Optimizing the Truckload / Less Than Truckload asq.org/wcqi/2008/team-award/pdf/2008-bronze- ASQ Team Excellence Competition Optimizing the Truckload / Less Than Truckload (TL/LTL) Decision for Bayer MaterialScience ASQ 2008 Team Excellence Competition

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1ASQ Team Excellence CompetitionOptimizing the Truckload / Less Than Truckload (TL/LTL) Decision for Bayer MaterialScienceOptimizing the Truckload / Less Than Truckload (TL/LTL) Decision for Bayer MaterialScienceASQ 2008 Team Excellence Competition2BMS 6 May 2008 Page # 2ASQ Team Excellence CompetitionBayer MaterialScience Global Business UnitsBayer MaterialScience Global Business UnitsPolyurethanesCoatings, Adhesives,SpecialtiesPolycarbonatesInorganicBasic Chemicals52 %52 %Euro10.4 billion27 %15%15%4%4%2%2%ThermoplasticPolyurethanesSeanGood Morning, Im Sean Ritchie Bayer MaterialScience is a global manufacturer of polymers used as raw materials for products ranging from compact disks to automotive finishes to furniture. Bayer MaterialScience ships billions of pounds of material each year to thousands of customers.3BMS 6 May 2008 Page # 3ASQ Team Excellence CompetitionTransportation reps assign packaged shipments to carriers Larger shipments are assigned to full Truckload Carriers (TL) Smaller shipments to what are known as Less Than Truckload Carriers (LTL)Carrier choice in the 16,000 to 25,000 pound range is a grey zone Optimal shipping cost depends on several factorsOne transportation rep suspected this grey zone was causing problems He took a sample of recent shipments in that weight range and compared the cost of each with the cost if optimal carrier choices had been made He found 83% of the shipments among his sample were sub-optimalBayer MaterialScience could be overspending by more than $1 million! But was the extrapolation valid? And if it was, what were the root causes of failure in the shipping process?A team of experts and a disciplined method was needed to investigate this potential opportunity.Bayer MaterialScience Ships a Large Volume of Packaged GoodsBayer MaterialScience Ships a Large Volume of Packaged GoodsSeanShipping costs are a significant component to the Cost of Goods Sold.In July, 2005 one of our transportation representatives identified a potential problem with the way we choose carriers. While examining a sample of shipment data for truck shipments in the 16,000 to 25,000 lb range he observed that 83% were shipped sub-optimally, hence more costly. Extrapolating this rate of sub-optimal shipping implied over $1 Million could be saved by shipping correctly.But was his extrapolation valid? And if so, what were the root causes of failure in the shipping process?4BMS 6 May 2008 Page # 4ASQ Team Excellence CompetitionIntroducing the TeamIntroducing the TeamSean Ritchie Team Leader Kristen Hermick Customer Master DataLaurie Colao Business IntelligenceSam Phipps FinanceMarko Dodig Technology ServicesRon Gadzinski LogisticsAmy Prevade Freight Payment & AuditSean Ritchie Team Leader Kristen Hermick Customer Master DataLaurie Colao Business IntelligenceSam Phipps FinanceMarko Dodig Technology ServicesRon Gadzinski LogisticsAmy Prevade Freight Payment & AuditSean5BMS 6 May 2008 Page # 5ASQ Team Excellence CompetitionSection 1: Project Selection & PurposeSection 1: Project Selection & PurposeSeanProject Selection and Purpose6BMS 6 May 2008 Page # 6ASQ Team Excellence CompetitionHighLowMediumMediumHighLowMedium LowHighFeasibilityROIAlignmentAlignment with Overarching GoalsFeasibilityReturn on Investment (ROI)Preliminary Assessment of Truckload versus Less than Truckload Project Strong Alignment High ROI Highly Feasible1A.a Types of Data and Tools Used to Select the Project and Why1A.a Types of Data and Tools Used to Select the Project and WhySeanA preliminary assessment of the problem led us to believe correcting it:1. Strongly aligned with four overarching organizational goals: Improving profitability. (Order to Cash thread) Improving Customer Relations Encouraging Grass Roots initiatives Developing Lean Six Sigma as an Organizational Core Competency2. The Return of Investment appeared high because we were confident the project would cost much less than the opportunity of $1 million3. Was feasible because key stakeholders agreed that this was a significant problem they would provide resources to correct.7BMS 6 May 2008 Page # 7ASQ Team Excellence Competition1A.a Types of Data and Tools Used to Select the Project and Why1A.a Types of Data and Tools Used to Select the Project and WhySampleSample MeanJanDecNovOctSepAugJul0.0600.0550.050__X=0.05624UCL=0.06209LCL=0.05039SampleSample RangeJanDecNovOctSepAugJul0.2750.2500.2250.200Xbar-R Chart of Cost / LbsJuly 2005 to January 2006Percent of TOTSHIPWGTTYPEWeight BracketLTLTL123123706050403020100Percent within levels of TYPE.Mode of Shipment versus Weight BracketsJuly 2005 to January 20061 = 14 to 16K 2 = 16 to 20K 3 = 20 to 25K TL LTL Process.igxRevised 5/19/2006CustomerRegional Service CenterCustomer ServiceLogisticsLogistics StrategyLogistics OperationsPlant / WhseCTLOrder Preparation PhaseOrder Preparation PhaseShipment Preparation PhaseShipment Preparation PhaseStart 1Create SAP Delivery4Carrier Bid Results26Select open TR, review requirements / notes6Transportat ion Request sent to TM3 f rom SAP5Tender TL Load to preferred carrier9Carrier Accept load?10O rder Q uantity31Update PVD Tables29Prepare PVD update spreadsheet27Select TL carrier and tender load25NoLoad Carrier11G enerate BOL13Enter PGI14Daily File? to CTL15Carrier Freight Bill24Network Optimizat ionResults2BMS Carrier rates (TL by lane, LTL general discount only)28Place O rder30Material Type32Delivery Date33Ship to Location34Special Inst ructions35Plant Schedules Pickup with LTL Carrier41Receive Shipment42Preferred Carrier from PVD43Transport Query YTO445Send Shipment Unit to Plant / Whse46KNMT Customer Material Record47Consolidate Shipments TL / LTL50 YesShip asTL or LTL51O verride Preferred TL Carrier53NoNoYesYesMissing Data - Transport Rep does not see rates!59Ship as TL60Ship as LTL61O verride Preferred LTL Carrier62NoYesEnd22Tender LTL Load to preferred carrier63Carrier Accept load?64NoYesSelect LTL carrier and tender load65TLLTLYesMissing Data - TM3 does not show consolidat ions in an easy format66How is the choice made to consolidate on TL or LTL . How is master bill of lading generated - load nose or tail? How does system pull PVD for consolidation67Trend Analysis Voice of the Customer Voice of the Business Baseline StatisticsSIPOCProject CharterProcess Mapping Discovery KaizenGantt ChartStakeholder MappingSeanOur first step was to identify potential stakeholders and bring them together in a Discovery Kaizen event. During highly focused brainstorming sessions we developed a SIPOC diagram, (Suppliers, Inputs, Process, Outputs, Customers) and a value stream map to clearly view the as isprocess flow and identify decision points, organizational transitions and potential non-value