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1.   Where we are

2.   Saving potentials

3.   Processes

4.   Evaluations

5.   Organizational skills and competencies

6.   The relationship




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7.   How to get there




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8.   Compensations and benefits




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9.   Lean Sourcing, Backup slides




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                                                   © Richard Norén


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 © Richard Norén




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Procurement is
                     getting there
 Procurement has become increasingly sophisticated in order to drive margin
 improvements, tools, productivity and transparency is improving the approach


                                    1st Wave Strategic
                                    Sourcing
                                    • Centralized                                                                      3d Wave Strategic Sourcing
                                      negotiations
                                                                                                                       • Establish “open season” on
                                    • Fewer suppliers                                                                    any function e.g., HR, R&D,
                                                                                                                         Procurement, design
                                    • Competitive bidding
                                      process                                                                          • TCO management focus
                                    Demand Management                      2nd Wave Strategic Sourcing                 Functional procurement
                                    • Standardized specs                   • Abolition of “sacred cows”
             • Procurement                                                                                             • High level of communality,
                                                                             e.g., Marketing, IT functions,              standardization and modular
               function mainly      • Policy/procedures                      Legal
               contract               outlined                                                                           processes. Procurement
               administration                                              • Cost management                             shares responsibilities with
               function             • Some monitoring                        imperative                                  centers of excellence (PMO)
                                      and tracking
             • Procurement and                                             Matrixed procurement                        • Organizational ”service
 Relative




                                                                                                                                                         Sc
               contracting                                                  function                                     threads” responsibilities
                                                                                                                         clearly defined
Efficiency     decisions highly




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               decentralized                                               • Procurement shares
                                                                             responsibilities with centers             Dynamic “in/outsourcing”
             • Vendor base                                                   of competence                             management
               fragmented




                                                                                                                                                  BA
                                                                           • Responsibilities by the                   • SLA/KPI allows service
             • Vendor                                                        various parts of the                        thread tracking
               relationships                                                 organization clearly defined
                                                                                                                       • System allows comparable




                                                                                                                                         ,M
               “incestuous”                                                                                              “best practice” of sourcing
                                                                           Effective “end to end”
                                                                           procurement management
                                                                                                                       • Cash flow management




                                                                                                                                   én
                                                                           • MIS allows unit/price tracking
                                                                                                                       • Service, quality and added
                                                                           • System allows “policing” of                 value (ex R&D) improvement




                                                                                                                             or
                                                                             compliance




                                                                                                                         N
                                                                           • Disbursement management
                                                                           • Service and quality




                                                                                                                    d
                                                                             improvement




                                                                                                                    ar
                Up To Late 80s                  90s                              New Millennium                                 > 2010




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                 Procurement                  Sourcing                      Supply Chain Management                       Close loop SCM




                                                                                                              Ri
             (“In The Basement”)   (Easier cost improvement lever)   (Source of sustainable total cost advantage)   (Dynamic sustainable total cost)


                                                                                                                             © Richard Norén
inter-dependencies
Purchasing comes down to three activities:
– Sourcing: includes all activities related to establishing and managing purchasing contracts
– Procurement: includes all activities related to identifying and fulfilling an actual
  purchasing need.
– Supply relationship management: Develop mutually beneficial relationships
                       Assess Internal            Assess
                        Supply Chain            Opportunity

                                                                              Identify       Create
     Assess Supply                                                             Need        Requisition
        Market
                                                                                                         Go to tender and
                                                                                                             evaluate


                                                                                                                 Award
    Define
   Sourcing                          Sourcing
   Strategy                                                                                                             Create Purchase




                                                                                                                                          Sc
                                                                                                                             Order
                                                                                   Procurement




                                                                                                                                    ,M
        Execute
  Sourcing Strategy                                                                                                    Shipping




                                                                                                                                  BA
                                                                                                                         ,M
                  Institutionalize
                 Sourcing Strategy                                                                          Receive
                                                                                                            Goods/




                                                                                                                   én
                                                                                                            Services
                                                       Supplier                           Payment &
                                                                                          Settlement




                                                                                                               or
                Create/Refine
                                                     Relationship
                                                     Management




                                                                                                            N
               Supplier Groups




                                                                                                         d
                                                                                      Assess
                                                                                    Relationship




                                                                                                         ar
                                                                                                   ch
                                   Initiate
                                                                                                               © Richard Norén


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                                 Relationship                          Manage
                                                         Define      Performance
                                                      Performance
                                                      Expectations
Productivity
       and transparency
• Lack of evaluation
  standards and                          RFI
  common processes                               SLA


• Limited vision         RFQ




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                                                 ,M
                                             I
• No fostering of best                     KP




                                               BA
                           A
                         GL




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  practice




                                          én
                                      A




                                      or
                                    SQ




                                    N
• Reinventing instead



                                d
                                ar
  of re-using

                               ch
                                     © Richard Norén


                               Ri
Act in the presence
• Assure the right
  competencies at senior
  positions that foster and
  represent the new
  strategic sourcing                0th
                                          1st
                                                 2nd
                                                       3d




                                                        Sc
                                                       ,M
• Slamming the suppliers




                                                 BA
  as hard as you can is old




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                                          én
  school, 0th wave, and will




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                                    N
  only cause organizational



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  stress and reduce savings

                               ch
                               Ri
                                © Richard Norén
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 © Richard Norén




                                  BA
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                                         Sc
Not about winning its
      about surviving
•   Everyone is out there, they’ve read the
    same books, heard the same arguments,
    fighting the same demons

•   Learning in action, Kaizen

•   @ Managers, admit that you don’t have
    control, act accordingly. Increase span of




                                                                        Sc
    control through procuring functions




                                                                 ,M
    rather than components, master entire




                                                              BA
    relationships, define service threads




                                                          ,M
                                                        én
                                                      or
•   @ Skilled procurement officers, many




                                                      N
    times your insight is exactly what the




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    suppliers need to excel, use it



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                                                      © Richard Norén
    communicate, propose, change & think

                                                 Ri
    cross-functional
Don’t gamble
• Make the strategy

• Make it stick

• Don't emphasize on
  short-term profits




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                                          ,M
                                       BA
• Don’t award business




                                   ,M
  on price tag alone




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                              or
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                          d
• Break down barriers


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  between staff areas         © Richard Norén


                         Ri
Reach out and it will
        materialize
• Approach the entire
  sourcing chain flow

• Justify your need

• Merge processes with




                                                   Sc
  supplier




                                            ,M
                                         BA
                                     ,M
• Its never about the




                                   én
  price only




                                 or
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                             d
                             ar
•     30-10% is likely to

                            ch
                                 © Richard Norén


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    be found
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                               ,M
 © Richard Norén




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                                         Sc
© Richard Norén




                 •Get it right, unless you know, no one else will know.
The processes’   •Transparency with suppliers, change if necessary
                 •Value mapping, spaghetti chart
                 •Identify the entire process from the supplier




                                                                      Sc
                 •Define service threads boundaries




                                                                  ,M
                                                              BA
                                                          ,M
Simplicity




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                                         Ri
Packet your processes
•   Make your homework, map your
    process and needs, define service value
    threads

•   Good packages and wrappings are like
    nice gifts, you can bring them easily
    anywhere & anytime.




                                                                    Sc
•   Mind your own business, suppliers are




                                                             ,M
    many times much better equipped in




                                                          BA
    knowing their own supply chain, your




                                                      ,M
    common work is to find out how to




                                                    én
                                                  or
    optimize and integrate the entire




                                                  N
    processes.




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                                                  © Richard Norén


                                             Ri
Value flow mapping
where do you add value?
• Assure that your SCM
  process are mapped,
  define ”service threads”

• Compare and match
  process flows and SLA/




                                                   Sc
                                            ,M
  KPI.




