1. Business Process Improvement –
Today’s Source of Competitive
Advantage
How Logistics and Supply Management can
Tap the Power of Process Improvement
A presentation by:
F. Michael Babineaux, CPSM. C.P.M.
President/CEO
Babineaux Educational Services and Training, Inc.
www.BESTraining.com
901.413.8893

2. Who Am I?
 F. Michael “Mike” Babineaux, CPSM, C.P.M.
 Experience
– 40 years Supply Chain Management Experience
– 30 year FedEx Veteran
 SCM Educator and Trainer
– Babineaux Educational Services &Training, Inc.
– www.BESTraining.com
– 901.413.8893

3. Business Process
Improvement – Today’s
Source of Competitive
Advantage
How Logistics and Supply
Management can Tap the Power
of Process Improvement

4. Why’s Business Process
Improvement Important?
Global Supply Chain: Balancing Cost Reduction
and Performance Improvement
Ernst & Young | March 18, 2009
Working with the Economist Intelligence Unit, Ernst &
Young surveyed more than 250 senior executives from
the world's largest corporations to get a sense of how
businesses are approaching cost reduction efforts, and
what is expected of their supply chains.
Overwhelmingly, senior executives expect to achieve
savings by improving the business processes of their
operations.

5. Why Now?
This is a great time . . .
– to think about Business Process
Improvements!
Anytime offers opportunity . . .
– to take on projects that you would (in
normal and prosperous times) just throw
more money at it!
“Profit hides a lot of sins”

6. Agenda and Direction
Business Process Improvement
 Process Basics
– What’s it all about
– Where to start
 Process Management
– The Need for Management
– Performance Management
– Performance Constraints
 Process Improvement
– Selection, process and “Best
Practices”

7. Agenda and Direction
Business Process Improvement
 Process Basics
– What’s it all about
– Where to start

8.  A business process consists of a group of logically
related activities that use the resources of the
organization to provide defined results in support
of the organization’s objectives
Business Processes -
Definition
InputsInputs Value-Adding
Activities
Value-Adding
Activities OutputsOutputs

9. Business Processes -
Objectives
1. Easy to use
– and understand
1. Optimize use of resources
– Idle assets = expensive
1. Eliminate errors
– and duplications
1. Minimize delays
– Cycle time focus

10. Business Processes -
Thirty Thousand foot level
Customer
Requirements
NEW PRODUCT INTRODUCTION
ORDER FULFILLMENT
Design/Develop Market
Procure Produce Distribute
Supply Base
Supply Base
Customer
Satisfaction
Corporate Strategy
Infrastructure, People, and Culture
Forecasting
Supply/Demand Planning
Base
business
philosophy
Getting
and
keeping
customers
Staying
on the
leading
edge

11. Order Fulfillment Process –
Key Supply Chain Management Processes
OPERATIONS DEMAND
• Operations
Planning and
Scheduling
• Capacity Planning
• Material Handling
• Insourcing/
Outsourcing
• Demand Planning
and Forecasting
• Sales
• Order Entry
• Outbound Logistics
• Finished Goods
Inventory
Management
DEMAND

12. Order Fulfillment Process –
Key Supply Chain Management Processes
OPERATIONS DEMAND
• Demand Planning
and Forecasting
• Sales
• Order Entry
• Outbound Logistics
• Finished Goods
Inventory
Management
DEMAND

13. SUPPLY
• Supply Planning and
Scheduling
• Strategic Sourcing
• Supplier Selection
• Supplier
Development
• Invoicing/Payment
Order Fulfillment Process –
Key Supply Chain Management Processes
OPERATIONS
• Operations Planning
and Scheduling
• Capacity Planning
• Material Handling
• Inbound Logistics
• Warehousing
• Inventory
Management
DEMAND
• Demand Planning
and Forecasting
• Order Entry
• Outbound
Logistics
• Finished Goods
Inventory
Management

14. Supplier Selection –
Key Process Example
 Specification
Development
 Requirement Review
 Source Identification
 Source Qualification
 Request Preparation
 Source Solicitation
 Response Evaluation

15. Business Process Levels
Where do you start?
 Getting & Keeping
Customers
– Order Fulfillment
• Supply
 Supplier
Selection
o Source
Identification

16. Business Process Levels
Where do you start?
Getting
&
Keeping
Customers
Getting
&
Keeping
Customers
Order
Fulfillment
Order
Fulfillment
Supply
Supply
Supplier
Selection
Supplier
Selection
Source
Identification
Source
Identification
Source
Identification
Supplier
Selection
Supply
Order
Fulfillment
Getting &
Keeping
Customers

17. Business Process Levels
Where do you start?
Order
Fulfillment
Order
Fulfillment
Supply
Supply
Supplier
Selection
Supplier
Selection
Source
Identification
Source
Identification
Net Result
Each improvement in a sublevel process
improves the next higher level process
Net Result
Each improvement in a sublevel process
improves the next higher level process

