Session 4: Business Process Management Six Sigma (BPSM & SS) Part 4: Focus BPM Methodology (Lean)

Session 4: Business Process Management Six Sigma (BPSM & SS) Part 4: Focus BPM Methodology (Lean) Ann Rosenberg 28th February 2012

Agenda (10:00 – 13:50)Business Process Management Six Sigma (BPSM & SS) - Part 4: Focus BPM Methodology (Lean) • BPM Governance • Small Recap • Roles and tasks (Six Sigma Competence development) • Process Performance Measurement • BPM Methodology (Six Sigma) • SIX SIGMA IMPLEMENTATION AT MAPLE LEAF FOODS CASE STUDY • BPM Tool Landscape • BPM Set-up Phase part 2 • BPM Methodology (LEAN) • LEAN Exercises (Wipro and Bayer) • BPM Transition and Continuous Improvement Phase • BPM Supporting Phases • Build a Process-centric IT • Manage Change • Leading Change Why Transformation Efforts • Meeting the Challenge of Disruptive Change • Communication and Training • Next time • (01.03.12): Group presentation and feed-back on mandatory exercises 1 • (08.03.12): Organizational Learning

Overview of all sessions

Small Recap

BPM Governance Source: Business Process Management – The SAP Roadmap, Rosenberg

Process Performance Indicator Definition / Characteristics in Detail Process Performance Indicators need to be defined in detail regarding different aspects. The most important aspects are covered in the template below. The definition should be clear and stable over time to allow e.g comparisons. Important Information on Performance Indicators Name of indicator and crystal clear definition. Target group(s) to which the indicator will be reported. Concise rational why the indicator is necessary and how it can be used to support decisions. Name of the Owner of the Performance Indicator and the department. Sub-processes of the process framework that are measured by this indicator. It should be stated, if KPI and PPI are hierarchically related. Explanation of how this indicator is calculated (e.g. methodology, components, formula, or data used). Name of the Data Contact. Drill-down criteria by which this indicator can be detailed (e.g. by region, course type). State whether the indicator is a Process Performance Indicator (PPI) or a Key Performance Indicator (KPI) and assign it to a category. Source from which the indicator can be taken.

The Set-Up phase follows a structured 4 step approach Phase Activities 1. Define Basics Definition of Process Map, roles and tasks, and decision-making bodies 2. Develop Analytics Preparation of Process Maturity Plan and Process Performance Measurement 3. Create Methods Definition of process handling and optimization methodology, modeling conventions and BPM tool landscape 4. Harmonize Terms Definition of standardized process terminology 2 SET-UP DEFINE BASICSDEVLOP ANALYTICSCREATE METHODSHARMONIZE TERMS Source: Business Process Management – The SAP Roadmap, Rosenberg

Linking the Strategy Model to the Operation Model Source: Linking Strategy to Operations: Process Models and Innovation by David P. Norton and Randall H. Russell

The Evolution of Process Management Evolution (Quality) BusinessProcessManagement Business ProcessRe-engineering LeanManufacturing Total QualityManagement Six-sigma Toyota ProductionSystem IndustrialEngineering Evolution (Time) Source: Business Process Management – The SAP Roadmap, Rosenberg

BPM tool box – focus process monitoring“from business to model to model to execution” BPM Tools: ARIS, BPM for NetWeaver, Solman, ESR ESR (SOA) Link process to service (SOA) Process Composing Modeling to execution – BPM for NetWeaver

Synchronize Design With Execution via Business Process Management Suites The Model (as Metadata) Is Used to Orchestrate the Process BPMSs create and dynamically execute explicit process models. Source: From Gartner, Janelle Hill – BPM Summit, London 2008

Business Process Excellence with SAP and IDS Scheer SAP Enterprise Modeling applications by IDS Scheer complement the Business Process Management capabilities of SAP NetWeaver Process Composer Process Desk Process Desk Business to Model Model to Execution Process Server SAP Enterprise Modeling applications by IDS Scheer SAP NetWeaverBusiness Process Management SOA DesignGovernance

