2009 P2 P Conference Keynote Krish, Ramesh Presentation - Using Six Sigma to Improve Procure to Pay
1. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Enhancing P2P Redesign with
Process
Excellence
Ramesh Krish
Amgen
2. Our Mission…
…to serve patients
Inflammation Nephrology Oncology
Provided May 9, 2008 as part of an oral presentation and is qualified by such, contains forward-looking statements, actual results may vary materially;
Amgen disclaims any duty to update.
3. Amgen: A Biotechnology Pioneer
Founded in 1980, Amgen was
one of the first biotechnology
companies to successfully
discover, develop and make
protein-based medicines
Today, we’re leading the
industry in its next wave of
innovation by:
– Developing therapies in
multiple modalities
– Driving cutting-edge
research and development
– Continuing to advance the
science of biotechnological
manufacturing
Provided May 9, 2008 as part of an oral presentation and is qualified by such, contains forward-looking statements, actual results may vary materially;
Amgen disclaims any duty to update.
4. Our Worldwide Presence
Cambridge, MA Norway Denmark
Toronto, ON Luxembourg Finland
West Greenwich, RI The Netherlands Sweden
Washington, DC Belgium
Estonia
Burnaby, BC Ireland
Latvia
Lithuania
Bothell, WA Russia
Seattle, WA England
Longmont, CO Czech Republic
France
Boulder, CO Poland
Switzerland
Slovakia
Hungary
Fremont, CA India
United Arab Emirates
South San Francisco, CA Hong Kong
Greece
Slovenia
Thousand Oaks, CA Austria
Germany
Mexico City, Mexico
Italy
Louisville, KY Spain Australia
Juncos, Puerto Rico Portugal New Zealand
Provided May 9, 2008 as part of an oral presentation and is qualified by such, contains forward-looking statements, actual results may vary materially;
Amgen disclaims any duty to update.
5. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Using Process Improvement Tools in P2P
• The DMAIC Process
• P2P – Process Landscape View
• Applying Process Improvement in P2P
– Operational statement & example
– Process Mapping
– Illustrative Process example
– Measurement Techniques
– Fishbone for error analysis
• Key Takeaways
6. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
The DMAIC Process
1. Define 2. Measure
• To identify and/or validate the • To identify critical measures that are necessary
improvement opportunity to evaluate success
5. Control
• To understand the importance of
3. Analyze
planning, executing against the plan
and determine the approach to be
taken to assure achievement of the
• To analyze the opportunity and to
targeted results.
identify a specific problem
4. Improve
• To identify, evaluate, and select the right improvement
solutions.
7. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
P2P – Process View
Operations Management
Initiate Purchase Receive Process Disburse
Purchase Goods & Goods & Accounts Supplier
Requisition Services Services Payable Payment
Strategic Supply Management
Define & Measure: Analyze Improve & Control
• Data to Collect • Best Practices • Recommendations
• People to Interview • Technology Enablers
• Interview Questions
• Key Issues
• Performance Metrics
• Process Maps
8. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
P2P – Opportunity Landscape
Initiate Purchase Receive Process Disburse
Purchase Goods & Goods & Accounts Supplier
Frequent Payment
Requisition Services Services Payable
Low Dollar Verbal Purchasing
Phone No Invoice
Purchases Order Card
Assumed
By Requestor Receipt
Local
Supplier Manual Internet EDI
Managed Check
Reorder
Manual
Per Contract
Match
Critical System EDI Summary
EFT
Re-Order Billing
Stocks
By a Buyer
Automated
Paper Match
High Dollar Systems
Purchases Requisition
Paper Paper
Invoice Check
Infrequent
9. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
The Process Improvement Roadmap
1.0 2.0 3.0 4.0 5.0
Define Measure Analyze Improve Control
Opportunities Performance Opportunity Performance Performance
What is How are What is What How do we
important? we doing? wrong? needs to guarantee
be done? performance?
10. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Step 1 – Define Opportunities
Objective Key Activities Key Deliverables
To identify and/or validate the Validate/Identify Business Team Charter
improvement opportunity, develop the Opportunity Action Plan
business processes, define critical Validate/Develop Team Charter Process Maps
customer requirements, and prepare Identify and Map Processes Quick Win Opportunities
themselves to be an effective project Identify Quick Win and Refine Critical Customer Requirements
team. Process Prepared Team
Translate VOC into Critical Customer
Requirements
Develop Team Guidelines & Ground
Rules
Potential Tools and Techniques
Team Charter
Business Case Opportunity Statement
Goal Statement Project Scope
Gap Project Plan Team Selection
Project Focus
Action Plan
Sigma Goal (CCR)
TASKS ACTIVITIES RESP. START DUE STATUS &ACTIONS $$
TASKS ACTIVITIES RESP. START DUE STATUS &ACTIONS
CCRs
11. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Step 2 – Measure Performance
Objective Key Activities Key Deliverables
To identify critical measures that are Identify Input, Process, and Output Input, Process, and Output Indicators
necessary to evaluate success, Indicators Operational Definitions
meeting critical customer requirements Develop Operational Definition & Data Collection Formats and Plans
and begin developing a methodology Measurement Plan Baseline Performance
to effectively collect data to measure Plot and Analyze Data Productive Team Atmosphere
process performance. Determine if Special Cause Exists
To understand the elements of the six Determine Sigma Performance
sigma calculation and establish Collect Other Baseline Performance
baseline sigma for the processes the Data
team is analyzing.
Potential Tools and Techniques
UCL
Input Process Output CCR Sigma=
Checksheets
Input X
Indicator A B
A B
A B
A1
A1
A1
D1 LCL
D1
D1 Sigma=
D2 CCR
Process Indicator D2
D2
A2
Process Indicator A2
A2 X
Output Indicator
Gap
12. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Step 3 – Analyze Opportunity
Objective Key Activities Key Deliverables
To stratify and analyze the Stratify Process Data Analysis
opportunity to identify a specific Stratify Data & Identify Problem Validated Root Causes
problem and define an easily Develop Problem Statement Sources of Variation
understood problem statement. Identify Root Causes FMEA
To identify and validate the root Design Root Cause Analysis Problem Statement
causes that assure the elimination of Validate Root Causes Potential Solutions
“real” root causes and thus the Comparative Methods
problem the team is focused on. Sources of Variation Studies
To determine true sources of Failure Modes & Effects Analysis
variation and potential failure modes Regression Analysis
that lead to customer dissatisfaction. Process Control & Capability
Design of Experiments
Potential Tools and Techniques
Quantified Root Causes
50%
Indicators &
Problem Problem
Statemen
Statement t
25%
Process/Product: FMEA Date: (original)
(effect)
FMEA Team: (Revised)
Black Belt: Page: of
Process Actions Results
Risk Priority
Risk Priority
Occurrence
Occurrence
Item Potential Potential Potential Current Recom- Responsibility Action
Detection
Detection
Severity
Severity
Process Failure Effects of Cause(s) Controls mended and Target Taken
Steps Mode Failure of Failure Action Completion
Date
Total Risk Priority Resulting Risk Priority
13. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Step 4 – Improve Performance
Objective Key Activities Key Deliverables
To identify, evaluate, and select the Response Surface Methods Solutions
right improvement solutions. Generate Solution Ideas Process Maps and Documentation
To develop a change management Determine Solution Impacts: Benefits Implementation Milestones
approach to assist the organization in Evaluate and Select Solutions Improvement Impacts and Benefits
adapting to the changes introduced Develop Process Maps & High Level Storyboard
through solution implementation. Plan Change Maps
Develop and Present Storyboard
Communicate Solutions to all
Stakeholders
Potential Tools and Techniques
Cost Benefit
S u rfac e P lot of Y1 1
100
Costs
50
Y 11
Energy-saver light bulbs $9,000
1 .5
1 .0
0 0.5
0 .0
X2
Gantt Chart (Pilot)
-0 .5
Installation by employee 500
-1 .5 -1 .0 -1 .0
