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BASF’s SCM Learning System

BASF’s SCM Learning System. Southeast District Meeting February 08-09, 2008 Alan L. Milliken CFPIM CIRM CSCP. Value-Based Management Approach. The company’s definition of success will define the contents of the learning system.

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BASF’s SCM Learning System

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  1. BASF’s SCM Learning System Southeast District Meeting February 08-09, 2008 Alan L. Milliken CFPIM CIRM CSCP

  2. Value-Based Management Approach The company’s definition of success will define the contents of the learning system.

  3. Where does Supply Chain Capability Fit in the Operations Planning & Execution Model? Identification of Customers, Products, Competition, Socioeconomic Environment Market & External Environment Analyses Overall missions & goals of the Organization, Recognition of Distinctive Competencies. Corporate Strategy Must develop the supply chain expertise required to plan & execute strategy. Competitive Priorities(Cost, Quality, Time, Price, etc..) Future Direction (Global Strategy, New Products & Services, etc…) Capabilities current needed plans Functional Area Strategies Finance Marketing Operations others Source: Operations Management, Fifth Edition, Krajewski & Ritzman

  4. BASF’s Vision 2015 Form the best team in theindustry Help our customers to be more successful Earn a premium on our cost of capital Ensure sustainabledevelopment None of these strategies can be achieved without competent employees who have been provided the necessary capabilities (behavior, knowledge, & skills) to succeed.

  5. Value-Based Management Concept Value can be created by: • increasing Profit and/or • reducing capital employed(e.g., inventories, receivables) Profit Reducingcapitalemployed Source: Kurt Bock – Chief Financial Officer – BASF Group

  6. Who in the Organization Can Create Value? All employees can create value by optimizing the value drivers in their day-to-day business, e.g., by: • increasing sales through higher prices and/or sales volumes • reducing costs • optimizing inventories and receivables • using production plants optimally Source: Kurt Bock – Chief Financial Officer – BASF Group

  7. Value Creation Driver Tree Value Drivers • Pricing • Product mix • Business model • Innovation (product and business models) + Sales revenue Profit • Variable manufacturing costs • Raw materials costs • Shipping costs • Packaging costs • Transport costs - Variablecosts EVA after costs of capital • Fixed manufacturing costs • Process innovation Fixedcosts - • Inventories • Receivables • Forecast reliability • Payment terms/dunning Working capital Costs of capital X% • New investments • Investments in expansions • Debottlenecking Fixedassets Source: Kurt Bock – Chief Financial Officer – BASF Group

  8. Example: Supply Chain/Marketing & SalesCase study from a BASF business unit • Sustainable reduction in current assets by $120m (= ca. 25%) • Streamlining of product range • Forecast reliability • Batch size optimization • Simplification of global warehouse structures • Shorter payment terms • Improved Inventory Control Sales revenue Profit Variablecosts EVA after costs of capital Fixedcosts Working capital Costs of capital Fixedassets Source: Kurt Bock – Chief Financial Officer – BASF Group

  9. Identifying and Defining Key Personal & Technical Competencies

  10. Adding Value through Individual Competency The “Best Team” can be built by fostering the use of personal and professional competencies. Competencies describe the personal behavior, skills, and knowledge of a person. Competencies differentiate individual performance and contribution to the team. There are two types of competencies: Describe capabilities in a specific area of knowledge (e.g. Supply Chain Management) and are based on education & experience. Refer to capabilities based on personality, personal trait, and values. Success Competencies enable employees to create value!

  11. Examples of Personal Competencies Improve your ability to guide and inspire employees to meet their maximum potential and the ability to work on a team. Improve your ability to develop and maintain collaborative working relationships (inside & outside the firm) and express facts and ideas in a convincing manner. Lead to better utilization of resources, improved decision making, more creativity, and the ability to manage change.

