1 KING FAHAD UNIVERSITY OF PETROLEUM & MINERALS College Of Environmental Design Construction...

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KING FAHAD UNIVERSITY OF PETROLEUM & MINERALS

College Of Environmental Design

Construction Engineering & Management Department

CEM 515- Quality managenet

Term Paper Presentation - 082

Process Improvement at Material Supply Organization

Prepared by:

Abdurrahman S. Al Shahrani, PMP June 8, 2009

2

OUTLINES

• Introduction

• What is “Process Improvement”?

• Material Supply – Process Improvement and Change Management Unit “PI&CM”

Risks Atrium Smoke

• Process Improvement Projects Selection

• Process Improvement Methodologies

• Case Study

3

Introduction:

• Quality is satisfying the end customer and add value to

his business

• Adding the same value every day does not work anymore

and every organization needs to continually seek ways to

improve value to customers

• Adding the same value every day does not work anymore

and every organization needs to continually seek ways to

improve value to customers

• They want more for less

• Thus, to move towards competitive world, the

organization target is to insist on Process Improvements.

4

What is “Process Improvement”?

• way of looking at how we can do our work better

• when try to fix what’s broken, we may never discover or understand the

root cause of the difficulty.

• However, when we engage and apply process improvement methodology,

we seek to learn what causes things to happen in a process .

• use this knowledge to reduce variation, remove activities that add no value

to the product or service produced, and improve customer satisfaction

• It means making things better.

5

Material Supply – Process Improvement and Change Management Unit “PI&CM” • formed in the material supply division in 2003, Material

Supply Organization , Saudi Aramco

• grown from three member team to eight members

• The objective was to drive process improvement

initiatives within various units

• material supply is the crucial link between the supplier

and the customer. If this link is strong, secure and

effective then only the material can be provided at the

right time, place, quantity, quality and cost.

6

Material Supply – Process Improvement and Change Management Unit “PI&CM” Continue….. • Unit members are from various background and experience

which give to the unit a good culture to exchange ideas

• Each unit member is at least Lean Six Sigma Green Belt

Certified which enough tools & techniques as skills to drive

process improvement initiatives within the division.

• VISION : Providing World class process Improvement

services to all Material Supply Departments and enable

them to deliver Six Sigma Quality service to all Customers

with minimum waste in the processes”

7

Material Supply – Process Improvement and Change Management Unit “PI&CM” Continue…..

Objectives:

• Focus on Material Supply business processes improvement initiatives

• Facilitate Business Process improvements using Lean Six Sigma and other

best practices, process improvement methodologies and frameworks

• Provide Training and Consultancy to all Material Supply departments for

improving Business Processes with structured methodologies/Frameworks

• Create learning organization with process improvement and customer

centric culture

8

Process Improvement Projects Selection

Before Selection:

• “Listening to Customers”

• understanding the Business needs

• looking at performance of the process

Then theme to capture:

• Customer requirements/concerns

• Management Goals/ Objectives

• Process Performance

• Auditing items

9

Process Improvement Methodologies

Three methods:

• Lean Six Sigma

• Lean Method

• Just-Do-It

SHOULD LYING ON BUSINESS PROCESS MAPS, METRICS and MONITORING

10


Solution is

Clearly Visible

Is it Limited to your Work Area?

Just-Do-It Project

Yes

No

Yes

Business Problem/ Opportunity for

Improvement Identified

Simple tools like RCA and

VSM are sufficient to Resolve this

Problem

Does it require

Rigorous Data

Analysis

Initiate Lean Six Sigma Project

No

Initiate LEAN Project

No

Yes


Initiate Lean Project

No

Yes

Solution is

Clearly Visible

Is it Limited to your Work Area?

Just-Do-It Project

Yes

No

Yes

Business Problem/ Opportunity for

Improvement Identified

Simple tools like RCA and

VSM are sufficient to Resolve this

Problem

Does it require

Rigorous Data

Analysis

Initiate Lean Six Sigma Project

No


No

Yes


Initiate Lean Project

No

Yes

11


Lean Six Sigma

Selected if:

• Root causes are not known for the problem and solution is also not known

• Problem is complex and cross functional or departmental

• Problem is related to defects reduction

• Data is available and data based root cause analysis is required

• Business benefit is significant

• Improvement takes more than 2 months

12


Lean Six Sigma

Lean Six Sigma has various methodologies and in Material Supply

department we use DMAIC (Define, Measure, Analyze Improve, and

Control) for improving the existing processes

Develop solution options Re-design process to

obtain required capability

Perform DOE as required

Evaluate options and select f inal solution

Prioritization matrixDetermine measurement system for improved processCreate implementation planComplete FMEAObtain buy-in / support for improvement actionsConduct pilot / testing to verify resultsImplement improvementsCommunicate resultsUpdate Charter

as requiredDevelop Improve report out

For Sponsor

Analyze Process FlowValue-added stepsNon value-added

stepsOpportunities

Analyze DataGraphical toolsHypothesis TestsRegression

analysisIdentify and collect additional required dataIdentify signif icant Xs

Tie to root cause analysis

Draw conclusionsPerform FMEAUpdate charter as requiredDevelop Analyze report out

Standard template

Create Fishbone• Tie to def ined

defect Collect Data

• Ys (results) with Xs (data tags)

