Baker s Dozen: 13 Ways Process Intelligence Drives Supply Chain Value

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Baker’s Dozen:

13 Ways Process Intelligence Drives

Supply Chain Value

Anthony Aming, Baker Hughes

Dave Brooks, Software AG

Anthony Aming

Enterprise Business and Applications Architect / Baker Hughes

Dave Brooks

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27 June 2011 | ProcessWorld 2011 | 2

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KNOW

What Capabilities Matter

Integration | Visibility | Control | Flexibility

Process Transparency

Process Assurance

Process Flexibility

Give the Business a Dashboard, a Steering

Wheel and the Responsiveness that

provides agility

• KPIs

• Volume

• Velocity

• Quality

• Value

• Dashboards

• Process

Visualization

• Thresholds /

Rules

• Alerts

• Orchestrated

Processes

• Workflow

• “Single View”

Interfaces

• Simulation

• Dynamic

Routing

• Multi-Channel

management

• Mid-flight

process

changes

Information Exchange

• Data Transport &

Transformation

• “Universal

Translator”

• Frictionless Data

Exchange

Visibility

Control

Agility

(4)

KNOW

Where Value is Created or Lost Upstream/Downstream

Review Order Check Order Compliance Receive Customer Order Receive Shipment Transmit PO to Supplier Generate Invoice Custom Billing System Ship Goods Prepare Shipping Documents Ship to FF Generate Pack Ship

Customer Submit PO Pay Invoice

Create Factory PO

Create Sales Order

Update Shipping Docs and Changes Consolidate

Boxes Receive ASN

Send ASN Receive Ship Notice Receive Ack

C

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B

C

F

G

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P

S

R

M

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A

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Exception Handling

• Call Center / Support personnel • Late / Missing / Stuck orders

Expedited shipping • Express / Air vs. Ground • Alternative methods / carriers

Late Delivery • SLAs / fines

• Customer Sat impact

#

Focus Area

Process Step Identifier

Advance Ship Notices • SLAs / fines

Additional Fulfillment Costs • Accelerated manufacturing

(overtime / extra shifts) • Other Costs

O

T

I

U

Returns

• Reverse logistics costs • Scrap

Q

Overall O2C Cycle time • DSO Impact

• Inventory impact • System handoffs

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KNOW

What’s Real

The Opportunity: Convert “Real-time” to “Real-Value”

V

a

lu

e

Business event

Data captured

Action

taken

Intelligence delivered

Opportunity

• Engaged with customer

• Truck at loading dock

Missed Opportunity

• Customer has left the store

• Truck has left the dock

Time

Reference: Richard Hackathorn – The BI Watch: Real Time to Real Value

Process

Intelligence

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How Do You

KNOW

You’re Successful...?

Measure It!

VOLUME

VELOCITY

RISK

VALUE

QUALITY

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Supply Chain Key Performance Indicators

P

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D

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ta

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KNOW

How You Perform Relative to the Competition

Oilfield Tools

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KNOW

Your Process is Working

Ensure the right transactions happen in the right timeframe

• Full visibility of round trip transactions

• Configured to support exception management:

identify both errors and delays

(10)

KNOW

What’s Going On Outside Your Direct Control

Track & Trace Outsourced Invoice Processing

End-to-End Model

Completed Steps

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KNOW

What Good Looks Like

Internal Benchmarking: Leaders and Laggards

Best Practice

eg: Sales Center #3

Benchmarking

activity level

Worst Performer

eg: Sales Center #14

Performance

Differences

revealed at Benchmarking

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KNOW

The Root Cause

(13)

KNOW

The Score (or SCOR!)