BPM Governance Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

SAP´s Modeling Handbook – Modeling Standards

Customer Journey for SOA http://www.sdn.sap.com/irj/sdn/soa-kit

Agenda (10:00 – 13:50)Business Process Management Six Sigma (BPSM & SS) - Part 4: Focus BPM Methodology (Lean) • BPM Governance • Small Recap • Roles and tasks (Six Sigma Competence development) • Process Performance Measurement • BPM Methodology (Six Sigma) • SIX SIGMA IMPLEMENTATION AT MAPLE LEAF FOODS CASE STUDY • BPM Tool Landscape • BPM Set-up Phase Part 2 • BPM Methodology (LEAN) • LEAN Exercises (Wipro and Bayer) • BPM Transition and Continuous Improvement Phase • BPM Supporting Phases • Build a Process-centric IT • Manage Change • Leading Change Why Transformation Efforts • Meeting the Challenge of Disruptive Change • Communication and Training • Next time • (01.03.12): Group presentation and feed-back on mandatory exercises 1 • (08.03.12): Organizational Learning

BPM Set-up Phase part 2BPM Methodology (LEAN)LEAN Exercises (Wipro and Bayer)

Linking the Strategy Model to the Operation Model Source: Linking Strategy to Operations: Process Models and Innovation by David P. Norton and Randall H. Russell

The Evolution of Process Management Evolution (Quality) BusinessProcessManagement Business ProcessRe-engineering LeanManufacturing Total QualityManagement Six-sigma Toyota ProductionSystem IndustrialEngineering Evolution (Time) Source: Business Process Management – The SAP Roadmap, Rosenberg

What is Lean?Lean manufacturing, lean enterprise, or lean production, often simply, "Lean Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS). The core idea is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources. A lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste. To accomplish this, lean thinking changes the focus of management from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers. Eliminating waste along entire value streams, instead of at isolated points, creates processes that need less human effort, less space, less capital, and less time to make products and services at far less costs and with much fewer defects, compared with traditional business systems. Companies are able to respond to changing customer desires with high variety, high quality, low cost, and with very fast throughput times. Also, information management becomes much simpler and more accurate. Source: http://www.lean.org/whatslean/

The original seven muda • The original seven muda are: • Transport (moving products that are not actually required to perform the processing) • Inventory (all components, work in process and finished product not being processed) • Motion (people or equipment moving or walking more than is required to perform the processing) • Waiting (waiting for the next production step) • Overproduction (production ahead of demand) • Over Processing (resulting from poor tool or product design creating activity) • Defects (the effort involved in inspecting for and fixing defects) • An easy way to remember the 7 wastes is TIMWOOD. • T: Transportation, I: Inventory, M: Motion, W: Wait, O: Over-processing, O: Over-production, D: Defect Source: http://www.lean.org/whatslean/

Principles of Lean • The five-step thought process for guiding the implementation of lean techniques is easy to remember, but not always easy to achieve: • Specify value from the standpoint of the end customer by product family. • Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create value. • Make the value-creating steps occur in tight sequence so the product will flow smoothly toward the customer. • As flow is introduced, let customers pull value from the next upstream activity. • As value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in which perfect value is created with no waste. Source: http://www.lean.org/whatslean/

Value Stream Mapping Value stream mapping is a lean manufacturing technique used to analyze and design the flow of materials and information required to bring a product or service to a consumer. At Toyota, where the technique originated, it is known as "material and information flow mapping”. It can be applied to nearly any value chain. Source: Business Process Management – The SAP Roadmap, Rosenberg

Lean Action Plan – Getting Started: • While every individual or company embarking on a lean journey will have different challenges based on their particular set of circumstances, there are several crucial steps that can help reduce resistance, spread the right learning, and engender the type of commitment necessary for lean enterprise. • 1. Getting Started: • Find a change agent, a leader who will take personal responsibility for the lean transformation. • Get the lean knowledge, via a sensei or consultant, who can teach lean techniques and how to implement them as part of a system, not as isolated programs. • Find a lever by seizing a crisis or by creating one to begin the transformation. If your company currently isn’t in crisis, focus attention on a lean competitor or find a lean customer or supplier who will make demands for dramatically better performance. • Forget grand strategy for the moment. • Map the value streams, beginning with the current state of how material and information flow now, then drawing a leaner future state of how they should flow and creating an implementation plan with timetable. • Begin as soon as possible with an important and visible activity. • Demand immediate results. • As soon as you’ve got momentum, expand your scope to link improvements in the value streams and move beyond the shop floor to office processes. Source: http://www.lean.org/whatslean/

Lean Action Plan – Creating an Organization to Channel Your Value Streams • 2. Creating an Organization to Channel Your Value Streams: • Reorganize your firm by product family and value stream. • Create a lean promotion function. • Deal with excess people at the outset, and then promise that no one will lose their job in the future due to the introduction of lean techniques. • Devise a growth strategy. • Remove the anchor-draggers. • Once you’ve fixed something, fix it again. • “Two steps forward and one step backward is O.K.; no steps forward is not O.K.” Source: http://www.lean.org/whatslean/