added steps. Based on the results of these tools, we checked for identification of all key stakeholder groups. We then interviewed key stakeholders both within our business and as customers of the process.Using baseline data available to us from our transportation system we examined trends and measured baseline performance. We evaluated questions of feasibility and resource requirements and developed a preliminary timeline for the project in Gantt chart format. We then consolidated all of this into a document which we call a Project Charter. The Project Charter is an integral part of a formal signoff process in which senior management representing key stakeholder groups must endorse a project before it can move forward.8BMS 6 May 2008 Page # 8ASQ Team Excellence CompetitionStakeholder MappingVoice of the CustomerVoice of the BusinessData Supporting Case for ChangeHigh Level Process Map (SIPOC Diagram)Cross Functional Process MappingDiscovery KaizenProject CharterDEFINEDEFINE MEASUREMEASURE ANALYZEANALYZE IMPROVEIMPROVE CONTROLCONTROLThe Bayer MaterialScience Lean Six Sigma ProcessAlignment FeasibilityReturn on InvestmentA Compelling Case for Change?1A.a Types of Data and Tools Used to Select the Project and Why1A.a Types of Data and Tools Used to Select the Project and WhySeanThe project would only move forward if the key stakeholders agreed this project represented a compelling case for change that aligned with organizational goals, had a good chance of success and would be a decent investment of resources9BMS 6 May 2008 Page # 9ASQ Team Excellence CompetitionSampleSample MeanJanDecNovOctSepAugJul0.0600.0550.050__X=0.05624UCL=0.06209LCL=0.05039SampleSample RangeJanDecNovOctSepAugJul0.2750.2500.2250.200Xbar-R Chart of Cost / LbsJuly 2005 to January 2006Percent of TOTSHIPWGTTYPEWeight BracketLTLTL123123706050403020100Percent w ithin levels of TYPE.Mode of Shipment versus Weight BracketsJuly 2005 to January 20061 = 14 to 16K 2 = 16 to 20K 3 = 20 to 25KA larger sample size and segmentation of data both chronologically and by mode, increased our confidence in the extrapolation estimate of $1 million. TL LTL Process.igxRevised 5/19/2006CustomerRegional Service CenterCustomer ServiceLogisticsLogistics StrategyLogistics OperationsPlant / WhseCTLOrder Preparation PhaseOrder Preparation PhaseShipment Preparation PhaseShipment Preparation PhaseStart 1Create SAP Delivery4Carrier Bid Results26Select open TR, review requirements / notes6Transportation Request sent to TM3 from SAP5Tender TL Load to preferred carrier9Carrier Accept load?10Order Quant ity31Update PVD Tables29Prepare PVD update spreadsheet27Select TL carrier and tender load25NoLoad Carrier11Generate BOL13Enter PGI14Daily File? to CTL15Carrier Freight Bill24Network OptimizationResults2BMS Carrier rates (TL by lane, LTL general discount only)28Place Order30Material Type32Delivery Date33Ship to Locat ion34Special Instructions35Plant Schedules Pickup with LTL Carrier41Receive Shipment42Preferred Carrier f rom PVD43Transport Query YTO445Send Shipment Unit to Plant / Whse46KNMT Customer Material Record47Consolidate Shipments TL / LTL50 YesShip asTL or LTL51Override Preferred TL Carrier53NoNoYesYesMissing Data - Transport Rep does not see rates!59Ship as TL60Ship as LTL61Override Preferred LTL Carrier62NoYesEnd22Tender LTL Load to preferred carrier63Carrier Accept load?64NoYesSelect LTL carrier and tender load65TLLTLYesMissing Data - TM3 does not show consolidations in an easy format66How is the choice made to consolidate on TL or LTL . How is master bill of lading generated - load nose or tail? How does system pull PVD for consolidat ion67Organizational Process Mapping revealed numerous hand-offs, opportunities for error, communication gaps and non-value added steps Organizational Alignment Improve profitabilityOrganizational Alignment Encourage grassroots Initiatives Improve customer relations Opportunity to apply Lean Six Sigma Methodology1A.b Reasons Why the Project Was Selected1A.b Reasons Why the Project Was SelectedSeanThe collective resources and process knowledge of our working team of stakeholder representatives gave us the horsepower to extract a much larger sample of data from our transportation system. Moreover, we now had the capability to extract fields which allowed us to segment data chronologically and in terms of issues such as mode of shipment. This greatly increased our confidence in the original extrapolation and verified the problem was potentially a $1 million savings opportunity.The swim lane organizational process map we developed allowed us to see the hand-offs between different parts of the organization, decision points and potential root causes for sub-optimal shipments.We discovered that root causes for sub-optimal shipment were too complex to be solved by a simple policy change of the truckload (TL) and less than truckload (LTL) weight breakpoint.10BMS 6 May 2008 Page # 10ASQ Team Excellence Competition Identification and involvement of stakeholders Definition of process being studied Clear boundaries of scope of the project More accurate estimate of impact Estimate of cost and time to implement Assessment of alignment with overall organizational prioritiesDEFINEDEFINEThe output deliverable of the Define Phase is a Project Charter which includes the following:A project moves beyond the Define Phase only after the preliminary estimate has been validated by stakeholders, and key management stakeholders have formally endorsed the initiative.1A.c Involvement of Potential Stakeholders in Project Selection1A.c Involvement of Potential Stakeholders in Project SelectionSeanBayers Define Phase is a rigorous study of the projects potential impact, cost and feasibility.A project moves forward only if the stakeholders are enrolled and formally endorse the project.The foundation of the Define Phase is the identification and involvement of stakeholders from the outset providing them with the information they need to make an informed decision.A project is formally sanctioned and resources provided only if the stakeholders are convinced of its alignment with organizational priorities, return on investment and feasibility.11BMS 6 May 2008 Page # 11ASQ Team Excellence CompetitionSenior Management Champions & SponsorsProcess Owner SponsorBusiness Excellence ChampionFinanceBusiness ExcellenceTransportation Operations Logistics Strategy & ProcurementCustomer Master Data Material Master DataCore Team of Stakeholder RepresentativesBusiness Intelligence FinancialBayer Technology ServicesCustomer Service1A.c Involvement of Potential Stakeholders in Project Selection1A.c Involvement of Potential Stakeholders in Project SelectionSeanSeveral segments of the organization were identified as potential stakeholders. Representatives from these groups participated in the development, evaluation and eventual endorsement of the Project Charter. They also went on to take the project through the measurement, analysis, improvement and control phases.12BMS 6 May 