                                         BA
                                     ,M
• Transparency, evaluate




                                   én
                                 or
  & improve




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• Focus on deliverables
                            Ri
                                 © Richard Norén
All Pieces fits into TCO
• TCO is your
  procurement DNA

• Every link is needed and
  every part counts




                                                     Sc
                                              ,M
• Use the precise supplier




                                           BA
  process at the right time




                                       ,M
                                     én
                                   or
• Unnecessary links will




                                   N
                               d
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  suboptimize TCO

                              ch
                              Ri
                                   © Richard Norén
No silo thinking,
Think ”service threads”
• ”Service threads” are the
  entire process from end-
  to-end

• Know your boundaries,
  facilitate and break out.




                                                                            Sc
                                                                           ,M
                                                     g
                                              r   cin
                                          sou




                                                                       BA
                                      n
• The sourcing is rarely        Lea         Accoun- Design
                                                    R&D




                                                                 ,M
                                            ting


  one silo only, pull strings




                                                              én
                                 Marketing                    Industrial
                                              Purchasing operations




                                                         or
                                   IT
  too all departments and




                                                         N
                                                              Communi-
                                             Bran             cation




                                                   d
                                             ding        HR




                                             ar
  dependants

                                          ch
                                  Ri
                                                         © Richard Norén
Cost is everywhere
        stack savings
•   Stack and aggregate savings

•   Define where you add or destroy
    value

•   Include even parts where you might
    is better of doing it on your own.




                                                                      Sc
                                                               ,M
•   It’s the entire service thread that will




                                                            BA
    save your cost, parts of it will not be




                                                        ,M
    interesting for suppliers or not even




                                                      én
    be feasible to grab as it e.g doesn’t




                                                    or
                                                    N
    make logistical sense. Think it




                                                d
    through




                                                ar
                                               ch
                                               Ri
                                                    © Richard Norén
anchoring
• Everyone needs to be
  part of it

• Personal agenda,
  empowerment,
  political, hierarchical




                                                   Sc
                                            ,M
  level is second nature




                                         BA
                                     ,M
• Sourcing service treads




                                   én
                                 or
  is cross-functional




                                 N
                             d
                             ar
                            ch
                                 © Richard Norén


                            Ri
modular processes
   facilitates sourcing
• Make every function
  a separat process
  module, available
  for outsourcing




                                               Sc
                                        ,M
• String your




                                     BA
                                 ,M
  processes as set of




                               én
  wild Strawberries




                             or
                             N
                         d
  into your own


                         ar
                        ch
  ”service thread”
                        Ri   © Richard Norén
Make sure that the
 sourcing makes sense
• Work with anchoring,
  supplier transparency
  and modular
  processes, adopt
  yourself continuously




                                                 Sc
                                          ,M
• Change process




                                       BA
                                   ,M
  modules whenever




                                 én
                               or
  needed without




                               N
                           d
  looking back


                           ar
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                          Ri   © Richard Norén
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                               én
                                 ,M
© Richard Norén




                                    BA
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                                           Sc
Where are you going

• Transparency,
  establish common
  grounds of
  evaluations,




                                                Sc
                                         ,M
  compare, use best




                                      BA
                                  ,M
  practice for forward




                                én
                              or
  movements




                              N
                          d
                          ar
                         ch
                         Ri   © Richard Norén
Are the trees in the way
     of the forrest

• Simplicity

• Focus on the ”do’s”

• Reenginering,




                                               Sc
  productivity




                                        ,M
                                     BA
  enhancements...




                                 ,M
                               én
                             or
• Stay upstreams, not




                             N
                         d
  downstreams


                         ar
                        ch
                        Ri
                             © Richard Norén
Kraljics inköpsmatris


                       Hög
                             LH                                             HH




                                  Hävstång                     Strategisk
          Affärsrisk




                                                                                   Inköps-kategori




                                                                                                    Sc
                                    Stapel




                                                                                             ,M
                                                                Flaskhals




                                                                                          BA
                                  Icke kritisk




                                                                                      ,M
                                                                                    én
                             LL                                              HL




                                                                                  or
                       Låg                                                   Hög




                                                                              N
                                        Leveranskedjans komplexitet




                                                                            d
                                                                         ar
                                                                        ch
Placera in den röda punkten, och anpassa storleken efter spendvolymen


                                                                        Ri
                                                                                  © Richard Norén
Kraljics inköpsmatris – positionering av samtliga inköpskategorier


                      Hög   LH                                                          HH


                                                                           Elektronik
                                 Hävstång                       Strategisk
         Affärsrisk




                                                      Mekanik




                                                                                                               Sc
                                     Stapel                                    Chassidelar




                                                                                                        ,M
                                                                Flaskhals
                                 Icke kritisk




                                                                                                     BA
                                   Kontors-                  Montage-




                                                                                                 ,M
                                  material                   material
                            LL                                                          HL




                                                                                               én
                                                                                             or
                      Låg                           Leveransrisk                        Hög




                                                                                         N
                                             Leveranskedjans komplexitet




                                                                                    d
                                                                                  ar
                                                                                ch
Placera in samtliga inköpskategorier i kraljicsmatrisen


                                                                             Ri
                                                                                             © Richard Norén
Kraljics inköpsmatris – Företagets ”fingeravtryck”


                      Hög   LH                                               HH




                                 Hävstång                Strategisk
         Affärsrisk




                                   Stapel




                                                                                                     Sc
                                                          Flaskhals




                                                                                              ,M
                                 Icke kritisk




                                                                                           BA
                                                                                       ,M
                            LL                                               HL




                                                                                     én
                                                                                   or
                      Låg                     Leveransrisk                   Hög




                                                                                  N
                                       Leveranskedjans komplexitet




                                                                             d
                                                                           ar
                                                                         ch
Samtliga inköpskategorier ger oss en samlad bild, ofta benämnd ”fingeravtrycket”. Denna bild kan


                                                                      Ri
sedan ge oss en sammantagen uppfattning om hur företagets strategier bör se ut.
                                                                                   © Richard Norén
Kraljics inköpsmatris – Olika företag har olika ”fingeravtryck”
                   Systemleverantör fordonsindustrin                                     Byggföretag

                     LH                                          HH      LH                                     HH


                            Hävstång                Strategisk                Hävstång             Strategisk




                             Stapel                                             Stapel
                                                    Flaskhals                                      Flaskhals
                           Icke kritisk                                       Icke kritisk

                     LL                                          HL      LL                                     HL




                                                                                                                      Sc
                                 Grossistföretag                                  Medicinteknikföretag




                                                                                                                     ,M
                     LH                                          HH      LH                                     HH




                                                                                                                BA
                                                                                                            ,M
                            Hävstång                Strategisk                Hävstång             Strategisk




                                                                                                       én
                                                                                                    or
                                                                                                  N
                             Stapel                                             Stapel




                                                                                                d
                                                    Flaskhals                                      Flaskhals
                           Icke kritisk                                       Icke kritisk




                                                                                              ar
                                                                                             ch
                     LL                                          HL      LL                                     HL




                                                                                             Ri
Exemplen är mycket hypotetiska, verkligheten kan skilja sig väsentligt
                                                                                                    © Richard Norén
Kraljics inköpsmatris - inköpsstrategierna

     Kraljicsfält     Strategisk          Hävstång              Flaskhals           Stapel
                                                                                                             Hävstång       Strategisk

                                          Konkurrensutsatta                         Kategoriintegratio
     Strategi         Partnerskap                               Säkra försörjning
                                          anbud                                     n                          Stapel
                                                                                                                            Flaskhals
                                                                                                             Icke kritisk

                                                                • Säkra kort &      •Reducera logistik-
                      •Skapa ömsesidiga                         långsiktig          komplexitet
                                          • Hitta bästa kort-   försörjning
     Mål              åtaganden i lång-                                             •Öka effektivitet
                                          siktiga anbud.
                      varig relation.                           •Reducera           •Reducera antal
                                                                försörjningsrisk    leverantörer

                      •Korrekt prognos    •Förbättra            •Korrekt prognos




                                                                                                                                  Sc
                      •Riskanalys         marknads- och         •Riskanalys         •Samla köp för




                                                                                                                             ,M
                                          produktkunskap                            hela kategorier
                      •Noggrant lever-                          •Bestäm




                                                                                                                            BA
                      antörsval           •Sök efter            kundranking         •Standardisera
                                          alternativ