Evaluate Measurement SystemsStart FMEAUnderstand detailed process

• Detailed process map w/ rework loops

Describe Process• Numerical

statistics• Graphs: Time,

Hist., Pareto, etc.Establish Process Capability

• DPMO or % Defects

• Calculate ZUpdate Charter

• as requiredDevelop Def ine/Measure report out

• Standard template

Analyze Improve ControlMeasureDefine

Perform Capability Analysis of improved processDevelop and Implement a Control PlanComplete Project Closure PackageUpdate f inancial benef its statement as required

Get OCD f inal evaluation

List best practices Identify lessons

learnedUse SPC ChartsHand of f project to process owner

Create follow up action plan

Develop Final report out

Standard template

Identify Sponsor and other key stakeholdersForm project team

• Team leader• Team members

Tour processClarify project

• Problem statement• Goal statement• Process output = Y

Def ine process boundaries

• SIPOCDef ine project boundaries

• Resources• Authority

Determine project timelineIdentify CTQ Customer Requirements

• Def ine the Defect• Def ine defect measure

Develop estimate of potential f inancial benef it if project goal is achievedGain Sponsor Approval of Project Approval FormChange Management Plan

13


Lean Method

Selected if:

• Problem is not complex and related to more number of steps in the process

• Problem is related to seven types of Waste in the process

• Data analysis is not required for the root cause analysis

• Solution can be finalized in the Lean Event

• Improvement can be achieved within 2 months

14


Lean Method

Process Improvement & Change Management Unit.igx

Lean

Exec

ution

Proc

ess

Just-

Do-

It Ex

ecuti

on

Proce

ss

Start Form teamProject Charter

Conduct Lean Event

Action items follow up

Implement the action items

Weekly update to the team

Monthly review by champion &

manager

Approval for implementation

plan

Reportout Benefits

Team recognition

StartConduct

Brainstorming session

Identify action items

Implementation the action

items

Reportout Benefits

Issue Appreciation letter from manager

Project Charter

Approved by Mgmt

Yes

Modify/Cancel The project

No

Implementation Plan

Approved by Management

Modify Action Items with Alternate solutions No

Target Achieved

No

Yes

Yes

Inform process owner

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Just-Do-It Methodology:

Selected if:

• Solution is clearly known

• Doesn’t need any further root cause analysis

• Solution can be finalized with 1 or 2 Brain storming sessions

• Improvement can be achieved within a month

• No need of forming bigger team ( 2 or 3 members can solve this problem)

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Just-Do-It Methodology:

Process Improvement & Change Management Unit.igx

Lean E

xecutio

n Proc

essJus

t-Do-

It Exec

ution

Proces

s

Start Form teamProject Charter

Conduct Lean Event

Action items follow up

Implement the action items

Weekly update to the team

Monthly review by champion &

manager

Approval for implementation

plan

Reportout Benefits

Team recognition

StartConduct

Brainstorming session

Identify action items

Implementation the action

items

Reportout Benefits

Issue Appreciation letter from manager

Project Charter

Approved by Mgmt

Yes

Modify/Cancel The project

No

Implementation Plan

Approved by Management

Modify Action Items with Alternate solutions No

Target Achieved

No

Yes

Yes

Inform process owner

17

Effectiveness of Process Improvement and Change Management Team

• Progress of Process Improvements is measured for all

Material supply departments through engagement and

effectiveness parameters

• Effectiveness parameters consist of business benefits

which PI projects have resulted in improving Quality, Cost

and Time parameters.

• Engagement parameters include like Number of people

Trained in the Process Improvement Methodologies,

Number of PI Projects, etc.

18

Effectiveness of Process Improvement and Change Management Team

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Recognition of Process Improvement Projects

• Lean Six Sigma projects

After closure of the project, project teams will receive the Project completion certificate and

Green Belt/Black Belt will receive GB/BB certificate

• Lean Projects

After closure of the project, project team and leader will receive the Project completion

certificate

• Just-Do-It Projects

After closure of the project, project teams will receive the appreciation letter from Management

about the Quick win

•

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CASE STUDY

• Title : Purchase Agreement/ Purchase order Bid Summary

process Improvement project

• Operational Definition: PO/ PA

• Problem Statement: Based on data for the year 2007 (Jan

to Dec), the median cycle time for Purchase Order “PO”

Bid summary preparation is 8 days for all orders less than

250,000 USD which contributes to 94% of total PO counts.