  12. Sample Definition of a Personal Competency Once the list of personal competencies is developed, a detailed definition of each is required. For example many supply chain roles require competency in “Analytical Thinking.” • Analytical Thinking is the ability to identify key issues and relationships, patterns and connections buried in a mass of data. A person in a job role requiring this competency should demonstrate: • the ability to break down problems and identify basic relationships • see inter-relationships in complex information • do complex analyses including “what-if” and “if-then” scenarios

  13. Examples of SCM Technical Competencies • Information Technology • ERP System • Advanced Systems • PC Skills • SCM Competencies • Demand Planning • Supply Planning • Execution & Control • Inventory Management • Distribution & Transportation • Foreign Trade • General Skills • Continuous Improvement • Project Management • Contract Management • Data Analysis Technical Competencies describe capabilities in a specific functional area and are based on education and experience. Each operational function must define those Technical Competencies needed to successfully implement their strategies.

  14. Define Levels of Technical Competency Once Technical Competencies are identified, definitions of progressive levels are needed to define specific job requirements. • Competency:Business Applications Knowledge – ERP System • Level 1: Beginning • Completed ERP Overview Training for SCM • Know how and where to find and use ERP tip sheets • Can use ERP online help functions • Understand basic system operations and/or commands within ERP System • Can modify a user profile • Know how to enter master data in your area of responsibility • Understand how others are impacted by your inputs into the ERP System • Can enter a Help desk ticket for the ERP System

  15. Define Levels of Technical Competency (Continued) • Competency:Business Applications Knowledge – ERP System • Level 2: Contributing • Can use the ERP System to support daily job activities • Know how to use display and reporting functionalities to find information outside your immediate area • Understand how to maintain material master data and implications for other functions • Can identify and resolve routine errors in configuration and data entry • Know basic configuration settings and how to modify these to meet business needs • Make suggestions on how to use the ERP System more effectively • Monitor and provide feedback regarding how well the system is being used

  16. Developing the Competency Curriculum

  17. Major Components of the Technical Competency Curriculum APICS Certified in Production & Inventory Management (CPIM) is a BASF global standard for supply chain planners (e.g. Master Schedulers, Demand Planners, Material Planners, etc..). The five CPIM modules are available via the on-line Supply Chain Academy, through local APICS chapters, and through self-study. Certified Supply Chain Professional (CSCP) is recommended for those who already achieved CPIM Certification or persons in supply chain functions other than production & inventory management who meet the eligibility requirements. SAP R3 Training SAP specific concepts, processes and transactions training is available via the SAP Training website. Supply Chain Academy (SCA) SCA is an on-line education & training tool used at BASF. It contains approximately 200 on-line courses including the APICS CPIM body-of-knowledge. In-House Classes BASF offers in-house classes that focus on supply chain management at BASF in SAP R3.

  18. Strategic Management of Resources Master Planning of Resources Detailed Scheduling & Planning Execution & Control of Operations Philosophies Strategies Targets Product Demand Material Plan Internal Resource Capacity Plan External Resource Supplier Plan BASICS of SUPPLY CHAIN MANAGEMENT APICS CPIM House of Knowledge

  19. Typical Education Approach Master Planning of Resources F O R E C A S T I N G S & OP M A S T E R P L N G. Strategic Plans Financial Plans Business Planning Sales & Operations Planning Rough-cut Capacity Planning Demand Management Master Scheduling APICS CPIM Approach The CPIM program emphasizes process including integration points, measurement & feedback, and business specific application.

  20. SAP Training for the Master Scheduling Role

  21. Sample of Supply Chain Academy (SCA) Courses Sales & Operations Planning SCA Sales and Operations Planning Concepts (MFG107) Self - Study .5 Hour l – The sales and operations planning process is impacted by various elements of the business environment, integrates the multiple plans of a business, and pr ovides direction for subsequent more detailed and near - term planning. This course explores the concepts that impact the sales and operations planning process and the ways that the process can be adapted to fit various environments. SCA Sales and Operations Planning Process (MFG108) Self - Study 1 Hour l – This Online Self - Study course explores the five primary steps in the sales and op erations planning process. It also discusses the roles and responsibilities of ind ividuals involved in each step. SCA Developing and Validating the Production Plan (MFG201) Self - Study 1 Hour l – The production plan is a key output of the sales and operations planning process that sets product family production volumes for all subsequent priority planning processe s. This course explores the development and validation of the production plan and the measur ement of the performance of the production planning process. S&OP Basic Concepts

