“We have only two sources of competitive advantage: The ability to learn more about our customer faster than the competition. The ability to turn that learning into action faster than the competition.”

- JackWelch, Chairman and CEO of General Electric between 1981 and 2001

Background

“A year from now you may wish you had started today.” - Karen Lamb

The journey to Operational Excellence within business has a long history. The origins of modern day Operational Excellence thinking have been developed on the foundations established by Deming in the 1940- 50’s through to the practices that became known as ‘lean thinking’ as practiced by Toyota in the 1960’s and the ‘Just in Time’ approach to managing the whole end-to-end supply chain across the boundaries of extended enterprises. The approach became more widely recognized in the mid 1970’s and evolved through time most notably in the 1980’s with TQM and six sigma in the 1990’s.

What is Operational Excellence?

“Excellence in execution, if not excellence what?” - Tom Peters

In our view, the practical definition of Operational Excellence is producing similar outcomes better than “the competition” leveraging sector-agnostic best-in-class practices. This is achieved by optimizing the organization’s structure, processes, resources, and knowledge to ensure that the organization’s processes and activities deliver value and clear line of sight to our end customer needs. This can be achieved by;

• Strategy – Strategies that are aligned and fully integrated to the organization’s strategic priorities, sometimes referred to as the “golden thread”
• Structure – Organized to directly support the organization’s goals and priorities
• Process – Lean and simplified processes that are designed with the end-user experience in mind and co-operability
• People – Knowledge and subject matter expertise optimized to deliver the best value to our customers and for their organization
• Technology – Pragmatic and fit-for-purpose solutions to deliver the organization’s goals and enhance the end customer experience

The typical characteristics of an organization that would benefit from an Operational Excellence approach are as follows:

• Lagging share price performance vs. competitors and overall market
• The need to fund growth strategies
• Deteriorating operating margin
• “Reactive” restructuring and job cuts, or any cost efficiency initiatives
• No or limited focus on third-party spend, both operating expenses and capital investments
• Post merger and acquisition integration

In fact, a recent study indicates that cost reduction remains the primary focus for CEOs. For the next 12 months, 66% of CEOs globally say they will cut costs.

Case Study – Why and How?

The following represents an amalgamation of case studies where we have delivered over $1B of benefits through the application of Operational Excellence.

A multi-billion dollars organization had restructured its’ organization numerous times without delivering sustainable value to the bottom line. These initiatives were targeted at reducing the number of employees via reorganizations, outsourcing and off-shoring. The organization had omitted addressing its’ significant multi- billion dollars third-party expenditures. The major hindering factor to addressing this challenge was its’ severely fragmented and decentralized procurement and supply chain activities with no focused strategy or leadership direction. The organization had also not evaluated its’ end-to-end value of the supply chain to improve efficiency and effectiveness.

A globally recognized view of the end-to-end supply chain is depicted below. Supply-Chain Operations Reference-model (SCOR) is a process model which has been endorsed by the Supply-Chain Council (SCC).

The organizations’ CEO requested that we develop a strategy to transform the end-to-end supply chain with two overarching guiding principles: improve the value derived from third parties and accelerate the organization’s required cultural change.

The first step in the process was to gain a deep understanding of this organization’s strategic priorities and ascertain how the supply chain could materially enable the organization to deliver these priorities and improve sustainable value for money with its’ limited resources. This process ensures that the supply chain priorities are directly aligned to the needs of the organization, ensuring a sustainable “golden thread”

The next critical step in the process was to complete a robust spend diagnostics to garner, in a management by fact way, a body of evidence to identify value for money improvement opportunities and the case for change. This is achieved by grouping the organizations’ spend into strategic supplier facing categories. This process is further informed by competitive evaluating these categories to identify value for money opportunity areas.

Value for money in this context is defined as achieving market price competitiveness, while improving service levels, quality, and delivery. The key levers to deliver value for money are through Rate, Usage, and Policy as depicted below:

These end-to-end supply chain value for money opportunity areas will then be addressed through the informed and systematic application of the overarching Category Management methodology as depicted below:

• Strategy – category strategy, innovative out of the box thinking
• Structure – governance process, benefits realization, supply chain balanced scorecard
• Process – Center of Excellence in category and demand Management, process mapping and redesign
• People – Center of Excellence to embed supply chain excellence into the entire organization and potentially an “exporter of talent”
• Technology – Fit-for purpose solutions; electronic and automated to minimize transactional low- value

People Development

“You must be the change you wish to see in the world.” - Ghandi

People are what make organizations work or, in some cases, not work. Harnessing the power of the heads, hearts and hands of the people within the organization is the key to the successful delivery of a Procurement and Supply Chain transformation. Ensuring the early engagement of the whole team impacted is a critical success factor for any Procurement and Supply Chain Management strategy implementation. The value circle depicts how shareholder value can be delivered through people.

The key elements to the development of a best in class people talent pool in support of the Procurement and Supply Chain strategy are as follows:

1. Identify the Desired State
2. Establish the Skills Baseline
3. Obtain Buy-In for the Need to Change
4. Define Roles and Responsibilities
5. Select the Right Candidates
6. Create a Sustainable Learning Environment
7. Measure Success

Not all organizations require a full scale transformation to support their strategy and objectives. In cases where the focus of the organization is to upgrade their people capabilities, practitioners should leverage the elements of this document that focus on skills base lining, Talent Management and measurement.

Lessons Learned

Our experience has led us to identify some of the critical lessons learnt in delivering a successful enterprise transformation. This can be best summarized as follows:

• Strong c-level relationships leveraged to quickly bring value to the organization
• Assessment provided to enable a vision to get to the next level which is quantified with management by fact data
• Adopting the client values to ensure seamless integration with the culture while still remaining objective
• C level Sponsorship which is mandatory to deliver value in transformation programs
• Providing coaching and an advisory role to the leadership team
• Systematic benefits realization tracking, with the buy in of the organization
• Adapting methodologies to the client environment
• Applying a “See, Learn, & Do" Approach
• The need to gain early wins on the board
• Full c-level engagement with a management by fact approach
• Strategies : Integrated and aligned to the golden thread of a company’s priorities
• People : Knowledge and subject matter expertise
• Process : Business and work flows designed for co-operability
• Technology : Compatible and leveraged

Summary

Our team has delivered over $5 billion in benefits to our clients utilizing our robust and systematic methodologies to deliver tangible and sustainable financial results with an improved end customer experience.