Lean Action Plan – Creating an Organization to Channel Your Value Streams • 3. Install Business Systems to Encourage Lean Thinking • Utilize policy deployment. • Create a lean accounting system. • Pay your people in relation to the performance of your firm. • Make performance measures transparent. • Teach lean thinking and skills to everyone. • Right-size your tools, such as production equipment and information systems. • 4. Completing the Transformation • Convince your suppliers and customers to take the steps just described. • Develop a lean global strategy. • Convert from top-down leadership to leadership based on questioning, coaching, and teaching and rooted in the scientific method of plan-do-check-act • More Lean Resources Source: http://www.lean.org/whatslean/

Common Lean Questions • How does lean apply to non-manufacturing settings? • Every core lean principle applies just as strongly, if not more so, beyond the shop floor. In fact, many of the most exciting breakthroughs are taking place in areas such as services, healthcare and government. • As John Shook LEI senior advisor and co-author of Learning to See, says, "TPS is described as a manufacturing system, but the thinking of TPS or lean applies to any function. Whether you¹re dealing with 15,000 parts, 15 parts, or just providing a service, lean works. It works because it is a way of thinking, a whole systems philosophy. Techniques aside, lean thinking gives you a broad perspective on providing goods and services that goes beyond the bottom line, beyond the stodgy principles of mass-producing capitalism. It is a human system, customer focused, customer driven; wherein employees within and outside the workplace are also customers." • On the LEI site you can find a wealth of articles and resources documenting lean breakthroughs in all industries. Visit the Knowledge Center to access these resources. Source: http://www.lean.org/whatslean/

Common Lean Questions • What are the most common mistakes in implementing lean?To start with, lean must never be seen as a tool for headcount reduction or mindless cost-cutting. This fundamentally misses the purpose of lean, which is to create value through eliminating waste. As companies improve their processes they should be able to reallocate their productive resources to new value-creating work. • Another important attitude to avoid from the beginning is the impulse to implement individual lean tools without seeking to understand the system in which they fit. This is hard to avoid, since many tools, like 5S, deliver immediate payoffs. But ultimately all lean workers must understand the "why" behind the tools, or their value will be lost. • Lean beginners should also limit the scope of their initial project so as to better insure success, be sure that they have a leader with deep knowledge and a gemba attitude i.e. always base one's thinking on a close observation of the work itself, and never relax in their efforts. Indeed, one of the hardest challenges they will face is the degree to which individual lean successes will invariably uncover new problems and greater challenges. So in this regard, simply be aware of how difficult this work will be. Source: http://www.lean.org/whatslean/

Common Lean Questions • How does lean compare to other improvement processes such as Six Sigma or Theory of Constraints?While there are many specific differences among the different schools of thought, Jim Womack cautions against getting lost in the competing schools. For veterans of each practice often get lost in finely detailed arguments over technical or even philosophical differences. In an e-letter outlining the key differences, he nonetheless grounds the discussion by saying, “At the end of the day we are all trying to achieve the same thing: The perfect value stream.” His letter gives a nice overview of how to view each approach. • Quality Progress magazine published an artcleHow To Compare Six Sigma, Lean and the Theory of Constraints which offers a very good overview that can help you choose the best framework for your organization. Source: http://www.lean.org/whatslean/

Automotive – examplehttp://www.sap.com/customer-showcase/index.epx Source: http://www.lean.org/whatslean/

Breakthrough Moments in Leanhttp://www.lean.org/WhatsLean/Timeline.cfm Source: http://www.lean.org/whatslean/

LEAN Skills and Education

LEAN Exercises (Wipro and Bayer)

LEAN (Wipro and Bayer)– Breakout Sessions • Group 1 - Wipro • Article: Lean Knowledge Work • Who is Wipro? • What have initiated the LEAN initiative at Wipro? • Describe the Six principles for making knowledge operations lean • Group 2: Bayer • Article: The CEO of Bayer Corp. on Creating a Lean Growth Machine • Questions: • What have initiated the LEAN initiative at Bayer? • How have they started their LEAN set-up (1. getting started, 2. Creating an Organization to Channel Your Value, 3. Install Business Systems to Encourage Lean Thinking, 4. Completing the Transformation)? • Which challenges and benefit do Bayer see in their approach 45 min

