Maximizing the Value of BPM in the Supply Chain

Transcription

1 Maximizing the Value of BPM in the Supply Chain How to Become Process-Driven Using Visibility Tools Business White Paper Sean Riley Director, Supply Chain Innovation April 2013

2 Contents ABSTRACT 3 THE NEED FOR SUPPLY CHAIN VISIBILITY 4 SELECTING THE RIGHT SOLUTION 5 START SMALL, BE QUICK, BE NIMBLE BE SUCCESSFUL 7 DETERMINING THE RIGHT STARTING POINT 7 YESTERDAY WAS GREAT, TOMORROW HAS TO BE OUTSTANDING 7 SUMMARY 9 2 WHITE PAPER Value of BPM in the Supply Chain

3 ABSTRACT A business s supply chain is fraught with complexity, and the intersection of processes, people and multiple business entities is where critical decisions are made, business is won or lost, and success or failure is determined. Supply chain visibility solutions provide clarity into issues as they occur and enable the ability to react quickly to small indicators before they become costly problems. While supply chain visibility is a critical capability to obtain, process visibility at the transaction level enables the transformation of companies to become process-driven. This allows a company to be aware of transaction-level performance and how the outcome of that process will affect the corporation s relationships with suppliers, partners and, most importantly, customers. Successful process-driven companies have learned the best manner of obtaining supply chain visibility and how to leverage and build upon visibility tools to maximize the value of their investment while minimizing the risk of the project. This white paper will examine how value in the following areas is derived: Decreasing costs to serve while increasing customer satisfaction Increasing shareholder return by identifying and monitoring the correlation between Key Process Metrics and Key Performance Indicators Changing the focus of an organization from fire fighting to pre-emptive and systemic issue resolution WHITE PAPER Value of BPM in the Supply Chain 3

4 THE NEED FOR SUPPLY CHAIN VISIBILITY When every corporation has a never ending list of priorities to address, why pursue supply chain visibility? The short answer is that supply chain visibility will make your customers and enterprise stakeholders happier by increasing the ability to execute at a lower cost. While this simple answer is correct, specific insights into the ever changing business and supply chain landscape portray the need for an enterprise to understand its supply chain processes at a granular level. Businesses and government will get obsessive about customers. New business models must delight the customer. New processes will shift from transactions to relationships. New tools that empower customers will upend today s processes. Operational excellence matters now more than ever. Poor operations can undo a great customer experience. Operational excellence delivers values to key stakeholders: regulators, shareholders, and customers. IT vanishes into the business. Business-ready technology abstracts configuation from technical complexity. SaaS and cloud deployment models reduce dependence on IT. Workers and customers become self-sufficient with technology. Finding and leveraging talent will be universal and strategic. The globalization of human talent will be a strategic advantage. Mobile is the new office. Ubiquitous and contextual collaboration will affect processes. Regulatory and competitive pressures will force constant change. New business models will drive established firms and startups alike. Increasing compliance requirements will affect processes. Emerging sustainability metrics will lead to new processes. The proliferation of data-based business opportunities will expand today s view of process. Figure 1: Accelerators for Becoming Process-Driven These five accelerators will require companies to become process-driven. But it can be argued that businesses must be process-driven prior to 2020 as items one through three in Figure 1 are not only already occurring but are also becoming exponentially more important. The bottom line is that the five accelerators noted by Forrester Research will require businesses to adopt new and better process methodologies faster than IT can provide them. That means business users will have to become process, technology and unique subject matter experts or obtain technology that enables process excellence. Supply chain visibility is only the first capability that a supply chain requires to adapt to the impending business environment changes. While becoming a process-driven organization will be a strong point of differentiation, tangible, immediate values exist and are the most compelling reasons for leveraging supply chain visibility as a critical building block. 4 WHITE PAPER Value of BPM in the Supply Chain