-0 .5 0 .0 -1 .5
0 .5
X1 1 .0 1 .5
Cost of lost production 1,500
Total cost $11,000 What When Who
S o lu tio n S ig m a T im e C o s t- O th e r T o ta l R ank
Im p act Im p act B en e fit I m p a c ts Task Jan Feb Mar Apr May Responsibility
Im p a c t Benefits - Year 1
2 1 1 1 Reduce electric bill by 8% $5,000 A Jim
Warranty for 5 years 1,800
Total benefits $6,800 B Sue
C Lynn
Forcefield Analysis D Bill/Jim
Forces Working against
Forces Working for Idea Idea
14. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Step 5 – Control Performance
Objective Key Activities Key Deliverables
To understand the importance of Develop Pilot Plan & Pilot Solution Process Control Systems
planning and executing against the Verify Reduction in Root Cause Sigma Standards and Procedures
plan and determine the approach to be Improvement Resulted from Solution Training
taken to assure achievement of the Identify if Additional Solutions are Team Evaluation
targeted results. Necessary to Achieve Goal Change Implementation Plans
To understand how to disseminate Identify and Develop Replication & Potential Problem Analysis
lessons learned, identify replication Standardization Opportunities Pilot and Solution Results
and standardization Integrate and Manage Solutions in Success Stories
opportunities/processes, and develop Daily Work Processes Trained Associates
related plans. Integrate Lessons Learned Replication Opportunities
Identify Teams Next Steps & Plans for Standardization Opportunities
Remaining Opportunities
Potential Tools and Techniques
Error Modes and Effects Analysis
E r r o r M o d e s a n d E f f e c t s A n a ly s is
E r r o r M o d e E f f e c t A n a ly s is D e s c r ip t io n :
(E M E A )
Implemented Solution
Process Control
D e g re e o f E ffe ct
P ro c e ss O c c u r r e n c e P r e v e n t io n
Step#
E rror C a u se E ffe ct
S te p (C o u n te rm e a su r e )
Frequency
Detection
Severity
System
Total
A s s e m b le a ll • B a c k in ju r y • C a r r y - a ll • B ac k 0 • P u r c h a s e tw o n e w c a r r y - a lls f o r
o u tb o u n d d u r in g lif t n o t a v a ila b le in ju r ie s , + m a ilr o o m
4.2.1 c o n ta in e r s in • F o o t a n d to e • L if tin g lo s t tim e , 2 • I n c lu d e to p ic in n e w s a f e ty f ilm
s ta g in g a r e a in ju r y f r o m g u id e lin e s in s u r a n c e 2 4 3 9
dro p pe d n o t f o llo w e d ex pe ns e
c o n t.
D e te r m in e • N o n - s ta n d a rd • V e n d o r • C o n ta in e r 2 • I n s p e c t f o r n o n - s ta n d a r d p a lle ts a n d
corre ct p a l le t u s e d p a l le ts k e p t s ta c k o v e r + r e tu r n to v e n d o r s
p a lle t s iz e en d of 2
4.2.2
p a l le t a n d 4 1 1 6
f a ll w h e n
b e in g lif te d
P o s itio n • F u ll p a lle ts • P a lle t s e t 9 0 ° • B a c k a n d 2 • U p d a te a n d c la r if y p a lle t p la c e m e n t
e m p ty p a lle t a r e r o ta te d off w h en h a n d i n j u ri e s , + pro ce du res
in m a r k e d 90 ° b y ha nd p o s itio n e d - lo s t tim e , 3 • I n c lu d e to p ic in n e w s a f e ty f ilm
4.2.3
area of lif t tr u c k in s u r a n c e 5 4 1 10
lo a d in g d o c k can ’t a cce ss ex pe ns e an d
rew o rk
S ta c k • F ir s t la y e r • S ta c k • C o n ta in e rs • U p d a te a n d c la r if y lo a d in g g u id e lin e s
0
o u tb o u n d no t g u id e lin e s f a ll w h ile +
c o n ta in e r s o n c o m p le te d no t u se d b e in g lif te d
4.2.4 1
p a lle t n o t to be fore 1 1 1 3
e x c e e d tw o s ta r tin g
hig h s e c o n d la y e r
L o a d p a lle ts in • T ie d o w n • T ie d o w n • I n ju r e d 0 • U p d a te a n d c la r if y lo a d in g g u id e lin e s
v e h ic le w ith lin e s g u id e lin e s f in g e r s , +
lif t tr u c k a n d da m a ge b ulk n o t c le a r da m a ge d 1
CCR
4.2.5
secu re m a il w h e n ou tb ou n d 1 2 1 4
tig h te n e d m a il
CCR
Project Workplan
X
Gap
Sigma Goal (CCR)
Gap
15. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
How do you deploy Process
Excellence in the P2P World
-Operational statement & example
-Process mapping tools - SIPOC
-Illustrative Process example
-Measurement Techniques
-Fishbone for error analysis
16. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Opportunity Statement
Purpose
• The opportunity statement describes the “why” of undertaking the
improvement initiative.