                                                                                                                  ,M
                      •Kostnadsanalys                           •Utveckla           kategorier och
     Aktiviteter                          •Förflytta             förebyggande        processer
                      •Rulland




                                                                                                             én
                                          inköpsvolymer         skydd               •Utveckla effektiva
                      inköpsplan




                                                                                                          or
                                          •Konsolidera inköp •Sök efter             orderprocesser




                                                                                                          N
                      •Effektiva
                      processer           •Optimera inköps- alternativ              •Delegera order-




                                                                                                         d
                                                                                                      ar
                                          kvantiteter        •Utveckla              hantering
                      •Leverantörsrankin




                                                                                                 ch
                      g                  •Target-pricing        alternativ



                                                                                              Ri
Källa: van Weele 2005, sid 153
                                                                                                          © Richard Norén
Alternativa portföljstrategier - Bensaous modell

                        Köparens specifika investeringar




                                                           Höga     Köparen fjättrad             Strategiskt partnerskap




                                                                                                                                              Sc
                                                           Låga     Marknadsrelation              Leverantören fjättrad




                                                                                                                                       ,M
                                                                                                                                    BA
                                                                                                                                ,M
                                                                                                                                én
                                                                         Låga                             Höga




                                                                                                                            or
                                                                       Leverantörens specifika investeringar




                                                                                                                            N
                                                                                                                           d
                                                                                                                           ar
                                                                                                                     ch
                                                                                                                   Ri
Källa: Bensaou, 1999); samt Skjött-Larsen sid 246

                                                                                                                            © Richard Norén
     2009-09-25                                                                        Inköpsmodeller                                         6
Alternativa portföljstrategier - Persons modell



                                      Många leverantörer, kort       Hårda krav på ledtid och
                                      ledtid, få kvalitetsproblem    kvalitet. Köparen beroende.
                        Repititiva    Strategi: Prispress, mark-     Strategi: Ram- och sam-
                                      nadsorientering, alternativa   arbetsavtal
                                      leverantörer
           Typ av köp




                                     Liknande ovan, samt prob-       Långa ledtider, hårda kval-
                                     Lem att känna leverantörer      itetskrav. Styrningsproblem




                                                                                                                     Sc
                                     och prisnivå. Köparen är        Strategier: Förhandlingar




                                                                                                              ,M
                        Engångs      beroende.                       och referenser
                                     Strategi: Prispress och




                                                                                                           BA
                                     referenser




                                                                                                       ,M
                                                                                                       én
                                                Standard                        Special




                                                                                                   or
                                                         Typ av produkt




                                                                                                   N
                                                                                                   d
                                                                                              ar
                                                                                            ch
                                                                                          Ri
Källa: Persson 1998

                                                                                                   © Richard Norén
     2009-09-25                                               Inköpsmodeller                                         7
Alternativa portföljstrategier – Andra modeller och deras
                                    egenskaper




               Modell                                        Utgångspunkt

               Elliot-Shircore-Steel (1985)                  Vinst/värde vs. leveransens sårbarhet

               Hadeler-Evans (1994)                          Produktvärde versus komplexitet




                                                                                                                   Sc
                                                                                                            ,M
               Lilliecreutz-Ydreskog (1999)                  Ekonomisk profil vs. Komplexitet/risk




                                                                                                         BA
                                                                                                      ,M
               Olsen-Ellram (1997)                           Strategisk vikt vs. Svårighet att leda




                                                                                                      én
               van Weele (2002)                              Vinstpåverkan vs. leveransrisk




                                                                                                 or
                                                                                               N
                                                                                            d
               Samtliga modeller liknar Kraljics modell.




                                                                                         ar
                                                                                       ch
                                                                                    Ri
                                                                                                 © Richard Norén
2009-09-25                                             Inköpsmodeller                                              8
Monitor and improve
            mutual expectations
Certification levels and the need to monitor suppliers

                     Process                               Performance Expectations *
                                                                 m         c

  Certification      Total Business       Quality          Delivery
                                                                  y               Quality                 Affordability          Customer
  level              Assessment           system                                                                                 Satisfaction
                     (
                     (Management,
                            g       ,     (QPS)
                     quality, delivery,                    On         Period      Acceptance   Period     Cost trends, cost      Management,
                     cost, technology,                     time                                           reduction efforts,     Schedule, Quality,
                     customer support)                                (Months)    (%)          (Months)   lean practices         Technical, Finance
                                                           (%)
                                                                      Run.                     Run.
                                                                      average                  average




                                                                                                                                                      Sc
   Gold                    4,5-5.0 Min    > X, facility wide 100             12         100       12            4.0 or greater       4.4 or greater
                           4.0




                                                                                                                                                ,M
                                                                                                                                         BA
   Silver                  3.5-4.4        >Y, critical       97              12         99.5      12            3.4-3.9              3.8-4.3
                                          processes
                           Min 3.0




                                                                                                                                  ,M
                                                                                                                               én
   Bronze                  2.5-3.4           Basic           93              12         99        12            2.8-3.3              2.8-3.7
                           Min 2.0           Initial




                                                                                                                           or
                                                                                                                       N
  * May vary with product complexity




                                                                                                                  d
                                                                                                              ar
                                                                                                          ch
    What are reasonable requirements to have?




                                                                                                          Ri
    How many certification levels does it make sense to have?

                                                                                                                        © Richard Norén
Ri
                    ch
                       ar
                         d
                             N
                              or
                                 én
                                   ,M
© Richard Norén




                                      BA
                                        ,M
                                             Sc
Teamwork, teamwork,
      teamwork...
• All reflections are
  valid in the
  corporates interest

• NO pride, NO




                                               Sc
  bounderies, NO




                                        ,M
  single voice




                                     BA
                                 ,M
                               én
• Who is the owner of




                             or
                             N
  a issue? Focus on



                         d
                         ar
                        ch
  solutions
                        Ri   © Richard Norén
Ri
                    ch
                       ar
                         d
                             N
                              or
                                 én
                                   ,M
© Richard Norén




                                      BA
                                        ,M
                                             Sc
See the larger picture
• Recognise that the
  supplier is just a
  part in the value
  flow chain




                                              Sc
• While a supplier




                                         ,M
                                     BA
  may fit the




                                  ,M
  requirement it may




                               én
                             or
  not fit the




                            N
                        d
                        ar
  environment

                       ch
                            © Richard Norén


                       Ri
Trust the supplier to
         fit in

• Give the supplier
  opportunity to fit
  into the picture

• The supplier is far




                                                 Sc
                                            ,M
  better equipped in




                                        BA
                                     ,M
  their area,




                                  én
  appreciate it, listen




                                or
                               N
  and amend



                           d
                           ar
                          ch
                          Ri   © Richard Norén
Industralization
                   challange
      Generation              Le
                                   an
       planning          Ap             ma
                                             nu
                              pr                  fac
            Plattforms             ov                   tu
                                                             rin
                                        ed                         g
                                             su
                 Moduls             pp
                                       lie
                     Features vs           rl
                                              ist
                                                                             Outsourced




                                                                                              Sc
Propriotority       components




                                                                                         ,M
                             Pre assembly                                   manufacturing




                                                                                     BA
manufacturing




                                                                                  ,M
                                                        Outsourced




                                                                               én
                                                                             or
                                                                            N
                                                                        d
                                                                        ar
                                   TIME


                                                                       ch
                                                                       Ri
                                                                            © Richard Norén
How mature is your
             sourcing?
                    Indicators or             Lights or electrical
Finish or design   control pannel                  system




                                                             Breaks or
                                                             stearing




                                                                 Sc
                                                              system




                                                            ,M
                                                        BA
                                                     ,M
                                                  én
                                                or
                                              N
                      Piston or engine




                                          d
                                          ar
                                         ch
Tyre or wheel

                                         Ri
                                               © Richard Norén
Cherrypicking
• Work tighter with
  suppliers

• Establish a set of real
  prefered or ”symbiotic”
  suppliers




                                                   Sc
                                              ,M
                                          BA
• Move from component




                                       ,M
  sourcing to conceptual




                                    én
                                  or
  cherry picking of ideas




                                 N
                             d
                             ar
  without loosing control