This leads to delay in material & services provided to

customers resulting loss in productivity. See Fig 9 next

page for the current flow chart.

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CASE STUDY

Objectives

• Streamline the current bid summary and bid equalization

processes.

• In addition to reviewing the current bid summary and bid

equalization process, the following need to be

considered:• Currency forecast.

• Price lists

• Vendor performance

• Grouping products (keeping a set of items together)

• Simulation/ scenarios (Optimization)

• Logistics options (Freight and Warehousing )

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CASE STUDY

Project Scope:

• Longitudinal Scope: (Length of the process):• Start Point: Bid Closing

• End Point: PO Creation

• Lateral Scope: (Width of the process) • Orders < 250,000 USD, All PAs & POs

• Out of Scope: • (Special Cases) Technical Evaluation related activities

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CASE STUDY

Bid ClosingWaiting to open

( 1 Day)Bids available Buyer opens bids

No Bid received/Re-develop/

Release

Bid Opening committee open

bids

Waiting (1 Day)

Start

Buyer Receives Bid

No

Buyer Initial Bid Review

Waiting ( 3 days)

Buyer Full Bid Review

( 2 days)OK

Buyer Rejects bids

Buyer Accepts bids

Buyer Seeks vendor clarification

( 1day)

AcceptsWaiting

( 7 Days)

No

Yes

No

Yes

Buyer Rejects the bids

No

Buyer enters bids into SAP( 1 day)

- Buyer processes 9 COM PA bids outside SAP

- OOK buyer enters prices to SAP

- Buyer uploads 9CAT PA excel (ZM0171)

Requires Tech evaluation

Tech Evaluation( 35 days)

Yes

Waiting (1 Day)

No

Buyer makes bid analysis including

equalization( 1 Day)

Buyer Prepares Award

Recomm.incl.bid summary

Waiting( 2 days)

Supervisor requests price

discussion

Waiting( 5 days)

Buyer/Vendor price discussions

( 1 Day)

Buyer enters alt. bid for revised

prices

Buyer submits revised award

recommendationsApproved ReworkNo

Waiting1( Day)

Buyer creates PO/PA

( 1 Day)PO ReleaseEnd

6/17/2008Current State Map – Purchase Agreement/ PO Bid Summary Process

24

CASE STUDY

High Level Process Map (SIPOC):

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CASE STUDY

What is wrong

26

CASE STUDY

Pareto Chart

27

CASE STUDY

What to be done:# Root Cause Recommendation Action By Complt.%

1 Unnecessary Price Discussions

- Education & instructions to Approvers

- Remove cost saving target from PMP

GS 100 %

2No rule for selective sampling in bid summary

- Create rules (Management approval needed)

- Procedure Updating

- GS- Bob/Nigel

100 %

3OOK office delay in updating SAP & delivery of bids/information

- Notifications to OOK management

GS 100 %

4No system grouping award items (Cherry picking not working)

- Deactivate cherry picking

- Procedure Update

- Maziad / James- Bob /Nigel

100 %

5Impractical to print large bid summary

- Enhance PA executive summary

- Update Procedures

James 100 %

6PA Executive Summary excludes OOK

- Included in # 5 recommendation

James 100 %

7Additional Process to add alternative bids

- Include in SRM requirement

Nigel 100%

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CASE STUDY

Future state Process Map:

Online Bid closingWaiting(1 day)

Buyer views bid summary

RequiresTech

evaluation

Technical evaluation( 35 days)

Yes

Buyer makes award

recommendation( 1 day)

OKAward Approved

( 1 Day)

Rejected for Rework

No Yes

No

Auto PO/PA issueStart

End

6/17/2008Future State Map – Purchase Agreement/ PO Bid Summary Process

37Total

2

(66.5%)

3

(42.5%)

Non Value Added

1

(33.3%)

4

(57.5%)

Value Added

Time (Days)No. of Steps

37Total

2

(66.5%)

3

(42.5%)

Non Value Added

1

(33.3%)

4

(57.5%)

Value Added

Time (Days)No. of Steps

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CASE STUDY

Project Scope:

• Longitudinal Scope: (Length of the process):• Start Point: Bid Closing

• End Point: PO Creation

• Lateral Scope: (Width of the process) • Orders < 250,000 USD, All PAs & POs

• Out of Scope: • (Special Cases) Technical Evaluation related activities

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THANKS

Q & A

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