  22. Sample of BASF In-House Classes Sales and Operations Planning • Integration of Demand Planning (BASF-SOP-C1) 1 Hour • Review the output of Demand Management process flow. Determine the reasons to integrate the sales forecast and the appropriate levels. What are product families? How should they be applied? Definition of Roles and Responsibilities are established. SAP interface highlights – key transactions, and screen identification. • Integration of Supply Planning (BASF-SOP-C2) 1 Hour • This module covers the development of the Operations Plan – Volume and Rates at the family level. The technique of applying Rough-cut Capacity Planning is presented. Definition of Roles and Responsibilities are established. SAP interface highlights – key transactions, and screen identification. • Pre-S&OP: Supply / Demand Balancing (BASF-SOP-C4) 1 Hour • This class covers the balancing of operations to that of Demand / Supply strategies. Review the importance to identify resource conflicts and identifying those areas where agreement could not reached. SAP interface highlights – key transactions, and screen identification. How to Do S&OP at BASF in SAP

  23. BASF 2015 HPO 2006 Required Competencies Training Available Value Based Management (Learning Portal) Earn a premium on our cost of capital Business and Financial Acumen Financial Essentials (HMMP) Marketing Essentials (HMMP) Focusing on your customer (HMMP) Help our customers to be more successful Customer Focus Marketing Essentials (HMMP) Marketing & Sales Academy (to be launched in 2nd quarter) Leading a team (HMMP) Form the best team in industry Leading Employees to Success/Teamworking Keeping teams on target (HMMP) Working with a virtual team (HMMP) Ensure sustainable development Environmental, Safety and Health Orientation The Journey to EH&S Excellence (to be launched in 3rd quarter) Harvard Mentor Management Program (HMMP) is used to support Global/Personal Competencies.

  24. Curriculum for Technical Competencies Once Technical Competencies are identified and defined, a curriculum must be identified and/or developed for each one. Below is a curriculum for Inventory Management. ***Note: Pre-requisite is APICS BSCM

  25. Implementing a Competency-Based Process

  26. Prioritize Competencies by Position/Role In order to determine what education & training an employee needs, Competencies must be prioritized by job. Review of existing job descriptions, review of current objectives for the position, and surveys of experts, incumbents, and leaders can be used to prioritize Competencies. Note: Some competencies are company specific (e.g. Product Knowledge, Manufacturing Knowledge, Internal Business Knowledge, etc..) and education & training must be developed in-house.

  27. Evaluate Individual Needs & Develop Plans Self Evaluation: plus Performance & Development Review with Your Leader = a Plan

  28. Example of an Individual Plan Note: The Cost Center Leader must approve both the content and cost of each Plan in their group.

  29. Assessments of Learning – Key Points • All courses should include post-assessment (e.g. review quiz, simulation of knowledge, etc..). • Major courses (e.g. >4 hours in duration) should also include pre-assessment to help in determining focus areas and periodic reviews to reinforce learning throughout the course. • Thresholds to pass internal assessments (not external certifications) should be set relatively low to motivate and reward participation. • Assessment results should always be kept confidential and only the highest score should be stored when multiple attempts are required.

