In a previous blog, we explored the benefits an organization can derive from beginning the Business Improvement process. The first and debatably most important piece of the puzzle is the Project Team Leader, who should be completely on board with the value the business improvement process will impart. The project may take many twists and turns through its life, so it is imperative the leader be able to deal with these challenges, yet keep the process on a straight path. However, a leader cannot act alone, and therefore requires a strong and committed team to execute. But the real question is, once this team is in place, what comes next?
Set a Baseline
The next step in the business improvement process is to set a baseline. It has often been said, “You cannot know how to find your way to the destination unless you know where you are.” The same holds true for a business improvement journey.
First, the team should gather some key performance measurements and their value over the past six to twelve months. A sample of these follows.
- Inventory Dollars
- Throughput Cycle Time
A detailed explanation of these performance metrics is beyond the scope of this blog, but a good reference is the book The Balanced Scorecard, by Kaplan and Norton. Your organization might not be actively measuring some of these performance categories today, but don’t let this hold you back. Create the measures now and by the time you are several weeks into the process, you will have a good start on the baseline.
Don’t Be Afraid to Set Aggressive Goals
Once your baseline in place, set some aggressive goals. A 20 – 50% improvement is not really as impossible as it sounds. You may not reach your “stretch” goal by the end of the business improvement process, but don’t worry. The “stretch” goal is designed to provide a meaningful target that energizes the project team and forces them to think well “out of the box” when considering improvement project options.
The Importance of Process Maps
The next step is to create process maps for each function that can be summarized up to the primary ERP-related process flows.
- Design to Launch
- Quote to Order
- Order to Cash
- Plan to Produce
- Procure to Pay
These process maps should be created at the functional level, i.e. Design, Planning/Scheduling, Production, etc. to assure the many sub-processes within the overall process are covered. Finally, these detailed business improvement process maps can be summarized to create the top-level cross-functional processes. Many readers will be familiar with the popular Value Stream Mapping process, which can also be utilized to define these processes.
How to Incorporate Non-Value Added Activities
As mentioned previously, developing these process maps serves to create a vehicle for the discussion of non-value added (NVA) and wasteful activities that currently exist in the business improvement process. Non-value added activities are those that may or may not be required, but clearly do not add value from your customer’s point of view.
If your customer has to pay for these NVAs with an itemized invoice, you will have a problem. Many of these NVA activities have likely been developed over several years to address shortcomings in the existing ERP system, while others have evolved for various reasons associated with the culture of an organization. These work-around processes are often explained by the comment “we’ve always done things this way.” A successful BPI project requires all such NVA activities be documented. At Ultra we use a tool known as the Activity Matrix.
The Activity Matrix
Typically, project teams will identify dozens of issues causing waste within the business improvement process and capture them with a list that can easily run into triple digits. It is important these issues be prioritized, as then only the most critical or highest yielding benefits to the company will be activated for root cause solution definition and subsequent mitigation.
In summary, define the current state of your processes in detail. Next, identify the issues causing delays and non-value added activity. Set priorities and begin to develop solutions to these challenges. With these actions you will have created a strong foundation for development of the Business Case for Change and Future State process maps that follow. These will be discussed in a future blog.
To further your education on this subject, refer to our whitepaper “A Roadmap for Business Performance Improvement.”