5 SELECTING THE RIGHT SOLUTION Selecting a supply chain visibility solution requires a thorough understanding of what is required now and in the future to outperform competitors. The first step to obtaining visibility, responsiveness and, ultimately, control of an enterprise s supply chain is to select the best technology to support this endeavor. The single, absolutely most important pre-requisite for this technology is the ability to interpret and act upon data in real-time. This directly relies upon the integration of multiple disparate systems and the ability of the solution to monitor the data. If either of these two critical components are not the best available, then the solution will be limited in its performance and the value derived from it will be equally limited. A best-in-class solution will turn data into actionable alerts based on the: Approaching deadline Importance of the customer being affected Financial impact that no action will have on the enterprise Dr. Opher Etzion termed this concept as right time, which is the ability to prioritize action based upon consequences with differing levels of severity for missing the deadline. The foundation for a successful, scalable solution is the distinction between visibility technologies that examine occurrences and data in real-time and provide actions in right time. A best in class supply chain visibility solution must have these attributes: Feature Function Value Real-Time Functionality Real-time functionality with the ability to monitor business activity and generate action at the right time Immediate issue identification maximizes the time to respond which minimizes the response costs Best-in-Class Application Integration Supports complete enterprise-wide scalability and single project requirements with both capability and cost flexibility Integrates seamlessly with any business intelligence application Single source of data for the entire organization Organizational focus on improvement, rather than questioning or obtaining the data Purposeful & Customizable Granular Process Monitoring Data Visualization Has almost unlimited flexibility to address your specific needs but is templatized to resolve a specific problem Customizing or tailoring of the software should be accomplished without changing the underlying program (i.e., SAP Z files) and must be accomplished in a costeffective manner Process monitoring should occur at both the transactional level and the aggregate process level Visibility should be provided at both a micro-process level and at the overall process level to ensure the micro-process performance is aiding the results of the overall, end-to-end process Business users should be able to create charts and graphs without requiring IT assistance Different roles within the organization should have easily created and customizable charts that all share the same data aggregation source Built-in Six Sigma and Lean methodologies and charts should be easily understood by non-certified users Restrictions to a business process force an enterprise to sub-optimize their supply chain processes resulting in higher costs and competitive parity Customer satisfaction is based upon the ability to execute upon each order, transaction or touch and identifying problems in time to correct them The simplification of complex data and a common methodology for presenting data facilitate correct sharing and discussion of data which enables immediate and long term process improvement Provider Expertise Software provider should have domain knowledge and significant process improvement methodology knowledge Faster time to a greater realized value without having to rely solely upon internal resources WHITE PAPER Value of BPM in the Supply Chain 5

6 START SMALL, BE QUICK, BE NIMBLE It s tempting to begin a visibility project to achieve enterprise-wide supply chain visibility and try to obtain a windfall return with the first activity. However, initially focusing on a single process or, even better, a targeted portion of that process allows for a well defined project scope which provides greater project control reduced risk. After selecting a single process, monitor only the most important steps to obtain meaningful data that drives action. These process steps are easily identifiable because they are critically important to the outcome of the process. If action does not occur or a negative response does, the process cannot continue. For example, if a customer is on a credit hold and an order is received, the order will not proceed further than the credit hold process step and the customer order will be blocked. Monitoring this critical process step ensures that if the order is on credit hold, action can be taken to either process the order, or notify the customer of this issue. Using technology that enables visibility will take some adjustment. While software vendors will provide training and education, users will still have to become familiar with how the technology interacts with their daily tasks. Giving a user the opportunity to gain this familiarity on a small portion of a process: Makes the change much more digestible Allows for easier managerial oversight and control Provides a small base of expert users as the software is expanded to other processes or departments This approach ensures successful implementations and a faster ROI. Successful implementations, even those that provide tangible results, create positive momentum, which can spread virally throughout an organization. Individuals who were not involved with the first project will want to be included on following projects and will vie for their department/process to be the next project stage. Momentum is a valuable deliverable that, all too often, determines success or failure. The ability to build momentum through continuous successes serves as the foundation for a culture that focuses on delivering continuous cycles of improvement. 6 WHITE PAPER Value of BPM in the Supply Chain

7 DETERMINING THE RIGHT STARTING POINT Selecting the initial supply chain process for a visibility project can be a daunting task. Select a process with impact on customers, partners, revenue and profitability. A company s order-tocash process, for example, touches all of these participants and directly affects gross revenue, net profit and customer satisfaction since it is the primary interaction point with customers. Obtaining visibility into the order process provides a definitive set of data points for other process improvement endeavors, such as procure-to-pay, inventory and SKU optimization, demand management and reverse logistics. The order-to-cash process also can be neatly distributed into process groups that affect single departments and have clearly and easily defined beginning and ending points, enabling a definitive path to follow to obtain supply chain visibility. Figure 2: The order-to-cash process can be an ideal first process for a supply chain visibility project. Whether a business is focused on selling raw materials (i.e., semi-conductor manufacturer), finished goods (i.e., CPG manufacturer), retail (i.e. mass merchandiser), or providing services to other businesses (i.e., 3PL), each order-to-cash process can be segmented in this manner. The difference is that multiple instances of a single process stage may occur prior to the beginning of the next process stage. For example, a 3PL operating a warehouse may take and fill numerous customer orders before billing for services rendered. Conversely, a semi-conductor firm will have a single transaction that wholly passes through the entire order-to-cash process. YESTERDAY WAS GREAT, TOMORROW HAS TO BE OUTSTANDING Obtaining supply chain visibility, while a crucial enabler of improved customer satisfaction, is the beginning of two capabilities that yield even larger benefits: Process intelligence Business Process Excellence (BPE) Being able to identify, understand and react to supply chain events is the cornerstone of supply chain visibility and has proven to provide noticeable returns by customers and executives. Continually decreasing costs and improving service using a visibility solution must be a foundation for process intelligence and BPE. Once the capabilities are understood within the enterprise, the solution must have the ability to be extended to customers and suppliers as a collaborative platform for complete BPE. The first step toward undertaking this journey is visually depicting complete supply chains processes, the underlying applications that support those processes and the owners of manually completed process steps. Without process visibility and understanding, an enterprise WHITE PAPER Value of BPM in the Supply Chain 7