Real-time Joint Scorecard

Supplier

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14 14

Baker’s Dozen (the first 6)

13 ways Process Intelligence Drives Value

1. Leverage different kinds of

metrics (Volume, Value,

Velocity, Quality, Risk)

2. Analyze Trends

3. Understand Root Cause

4. Bake-in Complex Event and

Business Rules

5. Provide Alerts to spur action

6. Enable Operations personnel

to get to the action level

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Revenue over $14 Billion

Oilfield tools and services; integrated

operations and reservoir consulting

9 Regional / 19 Geo-market Teams

>50,000 Employees in 90 Countries

Global Supply Chain critical to BHI‘s success

Baker Hughes

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Baker Hughes, Inc.

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19 19

What We’ll Cover …

• Visualize the Procure to Pay System and Process

• Baker's approach in delivering Business Process

Instrumentation (BPI)

• Get a firsthand account of how Baker Hughes, (BHI), a global

oilfield service company is able to measure and improve its

performance against its competition on critical key

performance indicators like Cash-to-Cash Cycle Time

• Gain insight the strategies and best practices Baker uses to

leverage BPI to drive millions of dollars of value to the

business

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27 June 2011 | ProcessWorld 2011 | 20 20 20 43,213,456 39,453 13,554 97,533 106,343

Use Case: Purchase Order Value Appears to be Too Great

Fix Purchase Order Problem

43,213 39,453 13,554 97,533

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27 June 2011 | ProcessWorld 2011 | 21 27 June 2011 | Software AG - Get There Faster | 21

Exception Sub-Process

Accept Reject Escalate

Error Handling Exception Handling Decision Support Review Order Check Order Compliance Receive Customer Order Receive Shipment Transmit PO to Supplier Generate Invoice Custom Billing System Ship Goods Prepare Shipping Documents Ship to FF Generate Pack Ship

Customer Submit PO Pay Invoice

Create Factory PO

Create Sales Order

Update Shipping Docs and Changes Consolidate Boxes

KPI KPI KPI

KPI

1. Establish Process

2. Determine KPIs &

Measure Baseline

3. Orchestrate Process &

Implement Workflow

4. Identify & Prioritize

Process Improvements

Business Process Instrumentation

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22 22

Business Process Instrumentation: Step by Step

• Establish alerts for certain conditions

• Link to Business Intelligence tools for

“deeper analytics”

• Identify business

process

to instrument

• Locate “triggers” at key

points within a process

in relevant application

• Design Console for

real-time visualization and

monitoring of:

• Volume

• Velocity

• Quality

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27 June 2011 | ProcessWorld 2011 | 23 23

Business Process

Instrumentation

(BPI)

BPI Metric

Event

Storage

Supplier Invoice-to-Payment Process Model

Event Metric Event Metric Event Metric

Console

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Business Process Instrumentation Steps

Define the process and steps or events to be monitored

Define success and failure

Success means the solution provides the visibility and metrics to

give the organization the agility to be flexible and adaptable to

be more productive, adds value

Define key actors and systems

Actor eg: Invoice Approver in the accounts payable process

Systems eg: SAP, webMethods, Maximo

Define business metrics that are a combination of:

Business facts (e.g., sales order amount)

Dimensions (e.g., region, product center)

Transactional data (e.g., sales order number)

Do as many as needed, but limit as much as possible

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BPI Steps (cont.)

Define business rules and alerts

Preemptive alerts for expected results that have not

occurred in a timely fashion

For example, invoice creation should be followed by releasing

document to accounting (Released to Accounting RTA) within X

days. Accounts Receivable Credit and Collections would receive

an alert when RTA has not been created within expected time

frame.

