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Sourcing, Richard Norén, Richard Noren

Sourcing, Richard Norén, Richard Noren



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Sourcing Sourcing Presentation Transcript

  • Ri ch ar d N or én ,M BA ,M Sc
  • 1. Where we are 2. Saving potentials 3. Processes 4. Evaluations 5. Organizational skills and competencies 6. The relationship Sc ,M 7. How to get there BA ,M 8. Compensations and benefits én or N 9. Lean Sourcing, Backup slides d ar ch © Richard Norén Ri
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • Procurement is getting there Procurement has become increasingly sophisticated in order to drive margin improvements, tools, productivity and transparency is improving the approach 1st Wave Strategic Sourcing • Centralized 3d Wave Strategic Sourcing negotiations • Establish “open season” on • Fewer suppliers any function e.g., HR, R&D, Procurement, design • Competitive bidding process • TCO management focus Demand Management 2nd Wave Strategic Sourcing Functional procurement • Standardized specs • Abolition of “sacred cows” • Procurement • High level of communality, e.g., Marketing, IT functions, standardization and modular function mainly • Policy/procedures Legal contract outlined processes. Procurement administration • Cost management shares responsibilities with function • Some monitoring imperative centers of excellence (PMO) and tracking • Procurement and Matrixed procurement • Organizational ”service Relative Sc contracting function threads” responsibilities clearly defined Efficiency decisions highly ,M decentralized • Procurement shares responsibilities with centers Dynamic “in/outsourcing” • Vendor base of competence management fragmented BA • Responsibilities by the • SLA/KPI allows service • Vendor various parts of the thread tracking relationships organization clearly defined • System allows comparable ,M “incestuous” “best practice” of sourcing Effective “end to end” procurement management • Cash flow management én • MIS allows unit/price tracking • Service, quality and added • System allows “policing” of value (ex R&D) improvement or compliance N • Disbursement management • Service and quality d improvement ar Up To Late 80s 90s New Millennium > 2010 ch Procurement Sourcing Supply Chain Management Close loop SCM Ri (“In The Basement”) (Easier cost improvement lever) (Source of sustainable total cost advantage) (Dynamic sustainable total cost) © Richard Norén
  • inter-dependencies Purchasing comes down to three activities: – Sourcing: includes all activities related to establishing and managing purchasing contracts – Procurement: includes all activities related to identifying and fulfilling an actual purchasing need. – Supply relationship management: Develop mutually beneficial relationships Assess Internal Assess Supply Chain Opportunity Identify Create Assess Supply Need Requisition Market Go to tender and evaluate Award Define Sourcing Sourcing Strategy Create Purchase Sc Order Procurement ,M Execute Sourcing Strategy Shipping BA ,M Institutionalize Sourcing Strategy Receive Goods/ én Services Supplier Payment & Settlement or Create/Refine Relationship Management N Supplier Groups d Assess Relationship ar ch Initiate © Richard Norén Ri Relationship Manage Define Performance Performance Expectations
  • Productivity and transparency • Lack of evaluation standards and RFI common processes SLA • Limited vision RFQ Sc ,M I • No fostering of best KP BA A GL ,M practice én A or SQ N • Reinventing instead d ar of re-using ch © Richard Norén Ri
  • Act in the presence • Assure the right competencies at senior positions that foster and represent the new strategic sourcing 0th 1st 2nd 3d Sc ,M • Slamming the suppliers BA as hard as you can is old ,M én school, 0th wave, and will or N only cause organizational d ar stress and reduce savings ch Ri © Richard Norén
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • Not about winning its about surviving • Everyone is out there, they’ve read the same books, heard the same arguments, fighting the same demons • Learning in action, Kaizen • @ Managers, admit that you don’t have control, act accordingly. Increase span of Sc control through procuring functions ,M rather than components, master entire BA relationships, define service threads ,M én or • @ Skilled procurement officers, many N times your insight is exactly what the d ar suppliers need to excel, use it ch © Richard Norén communicate, propose, change & think Ri cross-functional
