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2006 Northeast Supply Chain Conference &
Educational Exhibition
Managing your internal
suppliers
Michael O’Connor Ph.D.
2006 Northeast Supply Chain Conference &
Educational Exhibition
Contents
• The internal supply chain
• The transformation process
• Current enablers
– Balanced scorecards
– Six Sigma
– Lean
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2006 Northeast Supply Chain Conference &
Educational Exhibition
The internal supply chain
2006 Northeast Supply Chain Conference &
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The Transformation Process
1.Working together.
2.Fixing your manufacturing processes.
3.Winning back the spare parts business.
4.Marketing existing products.
5.Revamping new product development.
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2006 Northeast Supply Chain Conference &
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The internal supply chainThe steps for fixing your manufacturing processes are:1. Identify shaker/mover (not a bobble head).2. Baseline present performance.3. The build and test procedures, the defect collection system, and status of build procedures.4. Optimizing the build process. 5. Source inspection procedure.6. Install and warranty start processes.7. Process support.8. PO spec review process.
2006 Northeast Supply Chain Conference &
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Customer/
Shareholder/
Stakeholder
Requirements
C
T
Q
s
Business
Strategy
(S1)
Business Process
Business
Results
Process
Performance
Measures
(Capabilities)
Performance
Core and
Enabling
Process Goals
Tools for
Managing Performance
•Process Management (BPMS)
•Quality Systems (ISO)
•Design (DMADV)
•Improvement (DMAIC)
•New Product Introduction (NPI)
Resources for
Driving Performance
•Business Quality Council (BQC)
•Champions
•Master Black Belts
•Black Belts
•Green Belts
Critical Elements In The Drive For Excellence
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Customer
CTQs
Process
Performance
Goals
Required
Process
Capabilities
Strategic
Objectives
Maximizing The Impact Of Core ProcessesHow Improvement Priorities Were Developed
2006 Northeast Supply Chain Conference &
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Process
Performance
Goals
Required Process
Capabilities
Outcomes that will
contribute to the
accomplishment of
one or more of the
CTQs Process performance
attributes (cycle
time/accuracy) that will
contribute to the
accomplishment of Process
Performance Goals
CTQs Are Drivers Of What We Seek To
Achieve In A Core Process
• Considered critical to
customer satisfaction
and retention
• Are stated in
objective, measurable
terms
• Are defined in the
process SIPOCs, for
example:
-Defect-free
-Delivered when
promised
-Timely response
-100% complete,
clean, on-time
service
Customer
CTQs
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Legal
14.0
Financial
Support
Services
3.0
Site
Initial-
ization
13.0
Business
Develop-
ment
12.0
Staffing
7.0
Training
8.0
IT
9.0
Market-
ing
11.0
EXTERNAL CUSTOMER CTQs -Core Processes
INTERNAL CUSTOMER CTQs - Enabling Processes
ORDER TO IN-SERVICE
2.0
OPERATIONAL SUPPORT SERVICES
4.0
REMARKETING
6.0
MAINTENANCE & REPAIRS
5.0
Core Processes And Key Enabling Processes
SALES
1.0
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Productivity
Order to
Inservice Cycle Time
120 days by 1999
Speed of Providing
complete deals to
contract admin
2.1 Contract Prep
Cycle Time
5 days
2.0 STRATEGY
PROJECT
Teams 37,43
Speed of
Processing
executable
contract package
Speed of Order
Fulfillment
2.2 Deal Approval
Cycle Time
2.3 Issue P.O.
Cycle Time
7 days 5 days
Speed of OEM
build, in-service
center and
delivery
Able to Inservice
a unit to
customer in 1 day
2.4 Build & Deliver
Cycle Time
2.5 Inservice Unit
Cycle Time
100 days 1 day
PROJECT
Teams 2,3,21,33
PROJECT
Team 2
PROJECT
Team 12,22,46
PROJECT
Teams 10,23,36,37,54
Delivery of new unit,
to district,from OEM
not requiring
district capitalized
repair orders
District capitalized
Repair Orders
<5% of district
Inserviced Vehicles
Market GrowthShare Growth
New Unit cost
equal to rated cost
95% of units
delivered at rated
cost by 4th qt 1999
Non Executable
deal cycle time
14 days from
receipt in Contract
Admin by end 1999
Speed of correcting
non executable
deals
2.2.2 Record Approvals
Cycle time
14 days
PROJECT
Team 2,33
PROJECT
Team 12,54
∗ Team 7 DMADV touches all cycle time measures.