18. Key Point –
Process Basics
Focus on Business
Processes
BECAUSE
THAT’S HOW
THE WORK
GETS DONE!
Work
Orders
Work
Orders
IN OUT

19. Agenda and Direction
 A Beginning
– What’s it all about
– Where to start
 Process Management
– The Need for Management
– Performance Management
– Performance Constraints
 Process Improvement
– Selection, process and “Best
Practices”

20. Business Processes-
The Need for management
Effective Processes
– are not an accident
– have no process autopilot
 Must be well Designed and
Managed

21. Process Performance Management
Driven by Customer Requirements
Process performance
should be driven by
customer requirements
– Direct Customers
– Customers of Customers

22. Process Performance Management
Constraints
CUSTOMER
REQUIREMENTS
PROCESS
PERFORMANCE
TARGETS
REQUIRED
PROCESS
CAPACITY
REQUIRED
PROCESS
CAPABILITIES

23. Process Performance Management
Constraints & Required Process Capabilities
CUSTOMER
REQUIREMENTS
PROCESS
PERFORMANCE
TARGETS
REQUIRED
PROCESS
CAPACITY
REQUIRED
PROCESS
CAPABILITIES

24. Process Performance Management
Required Process Capabilities
 Capability determines . . .
– What a process can do
– How well it can perform
 Capability range determines . . .
– Upper and lower performance limits
REQUIRED
PROCESS
CAPABILITIES

25. Process Performance Management
Determinates of Process Capabilities
PROCESS
CAPABILITY
People
• Skills
• Experience
• Training
Methods
• Work flow
• Decision
making
Technology
• Equipment
• IS/IT
Inputs
• Information
• Materials

26. Process Management
Process Capability
 Process management must insure that . . .
– process performance requirements are feasible
given process capability
– Or that process capability is adequate given
performance requirements
PROCESS
Capability
PROCESS
PERFORMANCE
TARGETS

27. Process Performance Management
Required Process Capacity Constraint
CUSTOMER
REQUIREMENTS
PROCESS
PERFORMANCE
TARGETS
REQUIRED
PROCESS
CAPACITY
REQUIRED
PROCESS
CAPABILITIES

28. Process Capacity
Definitions
 There are different ways of defining the
capacity of a process:
– Design capacity -- maximum output that can
possibly be attained
– Effective capacity -- maximum output given
practical issues of
scheduling, quality
factors, maintenance, etc.
– Demonstrated capacity -- the rate of output
actually achieved

29. Process Capacity
Determinants
PROCESS
Capacity
People
• Skills
• Training
Downtime
• Planned
• Unplanned
Product/
Service Mix
Technology
• Equipment
• IT/IS

30. Process Capacity
Volume Determinates
 Capacity determines . . .
– the upper bound of the rate
of output and
– the volume of work that
can be performed by a
process during a specified
time period

31. Process Capacity
Time Constraint
 From a time perspective,
overall process capacity is
determined by the slowest
activity or step in the
process
 Need to focus improvement
efforts on
these “bottleneck” activities

32. SupplySupply 3 step
Operations
3 step
Operations DemandDemand
“Bottlenecks” Limit System Capacity

33. “Bottlenecks” Limit System Capacity
Step 1 Step 2 Step 3
Capacity:
250 units/day
Capacity:
105 units/day
Capacity:
300 units/day
If Customer requirements are 210 units per day,
is the process capacity adequate?

34. Parallel Operations
Step 1
Step 2a
Step 3
Capacity:
250 units/day
Capacity (each):
105 units/day
Capacity:
300 units/dayStep 2b
-210
90
-210
40

35. Process Management
Process Capacity
 Process management must insure that . . .
– process performance requirements are feasible
given process capacity
– Or that process capacity is adequate given
performance requirements
PROCESS
Capacity
PROCESS
PERFORMANCE
TARGETS

36. Process Performance Management
Drivers and Constraints
CUSTOMER
REQUIREMENTS
PROCESS
PERFORMANCE
TARGETS
REQUIRED
PROCESS
CAPACITY
REQUIRED
PROCESS
CAPABILITIES

37. Key Points –
Process Management
 Processes must be managed to
remain effective and efficient
– Processes do not improve on
their own
 Process Performance must be
customer driven
 Process capabilities and
Capacities must fit with
performance requirements

38. Agenda and Direction
 A Beginning
– What’s it all about
– Where to start
 Process Management
– Need for management
– Performance Management
– Performance Constraints
 Process Improvement
– Selection, process and
“Best Practices”

39. Process Improvement Selection
Critical Factors
Customer impact
– High makes the list
 Ability to change
– High makes the list
 Business or supply chain
impact
– High makes the list
 Current performance
– Low makes the list

40.  Frequent customer
problems/complaints
– internal or external
 High-cost processes
– More opportunity to reduce
cost
 High-variability processes
– Consistency Opportunity
 Long cycle time processes
– Quicker can be beneficial
Process Improvement Selection
Opportunity Keys