  • Don’t gamble • Make the strategy • Make it stick • Don't emphasize on short-term profits Sc ,M BA • Don’t award business ,M on price tag alone én or N d • Break down barriers ar ch between staff areas © Richard Norén Ri
  • Reach out and it will materialize • Approach the entire sourcing chain flow • Justify your need • Merge processes with Sc supplier ,M BA ,M • Its never about the én price only or N d ar • 30-10% is likely to ch © Richard Norén Ri be found
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • © Richard Norén •Get it right, unless you know, no one else will know. The processes’ •Transparency with suppliers, change if necessary •Value mapping, spaghetti chart •Identify the entire process from the supplier Sc •Define service threads boundaries ,M BA ,M Simplicity én or N d ar ch Ri
  • Packet your processes • Make your homework, map your process and needs, define service value threads • Good packages and wrappings are like nice gifts, you can bring them easily anywhere & anytime. Sc • Mind your own business, suppliers are ,M many times much better equipped in BA knowing their own supply chain, your ,M common work is to find out how to én or optimize and integrate the entire N processes. d ar ch © Richard Norén Ri
  • Value flow mapping where do you add value? • Assure that your SCM process are mapped, define ”service threads” • Compare and match process flows and SLA/ Sc ,M KPI. BA ,M • Transparency, evaluate én or & improve N d ar ch • Focus on deliverables Ri © Richard Norén
  • All Pieces fits into TCO • TCO is your procurement DNA • Every link is needed and every part counts Sc ,M • Use the precise supplier BA process at the right time ,M én or • Unnecessary links will N d ar suboptimize TCO ch Ri © Richard Norén
  • No silo thinking, Think ”service threads” • ”Service threads” are the entire process from end- to-end • Know your boundaries, facilitate and break out. Sc ,M g r cin sou BA n • The sourcing is rarely Lea Accoun- Design R&D ,M ting one silo only, pull strings én Marketing Industrial Purchasing operations or IT too all departments and N Communi- Bran cation d ding HR ar dependants ch Ri © Richard Norén
  • Cost is everywhere stack savings • Stack and aggregate savings • Define where you add or destroy value • Include even parts where you might is better of doing it on your own. Sc ,M • It’s the entire service thread that will BA save your cost, parts of it will not be ,M interesting for suppliers or not even én be feasible to grab as it e.g doesn’t or N make logistical sense. Think it d through ar ch Ri © Richard Norén
  • anchoring • Everyone needs to be part of it • Personal agenda, empowerment, political, hierarchical Sc ,M level is second nature BA ,M • Sourcing service treads én or is cross-functional N d ar ch © Richard Norén Ri
  • modular processes facilitates sourcing • Make every function a separat process module, available for outsourcing Sc ,M • String your BA ,M processes as set of én wild Strawberries or N d into your own ar ch ”service thread” Ri © Richard Norén
  • Make sure that the sourcing makes sense • Work with anchoring, supplier transparency and modular processes, adopt yourself continuously Sc ,M • Change process BA ,M modules whenever én or needed without N d looking back ar ch Ri © Richard Norén
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • Where are you going • Transparency, establish common grounds of evaluations, Sc ,M compare, use best BA ,M practice for forward én or movements N d ar ch Ri © Richard Norén
  • Are the trees in the way of the forrest • Simplicity • Focus on the ”do’s” • Reenginering, Sc productivity ,M BA enhancements... ,M én or • Stay upstreams, not N d downstreams ar ch Ri © Richard Norén
  • Kraljics inköpsmatris Hög LH HH Hävstång Strategisk Affärsrisk Inköps-kategori Sc Stapel ,M Flaskhals BA Icke kritisk ,M én LL HL or Låg Hög N Leveranskedjans komplexitet d ar ch Placera in den röda punkten, och anpassa storleken efter spendvolymen Ri © Richard Norén
  • Kraljics inköpsmatris – positionering av samtliga inköpskategorier Hög LH HH Elektronik Hävstång Strategisk Affärsrisk Mekanik Sc Stapel Chassidelar ,M Flaskhals Icke kritisk BA Kontors- Montage- ,M material material LL HL én or Låg Leveransrisk Hög N Leveranskedjans komplexitet d ar ch Placera in samtliga inköpskategorier i kraljicsmatrisen Ri © Richard Norén
