CHALLENGE
The success rates of Turn Arounds (TAs) within a global oil and chemical company have continued to deteriorate over the years in terms of safety, time and budget overruns.
The last TA in the Netherlands had been difficult and had delivered, among other things, a number of people suffering from burnout.
Axisto was invited to help to turn the tide and to support the TA team to make this TA an international showcase.
APPROACH
Together with all key people we developed a crisp and clear vision on ‘The Best Ever Turn Around’. It was built on their collective knowledge and experience.
In a coordinated process the vision was shared with next levels of the organisation. It was carefully explained and everyone was invited to contribute. This resulted in a vision that was owned by everyone involved, including the contractors.
The vision was combined with a simple but effective performance board as part of the overall visual management approach. Together with some light-touch coaching on-the-job, this resulted in a great teamwork not seen before in previous TAs.
Both production plants are back in operation and the results are impressive. The final evaluation showed additional improvement opportunities in Preparation and dealing with the schedule during execution. Good input for an even better next TA!
Disciplined cash and working capital management drives good operational and financial performance. However, performance in order to cash, inventory management and procure to pay slumped over the 5 years prior to the COVID outbreak. A closer analysis reveals that inventory optimisation poses companies the biggest challenge – both in volatile and non-volatile markets. More Cash – Lower Inventory – Better Service, good inventory management is the key.
DELIVER DOUBLE DIGIT INVENTORY REDUCTIONS AND MAINTAIN OR IMPROVE SERVICE LEVELS
Decades of experience have taught us that going straight for the inventories themselves is both the quickest and the surest way of delivering a high-performing supply chain. Inventory sits right at the heart of your supply chain and is both a symptom and cause of your supply chain performance. Getting inventory right keeps your customers happy, increases flow and reduces cost and waste and frees up cash.
At Axisto, we combine the practical business focus of management consulting with the high-speed analytical capability of advanced information technology. We rapidly distil practical insights from data in Enterprise Resource Planning (ERP) systems. Our people concentrate on the human challenges of implementing and sustaining resilient and lean supply chains.
Our unique approach to supply chain puts inventory optimisation front and centre. This allows us to help deliver double digit reductions in inventory while maintaining or improving service levels – at speed in a low risk manner compared to traditional approaches.
OUR INVENTORY MANAGEMENT PROPOSITIONS
Axisto provides three inventory management propositions: inventory optimisation programmes, inventory analytics and inventory maturity assessments.
Our starting point with most clients is a quick scan. On the basis of just 3 standard reports from your ERP system, we quantify improvement potential item by item as well as overall. The output is both an immediate high-level quantification of improvement potential and the basis of a road map to deliver sustainable improvements quickly.
INVENTORY OPTIMISATION PROGRAMMES
We provide expert analytics and effective change management backed up by a clearly measurable business case. Improvements to inventory positions of 20% or more, sometimes much more, are usually achievable within the first year, at a high return on investment.
INVENTORY ANALYTICS
Do you find it difficult to really understand what your inventory data is telling you, or what you should do about it? Do you have optimisation tools that are difficult to use or which give results you know to be wrong, but you’re not sure why? With the proprietary technology that we use, we provide clients with rapid actionable insights into their inventory data.
In addition, we help clients with a range of targeted analytical exercises, ranging from strategic inventory positioning (where in your supply chain should you hold inventory?) through to setting inventory policies for items that are hard to optimise, such as spare parts, or make to order products.
INVENTORY MATURITY ASSESSMENTS
Inventory is influenced by almost every aspect of your business. Therefore, it can be hard to know at an enterprise level where the biggest opportunities for further improvement are, or how you compare to your competitors.
Axisto can take the temperature of your inventory management. We combine a granular, bottom-up quantitative assessment of your potential for improvement with a qualitative overview of your people, processes and systems, including relevant benchmarks, to give you actionable insights into where to find the next step change in your performance journey.
A CASE
CHALLENGE
A medium-sized industrial manufacturing firm with a strong market position and profitability had little historical focus on inventory. The consequence was that inventory was increasing gradually. It was time to act.
