Presentacion Evolucion Excelencia Operacional - Paul Brackett - ABB

© ABB Group October 12, 2011 | Slide 1

Evolution of Operational Excellence an ABB Perspective

Paul Brackett, ABB – Quality Week, Lima Peru, Oct 2011

A Brief History of Operational Excellence

Henry Ford created the assembly line in early 1900’s

Toyota Production System – developed 1948-1975 - from

which came:

Lean Manufacturing

JIT – Just In Time

TPM – Total Productive Maintenance

TOC – Theory of Constraints – Eli Goldratt – 1984

Six Sigma – 1986 – Motorola

Followed by waves of other tools & methodologies, mostly

applied to the manufacturing shop floor & supply chain

© ABB Group – CD-QO – Operations Development Group October 12, 2011 | Slide 2

History continued…

By the 1980’s competition required that so-called High

Cost Countries in North America & Europe had to become

efficient enough to compete globally.

Coincidence between Opex Improvements & trade

balance? Perhaps, perhaps not…


Toyota Production System Institutionalized

JIT & other methodologies

become popular Now what do we do?

U-CELL

COMPUTER-INTEGRATED-MANUFACTURING

WHERE DO WE START ?

TQM ROBOTICS

A.M.T.

Where does Opex start?

Factory Shop Floor’s are a very obvious place to start…

Everything is visible, the layout, the flow, the inventory,

the work ethic, the work procedures…

Companies making multiples of the same product had

extreme advantages in streamlining operations

Improvements are obvious, “low hanging fruit”, relatively

simple to make improvements…

But what about companies that make products that are

ETO or Engineered to Order?



Cost structure

Operating

Expense&

material

Profit

Overhead

Th

rou

gh

pu

t

Sa

les

20%

savings in

this area

through

OpX

projects

How Operational Excellence affects Cost Savings

Basic laws of competitiveness…

T – I – OE = EBIT

Throughput (Cash generated) minus Inventory minus

Operating Expenses = EBIT (profit)

How does one company gain competitive advantage over

another when selling similar products/services?

Must assume that Inventory is nearly identical…

Therefore, one must either increase Throughput (sales) or

reduce OE (operating expenses)

So, while our salesmen are selling snowballs to Eskimos…

We begin to focus on Opex…


The basics of increasing profit with existing sales…

Finished

Goods Raw Material Work in Process

Value

Added

Time

Value

Added Value

Added

Product

Delivery

Manufacturing Cycle Time

Material

Delivery

Value

Added

Time

Value

Added

Value

Added

Product

Delivery

Manufacturing

Cycle Time

Material

Delivery

Work in Process

A Brief History of ABB

ASEA - Allmänna Svenska Elektriska Aktiebolaget – 1883

(Sweden)

BBC – Brown, Boveri & Cie – 1891 (Switzerland)

Both companies were instrumental in producing AC and

DC motors, generators, steam turbines and transformers,

and generating electricity to their respective regions.

Both were in countries that were “neutral” in WWII.

Merged in 1987 – becoming Asea Brown Boveri – ABB

Significant acquisitions in following years.

Now 5 divisions of Low Voltage Products, Power Products,

Power Systems, Process Automation, Discrete Motion

(including Robotics)


ABB and it’s various Product Portfolio

How do the principles of Operational Excellence apply

across all these disciplines?

And how does it apply to Commercial Projects?


Customers: The Life Blood of any Company

A sale is not something you pursue, it is something that

happens to you while you are immersed in serving your

customer.

Business is not just doing deals; business is having great

products, doing great engineering, and providing

tremendous service to customers. -Ross Perot

Know what your customers want most and what your

company does best. Focus on where those two meet.


Technology: Keeping the Edge

ABB is recognized as an industry leader in technology,

design & engineering, industry knowledge

This is affirmed by positive customer feedback

But with new designs and Engineering to Order comes risk

of being able to deliver on-time & on-quality.

Strict Quality & Opex standards help alleviate the problem


Operational Excellence: The need to Succeed

Success can be found in many ways, but is measured in

the eyes of the customer.

ABB has adopted a customer-centric focus that

incorporates rigorous Opex standards.

The standards go beyond what can be seen on the Shop

Floor and get to the root of the problem, usually found on

the Top Floor


© ABB Group 100510_QO_ODG Cary_1.ppt October 12, 2011 | Slide 14 © ABB Group 090914_QO_Quality & OPEX Vision 2012_1_1 October 12, 2011 | Slide 14

ABB Quality Policy – The Motivation for OPEX

To ensure that we meet our responsibilities and obligations to our customers, our

people, our partners, our suppliers and to our shareholders we are committed to the

following Quality Objectives:

1. Deliver on-time & on-quality products, systems and services that meet or

exceed our customer's expectations.

2. Identify and understand our customer's expectations, measure customer

perceptions, and implement improvements to increase customer satisfaction.

3. Enable and engage our people at all levels in a relentless drive to improve

operational performance along the value chain from suppliers to customers.

4. Increase the motivation and skills of our people to add value to our customers

and our businesses, through continual training and development.