BPM Transition and Continuous Improvement Phase

The Transition phase transforms the Set-Up into reality Phase Activities 1. Create Basics Implementation of Process Map, roles and tasks, and decision-making bodies 2. Perform Analytics Implementation of Process Maturity Plan and Process Performance Measurement 3. Define Portfolio Implementation of process-oriented strategic planning and project portfolio management 4 .Optimize Processes Implement PML methodology 3 TRANSITION CREATE BASICSPERFORM ANALYTICSDEFINE PORTFOLIOOPTIMIZE PROCESSES Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

The existing organization set-up plays an elementary role when you set-up and implement BPM Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009) Process related organizational structures (Schmelzer/ Sesselmann, 2006)

The implementation approach depends onthe organizational maturity and culture Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

1.0 Develop and monitor strategy 2.0 Create new products & services 3.0 Create market and sell products & services 7.0 Recruit, develop and motivate 9.0 Purchase goods and services 6.0 Develop and monitor fi 8.0 Deliver IT services 4.0 Deliver products & services Process Level 1 Process Level 2 Process Level 2 Process Level 3 Process Level 3 Process Level 3 Example Process Performance Indicators will be identified and aggregated on all levels of the Process Map. Each process and the specific KPIs/PPIs have to be represented within the Process Map. Level 1 PPIs Board Member Process Scenario/ Level 1 Ex. Create new products & services Level 2 PPIs Senior Process Owner Process/ Level 2 Ex. Develop Products and Services Process Office Level 3 PPIs Operational Process Owner Sub Process/ Level 3 To be defined by LOBs LOBs Level 4-n PPIs Operational Process Owner Process Activities/ Level 4 - n To be defined by LOBs Enquiry Resolution End to end process

Several input sources have to be consideredwhen defining the project portfolio • When prioritizing processes, make sure to align with the corporate strategy and include input from the Process Maturity Analysis. • Perform a deep-dive analysis on the “clear” winners of the process prioritization to ensure that they are indeed the best options for the overall company. Approach: Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

The Continuous Improvement phase ensures the long term success Phase Activities • The Continuous Improvement phase, just like any business process, can also include improvements to the overall BPM approach. • Four possible building blocks that can be added to the ones already introduced: • Process-based Rewards • Expanded Corporate Process Reporting • Process-based Budget and Cost Allocations • Process Audits 4 CI ADD PROCESS BASED REWARDSEXPAND REPORTING ALLOCATE BUDGETPERFORM AUDITS Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

The CI phase reviews all major activitiesimplemented in the previous phases Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

BPM Supporting PhasesBuild a Process-centric ITManage Change- Leading Change Why Transformation Efforts- Meeting the Challenge of Disruptive ChangeCommunication and Training

The Supporting Phases run in parallel to the4 main phases Phase Activities • The supporting activities are those building blocks that ensure that the company as a whole is aware of the BPM effort and understands how the effort will affect the different areas and can support them. • These building blocks include: • Process-centric IT • Change management • Communication COMMUNICATE & TRAIN MANAGE CHANGE BUILD PROCESS-CENTRIC IT Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

Build Process-Centric IT Phase Activities • The supporting activities are those building blocks that ensure that the company as a whole is aware of the BPM effort and understands how the effort will affect the different areas and can support them. • These building blocks include: • Process-centric IT • Change management • Communication BUILD PROCESS-CENTRIC IT Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

Situation & Complication at SAP IT Company Example Complication Situation • Mainly local view on IT-operation items • Processes “start” and “end” at the boarders of organizational units • No common, unified language between IT and LoB • Different tools, types and granularity of process documentation • From “swim lane” to “ARIS” type of process documentation • Use of Excel sheets, Word, Visio etc. • IT is perceived as a systems and application component specialist • System upgrades • Application Component Implementation & Operation • Support & Maintenance rather functionality centric than process centric • Lack of big picture in the treatment of IT-operation items • No transparency about regional variants of business processes lead to disruptive solution proposals • Onboarding of consultants is difficult, slow and costly • Low quality & high effort for integration tests • Lack of a transparent basis for the joint analysis and optimization of processes • Different understanding of the terms process, function or system • Different granularity levels of process documentation • Problems with E2E process testing for big scale upgrade projects • Difficulties to implement process aligned SOX-compliant governance • Late involvement of IT in Re-Engineering projects • Rather LoB internal process modeling than joint modeling and detailing • Process related technical feasibility checks are not performed in the beginning of the design phase Source: BPM Governance (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

Session 4: Business Process Management Six Sigma (BPSM & SS) Part 4: Focus BPM Methodology (Lean)