RESULTS
Inventory was reduced by more than 50% from the initial baseline over a period of 3 years, while service levels were maintained or improved. Improvements in the underlying data led to a better understanding of how and why to act – inventory management capability was significantly developed within the client’s teams.
SOME QUOTES
“We finally have full transparency of what we have, so we can make fact-based decisions on a weekly basis.” – Automotive manufacturer
“Since starting a programme, we have reduced our inventories by over 50%.” – Industrial manufacturer
“The results are exceptional and have made a major difference to our cash flow.” – Global manufacturing company
“The inventory programme brought a wide range of process issues into sharp focus, with an impact much broader than just inventory.” – Market-leading manufacturer
CHALLENGE
All current shift supervisors were due to retire within the next 10 years.
Their successors needed to be able to manage their teams in a modern way, focussing on inclusiveness, ownership, good discipline, openness and continuous development.
Furthermore, they had to be able to cope with the ever-increasing digitisation of their workplace.
APPROACH
Our client had come to the conclusion that the current lead operators could not progress to become the “new breed” of shift supervisors. Incidentally, most of them didn’t want that either.
However, working with HR, we developed an approach and a process to begin working with the first group of eight trainees.
The approach is based on the 70-20-10 principle: 70% development through practical assignments, 20% on-the-job coaching and 10% classroom training.
Currently, we are half-way the programme and both the trainees themselves and the site leadership is very enthousiast about the impact
We are look forward to the remainder of the programme. The programme is being codified and documented along the way for a future rollout to the next group of operators.
These days, customers expect shorter fulfilment timeframes and have a lower tolerance for late or incomplete deliveries. At the same time, supply chain leaders face growing costs and volatility. how process mining creates value in the supply chain is by creating transparency and visibility across the supply chain and providing proposals for decisions with their trade-offs for real-time optimisation of flows.
FULL TRANSPARENCY
Instead of working with the designed process flow or the process flow that is depicted in the ERP system, process mining monitors the actual process at whatever granularity you want: end-2-end process, procure-2-pay, manufacturing, inventory management, accounts payable, for a specific type of product, supplier, customer, individual order, individual SKU. Process mining monitors compliance, conformance, cooperation between departments or between client, own departments and suppliers, etc.
VISIBILITY ACROSS THE SUPPLY CHAIN
Dashboards are created to suit your requirements. These are flexible and can be easily altered whenever your needs change and/or bottlenecks shift. They create real-time insights into the process flow. At any time, you know, how much revenue is at stake because of inventory issues, what root-causes are and which decisions you can take and what their effects and trade-offs will be.
If supplier reliability is not at the target level at the highest reporting level, you can easily drill down in real-time to a specific supplier and a particular SKU to discover what is causing the problem in real-time. Suppliers could also be held to the best-practice service level of competitive suppliers.
MAKING INFORMED DECISIONS AND TAKING THE RIGHT ACTIONS
The interactive reports highlight gaps between actual and target values and give details of the discrepancies, figure A. By clicking on one of the highlighted issues, you can assign an appropriate action to a specific person, figure B. Or it can even be done automatically when a discrepancy is detected.And direct communication with respect to the action is facilitated in real-time, figure C.
Fig. A, details of the discrepancies. Fig. B, pop up to write a task. Fig. C, exchanging information.
HOW PROCESS MINING CREATES VALUE IN THE SUPPLY CHAIN – WRAP UP
Process mining is an effective tool to optimise the end-2-end supply chain flows in terms of margin, working capital, inventory level and profile, cash, order cycle times, supplier reliability, customer service levels, sustainability, risk, predictability, etc. Because process mining monitors the actual process flows in real-time, it creates full transparency and therefore adds significant value to the classic BI-suites. Process mining can be integrated with existing BI-applications and can enhance reporting and decision-making. We consider process mining to be a core element of Industry 4.0.
CHALLENGE
The site had created an appealing vision, and its realisation was seen as crucial for the site’s long-term viability.
However, a year and a half later, little had been achieved and the management team had lost control.
Axisto was hired to help put the realisation of the vision back on track and prevent it from derailing again.
APPROACH
The existing vision and strategic drivers had been relevant and appealing. However, the translation of the vision into strategic goals and targets had been missing. Furthermore, the composition of the Site Management Team (SMT) had changed considerably over the past year.