5. Leverage our partners & suppliers strengths to improve our products and our

businesses from product design through production, installation and

operation.

6. Embed social responsibility & company ethics policies in our business

practices.

7. Continually improve environmental, health and safety performance through all

products, operations, systems and services.

Why does Operational Excellence matter?

It is demanded of us by our customers

It is visible when customers visit the businesses

It is critical to the execution of projects

It is what keeps us in business


© ABB Group 100510_QO_ODG Cary_1.ppt October 12, 2011 | Slide 16

Driving Excellence in Operations

Drive “Customer Feedback” action follow-up (eg. NPS &

CCRP outputs)

Support OPEX Projects in Divisions & BU’s

Lead Cross-Divisional Group Key projects (eg. Streamline

Intra-Group Trading)

Drive OPEX Projects with Partners/Suppliers (eg.

Supplier Qualification Process, Flop 10)

Supporting Flawless Project & Risk Management

Lead Project Mgt Council (eg. publish ABB Project Mgt

Framework)

Strengthen ABB Project Review processes

Assess & Certify Project Mgrs & BU’s

Drive Project & Risk Mgt Training

Building an ABB Continual Improvement culture

Implement “ABB 4Q” methodology

Drive “ABB 4Q” training & coaching

Gain GEF level awareness & support

Launch CEO Excellence Awards

Actions driven by Quality & Opex

Competitive Drivers to Operational Excellence

VoC – The Voice of the Customer

CoGS – Cost of Goods Sold

Health & Safety


Voice of the Customer

Customer satisfaction is worth the price of the last sale.

Customer loyalty is priceless.

Opex is the proactive way of avoiding customer issues

Customer Complaint Resolution is the reactive way of

dealing with the issues

If the customer ain’t happy, nobody is happy!

A very high percentage of ABB’s improvement “projects”

are centered directly on finding and eliminating root causes

of customer issues


Cost of Goods Sold or Cost of Poor Quality (COPQ)

Cost of Poor Quality is like a cancer to an organization

An excellent company has 5-10% COPQ costs

An average company has 10-20% COPQ

The easiest way to reduce COPQ is to stop reporting it.

At ABB, COPQ is treated differently.

Make it transparent, measure it, report it.

Then create improvement projects to get measurable

results, and eliminate the root causes of COPQ.

The 2nd greatest number of improvement projects at ABB

are focused on measurable COPQ elimination.


Health & Safety

The Safety & Health of employees, customers, suppliers

and contractors is ABB’s primary concern.

A measurably growing number of improvement projects

and H&S initiatives have played a major role in achieving

this goal over the last few years


International Aspects of Operational Excellence

Opex varies greatly from country to country, region to

region, culture to culture

“High Cost” countries MUST have robust Opex programs

in order to continue to compete on the world stage

Stringent safety regulations have forced many companies

into compliance among the Industrialized Nations and most

of the Developing Nations.

The so-called “emerging economies” have less stringent

regulations for Health & Safety, and generally have much

lower wages.

Examples of project execution, safety violations, people

standing around for 15-30 minutes an hour, safety glasses,

etc.


So how is Opex evolving in the 21st Century?

Opex is no longer simply for Manufacturing Shop Floors

Our manufacturing folks have saved many a General

Managers job over the years.

But the root causes of the problems are rarely found on the

Shop Floor, they usually originate on the Top Floor

The most common cause comes back to communication in

the hand-offs between departments


Global KPI Monitoring – SMT & Opex Analyzer

Improvement Projects are monitored at a Global Level in a

large database called SMT (Strategic Monitoring Tool)

Every improvement project has a cost reduction element,

with few exceptions (Safety)

Cost reductions are reviewed by the CEO on a monthly

basis.

Strategic KPI’s such as OTD, OQD, Inventory, Revenues

per employee, etc. are updated monthly by each business

unit, and reviewed by a Division Responsible person using

the Opex Analyzer

Anomalies are flagged and discussed within days

Repeats of the anomalies trigger actions ranging from local

to regional to global support


Benchmarking: Internally, Externally & Internationally

Group Directives govern how ABB factories should be in

terms of appearance, safety, customer comfort, cleanliness

and so forth.

Teams within product groups are encouraged to regularly

visit and network to determine how one business solves a

given common problem

At every opportunity, ABB visits “friendly” businesses to

determine how well we are doing compared to other

businesses in similar industries


Guidelines & Awards that Promote Excellence

#1 Quality Award – various divisions – includes pictures

and write ups in the internal news letter

CEO award quarterly in various regions – includes internal

write-ups and a picture with the CEO!