  • Kraljics inköpsmatris – Företagets ”fingeravtryck” Hög LH HH Hävstång Strategisk Affärsrisk Stapel Sc Flaskhals ,M Icke kritisk BA ,M LL HL én or Låg Leveransrisk Hög N Leveranskedjans komplexitet d ar ch Samtliga inköpskategorier ger oss en samlad bild, ofta benämnd ”fingeravtrycket”. Denna bild kan Ri sedan ge oss en sammantagen uppfattning om hur företagets strategier bör se ut. © Richard Norén
  • Kraljics inköpsmatris – Olika företag har olika ”fingeravtryck” Systemleverantör fordonsindustrin Byggföretag LH HH LH HH Hävstång Strategisk Hävstång Strategisk Stapel Stapel Flaskhals Flaskhals Icke kritisk Icke kritisk LL HL LL HL Sc Grossistföretag Medicinteknikföretag ,M LH HH LH HH BA ,M Hävstång Strategisk Hävstång Strategisk én or N Stapel Stapel d Flaskhals Flaskhals Icke kritisk Icke kritisk ar ch LL HL LL HL Ri Exemplen är mycket hypotetiska, verkligheten kan skilja sig väsentligt © Richard Norén
  • Kraljics inköpsmatris - inköpsstrategierna Kraljicsfält Strategisk Hävstång Flaskhals Stapel Hävstång Strategisk Konkurrensutsatta Kategoriintegratio Strategi Partnerskap Säkra försörjning anbud n Stapel Flaskhals Icke kritisk • Säkra kort & •Reducera logistik- •Skapa ömsesidiga långsiktig komplexitet • Hitta bästa kort- försörjning Mål åtaganden i lång- •Öka effektivitet siktiga anbud. varig relation. •Reducera •Reducera antal försörjningsrisk leverantörer •Korrekt prognos •Förbättra •Korrekt prognos Sc •Riskanalys marknads- och •Riskanalys •Samla köp för ,M produktkunskap hela kategorier •Noggrant lever- •Bestäm BA antörsval •Sök efter kundranking •Standardisera alternativ ,M •Kostnadsanalys •Utveckla kategorier och Aktiviteter •Förflytta förebyggande processer •Rulland én inköpsvolymer skydd •Utveckla effektiva inköpsplan or •Konsolidera inköp •Sök efter orderprocesser N •Effektiva processer •Optimera inköps- alternativ •Delegera order- d ar kvantiteter •Utveckla hantering •Leverantörsrankin ch g •Target-pricing alternativ Ri Källa: van Weele 2005, sid 153 © Richard Norén
  • Alternativa portföljstrategier - Bensaous modell Köparens specifika investeringar Höga Köparen fjättrad Strategiskt partnerskap Sc Låga Marknadsrelation Leverantören fjättrad ,M BA ,M én Låga Höga or Leverantörens specifika investeringar N d ar ch Ri Källa: Bensaou, 1999); samt Skjött-Larsen sid 246 © Richard Norén 2009-09-25 Inköpsmodeller 6
  • Alternativa portföljstrategier - Persons modell Många leverantörer, kort Hårda krav på ledtid och ledtid, få kvalitetsproblem kvalitet. Köparen beroende. Repititiva Strategi: Prispress, mark- Strategi: Ram- och sam- nadsorientering, alternativa arbetsavtal leverantörer Typ av köp Liknande ovan, samt prob- Långa ledtider, hårda kval- Lem att känna leverantörer itetskrav. Styrningsproblem Sc och prisnivå. Köparen är Strategier: Förhandlingar ,M Engångs beroende. och referenser Strategi: Prispress och BA referenser ,M én Standard Special or Typ av produkt N d ar ch Ri Källa: Persson 1998 © Richard Norén 2009-09-25 Inköpsmodeller 7
  • Alternativa portföljstrategier – Andra modeller och deras egenskaper Modell Utgångspunkt Elliot-Shircore-Steel (1985) Vinst/värde vs. leveransens sårbarhet Hadeler-Evans (1994) Produktvärde versus komplexitet Sc ,M Lilliecreutz-Ydreskog (1999) Ekonomisk profil vs. Komplexitet/risk BA ,M Olsen-Ellram (1997) Strategisk vikt vs. Svårighet att leda én van Weele (2002) Vinstpåverkan vs. leveransrisk or N d Samtliga modeller liknar Kraljics modell. ar ch Ri © Richard Norén 2009-09-25 Inköpsmodeller 8
  • Monitor and improve mutual expectations Certification levels and the need to monitor suppliers Process Performance Expectations * m c Certification Total Business Quality Delivery y Quality Affordability Customer level Assessment system Satisfaction ( (Management, g , (QPS) quality, delivery, On Period Acceptance Period Cost trends, cost Management, cost, technology, time reduction efforts, Schedule, Quality, customer support) (Months) (%) (Months) lean practices Technical, Finance (%) Run. Run. average average Sc Gold 4,5-5.0 Min > X, facility wide 100 12 100 12 4.0 or greater 4.4 or greater 4.0 ,M BA Silver 3.5-4.4 >Y, critical 97 12 99.5 12 3.4-3.9 3.8-4.3 processes Min 3.0 ,M én Bronze 2.5-3.4 Basic 93 12 99 12 2.8-3.3 2.8-3.7 Min 2.0 Initial or N * May vary with product complexity d ar ch What are reasonable requirements to have? Ri How many certification levels does it make sense to have? © Richard Norén