2008 Page # 12ASQ Team Excellence Competition1B.a Affected Organizational Goals, Performance Measures, and Strategies1B.a Affected Organizational Goals, Performance Measures, and StrategiesGoals Cost management SimplificationPerformance Measures Cost per lb On Time in Full (OTIF) Carrier turndown ratesStrategies Overall Order to Cash objectives Premium Freight Development of Lean Six Sigma competencyLaurieAnother fundamental element of the project charter is an assessment of the degree of alignment of the project with overarching organizational goals. We found this project to align strongly with our goals of cost reduction and simplification. Existing performance metrics of cost per pound, on time in full and carrier turndown rates were all projected to be positively affected. Finally, we found it aligned well with our strategic organizational thread, Order to Cash, was synergistic with a multi-million dollar project involving premium freight costs and advanced our strategy to increase Lean Six Sigma competency.13BMS 6 May 2008 Page # 13ASQ Team Excellence Competition1B.b/c Degree of Impact on Organizational Goals, Performance Measures and Strategies1B.b/c Degree of Impact on Organizational Goals, Performance Measures and StrategiesGoals Cost Management Shipping Costs Reduced by $800M Simplification Streamlined the ProcessPerformance Measures Cost per lb Reduced by 0.8 cents/lb On Time in Full (OTIF) Held Constant Carrier Turndown Rates Reduction of 30-50%Strategies Order to Cash Objectives Increased Carrier Contract Compliance Premium Freight Increased Visibility of TL & LTL costs Development of Lean Six Sigma Competency Team DMAIC CompletionLaurieEach of the goals, performance measures and strategies identified in our project charter were affected in a positive way. Cost per pound went down by eight tenths of a cent. It may not sound like much but given the size of our transportation expenses, that translates into over a million dollars per year. Elimination of non-value added steps reduced the complexity of the process and supported our goal of simplification. On-Time-in-Full is a key performance indicator of importance to our customers. In our project charter one of the objectives we established was to reduce cost without adversely affecting On time in Full. We achieved this; it actually edged up a bit. 14BMS 6 May 2008 Page # 14ASQ Team Excellence Competition1C.a Identification of Potential Internal and External Stakeholders1C.a Identification of Potential Internal and External StakeholdersRepresentatives chosen for participation as members of: Core Team Resource Providers Sponsors and ChampionsDEFINEDEFINEThe first step in our DMAIC process is to identify and involve stakeholdersPotential stakeholders are evaluated considering their: Involvement Impact InfluenceLaurieBefore beginning any Lean Six Sigma project we must identify and engage stakeholders. The preliminary analysis discussed on previous slides was developed by a stakeholder team.Meeting and working together, representatives from potential stakeholder groups evaluated if the right groups and the right representatives were present.Potential stakeholders are evaluated considering their:Involvement (Are they working within or accountable for the performance of the current process?) Impact (How integral are they to current processes? Are they suppliers to, customers of, or workers within the current process? How might they be affected by potential change?)Influence (What would happen if they dont support the project and its potential changes)Based on this evaluation: we formed a core team, established management champions, sponsors and identified people required as technical support resources.15BMS 6 May 2008 Page # 15ASQ Team Excellence Competition1C.a Identification of Potential Internal and External Stakeholders1C.a Identification of Potential Internal and External StakeholdersSIPOC Cross- functional Process MapInvolvement? Impact? Influence?Stakeholder Mapping is Absolutely Fundamental DD MM AA II CC TL LTL Process.igxRevised 5/19/2006CustomerRegional Service CenterCustomer ServiceLogisticsLogistics StrategyLogistics OperationsPlant / WhseCTLOrder Preparation PhaseOrder Preparation PhaseShipment Preparation PhaseShipment Preparation PhaseStart 1Create SAP Delivery4Carrier Bid Results26Select open TR, review requirements / notes6Transportation Request sent to TM3 from SAP5Tender TL Load to preferred carrier9Carrier Accept load?10Order Quantity31Update PVD Tables29Prepare PVD update spreadsheet27Select TL carrier and tender load25NoLoad Carrier11Generate BOL13Enter PGI14Daily File? to CTL15Carrier Freight Bill24Network OptimizationResults2BMS Carrier rates (TL by lane, LTL general discount only)28Place Order30Material Type32Delivery Date33Ship to Location34Special Instructions35Plant Schedules Pickup with LTL Carrier41Receive Shipment42Preferred Carrier from PVD43Transport Query YTO445Send Shipment Unit to Plant / Whse46KNMT Customer Material Record47Consolidate Shipments TL / LTL50 YesShip asTL or LTL51Override Preferred TL Carrier53NoNoYesYesMissing Data - Transport Rep does not see rates!59Ship as TL60Ship as LTL61Override Preferred LTL Carrier62NoYesEnd22Tender LTL Load to preferred carrier63Carrier Accept load?64NoYesSelect LTL carrier and tender load65TLLTLYesMissing Data - TM3 does not show consolidations in an easy format66How is the choice made to consolidate on TL or LTL . How is master bill of lading generated - load nose or tail? How does system pull PVD for consolidation67LaurieAs we just discussed, identifying and engaging stakeholders as participants in a cross functional team is fundamental to our methodology. Our high level process description or SIPOC, (supplier, inputs, process, outputs and customers) and a cross-functional process map helped us identify stakeholder groups.Initial identification of champions and working team was an ad hoc assignment by the logistics sub-process owner, and discussions with process experts.This ad hoc working team used SIPOC and organizational swim lane value stream process mapping to validate and add to the core team. Support resources were identified when the working team developed a preliminary Gantt chart. The final core team emerged as a result of this process.Shipment carriers were recognized as an external stakeholder group. After much consideration we decided against including carrier representatives on the core team, however, because proprietary and confidential information concerning the negotiated transportation rates of all carriers would have to be part of the data we would analyze.16BMS 6 May 2008 Page # 16ASQ Team Excellence Competition1C.b Degrees of Potential Impact to Stakeholders1C.b Degrees of Potential Impact to StakeholdersPercent of TOTSHIPWGTTYPEWeight BracketLTLTL123123706050403020100Percent within levels of TYPE.Mode of Shipment versus Weight BracketsJuly 2005 to January 20061 = 14 to 16K 2 = 16 to 20K 3 = 20 to 25K TL LTL Process.igxRevised 5/19/2006CustomerRegional