                            ch
                            Ri
                                 © Richard Norén
Boeing defense                                                 er about
                                                                ”Its nev ney”
• Boeing started in already in                                     the mo
  the early 90s to outsource
  design of aircrafts to Russia
             Through brave outsourcing of product
             entire design and then cherrypicking,
             they have been able move quicker into
             communality and plattform standards
             across products to lower cost



• They do not make flight




                                                                               Sc
                                                                          ,M
  simulators, they only label




                                                                      BA
                                                                   ,M
  them       Through symbiotic realtionship, Boeing




                                                                én
             had indication of a large govermental




                                                              or
             order a few years ago. They discussed it




                                                             N
             with their core supplier, they were able
             to deliver the first simulator the day




                                                         d
             after reciving the order without




                                                         ar
             engaging in any corporate financial risk




                                                        ch
             or comittment




                                                        Ri   © Richard Norén
Ri
     ch
                   ar
                     d
                         N
                          or
                             én
                               ,M
 © Richard Norén




                                  BA
                                    ,M
                                         Sc
step by step
     A procurement function needs to work through the defined stages
     to achieve world class procurement capabilities


                                                               •   Strategy fully supports the corporate goals and driven by corporate consensus
                                                               •   Managing the supply risk while leveraging the competitive strengths                                             Stage V:
                                                               •   Nurturing supplier relationships                                                                               Pioneering
                                                               •   Supplier base share improvement target for cost and innovation added value
                                                               •   Full visibility and trust across the external value chain
                                                               •   Procurement maintains a rationalized supplier network that delivers technology, knowledge, products or
                                                                   service quality superior to competitors                                                                                   World Class

                                                                                                                                                Stage IV:
                          •   Procurement strategy aligned to corporate strategy
                          •   Suppliers selected for strategic fit and deliver continuous improvement                                        High Performing
                          •   Data driven decision making
                          •   Full support over purchasing cycle
Level of Added Value




                          •   Risk sharing higher with the Organizational co-located and jointly financed                                                Alliance
                          •   Business planning optimizes all commercial aspects, tax, investment, people




                                                                                                                                                                                                                        Sc
                                                                                                                                                                                                                    ,M
                                                                                                                                         •   Formal Planning processes
                                                                                                                                         •   Focus on SRM and sharing business plans
                                                                                    Stage III:                                           •   Longer term, bigger value contracts with fewer suppliers
                                                                                                              Partnership




                                                                                                                                                                                                                    BA
                                                                                   Advancing                                             •   Collaboration on cost improvement, increased levels of risk sharing
                                                                                                                                         •   Trained and qualified resources supporting all categories of spend
                                                                                                                                         •   Key Performance Indicators in place.




                                                                                                                                                                                                                   ,M
                                             Stage II:
                                            Developing                                               •   Some category strategy creation, but not company wide, and not communicated effectively




                                                                                                                                                                                                               én
                                                                                                     •   Volume leverage through effective use of competition across categories
                                                                       Procurement                   •   Track commercial measure of performance, targets for savings




                                                                                                                                                                                                         or
                                                                                                     •   Technology enables i.e. purchase to pay cycle improvement through automation
                                                                                                     •   Selected supplier base consolidation




                                                                                                                                                                                                    N
                       Stage I:                                                                      •   Training and recognition of skills required
                       Reacting




                                                                                                                                                                                              d
                                                                                                                                                                                         ar
                                                          •   Needs not anticipated, data not available or not used
                                  Buying                  •   No Organizational wide procurement strategy, large supplier base




                                                                                                                                                                                   ch
                                                          •   Transactional focus
                                                          •   Procurement provides ad-hoc tactical support                                                                                           © Richard Norén


                                                                                                                                                                             Ri
                                                          •   Low skills and resource, little career planning



                                                                                       Time Line (potentially 3-5 Years)
Its never about the
          price
The scope of sourcing extends beyond supplier price negotiation and
takes into account the total cost of ownership




                           Purchase                                                                Amount paid to
                             Price                                                                  the Supplier




                                                                                                                         Sc
                                                                                                                        ,M
         Total          Demand Drivers                          Internal Policies & Procedures
   Acquisition Cost                                                                                Factors generate
                                          Procurement Practices                                   additional costs to




                                                                                                                  BA
 (Actual Opportunity)   Specifications
                                                                                                    an organization
                                          Inventory Practices             Internal Processes        once an item is




                                                                                                            ,M
                                                                                                  commissioned and
                               Management Systems                                                       in use
                                                                 Operational Practices




                                                                                                       én
                                            Decommissioning/




                                                                                                   or
                                                Disposal




                                                                                                  N
                                                                                                 d
                                                                                                 ar
                                                                                            ch
                                                                                         Ri
                                                                                                  © Richard Norén
Identify weakness and
       strengths

• Make weakness and
  strengths your
  loved companions

• Be frank and




                                                Sc
                                           ,M
  transparent about it




                                       BA
                                    ,M
• Map the SCM




                                 én
                               or
  process, mirror it




                              N
                          d
                          ar
  with the supplier

                         ch
                              © Richard Norén


                         Ri
Impossible is not a fact
     its a opinion
•   Don’t listen to much on internal
    voices that claim that it cant be
    done, they may have different
    agenda or lack your insight

•   Challenge; ask for process
    mapping; proofs of evidence for
    why it can’t be sourced




                                                               Sc
                                                          ,M
                                                      BA
•   Verify information from critical




                                                   ,M
    internal voices with themselves,




                                                én
    analyse, summarize, propose a




                                              or
    solution based on given




                                             N
                                         d
    information so that it cant be




                                         ar
                                        ch
    challenged                               © Richard Norén


                                        Ri
The proposal
•   Superimpose your processes, cut
    and paste, simplify, rethink

•   Be frank about any expectancies,
    bad and good ones, NO one can
    read minds, not even your supplier




                                                                Sc
•   Don’t use service KPI/SLA as




                                                           ,M
    punishments, it’s veichle for




                                                       BA
    improvements and best practice




                                                    ,M
    dialogue




                                                 én
                                               or
                                              N
•   Make it work, just make it.




                                          d
    Never give up




                                          ar
                                         ch
                                         Ri   © Richard Norén
Synchronize yourself
• Once the main
  mapping is done,
  continue with all sub
  processes if needed

• Let go of your own




                                                   Sc
  pride, your supplier is




                                              ,M
                                          BA
  expected to deal with




                                       ,M
  it, you’re sourcing a




                                    én
                                  or
                                 N
  package, focus on:




                             d
                             ar
  ”in and output”

                            ch
                            Ri
                                 © Richard Norén
Get married
•   Realize that true cost /quality
    advantages will only happens
    when you behave and act as
    there is no one else.

•   Slapping the supplier only as
    hard as you can, will only dress




                                                          Sc
    you up for divorce.




                                                       ,M
                                                   BA
•   Never relax, measure and verify




                                                ,M
    that you are doing the right




                                             én
                                            or
    thing to avoid competition.




                                            N
                                        d
                                        ar
                                       ch
                                            © Richard Norén


                                       Ri
Ri
     ch
                   ar
                     d
                         N
                          or
                             én
                               ,M
 © Richard Norén




                                  BA
                                    ,M
                                         Sc
How much cost
             do you have?
                                                                                 Cost of operations
•   COGS, is typically in the range      Agriculture, forestry and fishing
    of 70-95% of revenue of most
    manufacturing firms. For those                                 Mining

    companies, net income is                                Construction
    typically 3-8% of revenue.
                                                          Manufacturing


•   A representative company                              Transportation

    who's COGS is 80% of revenue




                                                                                                       Sc
                                                         Communication
    and whose net income is 5% of




                                                                                                  ,M
    revenue; if you can reduce        Electric, gas, and sanitary services




                                                                                            BA
    COGS by 1% (to 79.2% of




                                                                                         ,M
                                                               Wholesale
    revenue), that savings goes




                                                                                   én
    directly to the bottom line,                                    Retail




                                                                                 or
    increasing net income to 5.8%




                                                                             N
                                                               Insurance
    of revenue thus increasing net




                                                                        d
                                                                    ar
                                                                             0      20       40       60   80
    income by 16%.



