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Process Optimization  with a Process-Centric Improvement Approach ARIS Users Conference May 3, 2001 First in Glass
Who is Pilkington North America? <ul><li>PNA is a private company </li></ul><ul><li>Owned 100% by Pilkington UK </li></ul>...
PNA SBU’s <ul><li>BP (30%) </li></ul><ul><ul><li>4 large float plants  </li></ul></ul><ul><ul><li>Customers - O/E, Windows...
PNA Business Organization <ul><li>Part of largest glass organization in the world </li></ul><ul><li>Pilkington invented fl...
Step 1: Describe the Problem
Team Charter
First Step Team Activities <ul><li>Data collected on work activities from 49 Corporate Finance employees in 8 departments ...
XY Matrix - Team Tribal Knowledge
Team Participation - Mapping Plan
Step 2: Analyze Current Results
Primary Metric Two-year target provided to Finance team
Benchmarking Best Practices Benchmarking is  based on a study of more than 500 companies by the AICPA and The Hackett Grou...
Benchmarking Best Practices Benchmarking is  based on a study of more than 500 companies by the AICPA and The Hackett Grou...
Step 3: Prioritize Key Problem Areas
Two Level Pareto Analysis
Step 4: Perform Root Cause Analysis
Root Cause by Process Modeling <ul><li>50 Level 3 and 4 process maps completed </li></ul><ul><li>40-50 people involved </l...
Simplify and Consolidate Three different processes for each SBU simplified and consolidated into one
Standardize and Automate
Step 5: Identify Activities & Countermeasures
<ul><li>Eliminated NVA work and positions; reassigned some work and positions to SBUs </li></ul><ul><li>Standardized and c...
Implementation Plan as of 2/25/00
Step 6: Evaluate Results
Primary Metric - Results FY01 Budget set 19% below target
Countermeasures Linked to Results Headcount reduction less than planned due to accelerated timing of Payroll centralizatio...
Customer Satisfaction Results <ul><li>Running rate actual cost reduction in Corporate Finance is $2,117M from FY00 Budget ...
Summary of Results <ul><li>Goals were achieved by attacking NVA activities and processes - to realize significant cost red...
Step 7: Standardize Improvements
Standardize Improvements <ul><li>Standardize payroll practices: </li></ul><ul><ul><li>Standardized timing of payrolls </li...
Step 8: Recognize Successes
Primary Metric - Post Project Actual is 7% below FY01 Budget to-date
The Proof is in the Results Two-sample T for FY00-Actual vs FY01-Actual N  Mean  StDev  SE Mean FY00-Act  11  455.9  46.5 ...
The Results Continue <ul><li>Three people in A/P accepted offers for early retirement resulting in $120,000 savings per ye...
Intangible Result Also Achieved <ul><li>Auto reconciliation of A/P resulting in time savings at the end of the month. </li...
Questions
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Pilkington - Aris Presentation - 05-03-2001

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Presentation given at IDS Scheer Users Conference in Philadelphia in 2001. Highlights the results from one project with the integration of Business Process Management with Operational Excellence / Six Sigma.

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Pilkington - Aris Presentation - 05-03-2001