Service CenterCustomer ServiceLogisticsLogistics StrategyLogistics OperationsPlant / WhseCTLOrder Preparation PhaseOrder Preparation PhaseShipment Preparation PhaseShipment Preparation PhaseStart 1Create SAP Delivery4Carrier Bid Results26Select open TR, review requirements / notes6Transportation Request sent to TM3 from SAP5Tender TL Load to preferred carr ier9Carrier Accept load?10Order Quant ity31Update PVD Tables29Prepare PVD update spreadsheet27Select TL carrier and tender load25NoLoad Carrier11Generate BOL13Enter PGI14Daily F ile? to CTL15Carrier Freight Bill24Network Optimizat ionResults2BMS Carrier rates (TL by lane, LTL general discount only)28Place Order30Material Type32Delivery Date33Ship to Location34Special Instructions35Plant Schedules Pickup with LTL Carrier41Receive Shipment42Preferred Carrier from PVD43T ransport Query YTO445Send Shipment Unit to Plant / Whse46KNMT Customer Material Record47Consolidate Shipments TL / LT L50 YesShip asTL or LTL51Override Preferred T L Carrier53NoNoYesYesMissing Data - Transport Rep does not see rates!59Ship as TL60Ship as LTL61Override Preferred LTL Carrier62NoYesEnd22Tender LTL Load to pref erred carrier63Carrier Accept load?64NoYesSelect LTL carrier and tender load65TLLTLYesMissing Data - TM3 does not show consolidations in an easy format66How is the choice made to consolidate on TL or LTL . How is master bill of lading generated - load nose or tail? How does system pull PVD for consolidat ion67SampleSample MeanJanDecNovOctSepAugJul0.0600.0550.050__X=0.05624UCL=0.06209LCL=0.05039SampleSample RangeJanDecNovOctSepAugJul0.2750.2500.2250.200Xbar-R Chart of Cost / LbsJuly 2005 to January 2006Cause and Effect Value Stream Mapping Data Segmentation and Performance KPIs (OTIF)Subjective Tools Objective ToolsAssessment of Impact on Each Stakeholder GroupPositives High Medium LowNegatives High Medium LowLaurieBrainstorming together, our core team of stakeholder representatives took information from both subjective tools like our cause and effect analysis and value stream mapping as well as from objective tools like customer data segmentation and on time and full performance KPI.From this we could see which stakeholders had higher potential positive and negative impacts and we could plan accordingly17BMS 6 May 2008 Page # 17ASQ Team Excellence Competition1C.c Types of Potential Impact to Stakeholders1C.c Types of Potential Impact to StakeholdersCarrier damages from cross-docking more LTLBetter customer service from BMS Better OTIFCustomersProject Failure would damage LSS CredibilityIncreasing Organizational LSS CompetencyBusiness ExcellenceCarrier damages from cross-docking more LTLBetter performance against KPI, OTIFLogisticsLoss of some revenueContract compliance, More businessCarriersNew KPIs to create and monitorParticipation in a project that improves profitabilityFinanceConflict with existing workloadCould make their job easierMaterial Master DataLoss of decision making power over carriersSimplified decision making processTransportation OperationsConflict with existing workload to obtain data for team useIncreased project competencyBusiness IntelligenceConflict with existing workload, Could cause confusionCould make their job easierCustomer Master DataPotential Negative ImpactPotential Positive ImpactStakeholderLauriePotential positive and negative impacts were assessed in a variety of ways. 18BMS 6 May 2008 Page # 18ASQ Team Excellence CompetitionSection 2: Current Situation AnalysisSection 2: Current Situation AnalysisSeanCurrent Situation Analysis19BMS 6 May 2008 Page # 19ASQ Team Excellence Competition2A.a Methods and Tools to Identify Root Causes and Opportunities2A.a Methods and Tools to Identify Root Causes and OpportunitiesIdentifying the critical Xs begins with verifying the integrity of dataDEFINEDEFINE MEASUREMEASUREShipping Cost (Y) = f (x1,x2,x3 )Measurement Systems Analysis Data segmentation strategy Data extraction strategy Data integrity challengeCause & Effect MatrixProcess Variables MapSeanA fundamental principle of our Lean Six Sigma methodology is the recognition that the output of the process, Y is a function, potentially, of several contributing input variables or Xs. Before beginning problem analysis there is a critical need to assess the accuracy of the data used in our analysis. Otherwise there is a risk in drawing incorrect conclusions regarding root cause, along with implementation of corrective actions which at best may fail and at worst may degrade performance.We began with Process Variables Mapping. Building upon the SIPOC developed in the Define Phase we identified input variables and assessed the degree to which each are under our control. Building on the SIPOC and the Process Variables Map, we developed a Cause and Effect Matrix in which we estimated the degree of impact of various input variables on output performance. This information helped us to think ahead about data segmentation desirable for analysis and clarified appropriate requests of the technical support staff who would be extracting data from various systems. Even though we werent dealing with data that lent itself to traditional Gage R&R or Attributes Agreement, we understood a need to test the integrity of our data. Each step along the way the team challenged the origin, operational definitions and potential sources of inaccuracy or bias in our data.20BMS 6 May 2008 Page # 20ASQ Team Excellence CompetitionProcess Variables MapProcess Variables Map2A.a Methods and Tools to Identify Root Causes and Opportunities2A.a Methods and Tools to Identify Root Causes and OpportunitiesDD MM AA II CCSeanA Process Variables Map provided insight into which input variables were within our control and which not. For example other orders coming from same sites/warehouses going to same area. 21BMS 6 May 2008 Page # 21ASQ Team Excellence CompetitionCause&EffectsMatrixCause&EffectsMatrix2A.a Methods and Tools to Identify Root Causes and Opportunities2A.a Methods and Tools to Identify Root Causes and OpportunitiesDD MM AA II CCSeanThe Cause and Effects Matrix improved our understanding of the degree of correlation and impact of process inputs on the output value to the customer. It gave us a numerical basis for ranking issues from the customers set of priorities. For example, we drilled further into consolidation decision making and the actions related to transportation requests in order to assist the Logistics reps in their decision-making.22BMS 6 May 2008 Page # 22ASQ Team Excellence CompetitionDEFINEDEFINE MEASUREMEASURE ANALYZEANALYZEFailure Modes and Effects Analysis (FMEA)Data segmentation Statistical analysisShipping Cost (Y) = f (x1,x2,x3 )2A.a Methods and Tools to Identify Root Causes and Opportunities2A.a Methods and Tools to Identify Root Causes and OpportunitiesSeanHaving become confident in the reliability of the data, we began the analysis phase to identify potential root causes and opportunities.Failure Modes and Effects Analysis (FMEA) and data segmentation