                                                                ch
                                                            Ri
                                                                                     © Richard Norén
you get what you pay
      for, use it wisely
•   If you want to save cost be ready
    to pay for it. Also, be willing to
    change processes and structures

•   Many old school is low cost,
    emerging 3d sourcing wave is still
    rare in supply




                                                                  Sc
                                                             ,M
•   Empower employees to challenge




                                                         BA
    concepts, top management needs




                                                      ,M
    to be part and support it.




                                                   én
                                                 or
•   If you buy a Ferrari and then drive




                                                N
    it on a dirt rode, don’t complain if




                                            d
                                            ar
    you can’t reach full velocity



                                           ch
                                           Ri
                                                © Richard Norén
Academical shift
•   The number of specialised procurement
    education are avalanching

•   More MBAs or people with dual
    education are entering the field, capable
    of dealing with multi dimensional and
    increasingly complex environment

•   Multilingual with global experience,




                                                                      Sc
                                                                 ,M
    dressed for making sustainable savings.




                                                             BA
    They’re skilled to be instrumental in




                                                          ,M
    increasing profit through saving cost




                                                       én
                                                     or
•   Purchasing salaries of > £100,000 is




                                                    N
                                                d
    becoming more common, moving




                                                ar
                                               ch
    towards financial industry wages

                                               Ri
                                                    © Richard Norén
Ri
     ch
                   ar
                     d
                         N
                          or
                             én
                               ,M
 © Richard Norén




                                  BA
                                    ,M
                                         Sc
The 5s’

Step            Name                         Action                       Catch Phrase

                Sort              Remove unnecessary items
 1                                   from the workplace            “When in doubt, throw it out”
               (Seiri)
       Straighten, Set in Order   Locate everything at the point
                                                                   “A place for everything, and
 2                                    of use
              (Seiton)                                                  everything in its place”

            Sweep, Shine          Clean and eliminate the
                                                                   “The best cleaning is to not
 3                                    sources of filth




                                                                                                    Sc
               (Seiso)                                                    need cleaning”




                                                                                                   ,M
            Standardize           Make routine and standard for
                                                                    “See and recognize what
 4                                   what good looks like




                                                                                                  BA
             (Seiketsu)                                                  needs to be done”




                                                                                          ,M
       Self-discipline, Sustain   Sustain by making 5S second      “The less self-discipline you
 5                                    nature
             (Shitsuke)                                                    need, the better”




                                                                                      én
                                                                                   or
                                                                                N
                                                                            d
                                                                         ar
                                                                      ch
                                                                                © Richard Norén


                                                                   Ri
Wastes’
The 7 Wastes –               Definition                                 Examples                                          Causes                   Countermeasures

Over-|production   Producing more than the          Producing product to stock based on sales         Forecasting                       Pull system scheduling
                   customer needs right now         forecasts                                         Long set-ups                      Heijunka – level loading
                                                    Producing more to avoid set-ups                   “Just in case” for breakdowns     Set-up reduction
                                                    Batch process resulting in extra output                                             TPM


    Trans-         Movement of product that         Moving parts in and out of storage                Batch production                  Flow lines
   portation       does not add value               Moving material from one workstation to another   Push production                   Pull system
                                                                                                      Storage                           Value Stream organizations
                                                                                                      Functional layout                 Kanban


    Motion         Movement of people that does     Searching for parts, tools, prints, etc.          Workplace disorganization         5S, Point of Use Storage
                   not add value                    Sorting through materials                         Missing items                     Water Spider
                                                    Reaching for tools                                Poor workstation design           One-piece flow
                                                    Lifting boxes of parts                            Unsafe work area                  Workstation design


    Waiting        Idle time created when           Waiting for parts                                 Push production                   Downstream pull
                   material, information, people,   Waiting for prints                                Work imbalance                    Takt time production
                   or equipment is not ready        Waiting for inspection                            Centralized inspection            In-process gauging
                                                    Waiting for machines                              Order entry delays                Jidoka




                                                                                                                                                                      Sc
                                                    Waiting for information                           Lack of priority                  Office Kaizen
                                                    Waiting for machine repair                        Lack of communication             TPM




                                                                                                                                                                     ,M
                                                                                                                                                                   BA
  Processing       Effort that adds no value from   Multiple cleaning of parts                        Delay between processing          Flow lines
                   the customer’s viewpoint         Paperwork                                         Push system                       One-piece pull
                                                    Over-tight tolerances                             Customer voice not understood     Office Kaizen
                                                    Awkward tool or part design                       Designs “thrown over the wall”    Lean Design




                                                                                                                                                           ,M
                                                                                                                                                    én
   Inventory       More materials, parts, or        Raw materials                                     Supplier lead-times               External kanban
                   products on hand than the        Work in process                                   Lack of flow, Long set-ups        Supplier development




                                                                                                                                               or
                   customer needs right now         Finished goods                                    Long lead-times                   One-piece flow lines
                                                    Consumable supplies                               Paperwork in process              Set-up reduction




                                                                                                                                          N
                                                    Purchased components                              Lack of ordering procedure        Internal kanban




                                                                                                                                        d
                                                                                                                                       ar
    Defects        Work that contains errors,       Scrap, Rework                                     Process failure                   GembaSigma
                   rework, mistakes or lacks        Defects                                           Mis-loaded part                   Pokayoke




                                                                                                                                       ch
                   something necessary              Correction                                        Batch process                     One-piece pull
                                                    Field failure                                     Inspect-in quality                Built-in quality




                                                                                                                                   Ri
                                                    Variation                                         Incapable machines                3P
                                                    Missing parts                                                                       Jidoka




                                                                                                                                            © Richard Norén
Drivers of change
                           From                                   To                                                 Driver

Improving      Single dimensions, limited      Several dimensions, higher complexity        Practical thinking become more scientific
               complexity
Productivity

Flattening     Partly sharing information      Instant sharing with everyone that want to   Resource usage
                                               know as to enhance collaboration and
                                               accelerate corporate competitiveness         Strengthen teamwork

                                                                                            Learning and control, ”smartness”


Control &      Spending time on collecting     Instant real time information access         Resource usage based on real time information
               and aggregating historical
               information                     Spending time on evaluating and reacting     Transparency
real time                                      on real time information
                                                                                            Improved planning and reaction
information




                                                                                                                                             Sc
                                                                                                                                            ,M
Authoring      Few author their own content    Easy and convenient authoring of content     Increased productivity
               digitally accessible for        digitally, accessible for anyone that want
information    everyone                        to know                                      Time to market




                                                                                                                                        BA
                                                                                                                                  ,M
Cost           Unnecessary administrative      Sliding cost trend based on mutual needs     Savings
               work                            and expectations
                                                                                            Simplicity




                                                                                                                              én
               Silo thinking                   Holistic thinking and planning
                                                                                            Leverage on volume




                                                                                                                         or
                                                                                                                      N
Improvement    Long reaction times to bottle   Identify bottle necks quickly and being      General efficiency and cost cutting
               necks                           able to prioritize planed reactions




                                                                                                                  d
                                                                                            Accelerated product and process improvement




                                                                                                              ar
                                                                                                             ch
Process        Limited alignment between       Alignment in-between process and its         Better process control
               process and information flow    information flow




                                                                                                      Ri
                                                                                            Predictability