Other regional and divisional awards include winning an

iPad for having the best improvement project



Net Promoter Score – Our Customer Feedback

Promoter

Passive

Detractor

Extremely likely

to recommend

9-10

0-6

7-8

Extremely unlikely

to recommend

Form long & profitable relationships,

are more interested in new technology

and are less price sensitive. They will

recommend ABB to others

These customers do not care about

ABB. Neither loyal or disloyal, they are

waiting for the next best opportunity

Feel as if they have been badly treated

and are more likely to defect to the

competition. They demand higher

discounts, complain more and will deter

others from using ABB

% Promoters subtract % Detractors = Net Promoter Score (NPS)

© ABB Group October 12, 2011 | Slide 27

Customer Action process (NPS link to CCRP as execution arm)

The Internal Customers: Kissing your Sister

In a company with many different centers each responsible

for P&L it sometimes becomes easier to reach out to

external customers than internal customers

ABB has a strong, successful and growing program to fix

this problem


One Simple ABB: Streamlining Internal Trade

Through a focused group of dedicated resources, a team

with representatives from each division are now meeting

on a regular basis to discuss how best to serve the

customer by working together.

Standardization of Terms & Conditions

Rules placed on where profit will be taken

A single ABB contact point for all issues regarding a

project or systems sale

Has now resulted in nearly $1 BUSD in additional business

in 3 years.



ABB OPEX – The 4Q methodology for problem solving

4Q Process

Q1 - Measure

Q4 - Sustain Q3 - Improve

Q2 - Analyze

Define opportunity

Investigate to understand

the current state in detail.

Identify and confirm root

causes of the problem.

Develop, pilot, and

implement solutions that

eliminate root causes.

Maintain the improvements

by standardizing the work

methods or processes.

Input Triggers CCRP, NPS, cust. feedback

COPQ data

Daily workplace rounds

Plant Assessment Guideline

Supplier Qualification Process

KPI tracking systems

Audits and Assessments

Results Customer satisfaction

Improved quality

Higher ROCE

Safer workplaces

Benefit tracking in SMT

People Leadership

Resources, Involvement, Motivation, Recognition

Continual Improvement of ABB OPEX

Sk

ills

in

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ply

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AB

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To

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| Slide 30 February 16, 2010

How it Works;


GF - QO Bill Black

PA OpEx

Narendra Gupta

PP OpEx

Goethe Wallin

PS OpEx

Bill Black

LP OpEx

Jon Telleria

Division

Head Division

Head Division

Head Division

Head Divisions

DM OpEx

Detlef Steck

GF-QO (Ambassadors of Quality & Operational Excellence)

Central OpEx CEU Georg Kohnen

DE Karl Auer

ES Josep Olive

HU Laszlo Mocsy

BE H. de Baerdemaker

Joost Kuijpers

IT Alberto Bracaglia

SE Maria Beijbom

NO Arne Klette

DK Peter Nielsen

EE Christian Puust

PL A. Sosnowski

IN CH Prahallad

UAE Liis Metusala

ZA Arther Tucker

Motimedi Ndala

SA Khizar Usmani

EG Amr Farouk

Eastern OpEx tbd

Division

Head Division

Head Division

Head Division

Head Countries

Americas OpEx NAM Don Allen

BR Alfredo Pini

ODG Cary N.C. (6)

ODG Beijing (12)

ODG Vaasa (12)

ODG Bangalore (12)

Customer & Supplier

Quality Louis Ladouceur

Polk Burleson

Project Mgt Sai Kanuparthi

Jo-Ann Albano

Operations Dev’t Adam Nowarski

ABB CEO Joe Hogan

Supply Chain Mgt Daniel Helmig

Global Footprint Stefan Bergerham

Project Mgt

Council

OPEX 4Q Training (3)

Opex: From the Shop Floor to the Top Floor

Improvement projects are now happening in:

Sales, Bid & Proposal

Engineering

Supply Chain Management

Manufacturing

Test

Finance & Accounting

Human Resources

Projects & Systems Business

Service

And more…


Opex in Large Commercial Projects & Systems

A project manager typically has more to do than any

human being should ever have to do

Quality and Opex personnel are increasing being assigned

to larger projects

The results are showing much improved execution,

resulting in happier customers and less margin erosion


Opex Success in Engineering

Engineering is now embarking on a significant

improvement projects in almost every business

KPI’s indicate that the number of engineering errors are

way down compared to before the improvements


Opex in Supply Chain Management

Supply Chain Management has embarked on a journey of

“fixing” our “Flop 10” worst suppliers

3rd party consulting companies are now working with these

suppliers at the suppliers expense when the OTD or quality

reaches an unacceptable level


Opex Success in Shared Accounting Services

Accounting services has now begun keeping KPI’s on their

success in Invoice Processing, Payables and Recievables

The number of errors has dropped drastically, reducing the

amount of rework, and ultimately the cost of processing


Opex thru the Value Chain: Suppliers Customers

The Opex Ambassadors are now becoming involved with

improvement projects, working directly with customers


Continuous Improvement is a Journey, not a Destination

Are we there yet?

There is always some improvement that can still be made,

but the culture is changing toward one of Continuous

Improvement

As Opex continues to evolve new places will be found

where it is applicable


The Value to the Customer: The Ultimate Value

Ultimately, the customer receives:

A better product

A well executed project, on time and under budget

Better service

Higher value

Continue to reach for the stars!


Presentacion Evolucion Excelencia Operacional - Paul Brackett - ABB

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