were our principle analysis tools.23BMS 6 May 2008 Page # 23ASQ Team Excellence CompetitionProcess Variables Map Cause & Effects MatrixFailure Modes and Effects AnalysisMultiplying Severity of occurrence Probability of occurrence Ability to detectYielded50 potential failure modes ranked by their Risk Probability Number (RPN)What went in Process input Potential failure mode Potential failure cause Potential failure effect2A.b Analysis of Data to Identify Possible Root Causes and Opportunities2A.b Analysis of Data to Identify Possible Root Causes and OpportunitiesDD MM AA II CCSeanDuring the development of the Cause and Effect Matrix in the Measure Phase we began to identify and prioritize potential root causes based on the Voice of the Business and the Voice of the Customer. The Process Variables Map identified which inputs were within our control and which were not. Now, in the Analysis Phase we conducted a Failure Modes and Effects Analysis. Facilitated as another Kaizen event, the team spent six hours over two days identifying potential failure modes and ranking each in terms of: their probability of occurrence, the severity of the impact should they occur and our ability to detect the failure. For each potential failure mode we ranked the Severity, Frequency and Detectibility of the risk with 1 low risk and 10 high risk. Multiplying these three yielded a Risk Probability Number (RPN)24BMS 6 May 2008 Page # 24ASQ Team Excellence CompetitionPercent of TOTSHIPWGTTYPEWeight BracketLTLTL123123706050403020100Percent within levels of TYPE.Mode of Shipment versus Weight BracketsJuly 2005 to January 20061 = 14 to 16K 2 = 16 to 20K 3 = 20 to 25K2A.b Analysis of Data to Identify Possible Root Causes and Opportunities2A.b Analysis of Data to Identify Possible Root Causes and OpportunitiesData stratification example Data segmentation exampleData stratification and segmentation$/Lb. (Y) = f (origin, destination, carrier, customer, product, mode, date)AugJulJunMayAprMarFebJanDecNovOctSepAugJul0.70.60.50.40.30.2MonthPercent Shipped TL Instead of LTL_P=0.4368UCL=0.5596LCL=0.3141111P Chart of Shipments in 16 -20 K Weight Range Defect Defined As a TL Shipment as Opposed to an LTL Shipment 1 Sigma2 SigmaNote: Sigma Levels Assume a Goal of Zero TL in This Weight RangeDD MM AA II CCSeanWith a sample size of over three hundred shipments per month and extraction of granular data for each shipment such as date, carrier, mode, origin, destination, product, customer and, of course, cost per pound we were in a position to stratify and segment the data in an attempt to gain insights into the relationship between cost per pound and a variety of potential input variables. At the outset of this project we suspected the reason shipping costs were high was because we were incorrectly shipping too much with full truck load carriers as opposed to LTL. In this data stratification example, we grouped shipments into arbitrary weight brackets and examined the percentage of shipments shipped LTL versus full truckload. It was clear there was an opportunity to direct more shipments to the lower cost LTL mode. We defined a defect as a shipment within a certain weight range shipped as full truckload instead of LTL. The proportion shipped incorrectly according to this definition gave us a different perspective when viewing baseline performance.25BMS 6 May 2008 Page # 25ASQ Team Excellence CompetitionSenior Management Champions & SponsorsProcess Owner SponsorBusiness Excellence ChampionFinanceBusiness ExcellenceTransportation Operations Logistics Strategy and ProcurementCustomer Master Data Material Master DataCore Team of Stakeholder RepresentativesBusiness Intelligence FinancialBayer Technology ServicesCustomer Service2A.c How Stakeholders were Involved in Identifying Root Causes and Opportunities2A.c How Stakeholders were Involved in Identifying Root Causes and OpportunitiesSeanSeveral segments of the organization were identified as potential stakeholders. Representatives from these groups participated in the development, evaluation and eventual endorsement of the Project Charter. They also went on to take the project through the measurement, analysis, improvement and control phases.26BMS 6 May 2008 Page # 26ASQ Team Excellence Competition2B.a Analysis of Data to Select Final Root Causes and Opportunities2B.a Analysis of Data to Select Final Root Causes and Opportunities(FMEA: page 1 of 5 ranked by RPN)SeanIn the previous section we discussed the FMEA as a method to identify potential root causes. During the selection of final root causes we ranked each potential failure mode on the basis of its Risk Probability Numbers. Those with the highest RPNs were judged to be root causes with the highest impact.For example, the failure mode with the highest RPN was found in shipment consolidations. The failure mode identified that consolidation opportunities were not visible to the transportation rep in the system. The severity of this error was ranked a 10, the highest possible value. Because the reps could not consolidate these shipments, the probability of occurrence was also ranked a 10. And the ability to detect the error was ranked as 10, meaning virtually undetectable, because there was no way to know when this type of error occurred. The RPN, therefore, was 1000. The fact that the transportation system did not provide transportation reps with visibility of consolidation opportunities was, therefore, selected as one of our final root causes. 27BMS 6 May 2008 Page # 27ASQ Team Excellence Competition2B.b Analysis of Data to Select Final Root Causes/Improvement Opportunities2B.b Analysis of Data to Select Final Root Causes/Improvement OpportunitiesUsing data to eliminate potential confounding factorsShipping Cost (Y) = f (x1,x2,x3 )$/Lb. = f (origin, destination, carrier, customer, product, mode, date) Some Xs are not significant contributing factors. Some Xs are not significant by themselves but interactions with other Xs may be. Changes in Xs over time may bias your perception of root cause/improvements. Activities of concurrent improvement efforts may bias your perception Knowledge of stability or instability in shipping patterns is essential.DD MM AA II CCSeanWe have described the use of data in identifying and selecting root causes. We feel it is equally important to use data to challenge assumptions of root cause, and both identify and quantify potential confounding issues.In section 2Ab we discussed the use of data to identify the potential root cause of a transportation rep making an incorrect mode selection (TL/LTL). In our analysis of all such issues we were careful to consider data which would contradict our conclusions. We found, for example, if the shipment was a rush with agreed upon carrier lead times, available LTL shippers may refuse the shipment forcing the shipment to be placed via full truckload. In this situation the root cause was not incorrect carrier selection but rather the handling of rush orders. The origin of rush orders