The first step was to allow a careful onboarding of the new site management team (SMT) members and to strengthen relationships within the SMT. Next, the first step of the Hoshin Policy Deployment process was done, setting level 0 strategy and targets. In a series of consecutive sessions next organisation levels were involved until the shop floor was reached. We followed the ‘catch ball’ process carefully.
Now, threequarters of the year onwards the results are what the SMT was looking for.
Massive change ahead
We’ve just had a long period of ever-increasing economic growth, but this has been halted in its tracks because of the Corona virus. The impact of the global lockdowns is huge, both generally, on the economy and society as a whole, and specifically, on companies, families and individuals. A major recession is a given. Consumer behaviour is likely to change in a fundamental way – and so are the ways in which business will be conducted in the future.
How will you navigate these current challenges and position yourself for new growth? Now is the time to review your company, the products and services it offers, the markets it serves and the way it conducts its business. Significant change is required to create the “new normal”. Your strategy needs to be reviewed. New (perhaps digital) operating models need to evolve. And all this needs to be implemented fast so that you can capitalise on new opportunities and build your competitive advantage.
The change challenge
Transformation, strategy execution and performance improvement programmes are notoriously hard to deliver successfully. Most change initiatives struggle to accomplish and sustain the initial programme goals – in fact, only 30 percent are successful. The delivery of a mission critical initiative on time and in full is, therefore, a real determinant of competitive advantage for any company. The vast majority of change initiatives stumble because of precisely the thing they are trying to transform: attitudes and behaviours of people at all levels in the organisation.
Successfully implementing change
The ability for people to change their attitudes and behaviours is primarily driven by their perceptions and intentions. These must be changed first before any change in attitude and behaviour occurs. So how can we do this? People’s perceptions and intentions change due to experiences and information. Perceptions and intentions capture people’s motivations and are indicators of how hard they are willing to try or how much effort they plan to exert in order to perform the required behaviours.
During a change process, people are confronted with two forces: first, change tension (the perceived necessity and urgency of the initiative) and, second, the power to change (the willingness to support and adopt the change and the ability to contribute effectively). Both forces are required in a programme to make change happen.
The way people experience these forces is the key indicator for people’s perceptions and intentions towards an initiative. The rating for these two indicators gives the best prediction about a person’s intention to adopt the attitude and behaviour that is needed. In different parts and at different levels in the organisation, the two forces are likely to develop differently. This drives the need for differentiated interventions for various parts of the organisation. Our Change Insider® provides insights and fact-based guidance for precisely these differentiated interventions to enable the on-time-in-full delivery of a company’s mission critical initiative.
CHALLENGE
An automotive OEM had experienced a major shift in demand towards new types of product. Demand for established products declined dramatically.
The company reacted to these changes by shifting production to low cost countries. In the remaining high-cost site productivity improvement for direct labour was consistently being addressed, but little attention was paid to the indirect labour. Thus the situation became out of balance, and Axisto was invited to explore indirect cost-cutting opportunities
APPROACH
There are two basic ways to approach cost cutting: targeted and zero-based. As our client was facing major, and quite disruptive, change, they needed a comprehensive approach. Our Zero-Based Alignment (ZBA) provides the better way to radically redesign the cost structure of a business, and this was the chosen approach.
Together with the client team, we turned their deep understanding of the market into a sharp new vision and aimed high with a cost reduction target of € 10 million. After sufficiently understanding the current activities and cost structure, we designed an ideal state from a blank sheet of paper; fully aligned with the vision. Activities were consolidated, the organisation was delayered and built along the end-to-end process. Even after applying the practical boundaries and business risks, the vast majority of the ideal-state design survived the final approval.
Is your cost structure still fully aligned with your vision?
The global lockdowns are having a significant – if not devastating – effect on most businesses. Many companies will survive the crisis, but they’ll emerge a lot smaller and in a changed environment. Reviewing your vision has now become a necessity. Your current cost structure is most certainly no longer optimal. Now is the time to ensure that every euro spent contributes 100 per cent towards achieving your ambition.