                                                                                                                      © Richard Norén

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Sourcing

  • 1. Ri ch ar d N or én ,M BA ,M Sc
  • 2. 1. Where we are 2. Saving potentials 3. Processes 4. Evaluations 5. Organizational skills and competencies 6. The relationship Sc ,M 7. How to get there BA ,M 8. Compensations and benefits én or N 9. Lean Sourcing, Backup slides d ar ch © Richard Norén Ri
  • 3. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 4. Procurement is getting there Procurement has become increasingly sophisticated in order to drive margin improvements, tools, productivity and transparency is improving the approach 1st Wave Strategic Sourcing • Centralized 3d Wave Strategic Sourcing negotiations • Establish “open season” on • Fewer suppliers any function e.g., HR, R&D, Procurement, design • Competitive bidding process • TCO management focus Demand Management 2nd Wave Strategic Sourcing Functional procurement • Standardized specs • Abolition of “sacred cows” • Procurement • High level of communality, e.g., Marketing, IT functions, standardization and modular function mainly • Policy/procedures Legal contract outlined processes. Procurement administration • Cost management shares responsibilities with function • Some monitoring imperative centers of excellence (PMO) and tracking • Procurement and Matrixed procurement • Organizational ”service Relative Sc contracting function threads” responsibilities clearly defined Efficiency decisions highly ,M decentralized • Procurement shares responsibilities with centers Dynamic “in/outsourcing” • Vendor base of competence management fragmented BA • Responsibilities by the • SLA/KPI allows service • Vendor various parts of the thread tracking relationships organization clearly defined • System allows comparable ,M “incestuous” “best practice” of sourcing Effective “end to end” procurement management • Cash flow management én • MIS allows unit/price tracking • Service, quality and added • System allows “policing” of value (ex R&D) improvement or compliance N • Disbursement management • Service and quality d improvement ar Up To Late 80s 90s New Millennium > 2010 ch Procurement Sourcing Supply Chain Management Close loop SCM Ri (“In The Basement”) (Easier cost improvement lever) (Source of sustainable total cost advantage) (Dynamic sustainable total cost) © Richard Norén
  • 5. inter-dependencies Purchasing comes down to three activities: – Sourcing: includes all activities related to establishing and managing purchasing contracts – Procurement: includes all activities related to identifying and fulfilling an actual purchasing need. – Supply relationship management: Develop mutually beneficial relationships Assess Internal Assess Supply Chain Opportunity Identify Create Assess Supply Need Requisition Market Go to tender and evaluate Award Define Sourcing Sourcing Strategy Create Purchase Sc Order Procurement ,M Execute Sourcing Strategy Shipping BA ,M Institutionalize Sourcing Strategy Receive Goods/ én Services Supplier Payment & Settlement or Create/Refine Relationship Management N Supplier Groups d Assess Relationship ar ch Initiate © Richard Norén Ri Relationship Manage Define Performance Performance Expectations
  • 6. Productivity and transparency • Lack of evaluation standards and RFI common processes SLA • Limited vision RFQ Sc ,M I • No fostering of best KP BA A GL ,M practice én A or SQ N • Reinventing instead d ar of re-using ch © Richard Norén Ri
  • 7. Act in the presence • Assure the right competencies at senior positions that foster and represent the new strategic sourcing 0th 1st 2nd 3d Sc ,M • Slamming the suppliers BA as hard as you can is old ,M én school, 0th wave, and will or N only cause organizational d ar stress and reduce savings ch Ri © Richard Norén
  • 8. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 9. Not about winning its about surviving • Everyone is out there, they’ve read the same books, heard the same arguments, fighting the same demons • Learning in action, Kaizen • @ Managers, admit that you don’t have control, act accordingly. Increase span of Sc control through procuring functions ,M rather than components, master entire BA relationships, define service threads ,M én or • @ Skilled procurement officers, many N times your insight is exactly what the d ar suppliers need to excel, use it ch © Richard Norén communicate, propose, change & think Ri cross-functional
  • 10. Don’t gamble • Make the strategy • Make it stick • Don't emphasize on short-term profits Sc ,M BA • Don’t award business ,M on price tag alone én or N d • Break down barriers ar ch between staff areas © Richard Norén Ri
  • 11. Reach out and it will materialize • Approach the entire sourcing chain flow • Justify your need • Merge processes with Sc supplier ,M BA ,M • Its never about the én price only or N d ar • 30-10% is likely to ch © Richard Norén Ri be found
  • 12. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 13. © Richard Norén •Get it right, unless you know, no one else will know. The processes’ •Transparency with suppliers, change if necessary •Value mapping, spaghetti chart •Identify the entire process from the supplier Sc •Define service threads boundaries ,M BA ,M Simplicity én or N d ar ch Ri
  • 14. Packet your processes • Make your homework, map your process and needs, define service value threads • Good packages and wrappings are like nice gifts, you can bring them easily anywhere & anytime. Sc • Mind your own business, suppliers are ,M many times much better equipped in BA knowing their own supply chain, your ,M common work is to find out how to én or optimize and integrate the entire N processes. d ar ch © Richard Norén Ri
  • 15. Value flow mapping where do you add value? • Assure that your SCM process are mapped, define ”service threads” • Compare and match process flows and SLA/ Sc ,M KPI. BA ,M • Transparency, evaluate én or & improve N d ar ch • Focus on deliverables Ri © Richard Norén
  • 16. All Pieces fits into TCO • TCO is your procurement DNA • Every link is needed and every part counts Sc ,M • Use the precise supplier BA process at the right time ,M én or • Unnecessary links will N d ar suboptimize TCO ch Ri © Richard Norén
  • 17. No silo thinking, Think ”service threads” • ”Service threads” are the entire process from end- to-end • Know your boundaries, facilitate and break out. Sc ,M g r cin sou BA n • The sourcing is rarely Lea Accoun- Design R&D ,M ting one silo only, pull strings én Marketing Industrial Purchasing operations or IT too all departments and N Communi- Bran cation d ding HR ar dependants ch Ri © Richard Norén
  • 18. Cost is everywhere stack savings • Stack and aggregate savings • Define where you add or destroy value • Include even parts where you might is better of doing it on your own. Sc ,M • It’s the entire service thread that will BA save your cost, parts of it will not be ,M interesting for suppliers or not even én be feasible to grab as it e.g doesn’t or N make logistical sense. Think it d through ar ch Ri © Richard Norén
  • 19. anchoring • Everyone needs to be part of it • Personal agenda, empowerment, political, hierarchical Sc ,M level is second nature BA ,M • Sourcing service treads én or is cross-functional N d ar ch © Richard Norén Ri
  • 20. modular processes facilitates sourcing • Make every function a separat process module, available for outsourcing Sc ,M • String your BA ,M processes as set of én wild Strawberries or N d into your own ar ch ”service thread” Ri © Richard Norén
  • 21. Make sure that the sourcing makes sense • Work with anchoring, supplier transparency and modular processes, adopt yourself continuously Sc ,M • Change process BA ,M modules whenever én or needed without N d looking back ar ch Ri © Richard Norén
  • 22. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 23. Where are you going • Transparency, establish common grounds of evaluations, Sc ,M compare, use best BA ,M practice for forward én or movements N d ar ch Ri © Richard Norén
  • 24. Are the trees in the way of the forrest • Simplicity • Focus on the ”do’s” • Reenginering, Sc productivity ,M BA enhancements... ,M én or • Stay upstreams, not N d downstreams ar ch Ri © Richard Norén
  • 25. Kraljics inköpsmatris Hög LH HH Hävstång Strategisk Affärsrisk Inköps-kategori Sc Stapel ,M Flaskhals BA Icke kritisk ,M én LL HL or Låg Hög N Leveranskedjans komplexitet d ar ch Placera in den röda punkten, och anpassa storleken efter spendvolymen Ri © Richard Norén
  • 26. Kraljics inköpsmatris – positionering av samtliga inköpskategorier Hög LH HH Elektronik Hävstång Strategisk Affärsrisk Mekanik Sc Stapel Chassidelar ,M Flaskhals Icke kritisk BA Kontors- Montage- ,M material material LL HL én or Låg Leveransrisk Hög N Leveranskedjans komplexitet d ar ch Placera in samtliga inköpskategorier i kraljicsmatrisen Ri © Richard Norén
