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1
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
Process Improvement Methodologies
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
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
Initiate LEAN Project
No
Yes
Initiate LEAN Project
Initiate Lean Project
No
Yes
11
Process Improvement Methodologies
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
Process Improvement Methodologies
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
Process Improvement Methodologies
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
Process Improvement Methodologies
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
15
Process Improvement Methodologies
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)
16
Process Improvement Methodologies
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.
19
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
•
20
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.
21
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 )
22
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
23
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
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%
28
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
29
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