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CRICOS Provider 00109J | www.newcastle.edu.au
1
Process Improvement
Business Process Excellence Strategy
Craig Lehman
Associate Director, Commercial Services
University of Newcastle
National University Finance and Procurement Conference
26-28 July 2010
Karla Stewart
Commercial Relationship Manager
University of Newcastle
CRICOS Provider 00109J | www.newcastle.edu.au
2IntroductionCraig LehmanAssociate Director, Commercial ServicesUniversity of Newcastle
Karla StewartSenior Commercial Relationship ManagerCommercial Services, University of Newcastle
CRICOS Provider 00109J | www.newcastle.edu.au
3Procurement 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.
CRICOS Provider 00109J | www.newcastle.edu.au
4If Procurement was reformed, why do we need a Process
Improvement Strategy?
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5Process Enablers
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6Business Process Excellence StrategyWhy does Procurement need a Process Improvement Strategy?
Decision SupportEvolving
TransactionalNeglected
Strategic Procurement
Tactical ProcurementSupport/Purchasing
GAPProcess Variance
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• 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
EnablingFoundation
Strategic Procurement
Commercial Services Procurement Excellence Profile
CRICOS Provider 00109J | www.newcastle.edu.au
8Business Process Excellence Strategy
Process Improvement Strategy
System Modernisation Strategy
Continued & SustainableEvolution of
Procurement
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9What 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.
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Commercial Services Business Process Excellence Strategy
Customer Focus
Robust Methodolog
y
Pulse Points
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Improvement Strategy Framework
Results
Personallyactively
Involved in improvement
Encouraging & enabling people
To participate inImprovement
Recognizing Individual &Team effort
Identifying & designing
processes to deliverstrategy
Developing Team skills
Aligning Individual &Organisation
Goals
Recognizing People
Establishing Process
managementSystem to be
used
ImplementingProcess Measures
Improving processes
to satisfy andGenerate valueFor customers
Delivery, Value,
reliability
Repurchasesatisfaction
Response Time to
customers
Time to Market
SatisfactionInvolvement Recognition
CompetencyProductivity
DefectsErrors
Improved Control
Process cycle timeProcess costsProductivity
UtilisationReduced work in Progress
StabilitySustainability
Leadership Policy & Strategy
People
Processes
PeopleResults
Key PerfResults
Customer Results
Enablers
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12Business 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.
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10/80/10 Rule
• 10% Incidentals• 80% Value• 10% Waste
New or Aligned Process
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10/80/10 Rule
• 10% Value• 80% Incidentals• 10% Waste
Aged or Misaligned Process
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15Process 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
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16Process Improvement Framework
• DMAIC- Define, Measure, Analyse, Implement,
Control
• DMADV- Define, Measure, Analyse, Design,
Verify
• 3i- Innovate, Improve, Implement
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17Process Improvement Framework Continued
DDefine
improvement goals
Tools used-Pareto charts-Bar Graphs-Pie Charts
MMeasure 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
IImprove
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 provides structure and rigor to problem solving DMAIC provides structure and rigor to problem solving and improving existing processand improving existing process
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Process Improvement Framework Continued
DMADV drives customer needs into service or process designDMADV drives customer needs into service or process design
DDefine
improvement goals
Tools used-Pareto charts-Bar Graphs-Pie Charts
MMeasure 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
DDesign 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
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Innovate Improve Implement
Define
Does MET
exist?
Control
Implement
Develop
Explore
Measure
Control
Implement
Improve
Analyse
Measure
MET Sufficient
?
NOYES
NO YES
NO
3i Model
3i is for a team charged to develop the underlying technology and processes that can meet customer expectations for quality and reliability
2
1
Process Improvement Framework Continued
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20DMAIC Process StoryboardTEAM FORMATION DEFINE MEASURE
ANALYSE IMPROVE - I : Generate Potential Solutions
CONTROL - Standardise FUTURE PLANS
Define, Measure, Analyse, Improve, Control
Objective: Identify and implement the measures required to establish baseline performance and quantify the opportunity.
Output: Team Project Charter, Work Plan, Measurable Customer Requirements, Process Map/Process Analysis
Objective: Identify and verify the root cause(s) of the problem.
Output: Root cause(s) identified.
Cause and Effect Diagram(Fishbone)
Pareto Chart
Checksheet
Objective: Determine possible solutions that will address the identified root cause(s) of the problem.
Action Plan
Step 1Step 2Step 3Step 4Step 5Step 6
Output: Preferred solution or countermeasures
Key Steps:-
•Generate potential solutions•Assess potential solutions•Select preferred solution•Test/Pilot preferred solution•Develop implementation plan
Objective: Implement the preferred solution. Confirm that the problem and its root cause(s) have been reduced or eliminated.
Before
After
Output: Confirmation that the best solution to eliminate the problem & its root cause(s) has been implemented.
Key steps:-•Implement preferred solution•Verify effectiveness•Apply comparative methods if necessary.
Objective: Prevent the problem and its root cause from recurring.
Flowchart Standard procedure
Output: Solution embedded and “routinised” in relevant process, procedures and standards.
Key steps:-•Standardise the solution (standards & procedures)•Document project•Implement scorecard•Implement controls
Objectives: Review team effectiveness, plan to address remaining issues and institutionalise the learning.
Output: Recommendations for future projects and improvements to team processes. Project documentation and learnings “pack”
Potential Solutions
D
MA
C
I
IMPROVE - II: Implement and Check
Objective: Define the Problem/Opportunity, Customers, Customer Requirements, and Process.
Output: A quantified picture of the current process performance, problem impact. The process sigma rating.
Objective: Select problem/ opportunity theme, select team members
Output: Problem/Opportunity selected, Team members selected.
•Develop business case•Develop project team charter•Understand Customer Requirements•Understand the Process.
•Determine what to measure•Understand the measures•Understand Variation•Assess measurement system•Assess process performance
Problem Solving Team
Key Steps:-Key Steps:-
FlowchartTeam charter Cause and Effect Diagram Run chart or
control chart
•Analyse data•Analyse process•Determine potential root causes•Hypothesis Testing•Verify root causes
Key Steps:-
Key Steps:-•Review remaining project opportunities•Review other applications•Review learnings
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• 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
Barriers to Process Improvement Initiative
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Improvement Example
Fleet Management
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23Fleet 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
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24Fleet Management
Innovate Improve Implement
Define
Does MET
exist?
Control
Implement
Develop
Explore
Measure
Control
Implement
Improve
Analyse
Measure
MET Sufficient
?
NOYES
NO YES
NO
3i Model
1
CRICOS Provider 00109J | www.newcastle.edu.au
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Outcomes
• All transactional fleet processes outsourced
• All decision support processes in-sourced
• Surplus resources redirected to commercial systems support
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26Benefits
• 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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THANK YOU
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