KPI alerts

Used for monitoring when individual transactions are outside

expected results

Trending alerts

Used to monitor patterns across multiple data points when an

overall process is deviating from normal

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Tracking the Value

Cash Conversion Cycle

CCC = DIO + DSO –DPO

CCC = Cash Conversion Cycle

DIO = Days inventory Outstanding

Average Stockholding Period

DSO = Days Sales Outstanding

Average Receivables Processing Period

DPO = Days Payables Outstanding

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Suppliers

Customers

BHI

Tracking the Value

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BHI Customer End of Job-to-Payment Life Cycle

Invoice Payment Job Completion Invoice Creation Date Payment Expected Invoice Released to Accounting and Booked as Revenue

Invoice Posted & Presented to

Customer

Customer Process Invoice and Pays according to Terms

Delays in Receiving Payment from Customer

Days After Job Completion to Invoice Creation Delays in releasing Invoice to Accounting Delays in Invoice Delivery/ to Customer Delays in Customer Invoice Processing On-Time Payments

Activities Causing Late Payments

Invoice Creation to Invoice Payment Job Completion to

Invoice Creation

Delays in Invoice Creation after Job Completion

Total Lapse Days Actual Payment Days

Total Cycle Time

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Consoles – DSO Reduction

SHOW ME THE MONEY

TOTAL LAPSE DAYS

GETTING THE MONEY

DSO is controlled by

• Lapse Days

• Actual Payment Days

Show Me the Money

• Actual Payment Days

Total Lapse Days and Getting the Money

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Total Lapse Days – Daily

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Total Lapse Days Console

Lapse Days Reduction

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Getting the Money – Invoice Delivery Cycle Time

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Show Me The Money – Daily

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Show Me the Money Console – APD Reduction

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BHI Customer End of Job-to-Payment Life-Cycle

Rules & Alerts

• Total Lapse Days (TLD)

• Days to Create Debit Memo Request

from DMR Complete Date

• Days to Create PGI from Delivery

Date

• Days to Invoice Create from

DMR/Delivery Date

• Days to RTA from Invoice Creation

• Days to Send Invoice from Invoice

Creation

• Days to Deliver Invoice from Send

Invoice

• Days to RTA is after Send Invoice

• Actual Payment Days RTA to

Payment (APD)

• Invoice Amount exceeds

$1,000,000

• RTA amount exceeds $1,000,000

• Credit Memo amount exceeds

$100,000

• Payment amount exceeds

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Sample Filters

• GEO Hemisphere

• Geo Region

• Geo Market

• Country

• Sales Organization

• Product Center

• Plant

• Profit Center

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Drill down to details

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Extending the Reach

Additional Consoles – available now

• Controlling the Cash Out

(APD)

• Getting Goods & Services

(DIO)

• Getting The Work

• Doing The Job

• Beacon & WellLink

• POWER

(POWER-Application Support)

• Technical Support

Portal (C&P)

• SOLV (IT Tickets)

• HR (Functional HR

Support Process)

• IT Tickets (Incidents)

• IT Tickets (Requests)

• Assets (Purchasing IT

Assets)

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Institutionalizing Business Process Instrumentation

Online BPI Catalog speeds requirements and adoption process

• Silver

• Gold

• Platinum

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Where Are We Going Next?

Predictive Analytics /

Smart Forecasting

• Use combination of

historical trends and

simulation to estimate

Future Performance

• Build in Risk Parameters

and assumptions for

„What-if“ scenario

modeling

Process Mining & Root

Cause Analysis

• Send Optimize data to

Process Performance

Manager for process

improvement

• Benchmark leaders and

laggards

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41

Baker’s Dozen

13 ways Process Intelligence Drives Value

9. Provide Near-Real-Time

Visibility and Control (hourly,

daily, weekly and monthly)

10. Make it Industrial Strength:

Available 24X7, scalable,

Global

11. Foster rapid

implementation; resist “boiling

the ocean”

12. Spend more time on data

analysis than on collection

13. Establish long-term strategy

with governance and

continuous improvement

1. Leverage different kinds of

metrics (Volume, Value,

Velocity, Quality, Risk)

2. Analyze Trends

3. Understand Root Cause

4. Bake-in Complex Event and

Business Rules

5. Provide Alerts to spur action

6. Enable Operations personnel

to get to the action level

7. Understand how to really add

Value to business

8. Tie to business strategy (all

levels of reporting)

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Thank you!