  • 27. Kraljics inköpsmatris – Företagets ”fingeravtryck” Hög LH HH Hävstång Strategisk Affärsrisk Stapel Sc Flaskhals ,M Icke kritisk BA ,M LL HL én or Låg Leveransrisk Hög N Leveranskedjans komplexitet d ar ch Samtliga inköpskategorier ger oss en samlad bild, ofta benämnd ”fingeravtrycket”. Denna bild kan Ri sedan ge oss en sammantagen uppfattning om hur företagets strategier bör se ut. © Richard Norén
  • 28. Kraljics inköpsmatris – Olika företag har olika ”fingeravtryck” Systemleverantör fordonsindustrin Byggföretag LH HH LH HH Hävstång Strategisk Hävstång Strategisk Stapel Stapel Flaskhals Flaskhals Icke kritisk Icke kritisk LL HL LL HL Sc Grossistföretag Medicinteknikföretag ,M LH HH LH HH BA ,M Hävstång Strategisk Hävstång Strategisk én or N Stapel Stapel d Flaskhals Flaskhals Icke kritisk Icke kritisk ar ch LL HL LL HL Ri Exemplen är mycket hypotetiska, verkligheten kan skilja sig väsentligt © Richard Norén
  • 29. Kraljics inköpsmatris - inköpsstrategierna Kraljicsfält Strategisk Hävstång Flaskhals Stapel Hävstång Strategisk Konkurrensutsatta Kategoriintegratio Strategi Partnerskap Säkra försörjning anbud n Stapel Flaskhals Icke kritisk • Säkra kort & •Reducera logistik- •Skapa ömsesidiga långsiktig komplexitet • Hitta bästa kort- försörjning Mål åtaganden i lång- •Öka effektivitet siktiga anbud. varig relation. •Reducera •Reducera antal försörjningsrisk leverantörer •Korrekt prognos •Förbättra •Korrekt prognos Sc •Riskanalys marknads- och •Riskanalys •Samla köp för ,M produktkunskap hela kategorier •Noggrant lever- •Bestäm BA antörsval •Sök efter kundranking •Standardisera alternativ ,M •Kostnadsanalys •Utveckla kategorier och Aktiviteter •Förflytta förebyggande processer •Rulland én inköpsvolymer skydd •Utveckla effektiva inköpsplan or •Konsolidera inköp •Sök efter orderprocesser N •Effektiva processer •Optimera inköps- alternativ •Delegera order- d ar kvantiteter •Utveckla hantering •Leverantörsrankin ch g •Target-pricing alternativ Ri Källa: van Weele 2005, sid 153 © Richard Norén
  • 30. Alternativa portföljstrategier - Bensaous modell Köparens specifika investeringar Höga Köparen fjättrad Strategiskt partnerskap Sc Låga Marknadsrelation Leverantören fjättrad ,M BA ,M én Låga Höga or Leverantörens specifika investeringar N d ar ch Ri Källa: Bensaou, 1999); samt Skjött-Larsen sid 246 © Richard Norén 2009-09-25 Inköpsmodeller 6
  • 31. Alternativa portföljstrategier - Persons modell Många leverantörer, kort Hårda krav på ledtid och ledtid, få kvalitetsproblem kvalitet. Köparen beroende. Repititiva Strategi: Prispress, mark- Strategi: Ram- och sam- nadsorientering, alternativa arbetsavtal leverantörer Typ av köp Liknande ovan, samt prob- Långa ledtider, hårda kval- Lem att känna leverantörer itetskrav. Styrningsproblem Sc och prisnivå. Köparen är Strategier: Förhandlingar ,M Engångs beroende. och referenser Strategi: Prispress och BA referenser ,M én Standard Special or Typ av produkt N d ar ch Ri Källa: Persson 1998 © Richard Norén 2009-09-25 Inköpsmodeller 7
  • 32. Alternativa portföljstrategier – Andra modeller och deras egenskaper Modell Utgångspunkt Elliot-Shircore-Steel (1985) Vinst/värde vs. leveransens sårbarhet Hadeler-Evans (1994) Produktvärde versus komplexitet Sc ,M Lilliecreutz-Ydreskog (1999) Ekonomisk profil vs. Komplexitet/risk BA ,M Olsen-Ellram (1997) Strategisk vikt vs. Svårighet att leda én van Weele (2002) Vinstpåverkan vs. leveransrisk or N d Samtliga modeller liknar Kraljics modell. ar ch Ri © Richard Norén 2009-09-25 Inköpsmodeller 8
  • 33. Monitor and improve mutual expectations Certification levels and the need to monitor suppliers Process Performance Expectations * m c Certification Total Business Quality Delivery y Quality Affordability Customer level Assessment system Satisfaction ( (Management, g , (QPS) quality, delivery, On Period Acceptance Period Cost trends, cost Management, cost, technology, time reduction efforts, Schedule, Quality, customer support) (Months) (%) (Months) lean practices Technical, Finance (%) Run. Run. average average Sc Gold 4,5-5.0 Min > X, facility wide 100 12 100 12 4.0 or greater 4.4 or greater 4.0 ,M BA Silver 3.5-4.4 >Y, critical 97 12 99.5 12 3.4-3.9 3.8-4.3 processes Min 3.0 ,M én Bronze 2.5-3.4 Basic 93 12 99 12 2.8-3.3 2.8-3.7 Min 2.0 Initial or N * May vary with product complexity d ar ch What are reasonable requirements to have? Ri How many certification levels does it make sense to have? © Richard Norén
  • 34. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 35. Teamwork, teamwork, teamwork... • All reflections are valid in the corporates interest • NO pride, NO Sc bounderies, NO ,M single voice BA ,M én • Who is the owner of or N a issue? Focus on d ar ch solutions Ri © Richard Norén
  • 36. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 37. See the larger picture • Recognise that the supplier is just a part in the value flow chain Sc • While a supplier ,M BA may fit the ,M requirement it may én or not fit the N d ar environment ch © Richard Norén Ri
  • 38. Trust the supplier to fit in • Give the supplier opportunity to fit into the picture • The supplier is far Sc ,M better equipped in BA ,M their area, én appreciate it, listen or N and amend d ar ch Ri © Richard Norén
  • 39. Industralization challange Generation Le an planning Ap ma nu pr fac Plattforms ov tu rin ed g su Moduls pp lie Features vs rl ist Outsourced Sc Propriotority components ,M Pre assembly manufacturing BA manufacturing ,M Outsourced én or N d ar TIME ch Ri © Richard Norén
  • 40. How mature is your sourcing? Indicators or Lights or electrical Finish or design control pannel system Breaks or stearing Sc system ,M BA ,M én or N Piston or engine d ar ch Tyre or wheel Ri © Richard Norén
  • 41. Cherrypicking • Work tighter with suppliers • Establish a set of real prefered or ”symbiotic” suppliers Sc ,M BA • Move from component ,M sourcing to conceptual én or cherry picking of ideas N d ar without loosing control ch Ri © Richard Norén
  • 42. Boeing defense er about ”Its nev ney” • Boeing started in already in the mo the early 90s to outsource design of aircrafts to Russia Through brave outsourcing of product entire design and then cherrypicking, they have been able move quicker into communality and plattform standards across products to lower cost • They do not make flight Sc ,M simulators, they only label BA ,M them Through symbiotic realtionship, Boeing én had indication of a large govermental or order a few years ago. They discussed it N with their core supplier, they were able to deliver the first simulator the day d after reciving the order without ar engaging in any corporate financial risk ch or comittment Ri © Richard Norén
  • 43. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 44. step by step A procurement function needs to work through the defined stages to achieve world class procurement capabilities • Strategy fully supports the corporate goals and driven by corporate consensus • Managing the supply risk while leveraging the competitive strengths Stage V: • Nurturing supplier relationships Pioneering • Supplier base share improvement target for cost and innovation added value • Full visibility and trust across the external value chain • Procurement maintains a rationalized supplier network that delivers technology, knowledge, products or service quality superior to competitors World Class Stage IV: • Procurement strategy aligned to corporate strategy • Suppliers selected for strategic fit and deliver continuous improvement High Performing • Data driven decision making • Full support over purchasing cycle Level of Added Value • Risk sharing higher with the Organizational co-located and jointly financed Alliance • Business planning optimizes all commercial aspects, tax, investment, people Sc ,M • Formal Planning processes • Focus on SRM and sharing business plans Stage III: • Longer term, bigger value contracts with fewer suppliers Partnership BA Advancing • Collaboration on cost improvement, increased levels of risk sharing • Trained and qualified resources supporting all categories of spend • Key Performance Indicators in place. ,M Stage II: Developing • Some category strategy creation, but not company wide, and not communicated effectively én • Volume leverage through effective use of competition across categories Procurement • Track commercial measure of performance, targets for savings or • Technology enables i.e. purchase to pay cycle improvement through automation • Selected supplier base consolidation N Stage I: • Training and recognition of skills required Reacting d ar • Needs not anticipated, data not available or not used Buying • No Organizational wide procurement strategy, large supplier base ch • Transactional focus • Procurement provides ad-hoc tactical support © Richard Norén Ri • Low skills and resource, little career planning Time Line (potentially 3-5 Years)
