Author : Tahir Rafiq

Project Start Date:

ATR Consulting Limited

June 2012

Lean Management Transformation

Case Study : Leading Bank in UAE

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Tahir Rafiq

Applying automotive best practice in the Banking Industry.....

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Schedule Page

The Purchasing Maturity Model (PMM) Journey towards best in class 1

Best in class procurement some attributes of a best in class procurement function...... 2

The gap analysis 3

Current state audit . collecting the voice of the customer (VOC) 4

Current state audit. Usage analysis 5

Developing a category strategy informed through analysis 6

Current state audit. mapping existing processes 7

Current state audit. value stream mapping 8

Current state audit. physical audit identifying waste 9

Transformed state. Using 5 S Framework to identify and eliminate waste 10

Transformed state. breakthrough change 11 - 13

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Contents

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Journey towards best in class

The Purchasing Maturity Model (PMM)

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3

Public Utilities Public Sector Financial Sector Food & Beverages Pharmaceuticals Telecomms

Automotive Aerospace

Retail Computers

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5

2

0

Inhibiting Performing Slow & Unresponsive

Process Optimizing Enabling System Optimization Best In Class Lean + Agile

• Procurement is not perceived as a core competency by business

• Business avoids procurement • Procurement disengaged with business

• Procurement perceived as “valued function” • Some executive support + Investment

• Business interacts with procurement • Procurement engaged with business • Some pursuit of best practice

• Qualified staff (degrees + certifications) • High degree of automation • Metrics driven (KPI, SLA) • Supplier diversity • Supplier rationalization

• Procurement perceived as strategic • proficient at expected business practices • High degree of business satisfaction • Procurement represented by CPO

• > 95% of all procurement under management

• Electronic PO cover > 80%

• 75% of spend through approved suppliers

• Procurement staff receive 24+ hours of training annually

• > 80% contract executed using own contract templates

• > 80% contracts executed within 30 calendar days; 95% within 60 days

Some hard KPI’s for Best Practice

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Mfg

Logistics

IT Finance

Planning

Eng

Mtkg

Maint

World class procurement

Some attributes of a best in class procurement function......

• Procurement is embedded within the organisation

• Procurement is completely integrated with its strategic suppliers

including systems and processes

• Procurement is strategically aligned with key suppliers, sharing

risks in, investments, inventory and product development.

• Procurement and its strategic suppliers are involved at the design

stage of product development (Supplier led design)

• Procurement has achieved an agile and lean supplier base, which

responds quickly to customer needs and help bring products to market

sooner than competitors.

• Procurement is consulted during planning and forecasting and is aware

of production schedules well in advance of actual requirements.

• Procurement shapes the supplier market dynamics, by creating competition,

by encouraging market entrants, by reducing dependencies on critical

supplies and guarding against monopolies.

Proc

Stores

2

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The gap analysis

Shifting the teams focus from short to long term and imbibing a philosophy of continuous improvement

1. Current State Push System

3. Future State Pull System

2. Transformation

• Satisfied customers

•Reduced lead time

• Visible process

• Reduced administration

•Reduced waste

• No overstocking

•Increased automation

•Reduction in LPO

•Reduction in invoices

• Reduction in resource

•Up skill staff

• Paperless solution

• Dissatisfied customers

• Long lead times ( 3 wks)

• Long process 15 steps

• Opaque process

• Over processing

• Overstocking

• Low automation

• 4.5k po’s issued

• 6k invoices received

• Low skill

• Too many bottlenecks

• Paper intensive

Team Problem Solving

Long Term Process

Eliminate Waste

Continuous Improvement

Lean

O optimization Process Optimization

Process + System Optimization

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Current state audit . collecting the voice of the customer (VOC)

Transforming feedback into insight

High satisfaction delighted

Low satisfaction disgusted

Low performance

High performance

Late PO’s

Linear Performance

Basic

Long LT

Helpful

Competence

Polite Communication

Easy to Use

P2P Functionality

Late Deliveries

Stock outs

GRN Issues

Invoices

Item Codes

Bureaucracy

Approval Process

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Current state audit. Usage analysis

Identifying top 20% SKU’s that constitute 80 % of usage across 200 locations

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Item E

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Item I

Please note. These are not actual usages or products, these have been changed to protect the company confidential data

1. Extract yearly usage per location (200 loc)

2. Identify and investigate anomalies

3. Establish monthly average per loc & add

10% buffer to mitigate stock outs and

arrive at Kan Ban volume

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Developing a category strategy informed through analysis

Deploying the Portfolio Analysis Tool

Suppliers Switching Costs are Low

Tactical

Many Buyers & Many Suppliers in the Marketplace

Buyers Switching Costs are Low

Suppliers Product / Service is Commoditised

Buyers Business is not Particularly Attractive

Buyers Search Costs are Low

Lots of Substitute Products in the market

Supply Market Dynamics

Val

ue

($)

of

Spen

d

Supply Risk

Simplify and streamline purchasing process, reduce

number of suppliers and automate ( reduce no of touch

points)

Procurement Strategy

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Current Requisition Process

Req

uis

itio

ner

P

2P

Su

pp

lier

Gen

eral

Ser

vice

s A

cco

un

ts P

ayab

l

ager

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Current state audit. mapping existing processes

Slow and bureaucratic process with little value add

Raise PR > 1K Branch Manager

> 5K > 1K

Regional Manager

Start

P2P Manager Approves

> 5K

Deliver Items

Raise PR > 1K

Check OK ? Release Payment End

To order one pen it takes more than

15 steps and touches more than 4 departments………

15

yes

No

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12

yes

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7 6

5 4 3 2 1

7

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Current state audit. value stream mapping

Current PR to LPO Process

80 % of the time is wasted in queues. Multiple bottlenecks (stop-start-stop...) which cost

both time and money

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Current state audit. physical audit identifying waste

Overstocking satellite storage (tied up Capital)

AED 3K x 206 locations

= AED 620 K

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Transformed state. Using 5 S Framework to identify and eliminate waste

Streamlining processes will not lead to optimization alone..........

Sustain

Sort Straighten

Shine

Standardize

1. Obsolete Stock

4. No Visibility of Working Stock

As Is 2. Over Stock

3. Multiple Satellite Stores

To Be

1. Obsolete Stock Removed

2. Only Kan Ban Items Remain

3. Consolidate into single store

4. True Visibility of Working Stock

5 S Framework

Before 5 S After 5 S

PO’s not aligned to demand

Kan Ban aligned to demand

Push System

Pull System

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Push System PO is not aligned to demand

Pull System Kan Ban is aligned to demand

Scale - Technology

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Transformed state. breakthrough change will only be achieved by scaling through technology

Coupling a procurement card solution with software....

O Optimisation

Partial Optimisation

Visa Intelli Link

Cloud based spend management tool

for procurement card transactions

Visibility & control over

organisational spend

Reporting & Analytics Capability

Maximum Optimisation

achieving break through change with....... Technology

Procurement & Intellilink Card Process

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Transformed state. breakthrough change will only be achieved by scaling through technology

Coupling a procurement card solution with software....

Reduced bottle necks

Eliminated unnecessary paperwork. Eliminated non

value added steps

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Reduced no of annual PO’s from 4.5K to less than 200

Reduced no of annual invoices

From 6k to less than 200

Reduced Lead Time from 6 working days to 0

Freed up 0.5FTE in accounts

Freed up 1 FTE from P2P

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Transformed state. breakthrough change will only be achieved by scaling through technology

Coupling a procurement card solution with software....

Measures of success

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End of presentation

Tahir Rafiq Feedback would be greatly received and appreciated

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