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • Teamwork, teamwork, teamwork... • All reflections are valid in the corporates interest • NO pride, NO Sc bounderies, NO ,M single voice BA ,M én • Who is the owner of or N a issue? Focus on d ar ch solutions Ri © Richard Norén
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • See the larger picture • Recognise that the supplier is just a part in the value flow chain Sc • While a supplier ,M BA may fit the ,M requirement it may én or not fit the N d ar environment ch © Richard Norén Ri
  • Trust the supplier to fit in • Give the supplier opportunity to fit into the picture • The supplier is far Sc ,M better equipped in BA ,M their area, én appreciate it, listen or N and amend d ar ch Ri © Richard Norén
  • Industralization challange Generation Le an planning Ap ma nu pr fac Plattforms ov tu rin ed g su Moduls pp lie Features vs rl ist Outsourced Sc Propriotority components ,M Pre assembly manufacturing BA manufacturing ,M Outsourced én or N d ar TIME ch Ri © Richard Norén
  • How mature is your sourcing? Indicators or Lights or electrical Finish or design control pannel system Breaks or stearing Sc system ,M BA ,M én or N Piston or engine d ar ch Tyre or wheel Ri © Richard Norén
  • Cherrypicking • Work tighter with suppliers • Establish a set of real prefered or ”symbiotic” suppliers Sc ,M BA • Move from component ,M sourcing to conceptual én or cherry picking of ideas N d ar without loosing control ch Ri © Richard Norén
  • Boeing defense er about ”Its nev ney” • Boeing started in already in the mo the early 90s to outsource design of aircrafts to Russia Through brave outsourcing of product entire design and then cherrypicking, they have been able move quicker into communality and plattform standards across products to lower cost • They do not make flight Sc ,M simulators, they only label BA ,M them Through symbiotic realtionship, Boeing én had indication of a large govermental or order a few years ago. They discussed it N with their core supplier, they were able to deliver the first simulator the day d after reciving the order without ar engaging in any corporate financial risk ch or comittment Ri © Richard Norén
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • step by step A procurement function needs to work through the defined stages to achieve world class procurement capabilities • Strategy fully supports the corporate goals and driven by corporate consensus • Managing the supply risk while leveraging the competitive strengths Stage V: • Nurturing supplier relationships Pioneering • Supplier base share improvement target for cost and innovation added value • Full visibility and trust across the external value chain • Procurement maintains a rationalized supplier network that delivers technology, knowledge, products or service quality superior to competitors World Class Stage IV: • Procurement strategy aligned to corporate strategy • Suppliers selected for strategic fit and deliver continuous improvement High Performing • Data driven decision making • Full support over purchasing cycle Level of Added Value • Risk sharing higher with the Organizational co-located and jointly financed Alliance • Business planning optimizes all commercial aspects, tax, investment, people Sc ,M • Formal Planning processes • Focus on SRM and sharing business plans Stage III: • Longer term, bigger value contracts with fewer suppliers Partnership BA Advancing • Collaboration on cost improvement, increased levels of risk sharing • Trained and qualified resources supporting all categories of spend • Key Performance Indicators in place. ,M Stage II: Developing • Some category strategy creation, but not company wide, and not communicated effectively én • Volume leverage through effective use of competition across categories Procurement • Track commercial measure of performance, targets for savings or • Technology enables i.e. purchase to pay cycle improvement through automation • Selected supplier base consolidation N Stage I: • Training and recognition of skills required Reacting d ar • Needs not anticipated, data not available or not used Buying • No Organizational wide procurement strategy, large supplier base ch • Transactional focus • Procurement provides ad-hoc tactical support © Richard Norén Ri • Low skills and resource, little career planning Time Line (potentially 3-5 Years)
