Tools for Improvement (1)

1. Tools for Improvement (1) Mahendrawathi ER, Ph.D

2. Streamlining • Main principle: to trim away excess waste and superfluous elements in business processes • Aspect of a streamlined process: it flows easily without resistance lowering the performance level • Several tools for streamlining: • Bureaucracy elimination • Redundancy elimination • Value-added analysis

3. Bureaucracy elimination • Streamlined vs. bureaucracy • Streamlined = efficient & flow easily • Bureaucracy = slow & cumbersome • Bureaucracy often an obstacle… toward process thinking and the transition from departmental to process management • Eliminating bureaucracy  a first natural step when streamlining business processes

4. Typical effect of bureaucracy  unnecessary paper works! • Studies have shown that 60% of office work consists of • Reviewing other’s work • Storing and retrieving information sometimes useful and very often not useful information • Many negative effects, sometimes impossible to measure

5. Approach to eliminating bureaucracy • Track down bureaucracy by asking questions like: • Is the activity performed to inspect or approve someone else’s work? • Does it require more than one signature? • Are several copies made of the result? • Are several copies stored for no apparent reason? • Are copies sent to persons who do not need or use them? • Are persons or departments involved that stifle efficiency and quality of the work?

6. Tracking bureaucracy • Compare flow chart for the process and answer to the above questions • Activities connected to review, approval, signing or inspection are colored blue • Persons responsible for each “blue” activities present an overview if time and costs related to the activity as well as its usefulness • Activities that cannot be justified are eliminated

7. Another sign of bureaucracy • Unlimited use of copier or access to large filling cabinets  about 90% of all documents stored in an organization are never used again

8. Redundancy Elimination • Especially for administrative processes  many identical or similar activities are often performed at two or more places in the process • Different departments perform their tasks independently • Impact: • Increase process costs • Increase possibility of conflicting data • How to avoid it? • No easy tricks • Go through each of the activities and results associated with the process • Identify and eliminate activities, documents and results generated more than once

9. Value Added Analysis • A central concept in the streamlining processes • When a product passes through the company and is transformed from raw materials into finished goods, two things really happen to its value: • By supplying materials, labor, energy etc the process incurs costs for the organization • By adding to the product quality, the product experiences and added value • The challenge: how to ensure that the value of the product (express in terms of what the market is willing to pay) > cost

10. Added Value • Added Value = Value after processing – Value before processing • Process in an organization can be divided into three categories: • Real Value Adding Activities (RVA): activities that from the end customer’s point of view add value to the product • Organizational Value Adding Activities (OVA): activities that from the end customer’s point of view do not add any value, but that are necessary from the organization’s point of view • Non Value Adding Activities: activities that neither from the customer’s nor from the organization’s point of view add any value

11. Value-added analysis • Analysis of each single activity in the process to determine their contribution to the added value for the end customer • Classify all activities • RVA: marked green • OVA: marked yellow • NVA: marked red • Work to optimize OVA and eliminate NVA

12. General advice for removing NVA and minimizing OVA • Rework can only be eliminated by eliminating the source causing the error to occur in the first place • Pure movement of documents or other information can be minimized by combining operations, moving people closer to each other etc • Waiting time can be minimized by combining operations, balancing the work load or automation • Most output of NVA can be eliminated if management accepts it • Inspection and control can be eliminated by changing policies and procedures

13. Process Cycle Time Reduction • Motivation: time is money! • Product should be delivered to the customer as fast as possible • Long cycle time results in • Higher inventory • Higher costs • Typical efforts to remedy long cycle times: • Perform activities in parallel instead of in sequence • Change the sequence of activities • Reduce interruptions • Improved timings

14. Cycle time reduction is paramount in what industry???? • Seasonal • Short product life cycle • E.g. Apparel industry

15. Example: How ZARA change reduce cycle time Initial Process Scan fashion shows Product Design Purchase Fabrics Mfg Dist

16. Reengineered Process Scan fashion shows Efficient distribution with sorting & MH technology Final Design Initial Design Purchase Fabrics Mfg Dist After spotting new trends After obtaining reliable data from stores

17. Dealers Germany Nordic Plant 1 H v SMTS DMTS Spain SMTS SMTS SMTO SMTS SMTO SMTS MTS MTS MTS MTO MTS MTO DMTO DMTS DMTS DMTS DMTS DMTO H SMTS MTS DMTS SUPPLIER Consolidators C H e.g S. America UK Nordic Plant 2 H SMTS DMTS Dealers Italy SUPPLIER H East European & North Africa H US Plant 1 NL SMTS DMTS H SMTS MTS DMTS France H US Plant 2 S S S S S S S S D D D D D D D D SMTS DMTS Often supply chain networks are highly complex when mapped out MTS S Material flow Make to stock e.g Kits Source Example of spares & consumables for medical equipment D Deliver Customer Order flow H Hospitals Finished goods Replenishment Order flow

18. Dealers Germany Nordic Plant 1 SMTS DMTS H SMTS SMTO SMTS SMTS SMTO SMTS MTS MTO MTO MTS MTS MTS DMTS DMTS DMTO DMTO DMTS DMTS SMTS MTS DMTS Spain H SUPPLIER Nordic Plant 2 Consolidators C H SMTS DMTS e.g S. America UK S&C hub H SUPPLIER Dealers Italy US Plant 1 H SMTS DMTS East European & North Africa H NL SMTS MTS DMTS H US Plant 2 France SMTS DMTS S S S D D D H Alternative ‘configurations’ can simplify the flows significantly Example of spares & consumables for medical equipment MTS S Material flow Make to stock e.g Kits Source D Deliver Customer Order flow Replenish Order flow H Hospitals Finished goods

19. Example - current Supply Chain configuration Local Market Forecasts Local Market Forecasts Local Market Forecasts Local Market Forecasts Local Market Forecasts Local Market Forecasts Local Market Forecasts Local Market Forecasts Local Market Forecasts Local Market Forecasts Local Market Forecasts Pipeline Stock (SIT) Distribution Inventory In Market Sales Forecasts Local Market Forecasts Distributor Orders NRP’s NRP’s NRP’s Supply Source Supply Source Supply Source Supply Source UK – Stakehill 1 Dist. Centre UK – Stakehill 2 Dist. Centre UK - Heywood Dist. Centre Local Market Customer Care Group Planning NRP Group Planning Shipping Department Euro - Leerdam Dist. Centre USA - Anderson Dist. Centre UK - Newcastle Dist. Centre Customers Customers Customers

20. Example - future configuration……… NRP’s NRP’s NRP’s NRP’s Supply Source Supply Source Supply Source Supply Source Supply Source Supply Source Supply Source Local Markets Group Planning Strategic Planning Customers Customers Customers