was outside the scope of our Project Charter but it was helpful to understand this issue and its possible affect on our data. 28BMS 6 May 2008 Page # 28ASQ Team Excellence Competition TL LTL Process.igxRevised 5/19/2006CustomerRegional Service CenterCustomer ServiceLogisticsLogistics StrategyLogistics OperationsPlant / WhseCTLOrder Preparation PhaseOrder Preparation PhaseShipment Preparation PhaseShipment Preparation PhaseStart 1Create SAP Delivery4Carrier Bid Results26Select open TR, review requirements / notes6Transportation Request sent to TM3 from SAP5Tender TL Load to preferred carrier9Carrier Accept load?10Order Quantity31Update PVD Tables29Prepare PVD update spreadsheet27Select TL carrier and tender load25NoLoad Carrier11Generate BOL13Enter PGI14Daily File? to CTL15Carrier Freight Bill24Network OptimizationResults2BMS Carrier rates (TL by lane, LTL general discount only)28Place Order30Material Type32Delivery Date33Ship to Location34Special Instructions35Plant Schedules Pickup with LTL Carrier41Receive Shipment42Preferred Carrier from PVD43Transport Query YTO445Send Shipment Unit to Plant / Whse46KNMT Customer Material Record47Consolidate Shipments TL / LTL50 YesShip asTL or LTL51Override Preferred TL Carrier53NoNoYesYesMissing Data - Transport Rep does not see rates!59Ship as TL60Ship as LTL61Override Preferred LTL Carrier62NoYesEnd22Tender LTL Load to preferred carrier63Carrier Accept load?64NoYesSelect LTL carrier and tender load65TLLTLYesMissing Data - TM3 does not show consolidations in an easy format66How is the choice made to consolidate on TL or LTL . How is master bill of lading generated - load nose or tail? How does system pull PVD for consolidation672B.b Analysis of Data to Select Final Root Causes/Improvement Opportunities2B.b Analysis of Data to Select Final Root Causes/Improvement OpportunitiesSeanThis process map is laid out so we could visualize the hand-offs between various internal and external stakeholder groups. Steps are color coded: Those important to the customer are green, important to business or required by the business are in yellow, those identified at important to neither, and hence non-value added, are in red.Analysis of the value stream map revealed non-value added steps. As we compared this process map to the FMEA, we realized some important steps were missing and correlated to failure modes, root causes and improvement opportunities. 29BMS 6 May 2008 Page # 29ASQ Team Excellence Competition2B.c Identification and Validation of Final Root Cause2B.c Identification and Validation of Final Root Cause1. Text messages require a two step drill-down Only checked if Reps have time Accuracy of data was not verified when transported into new ERP2. YTO-4 screen is really ugly Cannot sort for important information Special requirements and consolidation opportunities are all but invisible3. Guidelines of when to choose TL or LTL are unclear Tribal knowledge no statistically based guideline Reps often do not know backup carriers Routing Guide usage is spotty If all else fails, shipments are sent TL (higher rates in this range)4. Lack of planning time consumes Logistics Reps Three-day Delivery Window Carrier turndown rates are high Significant rework when turndowns occurDD MM AA II CCSeanAs part of our FMEA we had assigned each failure mode a potential cause. Looking down the list of failure modes ranked in terms of their RPN, these four root causes, or variants of them, appeared repeatedly. Grouping these similar potential causes for each failure mode resulted in the list you see here. Thus, affinity mapping provided us with our first level of validation.Another validating observation was the reaffirmation of the links between failure modes in our FMEA and the key input and output relationships in our cause and effects matrix. The identification of non-value added steps and the correlation between missing steps in the current process with failure modes, potential cause and improvement opportunities provided further validation that these four major categories represented the significant root causes for shipping errors in this weight class.30BMS 6 May 2008 Page # 30ASQ Team Excellence CompetitionSection 3: Solution DevelopmentMarkoSolution Development31BMS 6 May 2008 Page # 31ASQ Team Excellence CompetitionSolution Design KaizenDesign FMEAOrganizational Process MappingDEFINEDEFINE MEASUREMEASURE ANALYZEANALYZE IMPROVEIMPROVE3A.a/b Methods and Tools to Analyze and Develop Possible Improvements3A.a/b Methods and Tools to Analyze and Develop Possible ImprovementsMarkoThe key tools employed in developing solutions were the Design FMEA and Organizational Process Mapping.32BMS 6 May 2008 Page # 32ASQ Team Excellence CompetitionAn improvement action item was developed for each failure mode.3A.a/b Methods and Tools to Analyze and Develop Possible Improvements3A.a/b Methods and Tools to Analyze and Develop Possible ImprovementsDD MM AA II CCMarkoDesign FMEA entailed developing a potential improvement or corrective action for each of the fifty failure modes identified within our FMEA.33BMS 6 May 2008 Page # 33ASQ Team Excellence Competition TL LTL Process revised 101306.igxRevised 10/24/2006CustomerRegional Service CenterCustomer ServiceLogisticsLogistics StrategyLogistics OperationsPlant / WhseCTLOrder Preparation PhaseOrder Preparation PhaseShipment Preparation PhaseShipment Preparation PhaseStart 1Create SAP Delivery4Carrier Bid Results26Select open TR, review requirements / notes6Transportation Request sent to TM3 from SAP5Tender TL Load to preferred carrier9Carrier Accept load?10Order Quantity31Update PVD Tables(As needed & Quarterly)29Prepare PVD update spreadsheet27Load Carrier11Generate BOL13Enter PGI14Carrier Freight Bill24Network OptimizationResults2BMS Carrier rates (TL by lane, LTL general discount only)28Place Order30Material Type32Delivery Date33Ship to Location34Special Instructions35Plant Schedules Pickup with LTL Carrier41Receive Shipment42Preferred Carrier from PVD43Transport Query YTO445Send Shipment Unit to Plant / Whse46KNMT Customer Material Record47Consolidate Shipments 50Ship asTL or LTL51Accept Preferred TL Carrier53NoNoYesShip as TL60Ship as LTL61Accept Preferred LTL Carrier62NoEnd22TLLTLSort for consolidation opportunities67Consult routing Guides for Carrier Selection68Prepare Routing Guides69YesYesLTLTLSelect carrier & Tender load71DeclineRevised Process Map1. Eliminated 3 non-value added steps2. Consolidation opportunities visible in YTO-4 Sort3. Rate data available from CTL through inquiry3A.a/b Methods and Tools to Analyze and Develop Possible Improvements3A.a/b Methods and Tools to Analyze and Develop Possible ImprovementsMarkoWe then developed a new, to be process flow which eliminated non-value added steps and added missing steps based on what we had learned from cause and effect, FMEA and our original process map.34BMS 6 May 2008 Page # 34ASQ Team Excellence Competition012345678910Severity Occurrence Detection RPNAverageFMEA ResultsBeforeAfterReduced frequency of occurrence and improved detectionReduced frequency of occurrence and improved detection3A.c Criteria Used to Select Final Improvement Actions3A.c Criteria Used to Select Final Improvement ActionsIdentifying possible solutions to reduce RPNMarkoEach corrective action or improvement was designed to mitigate or significantly reduce the probability of occurrence and/or increase the detectability of a given failure mode.For example, the failure mode discussed in section 2B.a in which shipping consolidation opportunities were not visible to transportation reps had a baseline RPN of 1000. A potential corrective action was identified which could reduce the RPN to 225. Just as we had experienced in the grouping of root causes in section 2B we now saw groupings of corrective actions with similar themes emerging. 