Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Our Mission…

…to serve patients




                                Inflammation                                        N...
Amgen: A Biotechnology Pioneer
        Founded in 1980, Amgen was
        one of the first biotechnology
        companies...
Our Worldwide Presence

                        Cambridge, MA                                  Norway                     ...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Accounts Payable
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 ...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
  Procure to Pay Summit Keynote
  Enhancing P2P Redesign with Process Excellence
  February 23-25 2009, Miami...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
Ramesh Krish
Procure to Pay Summit Keynote
Enhancing P2P Redesign with Process Excellence
February 23-25 2009, Miami FL


...
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2009 P2 P Conference Keynote Krish, Ramesh Presentation - Using Six Sigma to Improve Procure to Pay

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2009 P2 P Conference Keynote Krish, Ramesh Presentation - Using Six Sigma to Improve Procure to Pay

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

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