Aligning your vision and cost structure – 4 questions
There are two basic ways to approach cost cutting: targeted and zero-based. As most companies are facing a major, and quite disruptive, change, a comprehensive approach is needed. In our experience, Zero-based Alignment provides the better way to radically redesign the cost structure of a business.
The first step is to work out an appealing vision for your business in the “new normal” and set a challenging cost target. Next, current activities and cost structures need to be mapped and understood in detail. To understand how best to address this, we work with four main questions (see figure below).
The answers to these questions become the input for an iterative process that starts with a redesign of end-to-end business processes. Next, the organisation structure is designed to fit these new processes. The design always starts with a blank sheet of paper. By comparing the existing state with the ideal state, many opportunities are identified for both savings and new growth opportunities.
The Zero-based Alignment workflow
The overall process that Zero-based Alignment follows is shown below.
A new and stimulating future
Zero-based Alignment generates powerful effects: a fresh and energising vision that reflects changed market conditions, significant cost reductions, improved yield on every euro invested, new growth opportunities, and a new and stimulating future for your business. And that’s exactly what every company needs right now?
To what extent is your organisation able to move quickly and decisively?
Already in normal times companies struggle to deliver business targets on-time-in-full. Typically, we find three related main causes: (1) there is no appealing vision that is owned by everyone in the company, (2) the strategic goals are unclear and (3) the organisation is not aligned. As strategies are not unique anymore, it’s delivery fast and in full is, therefore, a real determinant of competitive advantage for your company.
It starts at the top
All successful change management initiatives start at the top, with a committed and well-aligned group of executives. The first step is to ensure that the team will coalesce around a coherent vision on how the company should look and run like. It is the basis for the identification of the three to five strategic goals with challenging targets.
And cascades down the organisation
Next the top team involves the next organisational level down in refining the vision and gives them the challenging targets set. Collectively, they will need to work out how to deliver them. This requires horizontal within the organisational level and vertical alignment between the levels. This process is iterative and continues right through the levels till shopfloor is reached. What happens is alignment top-down and horizontally at each level.
Catch-ball process
The process is not a one-way street, it is a ‘catch-ball’ process. The higher level throughs the ball, i.e. the target to the next level down. They will sort out how to deliver it. It requires the involvement of the various departments at each level as they are interdependent. If they can’t find ways to deliver and substantiate this, they are allowed to through the ball back with an indication of what is achievable. Our experience is that, if done well, this results in challenging targets which are more often than not higher than the top team started with. The process builds on the collective insight, knowledge and experience. What happens is both alignment and ownership of the targets, a great starting point for moving quickly and decisively.
Are your business processes still up to the required standard?
Particularly now, in the major economic recession that has set in due to the Corona lockdowns, the quality of your business processes have to be top notch. After all, this is the determiner of the operational performance your company delivers.
Over the years your customer base will have changed, but so too has your supplier base, your products and services, your employees, your IT-infrastructure and your organisational structure. With every change your processes have been affected and now they are rather a tangled web with insufficient performance.
Understanding how your processes behave – a prerequisite for improvement
The scale of the current crisis requires companies to move quickly. You want to cut costs, slash cycle time, serve customers faster, get things right first time, improve reliability and be more agile. Therefore, you need a 100% fact-based insight into how your business processes are currently performing – and this can only be obtained through Process Mining.
Process Mining – the gateway to rapid operational performance improvement
How business processes behave is determined by the way those processes are designed and represented in IT-systems on the one hand and how your employees behave on the other. The good news is that this information is already captured in the log data in your IT-systems. This log data can be loaded from your IT-systems into the Process Mining software tool and, literally at the touch of a button, it then displays your process, as it behaves in daily reality, with all the process variants, rework loops, bottlenecks, compliance issues and more. Static, as a process flow, and dynamic, in the form of an animation. In short, a fast and effective way to understand processes and make an effective impact on those things that really matter.
The power of Process Mining
Process Mining (PM) quickly puts an end to “underbelly” discussions because it is fact-based. With PM, both the entire process and an individual case can be analysed – and everything in between. After loading your log data into PM, interactive “deep dives” can be organised with the people involved in the process. Our experience is that the root cause of problems is discovered in a short time and it quickly becomes clear which actions need to be taken to solve problems and seize opportunities.