  1. 1. Process Optimization with a Process-Centric Improvement Approach ARIS Users Conference May 3, 2001 First in Glass
  2. 2. Who is Pilkington North America? <ul><li>PNA is a private company </li></ul><ul><li>Owned 100% by Pilkington UK </li></ul><ul><li>North American glass company </li></ul><ul><li>Over 150 locations </li></ul><ul><li>Three SBU’s </li></ul><ul><ul><li>AGR - Auto glass aftermarket </li></ul></ul><ul><ul><li>BP - Building products </li></ul></ul><ul><ul><li>OE - Auto glass to the OEM </li></ul></ul>
  3. 3. PNA SBU’s <ul><li>BP (30%) </li></ul><ul><ul><li>4 large float plants </li></ul></ul><ul><ul><li>Customers - O/E, Windows and M&F </li></ul></ul><ul><li>OE (45%) </li></ul><ul><ul><li>7 Fab/modular plants </li></ul></ul><ul><ul><li>Customers - AGR, Big 3 and NNAMS </li></ul></ul><ul><li>AGR (25%) </li></ul><ul><ul><li>Large Depot/100 Wholesale sites </li></ul></ul><ul><ul><li>Customers - AGR retailers </li></ul></ul>
  4. 4. PNA Business Organization <ul><li>Part of largest glass organization in the world </li></ul><ul><li>Pilkington invented float glass process </li></ul><ul><li>Pilkington leader in product innovation </li></ul><ul><li>PNA has largest float tanks in N.A. </li></ul><ul><li>PNA designs/manufactures most complex auto glass </li></ul><ul><li>PNA OE business is low cost producer </li></ul><ul><li>PNA AGR has leading market share </li></ul><ul><li>PNA AGR has industry’s largest distribution facility </li></ul>
  5. 5. Step 1: Describe the Problem
  6. 6. Team Charter
  7. 7. First Step Team Activities <ul><li>Data collected on work activities from 49 Corporate Finance employees in 8 departments and over 100 employees in the business units for 21 financial sub-processes (totaling 61 detailed activities) </li></ul><ul><li>Team prioritized which finance sub-process areas needed to be mapped using XY Matrix and confirmed by data collection - total of nearly 50 process maps completed </li></ul>
  8. 8. XY Matrix - Team Tribal Knowledge
  9. 9. Team Participation - Mapping Plan
  10. 10. Step 2: Analyze Current Results
  11. 11. Primary Metric Two-year target provided to Finance team
  12. 12. Benchmarking Best Practices Benchmarking is based on a study of more than 500 companies by the AICPA and The Hackett Group - levels shown are first quartile for each category
  13. 13. Benchmarking Best Practices Benchmarking is based on a study of more than 500 companies by the AICPA and The Hackett Group - levels shown are first quartile for each category
  14. 14. Step 3: Prioritize Key Problem Areas
  15. 15. Two Level Pareto Analysis
  16. 16. Step 4: Perform Root Cause Analysis
  17. 17. Root Cause by Process Modeling <ul><li>50 Level 3 and 4 process maps completed </li></ul><ul><li>40-50 people involved </li></ul><ul><li>Documented how the work is done - both “as is” and “to be” process maps </li></ul><ul><li>Sub-processes assigned costs and prioritized for improvement: </li></ul><ul><ul><li>Simplify - eliminate non-value added </li></ul></ul><ul><ul><li>Standardize - reduce variation </li></ul></ul><ul><ul><li>Consolidate - improve efficiency </li></ul></ul><ul><ul><li>Automate - reduce manual effort </li></ul></ul><ul><ul><li>Outsource - use specialized expertise </li></ul></ul>
  18. 18. Simplify and Consolidate Three different processes for each SBU simplified and consolidated into one
  19. 19. Standardize and Automate
  20. 20. Step 5: Identify Activities & Countermeasures
  21. 21. <ul><li>Eliminated NVA work and positions; reassigned some work and positions to SBUs </li></ul><ul><li>Standardized and consolidated payroll processing </li></ul><ul><li>Implemented Receipt Initiated Voucher (RIV) for AGR glass purchases </li></ul><ul><li>Decentralized processing of customer credits </li></ul><ul><li>Automated Accounting processes </li></ul><ul><li>Outsourced pension management </li></ul><ul><li>Lengthened account reconciliation cycles </li></ul>Activities and Countermeasures
  22. 22. Implementation Plan as of 2/25/00
  23. 23. Step 6: Evaluate Results
  24. 24. Primary Metric - Results FY01 Budget set 19% below target
  25. 25. Countermeasures Linked to Results Headcount reduction less than planned due to accelerated timing of Payroll centralization project (headcount addition scheduled in FY02) and A/P issues
  26. 26. Customer Satisfaction Results <ul><li>Running rate actual cost reduction in Corporate Finance is $2,117M from FY00 Budget to FY01 Actual to-date. </li></ul><ul><li>This is 112% better than customer expectations of $1,000M in first year and 41% better than $1,500M during first two years! </li></ul>
  27. 27. Summary of Results <ul><li>Goals were achieved by attacking NVA activities and processes - to realize significant cost reductions with minimal risk to the organization. </li></ul><ul><li>Cost reduction for first year is estimated at 124% of customer expectations for two years and is on target to reach or exceed the estimate! </li></ul>
  28. 28. Step 7: Standardize Improvements
  29. 29. Standardize Improvements <ul><li>Standardize payroll practices: </li></ul><ul><ul><li>Standardized timing of payrolls </li></ul></ul><ul><ul><li>Checks now print centrally in one format </li></ul></ul><ul><ul><li>Standardized policy for special payrolls and checks </li></ul></ul><ul><ul><li>Checks / direct deposit notifications mailed </li></ul></ul><ul><li>Standardize A/P processing (RIV) </li></ul><ul><li>Standardize credit memo processing and automate OE credit numbering system </li></ul>
  30. 30. Step 8: Recognize Successes
  31. 31. Primary Metric - Post Project Actual is 7% below FY01 Budget to-date
  32. 32. The Proof is in the Results Two-sample T for FY00-Actual vs FY01-Actual N Mean StDev SE Mean FY00-Act 11 455.9 46.5 14 FY01-Act 6 277.8 25.5 10 Difference = mu FY00-Actual - mu FY01-Actual Estimate for difference: 178.1 95% CI for difference: (134.0, 222.1) T-Test of difference = 0 (vs not =): T-Value = 8.61 P-Value = 0.000 DF = 15 P-value of 0 indicates there is a 0% chance that the difference between the two samples occurred by random chance. The difference between the two samples is statistically significant - our countermeasures have proven effective in reducing Corporate finance costs.
  33. 33. The Results Continue <ul><li>Three people in A/P accepted offers for early retirement resulting in $120,000 savings per year. </li></ul><ul><li>$140,000 per year cash discounts recovered. </li></ul><ul><li>Upon completion of improvements yet to be completed, expect to recover an additional $110,000 per year. </li></ul><ul><li>With the centralization of purchasing, savings of $300,000 per year have been realized with the reduction of five people. </li></ul>
  34. 34. Intangible Result Also Achieved <ul><li>Auto reconciliation of A/P resulting in time savings at the end of the month. </li></ul>
  35. 35. Questions

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