  30. Key Performance Indicators (KPIs) KPI’s can be used to measure participation and confirmation of learning. Examples include: • No. of Education & Training Hours Taken per Year • No. & Percent of Employees Participating • Number of Exams Passed • Certifications Received

  31. Measuring ROI on Learning Efforts Note: It is not easy to tie individual learning directly to company performance, particularly given the limited span-of-control that most employees have and the fact knowledge is only one key factor in success. However, major education & training programs should result in overall improvement as well as individual improvement. Below is an example: • Actions Taken: • all Planners, Schedulers, and Buyers received APICS CPIM Education & Training • New knowledge was used to establish Inventory KPI’s for each group • New knowledge was used to improve inventory control processes and use of ERP system (e.g. update planning factors, discontinue spreadsheets, etc..) Results:

  32. Identify & Define Global (Personal) Competencies Identify & Define Technical (SCM) Competencies Prioritize Competencies by Position (4-6) Develop Curriculum by Competency Assess Individual Needs based on Position Develop Individual Education & Training Plans Monitor Progress and Provide Feedback Summary of the Learning Process

  33. Current Status at BASF

  34. APICS CPIM is required to advance.

  35. APICS CPIM is a Global Standard at BASF CPIM Certifications as of September, 2007

  36. CPIM Exams Passed in BASF (Aug 06-Jul 07)

  37. APICS CPIM Program in NAFTA (2008) • APICS CPIM Program to be offered in-house via intranet: - New SC Planner position requires APICS CPIM at level 3 & above - Acquisitions resulted in addition of over 60 Planners-Schedulers • Classes to be taught by Alan Milliken; Examples used in class will come from BASF and SAP R3. • Class enrollment for first class (Basics of Supply Chain Management) was 112 employees (64 from acquired businesses and 48 from legacy businesses) • Class enrollment for second class (Master Planning of Resources) is 136 employees. • Plan is to complete all five modules during next 15 months.

  38. Status of SCM Learning at BASF • approximately 90 APICS CPIMs and 40-50 in progress globally • Thirteen Certified Supply Chain Professionals (CSCP’s) • Individual Training Plans in place for approximately 75% of SCM employees in NAFTA • usage of e-Learning tools has increased with 80-100 employees taking online supply chain courses globally each month • global roles and associated core competencies developed and agreed to • enhanced curriculum including BASF specific courses available • Over 100 employees enrolled in Advanced classes on how to do SCM at BASF in SAP R3. • 192 APICS Members in NAFTA via Enterprise Membership

  39. BASF is Committed to Supply Chain Excellence Award for Outstanding Supply Chain Performance This year is the first of three consecutive years BASF is awarding the "Supply Chain Project of the year". The award is given for innovative solutions in supply chain management and outstanding performance in implementing supply chain concepts. Chief Financial Officer Dr. Kurt Bock is sponsoring the award. All employees in operational, service and functional units within the BASF Group – up to and including the director's level – can apply. Only teams can submit projects. Applications can be submitted through the Head of Business

  40. 2003-2006 BASF SCM/Logistics Competency Related Activities Organization: • NAFTA Learning CoE Team formed (One representative from each function) • Global SCM Competency Team formed (one representative from each Region) • NAFTA MM Education & Training Team formed • NAFTA MM Job Structure Team Formed (HR, Bus. Log., Corp. Log) 2003 2004 2005 2006 Highlights: • Competency based Training Plans in place for approx. 75% of NAFTA Logistics Employees • Enhanced Technical Competency Curriculum under development for MM. (IT, Logistics) • MM Job Structure under review. • MM Job Structure (SC Plnr.) Finalized Approved. • MM Jobs Technical Curriculum& Courses Developed • NAFTA Logistics updated competencies by job role. Curriculums were developed for Technical Competencies • Global SCM Competency Team agreed upon standard roles & associated competencies. SCA adopted globally. • NAFTA Learning CoE developed curriculum for Global Competencies to be supported by HMMP • Supply Chain Academy (SCA) piloted globally. Global Team Began discussing PCDC effort. • APICS CPIM adopted Globally

  41. Practice Exercise: Competencies by Job SC/Logistics Mgr. – the person responsible for planning, organizing, and controlling supply chain/logistics activities. Master Production Scheduler – the person charged with establishing, managing, reviewing, and maintaining a master schedule.

  42. Practice Exercise: Response at BASF

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