35BMS 6 May 2008 Page # 35ASQ Team Excellence CompetitionFeasibilityRPNHighLow HighIncrease TL/LTLBreakpointImprove YT0-4 SortingUpdate carrier dataEnable Routing GuidesCode carrier selection tiers into systemMove Text Messages toMaster DataSimplify Transportation Mgt SoftwareRetrain logistics reps on contiguous routingQuick HitsSpecific Measurable Achievable Responsible Time-BoundEncourage timely notification on rush shipments3A.c Criteria Used to Select Final Improvement Actions3A.c Criteria Used to Select Final Improvement ActionsMarkoA force field analysis of the feasibility for implementing an improvement versus the risk probability number (RPN) of the failure mode it addressed was used to select and prioritize final improvements.The team wanted to reduce shipping costs as rapidly as possible. Having already grouped and ranked improvement opportunities based on RPN, we now took another cut and overlaid feasibility criteria. Which could we implement immediately? Which required some effort but could be done in the near term? Which involved significant or expensive changes?The improvements highlighted in green were selected for implementation. Those in orange are examples of potential improvements which were deemed to have an unfavorable feasibility to RPN ratio and not selected for implementation. We also set the criteria of SMART design: specific, measurable, achievable, responsible, time-bound.36BMS 6 May 2008 Page # 36ASQ Team Excellence CompetitionResistance to solution paradigmA simple policy change stipulating an increase to the TL/LTL breakpoint will fix this problem. Stakeholder mapping Discovery Kaizen SIPOC Value Stream Mapping Process Variables Mapping Measurement Systems Analysis Cause and Effect Matrix Data stratification and segmentation Control charts FMEAOpen-minded application of DMAIC3A.c Criteria Used to Select Final Improvement Actions3A.c Criteria Used to Select Final Improvement ActionsDD MM AA II CCMarkoThere were members of the management stakeholder group and the core team who believed that a simple policy change increasing the breakpoint at which shipments should be sent TL versus LTL would suffice to reduce the cost per pound.We are proud, as a core team, to have shrugged off that developing paradigm and continued on applying the Lean Six Sigma methodology with open-mindedness; following the data wherever it led. Not only were there root causes unaffected by a change in the TL/LTL breakpoint, there were other root causes acting to prevent a breakpoint policy change from being effective.37BMS 6 May 2008 Page # 37ASQ Team Excellence Competition3B.b Analysis of Data to Select Final Improvements3B.b Analysis of Data to Select Final Improvements TL LTL Process revised 101306.igxRevised 10/24/2006CustomerRegional Service CenterCustomer ServiceLogisticsLogistics StrategyLogistics OperationsPlant / WhseCTLOrder Preparation PhaseOrder Preparation PhaseShipment Preparation PhaseShipment Preparation PhaseStart 1Create SAP Delivery4Carrier Bid Results26Select open TR, review requirements / notes6Transportat ion Request sent to TM3 f rom SAP5Tender TL Load to preferred carrier9Carrier Accept load?10Order Quant ity31Update PVD Tables(As needed & Quarterly)29Prepare PVD update spreadsheet27Load Carrier11Generate BOL13Enter PGI14Carrier Freight Bill24Network OptimizationResults2BMS Carrier rates (TL by lane, LTL general discount only)28Place Order30Material Type32Delivery Date33Ship to Locat ion34Special Instructions35Plant Schedules Pickup with LTL Carrier41Receive Shipment42Preferred Carrier from PVD43Transport Query YTO445Send Shipment Unit to Plant / Whse46KNMT Customer Material Record47Consolidate Shipments 50Ship asTL or LTL51Accept Preferred TL Carrier53NoNoYesShip as TL60Ship as LTL61Accept Preferred LTL Carrier62NoEnd22TLLTLSort for consolidation opportunities67Consult rout ing Guides for Carrier Select ion68Prepare Routing Guides69YesYesLTLTLSelect carrier & Tender load71DeclineFMEA Force Rank by RPN Value Add vs. Non-Value Add Impact vs. FeasibilityFinal improvements to be implementedDD MM AA II CCMarkoThe key analysis used to select final improvements was therefore a synthesis of results obtained from: Improvement opportunities associated with FMEA failure modes with the highest risk probability numbersAnalysis of value added and non-value added steps within the organizational process mapAssessment of feasibility of implementation versus impact of implementation38BMS 6 May 2008 Page # 38ASQ Team Excellence Competition3B.c Stakeholder Involvement in Selection of Final Improvements3B.c Stakeholder Involvement in Selection of Final ImprovementsInformedInformedInformedInformedInformedCustomer ServiceInformedConsultedConsultedConsultedConsultedBayer Technology ServiceAccountableInformedConsultedInformedConsultedFinanceInformedAccountableConsultedAccountableConsultedMaterial Master DataConsultedConsultedAccountableConsultedAccountableLogisticsAccountableAccountableResponsibleAccountableResponsibleTransportation OperationsInformedInformedConsultedInformedConsultedBusiness IntelligenceAccountableAccountableConsultedAccountableConsultedCustomer Master DataResponsibleResponsibleAccountableResponsibleAccountableBusiness ExcellenceImprovement ImplementationFinal ImprovementPotential ImprovementFinal CausePotential CauseStakeholder GroupMarkoInternal stakeholders covered various roles and responsibilities in the selection of final improvements to be implemented. Responsible The Buck Stops Here with overall responsibility to make certain this step happens.Accountable The people who perform the identification based upon the data and information available through work with the team.Consulted People with specific knowledge to the project focus area that bring their specific abilities (such as datamining) to the project to enable decision making. Informed People who are told the project is in progress and updated where their specific area is impacted or change on their part may be required. 