• The opportunity statement should address the following questions:
– What is wrong or not working?
– When and where do the problems occur?
– How extensive is the problem?
– What is the impact “pain” on our customers?
– What is the impact “pain” on our business?
– What is the impact “pain” on our employees?
– Does it make strategic sense to address this problem?
17. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Steps to Definition, Measurement & Analysis
Identify
Measures
Step 1
Develop operational
definitions for measure
Step 2
Develop measurement plan
Step 3
Collect data
Step 4
Display and evaluate data
18. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Step 1: Operational Definition
An operational definition is a concept that helps guide the team’s thinking
on what they need to measure as well as the key attributes of the measure:
what, how, and who. It provides the foundation for the team to reach
agreement and build consistency and reliability into data collection. This
helps ensure any person using the agreed-on definition will be measuring
the same thing.
19. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Accounts Payable – Illustrative Example
• Process Description
– The Accounts Payable process is used to recognize the liability for goods and services acquired during the
procurement process, and to provide payment to the vendors who provided those goods and services. This
report segments the Accounts Payable process into the following categories:
• Raw Material and Packaging Material Disbursements
• Capital Equipment Disbursements
• Contract Service Disbursements (i.e., auditing and consulting fees, and freight)
• Non P.O. Service Disbursements (i.e., utilities and telephone)
• Supply and MRO (i.e., maintenance, repair and obsolescence) Disbursements without Procurement Card
• Summary of Process Features
– Processing accounts payable, initially, on a country-wide basis across all divisions. Subsequently, moving to
either a enterprise-wide shared service center or two shared service centers segregated by language
differences
– Vendor payments established and based on the goods received (i.e., two-way matching of P.O. and receipt),
thus eliminating the need for invoices for payment purposes. However, in those countries that require paper
invoices for tax purposes, they will still be acquired
• Required Inputs
– A reengineered procurement process consisting of:
• A vendor list rationalized by the Company’s global and local requirements
• The implementation of global purchasing contracts (to lower costs) that can be used at the local level
• The use of an enterprise-wide, standardized database for all required vendor information
• The use of procurement cards for non-inventoried items (i.e., supplies)
20. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
• Required Inputs (cont.)
• Proper controls to ensure:
– All P.O.’s are authorized before being sent to vendors by having pre-established limits of authorization by manager level (i.e., SAP
release strategy)
– The P.O. will specify the appropriate cost center for the purchase
– Each P.O. reflects all costs (i.e., quantity, freight, tax, etc.) since ABC Company will pay on the P.O. and receipt
– The P.O. number must be reflected on all deliveries
• Best Practices
– The use of two-way matching (i.e., the P.O. and receipt quantity) for payment to be established. Therefore, in
those countries that do not require invoices for tax purposes, they will be eliminated
– The use of summarized invoicing in the countries where invoices are required
– Where possible, electronic storage of all invoices (where needed)
– All checks are issued by Accounts Payable
– The use of an enterprise-wide database for vendor performance information
– Disburse payments once per week and take advantage of discounts for early payment
• Technology Enablers
– SAP
– Bar Coding Technology
– Hand Held Computers
– Optical Scanner/Imaging Technology and Workflow
– Electronic Mail (E-Mail)
– Electronic Data Interchange (EDI)
– Electronic Funds Transfer (EFT)
21. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Process Mapping
• A process map visually depicts the sequence of events to build a product or
produce an outcome.
• Key Rules of Process Mapping
– Activity flow: sequence of activities from start to end along with their
interdependencies and inter-relationships
– Information flow: inputs and outputs for each of the activity mapped as part of
activity flow
– Business rules: business policies governing the flow of business process
– Performer: performer of the activity; a person, a group of persons, or a system
– Activity turnaround time
– Activity cost
• Role of Facilitator: Facilitators guide events, question conventional wisdom
and keep the discussion on track. The team provides detailed process
knowledge.
• Teams do not need training in mapping techniques if the facilitator has
experience.
22. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Process Elements and Indicator Relationships
Start Boundary ____________ End Boundary ____________
Suppliers: Inputs: Outputs: Customers:
Process
Input Indicators Process Indicators Output Indicators
Measures that evaluate the degree to Measures that evaluate the Measures that evaluate dimensions of
which the inputs to a process, provided effectiveness, efficiency, and quality the output – may focus on the
by suppliers, are consistent with what of the transformation processes – the performance of the business as well
the process needs to efficiently and steps and activities used to convert as that associated with the delivery of
effectively convert into customer- inputs into customer-satisfying services and products to customers.
satisfying outputs. outputs.
Examples: Examples: Examples:
• # of customer inquiries • Availability of service personnel • # of calls/hour taken by each
• Type of customer inquiries • Time required to perform credit service rep
• # of orders review • 2 nd year customer retention
• # of positions open • % of non-standard approvals figures
• Type of position open required • Total # of meals delivered
• Accuracy of the credit analysis • # of qualified applicants • % customer complaints
• Timeliness of the contract • Total cost of service delivery
submitted for review • Total overtime hours
23. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Responsibility KEY ACTIVITIES Receive Receive
Checks Payment
Purchasing
Return
F Material
Vendors
Receiving
Discard
D Material
Quality Assurance
Establish * Payment N
Establish Payment Electronic Prepare
Payment Plan Electronic
E Payment Plan Payment?
Payment? Checks
Send Checks
Plan
Plan Released
Released
Manufacturing
N
Y
Y
Cash Available Bank
Bank
for Plan? Reconciliation
Reconciliation
A/P Shared
Service
Send
Payment
Treasury
Banking Entity
Functional Area Illustrative
Non System Supported Activities Decision Shading = New Connector
24. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Helpful Hints for Process Mapping
• Keep it simple. Use as few words as possible to label columns and describe
work steps.
• Role of Facilitator: Facilitators guide events, question conventional wisdom
and keep the discussion on track. The team provides detailed process
knowledge.
• Teams do not need training in mapping techniques if the facilitator has
experience.
• Include the individuals involved in a process on the process mapping team.
These are the employees who are most familiar with a process and who will
have to live with any future process changes.
• A common view of the process rarely exists at the outset. Individual team
members who possess a detailed knowledge about a unique part of the
process do not always consider how each part relates to the big picture.
25. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Step 2: Develop a Measurement Plan
Determining current process performance usually requires the collection of data.
When developing a measurement plan ensure that:
– The data collected is meaningful
– The data collected is valid
– All relevant data is collected concurrently
Questions to Answer
• What precise data will be collected? • What logistical issues are relevant?
– Performance measurement? – Who will collect data?
– Causes of process deficiencies? – Where is the data located?
• Do we analyze all relevant data or a sample? – When will it be collected?
– What is the right sample size? – What additional assistance is required?
– What is the right frequency? • What do you want to do with the data?
– What will be the sample selection – Use daily, weekly, etc.
method? – Identify trends in the process data
• What tools are necessary? – Identify deficiencies in the process
– What formats will be used? – Demonstrate current process
– What logs will be kept? performance
– Do we need a computer? – Identify variation in a process
– Identify a cause and effect relationship
26. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Sample Data Measurement Plan Form
Other Data
Performance Operational Data Sample Who Will When Will How Will the that Should Be
Measure Definition Source Size Collect the the Data Be Data Be Collected at
and Data Collected Collected the Same
Location Time
How will the data be used? How will the data be displayed?
Examples: Examples:
Identification of Largest Contributors Pareto Chart
Identifying if Data is Normally Distributed Histogram
Identifying Sigma Level and Variation Control Chart
Root Cause Analysis Scatter Diagrams
Correlation Analysis
27. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Performance Measures – What are they?
Input Activity-based Efficiency Output Outcome
Measure Measure Measure Measure Measure
Description Description Description Description Description
Refers to resources Refers only to the Refers to the cost of Represents the Gives an indication of
allocated to the level of activity of the providing a service but level of service whether goals or
organization. Useful on a per unit basis. provided by an mandate of an
organization or the
mainly for analyzing Takes into account organization. organization is
level of demand for both the cost and the
impacts if the level of being achieved.
specific services. volume of work or
resources changes.
Not used to measure Not linked to service (i.e. productivity
performance productivity. measure).
per se.