• Bold outlined Capability represents current BPMS measures.
ORDER TO INSERVICE STRATEGY / CTQ DRILL DOWN CHART
Applying SalesNet
to every deal
submitted
2.6 SalesNet
Communication
TBD
PROJECT
Team ?
All Information
In SalesNet
TBD
100% of time
PROJECT
Team ?
Percent of deals
coming through
SalesNet
100% SalesNet
Usage
by end 1999
Strategic
Objective
Dashboard
Goal
Capability
BPMS Measure
Process Goal
Projects
Total Excess Cost
.05% of rated cost
cost by 4th qt 1999
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The Process Management Chart Is The Primary Tool For
Managing Planned Improvements
Guarantee delivery on CTQs and achieve strategic objectives
profitably
• Standardizes and documents
the base process
• Communicates desired
capabilities and performance
standards
• Identifies measures used to
evaluate process performance
• Tracks process performance
and improvement efforts
against targets
• Serves as vehicle for process
reporting and improvement
Process Management Chart Example
2006 Northeast Supply Chain Conference &
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Company-wide Area
Staff and BB
Deployment Team
Preparation Workshop
(Regional Meetings)
Lessons Learned
Company-wide Deployment
Approach
Initial Site Area Staff
and BB attend
Deployment Team
Preparation
Workshop May 4-5
AVP conducts
BPMS Field
Deployment Work-
shop for District
Staff
AVP conducts
BPMS Field
Deployment Work-
shop for District
Staff
AVP conducts
BPMS Field
Deployment Work-
shop for District
Staff
AVP conducts
BPMS Field
Deployment Work-
shop for District
Staff
Company-wide Area
BPMS Field Deployment
Workshops
(Area Meetings)
Initial Site Deployment
Lessons Learned
From District Offices
DM/GB and
District Staff
Deploy BPMS
DM/GB and
District Staff
Deploy BPMS
DM/GB and
District Staff
Deploy BPMS
DM/GB and
District Staff
Deploy BPMS
BQC & PMT
Initial Site
Deployment
Decisions
Targeted Company-
wide Deployment
Company-wide District
BPMS Deployment
Workshops
(District Sites Only)
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The transformation process –
The Flawless Execution ModelFuture Picture
Strategy
Leader’s Intent
Plan – Brief – Execute - Debrief
Standardize
Training
People
2006 Northeast Supply Chain Conference &
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Financial
Perspective
Customer
Perspective
Internal
Perspective
Learning
and Growth
Perspective
Brand Image
8 Metrics
Human Capital
6 Metrics
Best in Class Cost
Structure
1 Metric
Improve Operating
Margins
3 Metrics
Grow Faster than the
Market
11 Metrics
Customer
Management
Strategies
8 Metrics
Product and
Portfolio
Strategy
13 Metrics
Operational
Management
Strategies
10 Metrics
Delivery
Management
Strategies
21 Metrics
Long-Term Shareholder Value
Information Capital
2 Metrics
Organization Capital
0 Metrics
The Balanced Scorecard
Client Intimacy
25 Metrics
Seamless Service & Support
3 Metrics
Effective
Proposals
1 Metric
Partner
Management
Strategies
15 Metrics
(15 metrics)
(37 metrics)
(67 metrics)
(8 metrics)
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2006 Northeast Supply Chain Conference &
Educational Exhibition
Breakthroughs in performance require major change,
including changes in the measurement and
management systems used by an organization
• The real power of an Balanced Scorecard executive dashboard is in its
ability to:
– Translate mission and strategy into tangible objectives and measures to
all levels of the organization
– Measures organizational performance across four balanced
perspectives: financial, customers, internal business processes, and
learning and growth
– Align individual, organizational, and cross-departmental objectives to
drive positive behavioral changes
– Uses measurement to inform employees about the drivers of current
and future success
“If you can’t measure it, you can’t manage it”
2006 Northeast Supply Chain Conference &
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Benefits of Balanced Scorecard are evidenced across
many companies and industries
30%71%Information
shared
openly and
candidly
8%60%Communication
of strategy
37%93%Agreement on
strategy
CULTURE
55%97%Success in last
major
change
effort
52%83%Financially
ranked in
the top
third of
their
industry
44%74%Industry leader
over the
past three
years
PERFORMANCE
Non–Measurement
Managed
Organizations
Measurement
Managed
Organizations
Measure of
Success
Performance Management Gets Results • Early adopters have
shown significant results
– Mobil NA became the
industry leader in
profitability per gallon
within 2 years
– CIGNA Property &
Casualty returned to
profitability and
improved its
performance during each
of the next four years
– Chemical (Chase) Retail
Bank improved its 19-
fold four years after
deploying scorecards
strategically
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2006 Northeast Supply Chain Conference &
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Business Unit scorecards and operational reports should
complement the Executive Dashboard