  • 45. Its never about the price The scope of sourcing extends beyond supplier price negotiation and takes into account the total cost of ownership Purchase Amount paid to Price the Supplier Sc ,M Total Demand Drivers Internal Policies & Procedures Acquisition Cost Factors generate Procurement Practices additional costs to BA (Actual Opportunity) Specifications an organization Inventory Practices Internal Processes once an item is ,M commissioned and Management Systems in use Operational Practices én Decommissioning/ or Disposal N d ar ch Ri © Richard Norén
  • 46. Identify weakness and strengths • Make weakness and strengths your loved companions • Be frank and Sc ,M transparent about it BA ,M • Map the SCM én or process, mirror it N d ar with the supplier ch © Richard Norén Ri
  • 47. Impossible is not a fact its a opinion • Don’t listen to much on internal voices that claim that it cant be done, they may have different agenda or lack your insight • Challenge; ask for process mapping; proofs of evidence for why it can’t be sourced Sc ,M BA • Verify information from critical ,M internal voices with themselves, én analyse, summarize, propose a or solution based on given N d information so that it cant be ar ch challenged © Richard Norén Ri
  • 48. The proposal • Superimpose your processes, cut and paste, simplify, rethink • Be frank about any expectancies, bad and good ones, NO one can read minds, not even your supplier Sc • Don’t use service KPI/SLA as ,M punishments, it’s veichle for BA improvements and best practice ,M dialogue én or N • Make it work, just make it. d Never give up ar ch Ri © Richard Norén
  • 49. Synchronize yourself • Once the main mapping is done, continue with all sub processes if needed • Let go of your own Sc pride, your supplier is ,M BA expected to deal with ,M it, you’re sourcing a én or N package, focus on: d ar ”in and output” ch Ri © Richard Norén
  • 50. Get married • Realize that true cost /quality advantages will only happens when you behave and act as there is no one else. • Slapping the supplier only as hard as you can, will only dress Sc you up for divorce. ,M BA • Never relax, measure and verify ,M that you are doing the right én or thing to avoid competition. N d ar ch © Richard Norén Ri
  • 51. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 52. How much cost do you have? Cost of operations • COGS, is typically in the range Agriculture, forestry and fishing of 70-95% of revenue of most manufacturing firms. For those Mining companies, net income is Construction typically 3-8% of revenue. Manufacturing • A representative company Transportation who's COGS is 80% of revenue Sc Communication and whose net income is 5% of ,M revenue; if you can reduce Electric, gas, and sanitary services BA COGS by 1% (to 79.2% of ,M Wholesale revenue), that savings goes én directly to the bottom line, Retail or increasing net income to 5.8% N Insurance of revenue thus increasing net d ar 0 20 40 60 80 income by 16%. ch Ri © Richard Norén
  • 53. you get what you pay for, use it wisely • If you want to save cost be ready to pay for it. Also, be willing to change processes and structures • Many old school is low cost, emerging 3d sourcing wave is still rare in supply Sc ,M • Empower employees to challenge BA concepts, top management needs ,M to be part and support it. én or • If you buy a Ferrari and then drive N it on a dirt rode, don’t complain if d ar you can’t reach full velocity ch Ri © Richard Norén
  • 54. Academical shift • The number of specialised procurement education are avalanching • More MBAs or people with dual education are entering the field, capable of dealing with multi dimensional and increasingly complex environment • Multilingual with global experience, Sc ,M dressed for making sustainable savings. BA They’re skilled to be instrumental in ,M increasing profit through saving cost én or • Purchasing salaries of > £100,000 is N d becoming more common, moving ar ch towards financial industry wages Ri © Richard Norén
  • 55. Ri ch ar d N or én ,M © Richard Norén BA ,M Sc
  • 56. The 5s’ Step Name Action Catch Phrase Sort Remove unnecessary items 1 from the workplace “When in doubt, throw it out” (Seiri) Straighten, Set in Order Locate everything at the point “A place for everything, and 2 of use (Seiton) everything in its place” Sweep, Shine Clean and eliminate the “The best cleaning is to not 3 sources of filth Sc (Seiso) need cleaning” ,M Standardize Make routine and standard for “See and recognize what 4 what good looks like BA (Seiketsu) needs to be done” ,M Self-discipline, Sustain Sustain by making 5S second “The less self-discipline you 5 nature (Shitsuke) need, the better” én or N d ar ch © Richard Norén Ri
  • 57. Wastes’ The 7 Wastes – Definition Examples Causes Countermeasures Over-|production Producing more than the Producing product to stock based on sales Forecasting Pull system scheduling customer needs right now forecasts Long set-ups Heijunka – level loading Producing more to avoid set-ups “Just in case” for breakdowns Set-up reduction Batch process resulting in extra output TPM Trans- Movement of product that Moving parts in and out of storage Batch production Flow lines portation does not add value Moving material from one workstation to another Push production Pull system Storage Value Stream organizations Functional layout Kanban Motion Movement of people that does Searching for parts, tools, prints, etc. Workplace disorganization 5S, Point of Use Storage not add value Sorting through materials Missing items Water Spider Reaching for tools Poor workstation design One-piece flow Lifting boxes of parts Unsafe work area Workstation design Waiting Idle time created when Waiting for parts Push production Downstream pull material, information, people, Waiting for prints Work imbalance Takt time production or equipment is not ready Waiting for inspection Centralized inspection In-process gauging Waiting for machines Order entry delays Jidoka Sc Waiting for information Lack of priority Office Kaizen Waiting for machine repair Lack of communication TPM ,M BA Processing Effort that adds no value from Multiple cleaning of parts Delay between processing Flow lines the customer’s viewpoint Paperwork Push system One-piece pull Over-tight tolerances Customer voice not understood Office Kaizen Awkward tool or part design Designs “thrown over the wall” Lean Design ,M én Inventory More materials, parts, or Raw materials Supplier lead-times External kanban products on hand than the Work in process Lack of flow, Long set-ups Supplier development or customer needs right now Finished goods Long lead-times One-piece flow lines Consumable supplies Paperwork in process Set-up reduction N Purchased components Lack of ordering procedure Internal kanban d ar Defects Work that contains errors, Scrap, Rework Process failure GembaSigma rework, mistakes or lacks Defects Mis-loaded part Pokayoke ch something necessary Correction Batch process One-piece pull Field failure Inspect-in quality Built-in quality Ri Variation Incapable machines 3P Missing parts Jidoka © Richard Norén
  • 58. Drivers of change From To Driver Improving Single dimensions, limited Several dimensions, higher complexity Practical thinking become more scientific complexity Productivity Flattening Partly sharing information Instant sharing with everyone that want to Resource usage know as to enhance collaboration and accelerate corporate competitiveness Strengthen teamwork Learning and control, ”smartness” Control & Spending time on collecting Instant real time information access Resource usage based on real time information and aggregating historical information Spending time on evaluating and reacting Transparency real time on real time information Improved planning and reaction information Sc ,M Authoring Few author their own content Easy and convenient authoring of content Increased productivity digitally accessible for digitally, accessible for anyone that want information everyone to know Time to market BA ,M Cost Unnecessary administrative Sliding cost trend based on mutual needs Savings work and expectations Simplicity én Silo thinking Holistic thinking and planning Leverage on volume or N Improvement Long reaction times to bottle Identify bottle necks quickly and being General efficiency and cost cutting necks able to prioritize planed reactions d Accelerated product and process improvement ar ch Process Limited alignment between Alignment in-between process and its Better process control process and information flow information flow Ri Predictability © Richard Norén