8 may be over or under utilizing assets without realizing the strain that is being placed on a department, person or application. This can easily lead to the loss of human or physical assets that may be difficult to replace. By combining a visibility solution with robust process models, an enterprise can begin to identify and understand the relationship between leading indicators, otherwise known as Key Process Metrics (KPMs), and their affect on lagging indictors, otherwise known as KPIs. By understanding this relationship, the specific actions that are required to impact the process as it is occurring and improve the process outcomes, or results, becomes clear. Armed with this information and the correct tools, an organization can benchmark executed processes at the aggregated level, at the transaction level as a whole or in key parts with visual indicators to identify the time and cost for each process step that was taken. Combining these key capabilities results in an organization having process intelligence. Process intelligence is the ability to understand these connections, interpret the leading indicators, and derive the proper immediate concrete actions to improve your results. 1 A process-intelligent supply chain has the ability to: Identify issues React quickly Visualize processes Understand the financial outcomes of processes as they are occurring It will produce substantial value to all stakeholders and partners. But a third and final stage results in a continuous cycle of improvement. BPE can be realized by using all of the previously obtained capabilities as a foundation, as well as bringing together supply chain and information technology professionals, automating key tasks and focusing on future improvements rather than day-to-day operational activities. Figure 3: The Continuous Cycle of Improvement 1 Blickle, Tobias, Hess, Helge, Joerg, Klueckmann, Lees, Mike, Williams, Bruce, Process Intelligence For Dummies, WHITE PAPER Value of BPM in the Supply Chain

9 BPE is enabled by applying a robust suite of BPM tools, which provides the ability to automate key process points, understand how a process is functioning at a transactional level and enable processoriented transactional analysis that was not previously possible. By starting small and using a solution that can scale enterprise-wide and to full BPM, an organization can postpone the need for a large, formalized change management group. Large projects require a formalized change management program and funding that program can be costly, which increases project risk. Establishing a Center of Excellence (COE) is inarguably a best practice. One of the center s primary functions will be aligning the company s objectives and Key Performance Indicators (KPIs) as the solution is implemented process by process, department by department. Building a COE in stages, rather than all at once, with users who are familiar with the technology and have shown success will yield a group that thoroughly understands business processes, technology capabilities and the interactions between them and with customers and partners. The process of building from supply chain visibility to process intelligence and finally achieving BPE provides more than financial rewards. It begins a fundamental culture change of a business toward customer centricity and continuous improvement. This is primarily enabled by enterprise associates no longer primarily focusing on fighting fires but changing their focus to process improvement initiatives because they have the time to spend on improving the business. The alignment of IT and supply chain professionals is a critical factor because of the hand-in-hand nature of technology and business needs, and it cannot be overlooked. To ensure alignment at this stage, a COE is recommended best practice. SUMMARY Supply chain visibility is a critical capability that enables supply chains to significantly improve customer satisfaction and value realization. Customers and supply chain professionals are demanding more than simply access to a dashboard portal that provides real-time information. They want to know when they have to view the dashboard and when they do not. Real-time visibility into supply chain processes that drives right-time action is critical yet only the first step to exceeding customers expectations, maximizing value and minimizing costs. A supply chain that implements a rigorous business process optimization program can realize competitive differentiation and may significantly enhance a company s products or services over the competition. While the business landscape is rapidly changing between now and 2020, which will force supply chains and businesses to adapt to the new normal of being process-driven, being a fast follower of the impending change allows an organization to realize the enormous benefits without exposing itself to undue risk. Many companies, particularly those regarded with the best supply chains, have already undertaken this initiative and realized tremendous value because the tools, capabilities and expertise exist today. Take the next step. If you would like to learn more about how companies like yours are maximizing the value of BPM in their supply chain and to discuss specific case study examples from companies like Coca-Cola Enterprises, Jabil, Baker Hughes or Electrolux, we encourage you to visit and check out the 2-minute iknow video. If you would like to share your challenges with one of Software AG s supply chain experts, or schedule a demonstration of Software AG s iknow solution for supply chain visibility, please contact us at iknow@softwareag.com, or call (877) WHITE PAPER Value of BPM in the Supply Chain 9

10 TO FIND THE SOFTWARE AG OFFICE NEAREST YOU, PLEASE VISIT Take the next step to get there faster. To find the Software AG office nearest to you, please visit ABOUT SOFTWARE AG Software AG helps organizations achieve their business objectives faster. The company s big data, integration and business process technologies enable customers to drive operational efficiency, modernize their systems and optimize processes for smarter decisions and better service. Building on over 40 years of customer-centric innovation, the company is among the top 10 fastest-growing technology companies in the world and is ranked as a leader in 15 market categories, fueled by core product families Adabas and Natural, ARIS, Terracotta and webmethods. Learn more at Software AG - Get There Faster 2013 Software AG. All rights reserved. Software AG and all Software AG products are either trademarks or registered trademarks of Software AG. Other product and company names mentioned herein may be the trademarks of their respective owners. SAG_BPM_Supply Chain_WP_Apr13