2006 Northeast Supply Chain Conference &
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Lessons from Lean
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Lessons
from
Lean
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Six SigmaSix Sigma
Champion
Black Belt
Sponsor
Leadership TeamVisionPriorityPath
Define
TeachSupport
ConsultMeasure
MeasureAnalyze
ImproveControl
Communication
and Coordination
Finance
Yellow
Belt
White
Belt
TEAMS AND BELTS
Process Owners
SMEs
Yellow
BeltWhite
Belt
SMEs
Green Belt
Master
Black Belt
Green Belt
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Six Sigma Fireworks
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Change
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Change
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Appendix
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Transforming the Production
Line
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Transforming the Production Line
Step 1:
Document “as-is” process (what are you building? Does it work at each
phase? Learn how the tool is built (positive and negative attributes)
Perform the task with the individual – As you are doing this you are
asking Why 5 times.
Fix the process. How should it be done? Integrate a measurement
system.
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Transforming the Production Line
Step 2:
Identify defects – you now know what has to be addressed
2006 Northeast Supply Chain Conference &
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Transforming the Production Line
Step 3:
Fix defects, fix the problems, step to step , success rate at each stage
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2006 Northeast Supply Chain Conference &
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Transforming the Production Line
Step 4:
What is a simple coherent way to collect data – real time defect database –
kiss, you want the people who have the problems to be able to run their own
reports
2006 Northeast Supply Chain Conference &
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Transforming the Production Line
Step 5:
Internal supplier and customer to own it – is it legit, how do you rate it?
Review it, make sure it is correct, pick your battles (define your scope –
management decision, don’t stop the process because there is one big
gotcha), fix all the little stuff first
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Transforming the Production Line
Step 6:
Employees are now part of the quality system
2006 Northeast Supply Chain Conference &
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Transforming the Production Line
Step 7:
That was the beginning of your measurement system. Now you have a
quality performance of each internal supplier.
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Transforming the Production Line
Step 8:
Now you can branch out.
2006 Northeast Supply Chain Conference &
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Transforming the Production Line
Step 9:
What are you going to measure? Management understands money,
everyone else understands the parts.
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Transforming the Production Line
Step 10:
Defects by department. Defects repaired, Associated cost of non-quality.
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Balanced Scorecard
Examples
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NCR- 2001 Balanced Scorecard
- WCS capture rate
Drive core competencies
- Revenue from India (emerging market)
- Revenue from China (emerging market)
Penetrate new markets
- Revenue in targeted new solutions
Grow new solutions
Grow Aggressively
Primary Metrics
- Resolved remotely
Re-engineer business processes
- Global sourcing savings
Execute global sourcing strategy
- Percentage of field equipment inventory > 90 days
- High-impact project PS gross margin leakage
- Operating income
Nature core competencies
Improve Profitability
Primary Metrics
- Upward mobility (percentage of females at D-band or above)
- Upward mobility (percentage of minorities at D-band or above)
Improve leadership bench strength
- Invention disclosures
Manage intellectual property
- Customer-facing PMs with internal PM certification
- Customer-facing PM turnover percentage
- Total customer-facing PMs
Leverage PM resources to manage execution
- Six Sigma projected annualized benefit of completed projects
- Six Sigma projects completed
- Six Sigma potential benefits of projects when started
- Six Sigma projects initiated
Transform culture through Six Sigma
Invest in the Future
Primary Metrics
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A Fashion Retailer’s Strategic Map and Metrics
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United Way of Southeastern New England’s Balanced
Scorecard
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Duke Children’s Hospital Balanced Scorecard
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Brown & Root Energy Services’ Balanced Scorecard