  • Its never about the price The scope of sourcing extends beyond supplier price negotiation and takes into account the total cost of ownership Purchase Amount paid to Price the Supplier Sc ,M Total Demand Drivers Internal Policies & Procedures Acquisition Cost Factors generate Procurement Practices additional costs to BA (Actual Opportunity) Specifications an organization Inventory Practices Internal Processes once an item is ,M commissioned and Management Systems in use Operational Practices én Decommissioning/ or Disposal N d ar ch Ri © Richard Norén
  • Identify weakness and strengths • Make weakness and strengths your loved companions • Be frank and Sc ,M transparent about it BA ,M • Map the SCM én or process, mirror it N d ar with the supplier ch © Richard Norén Ri
  • Impossible is not a fact its a opinion • Don’t listen to much on internal voices that claim that it cant be done, they may have different agenda or lack your insight • Challenge; ask for process mapping; proofs of evidence for why it can’t be sourced Sc ,M BA • Verify information from critical ,M internal voices with themselves, én analyse, summarize, propose a or solution based on given N d information so that it cant be ar ch challenged © Richard Norén Ri
  • The proposal • Superimpose your processes, cut and paste, simplify, rethink • Be frank about any expectancies, bad and good ones, NO one can read minds, not even your supplier Sc • Don’t use service KPI/SLA as ,M punishments, it’s veichle for BA improvements and best practice ,M dialogue én or N • Make it work, just make it. d Never give up ar ch Ri © Richard Norén
  • Synchronize yourself • Once the main mapping is done, continue with all sub processes if needed • Let go of your own Sc pride, your supplier is ,M BA expected to deal with ,M it, you’re sourcing a én or N package, focus on: d ar ”in and output” ch Ri © Richard Norén
  • Get married • Realize that true cost /quality advantages will only happens when you behave and act as there is no one else. • Slapping the supplier only as hard as you can, will only dress Sc you up for divorce. ,M BA • Never relax, measure and verify ,M that you are doing the right én or thing to avoid competition. N d ar ch © Richard Norén Ri
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • How much cost do you have? Cost of operations • COGS, is typically in the range Agriculture, forestry and fishing of 70-95% of revenue of most manufacturing firms. For those Mining companies, net income is Construction typically 3-8% of revenue. Manufacturing • A representative company Transportation who's COGS is 80% of revenue Sc Communication and whose net income is 5% of ,M revenue; if you can reduce Electric, gas, and sanitary services BA COGS by 1% (to 79.2% of ,M Wholesale revenue), that savings goes én directly to the bottom line, Retail or increasing net income to 5.8% N Insurance of revenue thus increasing net d ar 0 20 40 60 80 income by 16%. ch Ri © Richard Norén
  • you get what you pay for, use it wisely • If you want to save cost be ready to pay for it. Also, be willing to change processes and structures • Many old school is low cost, emerging 3d sourcing wave is still rare in supply Sc ,M • Empower employees to challenge BA concepts, top management needs ,M to be part and support it. én or • If you buy a Ferrari and then drive N it on a dirt rode, don’t complain if d ar you can’t reach full velocity ch Ri © Richard Norén
  • Academical shift • The number of specialised procurement education are avalanching • More MBAs or people with dual education are entering the field, capable of dealing with multi dimensional and increasingly complex environment • Multilingual with global experience, Sc ,M dressed for making sustainable savings. BA They’re skilled to be instrumental in ,M increasing profit through saving cost én or • Purchasing salaries of > £100,000 is N d becoming more common, moving ar ch towards financial industry wages Ri © Richard Norén
  • Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • The 5s’ Step Name Action Catch Phrase Sort Remove unnecessary items 1 from the workplace “When in doubt, throw it out” (Seiri) Straighten, Set in Order Locate everything at the point “A place for everything, and 2 of use (Seiton) everything in its place” Sweep, Shine Clean and eliminate the “The best cleaning is to not 3 sources of filth Sc (Seiso) need cleaning” ,M Standardize Make routine and standard for “See and recognize what 4 what good looks like BA (Seiketsu) needs to be done” ,M Self-discipline, Sustain Sustain by making 5S second “The less self-discipline you 5 nature (Shitsuke) need, the better” én or N d ar ch © Richard Norén Ri
  • Wastes’ The 7 Wastes – Definition Examples Causes Countermeasures Over-|production Producing more than the Producing product to stock based on sales Forecasting Pull system scheduling customer needs right now forecasts Long set-ups Heijunka – level loading Producing more to avoid set-ups “Just in case” for breakdowns Set-up reduction Batch process resulting in extra output TPM Trans- Movement of product that Moving parts in and out of storage Batch production Flow lines portation does not add value Moving material from one workstation to another Push production Pull system Storage Value Stream organizations Functional layout Kanban Motion Movement of people that does Searching for parts, tools, prints, etc. Workplace disorganization 5S, Point of Use Storage not add value Sorting through materials Missing items Water Spider Reaching for tools Poor workstation design One-piece flow Lifting boxes of parts Unsafe work area Workstation design Waiting Idle time created when Waiting for parts Push production Downstream pull material, information, people, Waiting for prints Work imbalance Takt time production or equipment is not ready Waiting for inspection Centralized inspection In-process gauging Waiting for machines Order entry delays Jidoka Sc Waiting for information Lack of priority Office Kaizen Waiting for machine repair Lack of communication TPM ,M BA Processing Effort that adds no value from Multiple cleaning of parts Delay between processing Flow lines the customer’s viewpoint Paperwork Push system One-piece pull Over-tight tolerances Customer voice not understood Office Kaizen Awkward tool or part design Designs “thrown over the wall” Lean Design ,M én Inventory More materials, parts, or Raw materials Supplier lead-times External kanban products on hand than the Work in process Lack of flow, Long set-ups Supplier development or customer needs right now Finished goods Long lead-times One-piece flow lines Consumable supplies Paperwork in process Set-up reduction N Purchased components Lack of ordering procedure Internal kanban d ar Defects Work that contains errors, Scrap, Rework Process failure GembaSigma rework, mistakes or lacks Defects Mis-loaded part Pokayoke ch something necessary Correction Batch process One-piece pull Field failure Inspect-in quality Built-in quality Ri Variation Incapable machines 3P Missing parts Jidoka © Richard Norén
  • Drivers of change From To Driver Improving Single dimensions, limited Several dimensions, higher complexity Practical thinking become more scientific complexity Productivity Flattening Partly sharing information Instant sharing with everyone that want to Resource usage know as to enhance collaboration and accelerate corporate competitiveness Strengthen teamwork Learning and control, ”smartness” Control & Spending time on collecting Instant real time information access Resource usage based on real time information and aggregating historical information Spending time on evaluating and reacting Transparency real time on real time information Improved planning and reaction information Sc ,M Authoring Few author their own content Easy and convenient authoring of content Increased productivity digitally accessible for digitally, accessible for anyone that want information everyone to know Time to market BA ,M Cost Unnecessary administrative Sliding cost trend based on mutual needs Savings work and expectations Simplicity én Silo thinking Holistic thinking and planning Leverage on volume or N Improvement Long reaction times to bottle Identify bottle necks quickly and being General efficiency and cost cutting necks able to prioritize planed reactions d Accelerated product and process improvement ar ch Process Limited alignment between Alignment in-between process and its Better process control process and information flow information flow Ri Predictability © Richard Norén