41. Process Improvement Process
Five steps and a map
1. Establish process
improvement team
– You can’t do it all
yourself
– Two heads are better
than one
– Ownership

42. Process Improvement Process
Five steps and a map
Map process
And
analyze data
Map process
And
analyze data

43. Process Improvement Process
Five steps and a map
2. Understand current
process
– As Is – Not as should be
– You can’t change what
you don’t understand

44. Process Improvement Process
Five steps and a map
Map process
And
analyze data
Map process
And
analyze data
Develop
Process
Knowledge
Develop
Process
Knowledge

45. Process Improvement Process
Five steps and a map
3. Identify initial
improvement efforts
– Cost/Benefits Analysis
– Big, quick gains first

46. Process Improvement Process
Five steps and a map
Map process
And
analyze data
Map process
And
analyze data
Develop
Process
Knowledge
Develop
Process
Knowledge
Select
Process
Improvement
targets
Select
Process
Improvement
targets

47. Process Improvement Process
Five steps and a map
4. Understand how people
deal with change
– Analytical Focus
• Give them Details
As long as they know
the facts

48. Process Improvement Process
Five steps and a map
4. Understand how people
deal with change
– Stability Focus
• Give them security
As long as everybody
gets along

49. Process Improvement Process
Five steps and a map
4. Understand how people
deal with change
– Involvement Focus
• Get them involved
As long as they can
have fun doing it
;-)

50. Process Improvement Process
Five steps and a map
4. Understand how people
deal with change
– Results Focus
• Give them control
A few dead bodies
won’t hurt anything

51. Process Improvement Process
Five steps and a map
Change
Process
Change
ProcessMap process
And
analyze data
Map process
And
analyze data
Develop
Process
Knowledge
Develop
Process
Knowledge
Select
Process
Improvement
targets
Select
Process
Improvement
targets

52. Process Improvement Process
Five steps and a map
5. Establish controls and
measurements
– Provides manageability
and adaptability
– You can’t manage what
you don’t measure

53. Process Improvement Process
Five steps and a map
Control
Process
Control
Process
Change
Process
Change
ProcessMap process
And
analyze data
Map process
And
analyze data
Develop
Process
Knowledge
Develop
Process
Knowledge
Select
Process
Improvement
targets
Select
Process
Improvement
targets

54. Process Improvement Process
Five steps and a map
Map process
And
analyze data
Map process
And
analyze data
Develop
Process
Knowledge
Develop
Process
Knowledge
Control
Process
Control
Process
Change
Process
Change
Process
Improved
Performance
Improved
Performance
Satisfied
Customers
Shareholders
Etc.
Satisfied
Customers
Shareholders
Etc.
Inputs
Activities
Outputs
Select
Process
Improvement
targets
Select
Process
Improvement
targets

55. Process Management
“10 Best Practices”
1. Customer-related
objectives
– Direct
Customers
– Customer’s
Customers

56. Process Management
“10 Best Practices”
2. Accountability for
process performance
– Need a “Process
Owner”
– Who to go to if the
process doesn’t work
– There must be
accountability

57. 3. Well-defined process
boundaries
– Not walls
– Boundaries established or
defined
– For accountability
• Responsible for a
package delivered to
the dock and then lost
inside the building?
Process Management
“10 Best Practices”

58. Process Management
“10 Best Practices”
4. Well-defined
interfaces and
responsibilities
– For Understanding
and Accountability
– Must know how our
process interfaces
with others

59. Process Management
“10 Best Practices”
5. Documentation
– Policies
– Procedures
– Training requirements
• SKA’s
• Fast employee
onboarding

60. Process Management
“10 Best Practices”
6. Formal performance
measurement
– If you can’t measure
it . . .
– Universally
compelling metrics
– Scorecards
• Internal
• External
 Supplier

61. Process Management
“10 Best Practices”
7. Formal feedback
controls that
includes . . .
– Monitoring
– Reporting
– Evaluating
– Adapting

62. Process Management
“10 Best Practices”
8. Known cycle times
– Benchmark
– Survey
– Observation

63. Process Management
“10 Best Practices”
9. Formal change
procedures
– Introduces process
discipline
– Maintain currency
• Keeping up with
changing
Customer
requirements

64. Process Management
“10 Best Practices”
10.Process performance
that is customer driven
– The only way to
ensure successful
results
• Customer,
Stakeholder, etc.
Satisfaction

65. Key Point –
Process Improvement
Where best practices
have been
established, don’t
try to reinvent the
wheel….use them

66. Ask The Consultant
I can tell you
what to do,
but the doing is up
to
YOU

67. Business Process Improvement –
Today’s Source of Competitive
Advantage
How Logistics and Supply Management Tap
the Power of Process Improvement
A presentation by:
F. Michael Babineaux, CPSM. C.P.M.
President/CEO
Babineaux Educational Services and Training, Inc.
www.BESTraining.com
901.413.8893