Examples Examples Examples Examples Examples
• Number of services • Number of QC • Cost per inspection • Number of invoices • Reduction of
offered requests received • Cost per activity inspected processing cycle
• Number of full-time • Number of hours inspected • % of defects time
equivalents worked identified • Customer
satisfaction
28. Accounts Payable
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Defining Measures – Illustrative KPIs
• Key Performance Indicators
– Transactions processed per full-time equivalent (FTE)
– Labor cost per transaction
– FTE’s per $ billion in revenue
– Percentage of transactions requiring credit notes
– For those transactions that require a P.O., the percentage of
transactions without a pre-established P.O.
– Percent of P.O.’s with matching invoices
– Percent of payments through electronic transfer
– Percent of purchases less than $1,000 paid with the procurement card
29. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Develop a Measurement Plan - Types of Data
Before data collection starts, classify the data into different types:
continuous or discrete. This is important because it will:
– Provide a choice of data display and analysis tools
– Dictate sample size calculation
– Provide performance or cause information
Continuous Discrete
Measured on a continuum Categories
•Time Ordinal Nominal
•Money •Count defects •Yes/No
•Weight •# approved •Categories
•Length •# of errors
•Percent defective
30. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Cause & Effect Analysis – Fishbone Diagram
Figure 1: Fishbone Diagram
Example
31. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Cause & Effect Analysis – Fishbone Diagram
allergy cold
Figure 1: Fishbone Diagram
Example
Coughing
Example
sinus immunity
32. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Cause & Effect Analysis – Fishbone Diagram
1. Identify challenge
Define the problem or opportunity in a brief statement that all can agree upon. Write it down in detail and summarize.
2. Identify major factors involved
There should be many factors that may contribute to the problem; man, method, policies, procedures, system, equipment, materials, external
forces, etc. These are going to be your fishbone.
- The 6 M's bone recommended for manufacturing industry: Machine, Method, Materials, Measurement, Man
and Mother Nature (Environment)
- The 8 P's bone recommended for administration and service industry: Price, Promotion, People, Processes,
Place / Plant, Policies, Procedures & Product (or Service)
- The 4 S's bone recommended for service industry: Surroundings, Suppliers, Systems, Skills
3. Brainstorm possible causes
Held an open brainstorming session. No discussion as to the good quality of the idea and especially no negative comments are allowed. Have
fun with it.
4. Analyze and Finalize Fishbone diagram
Now you can investigate the most likely causes further, depending on the complexity and importance of the problem. Don't forget to keep things
positive, and don't drag it out.
33. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Example: Invoice Processing
Computer Internal Mail
System System
Cost-Reduction Program
Older System
Excess One Pick-Up Daily
Demand Downtime
Manual
Workspace Equipment
Sort
New Process
Access Limitations Excess Maintenance
Lost/Misplaced Mail
Demand Contractor
Turnover
Low Priority
Inexperienced Staff Why are
Hiring
Morale invoices paid
Freeze Turnover Audit Recommendation
Paycuts
for Tighter Control late?
Productivity Deadlines Centralized
Access Limitations
Payment Manual Crowded
Overtime Maximize Cash Authorization Files Space
Reduced Low Priority
Payment Branch Offices
Delays Forward Payments Weekly Missing Documentation
Reorganization Resigned
Increased Workload of Purchase Org. No Limit Manager
Missing
Purchase Orders
Finance
Staff Documentation
Policy
34. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Quick Win Improvement Opportunities to build credibility
Criteria for Defining an Improvement Opportunity as a Quick Win
• Easy to Implement: making the change or improvement does not require a great deal of
coordination and planning.
• Fast to Implement: making the change or improvement does not require a great deal of
time.
• Cheap to Implement: the change or improvement does not require a large investment of
capital, of human resource, or of equipment or technology.
• Within the Team’s Control: the team and its management are able to gain the support of
the people needed to make the change. The scope of the change is within the team’s ability
to influence.
• Easily reversible: the quick win opportunity should be reversible if the opportunity requires
more time and resources than originally thought.
35. Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL
Key Takeaways
• Tools are a means to an end
• The end game is what we are trying to accomplish
• Use the right tools as required by your specific situation
• It is not necessary to use all the tools for each situation
• It’s a great team building and motivation tool
• Enjoy the workout!
• Share your pains & wins with me: rameshk@amgen.com