologies available of which we have listed just some of the well known ones. We chose Six Sigma.

16 Process Improvement Framework
DMAIC- Define, Measure, Analyse, Implement, Control DMADV- Define, Measure, Analyse, Design, Verify 3i- Innovate, Improve, Implement Our methododology includes Six Sigma variations and these are, DMAIC, DMADV, 3i or as we call it MET (Most Effective Technology).

17 Process Improvement Framework Continued
April 1, 2017 DMAIC provides structure and rigor to problem solving and improving existing process D Define improvement goals Tools used Pareto charts Bar Graphs Pie Charts M Measure current performance Tools Used MSA Box Plots Dot Plots Histograms A Analyze the system to determine ways to improve it Tools Used Regression Correlation Hypothesis testing I Improve the system –remove variation and non value added criteria Tools Used -DoE ANOVA Surface Response Testing C Control the system so problems don’t recur Tools used Poka Yoka Flagging Control Charts DMAIC is a basic component of the Six Sigma methodology- it is a way to improve existing work processes by eliminating waste and aligning with desired process outcomes.

18 Process Improvement Framework Continued
April 1, 2017 Process Improvement Framework Continued D Define improvement goals Tools used Pareto charts Bar Graphs Pie Charts M Measure current performance Tools Used MSA Box Plots Dot Plots Histograms A Analyze the system to determine ways to improve it Tools Used Regression Correlation Hypothesis testing D Design new services or processes Tools Used Predictive Models Simulation Prototypes Pilot runs V Verify design effectiveness in the real world Tools used Poka Yoka Flagging Control Charts DMADV is for designing new process and services. It’s relationship to DMAIC ends after the first 3 stages, Define Measure and Analyse. DMADV drives customer needs into service or process design

19 Process Improvement Framework Continued
3i Model Define Innovate Improve Implement Does MET exist? NO YES Measure Measure Explore Analyse 2 Develop MET Sufficient? NO YES Implement Implement 1 NO The 3i concept is better known to Commercial Services as Implement MET or “Most Effective Technology.” MET is comprised of three levels: • Corporate leverageable technology, referred to as MET-1 • Business leverageable technology, referred to as MET-2 • And, location specific technology, referred to as MET-3 For the purposes of this model, technology encompasses both the process and the underlying technology to support the process. If modification is required, a determination is made if improvements to an existing MET will meet the requirements. If the answer is ”yes,” (1) then improvements are made and implemented. If the answer is “no,” (2) then it is shifted over as an “innovate project.” Control Improve Control 3i is for a team charged to develop the underlying technology and processes that can meet customer expectations for quality and reliability

20 DMAIC Process Storyboard
TEAM FORMATION DEFINE MEASURE Objective: Select problem/ opportunity theme, select team members Objective: Define the Problem/Opportunity, Customers, Customer Requirements, and Process. Objective: Identify and implement the measures required to establish baseline performance and quantify the opportunity. Team charter Key Steps:- Key Steps:- Cause and Effect Diagram Run chart or control chart Flowchart Determine what to measure Understand the measures Understand Variation Assess measurement system Assess process performance Develop business case Develop project team charter Understand Customer Requirements Understand the Process. Output: Problem/Opportunity selected, Team members selected. Output: Team Project Charter, Work Plan, Measurable Customer Requirements, Process Map/Process Analysis Output: A quantified picture of the current process performance, problem impact. The process sigma rating. ANALYSE IMPROVE - I : Generate Potential Solutions Objective: Identify and verify the root cause(s) of the problem. Objective: Determine possible solutions that will address the identified root cause(s) of the problem. Key Steps:- Cause and Effect Diagram (Fishbone) Pareto Chart Checksheet Key Steps:- Analyse data Analyse process Determine potential root causes Hypothesis Testing Verify root causes Potential Solutions Action Plan Generate potential solutions Assess potential solutions Select preferred solution Test/Pilot preferred solution Develop implementation plan Step 1 Step 2 Step 3 Step 4 Step 6 Step 5 Output: Root cause(s) identified. Output: Preferred solution or countermeasures IMPROVE - II: Implement and Check CONTROL - Standardise FUTURE PLANS Objective: Implement the preferred solution. Confirm that the problem and its root cause(s) have been reduced or eliminated. Objective: Prevent the problem and its root cause from recurring. Objectives: Review team effectiveness, plan to address remaining issues and institutionalise the learning. A Six Sigma storyboard is developed to provide a real-life example of the application of the methodology to improve the process. This document is a living document and communication tool throughout the improvement process. Key steps:- Key steps:- Flowchart Standard procedure D M A C I Before After Key Steps:- Implement preferred solution Verify effectiveness Apply comparative methods if necessary. Standardise the solution (standards & procedures) Document project Implement scorecard Implement controls Define, Measure, Analyse, Improve, Control Review remaining project opportunities Review other applications Review learnings Output: Recommendations for future projects and improvements to team processes. Project documentation and learnings “pack” Output: Confirmation that the best solution to eliminate the problem & its root cause(s) has been implemented. Output: Solution embedded and “routinised” in relevant process, procedures and standards.

21 Barriers to Process Improvement Initiative
April 1, 2017 Barriers to Process Improvement Initiative Objectives of the initiatives not clear Value of the Implementation not recognized Perception that process improvement is time consuming Lack of understanding improvement strategies Lack of understanding benefits of process improvement Not confident during the early stages Lack of management support Expectation of instant results Lack of adequate coaching Unwillingness to invest unless results seen

22 Improvement Example Fleet Management

23 Fleet Management Problem Statement or the Case for Change
Growing CAPEX Fleet Budget Growing Fleet size and operational costs Under utilised third party fleet management system. No decision support data for management of fleet and sourcing. Tactical sourcing of Fleet requirements The 1st step that we take is we complete a charge document. This will identify Problem/Opportunity. Creates a Problem Statement. This then will allow for the correct improvement framework to be used for improvement or design.

24 Fleet Management 3i Model 1 Process Improvement March 2000 Define
Innovate Does MET exist? Improve Implement NO YES Measure Measure Explore Analyse Develop MET Sufficient? NO YES Implement Implement The 3i model was chosen as the preferred methodology for improvement. Is was chosen as a MET 2 improvement. ‘As is’ was defined and measured for both process and system capability by using process flow charts with desired transaction and decision support process identified. This included process tasks, process outcomes and process control points. The desired system output was identified, The current technology was sufficient, improvements made, UAT conducted and then implemented. 1 NO Control Improve Control

25 Outcomes All transactional fleet processes outsourced
Process Improvement March 2000 Outcomes All transactional fleet processes outsourced All decision support processes in-sourced Surplus resources redirected to commercial systems support

26 Process Improvement March 2000 Benefits Increased support for procurement function through decision support data and systems. Reduced Fleet CAPEX budget by 84% from 2008 to 2010 Sustained fleet size with requirements increasing 2.9%.


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