39BMS 6 May 2008 Page # 39ASQ Team Excellence Competition3C.a Final Improvement Actions and Validation3C.a Final Improvement Actions and Validation1. Established New Weight Breakpoint in Carrier Tables Historical basis rather than a best guess Coded LTL carrier recommendation into shipments up to 20K lbs.2. Improved Sorting Capability in Transportation Software Reps can now see consolidation opportunities Enables system sorts based on origin, destination, weight3. Enhanced Carrier Table Update Process Dramatically improved identification and updates of carrier records Provides carrier recommendations (replaces a guess)4. Enabled Use of Routing Guides Routing guides show four carrier choices Online freight payment vendor carrier rating system for new customer locationsDD MM AA II CCRonThe team identified four major improvements. 1) We established a new TL/LTL weight breakpoint but we did so based on data, not conjecture. Moreover, we hard coded carrier recommendations into our system.2) We gave the transportation reps visibility of consolidation opportunities and the ability to sort on origin, destination and weight. This, as you may recall, addressed the failure mode with the highest Risk Probability Number.3) Enhancement of the carrier tables offered a software and process execution upgrade which provided transportation reps with accurate carrier recommendations based on weight and origin-destination pair and a vendor managed lane rating system created a closed loop with our external transportation billing service.4) Enabling the routing guides provided another level of visibility to the transportation reps. For any proposed shipment the routing guide now provides four carrier options consistent with established BMS Logistic and Procurement contracts.Concurrently, we worked to inform product planning about missed opportunities to utilize lower cost intermodal equipment due to lack of planning time, and we embedded text messages in our master data for a Poke-Yoke or mistake proofing solution.40BMS 6 May 2008 Page # 40ASQ Team Excellence Competition3C.b Tangible Benefits3C.b Tangible BenefitsProject Projected Cost Savings: $590,0002006 Savings: $505,0002007 Savings: $804,000$41,889$98,284$76,397$52,226 $49,670$56,236$83,376$74,498$55,526$62,489$58,725$94,508$-$20,000$40,000$60,000$80,000$100,000$120,000J-07 F-07 M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-070.0000.0100.0200.0300.0400.0500.060Savings Current Cost / Lb Baseline Cost / LbNew/Old Cost/LbDollar SavingsDD MM AA II CCRonCost reduction was our key objective and the most tangible measure of the affect of our improvements. Implementation of improvements began in February of 2006 and we validated a savings of $505,000 for that year. In 2007 we have reduced cost by over $800,000, and the project continues to generate results.New measurements were established to chart the cost per pound ofshipments within the affected range. These charts are published and pushed electronically to 15 people each month. In addition, backup files show that the cost per pound of shipments within the range studied are within controls established by the team.41BMS 6 May 2008 Page # 41ASQ Team Excellence Competition3C.b Tangible Benefits3C.b Tangible Benefits5% of BMS shipments shifted to shorter leadtimes Carrier turndown rates improved! Remaining turndowns were primarily due to product shortages Less Non-value Added rework trying to find backup carriersNo negative impact to On-Time in Full (OTIF) MetricNo Increase in carrier damages (possible due to increased handling)Percent of totalCarrier RejectionsPercent of totalCarrier Rejections2+ days notice 75% 10% 70% 5%1 day notice 17% 40% 18% 20%Same day notice 8% 62% 11% 47%Apr-06 Aug-060%10%20%30%40%50%60%70%80%90%100%Same Day 1 day 2 dayDays Lead TimeCarrier AcceptanceApr-06Aug-06RonCarrier shipment refusals are down by 50% in the one to two day notice timeframe and down about 30% for same day notice. This effect had a collateral positive impact on transportation reps because they now spent less time chasing backup carriers to make transportation arrangements.42BMS 6 May 2008 Page # 42ASQ Team Excellence Competition3C.b Intangible Benefits3C.b Intangible BenefitsCustomer Service Reps, Logistics Reps and Planners were trained via a series of Lunch and Learns about what costs are generated through the use of certain requirements.Best Value Transportation decisions are visible to Logistics RepsSmoother workflow/ less hassle for Transportation RepsFaster training times for new Transportation RepsBetter relationship with carriersBetter compliance with routing guidesCross-functional process knowledgeIncreased competency and confidence in Lean Six SigmaRonAs an outcome of the project, we held a number of Lunch and Learn events open to all employees engaged in transportation planning entitled Transportation: Balancing Costs and Service. Feedback from these meetings showed there were a number of cost drivers that were not clearly communicated to people influencing carrier selection. One such cost driver was the use of the word guaranteed when discussing freight arrangements with a carrier. Guarantees can drive costs for transportation upwards by as much as 40%.43BMS 6 May 2008 Page # 43ASQ Team Excellence Competition3C.c Final Improvement Validation3C.c Final Improvement ValidationMonthSample MeanAugJulJunMayAprMarFebJanDecNovOctSepAugJul0.0600.0550.0500.045__X=0.04821UCL=0.05255LCL=0.043881 2 3 4MonthSample StDevAugJulJunMayAprMarFebJanDecNovOctSepAugJul0.0400.0350.030_S=0.03200UCL=0.03507LCL=0.028941 2 3 41Xbar-S Chart of Cost / Lbs by PeriodBaseline and Improvement Stages July 2005 through Aug 2006X-Bar S charts - $/Lb. segmented by improvement implementation phases DD MM AA II CCMarkoControl charts and hypothesis testing were used to validate that the improvements had the desired effect. Care was taken to consider any confounding issues like carrier price negotiations or fuel surcharges. As we said, we ranked improvements based on feasibility. Those which could, were implemented immediately, followed within a month or two by a next wave as we developed and implemented changes to SAP software. Here we see the impact of improvements over these various implementation phases. Note: Not only did the mean cost per pound decrease in a statistically significant way, the variance in cost decreased as well.44BMS 6 May 2008 Page # 44ASQ Team Excellence Competition3C.c Final Improvement Validation3C.c Final Improvement ValidationAugJulJunMayAprMarFebJanDecNovOctSepAugJul0.70.60.50.40.30.2MonthPercent Shipped TL Instead of LTL_P=0.4368UCL=0.5596LCL=0.3141111P Chart of Shipments in 16 -20 K Weight Range Defect Defined As a TL Shipment as Opposed to an LTL Shipment 1 Sigma2 SigmaNote: Sigma Levels Assume a Goal of Zero TL in This Weight RangeDD MM AA II CCMarkoAnother way to view improvement. This is a p-chart: the defect is defined as a shipment which should have gone LTL but was incorrectly shipped via a full truckload carrier.45BMS 6 May 2008 Page # 45ASQ Team Excellence CompetitionHypothesis Testing 2-Sample T-Test ResultsHypothesis Testing 2-Sample T-Test ResultsTwo-Sample T-Test and CI: Cost / Lb, Period Period N Mean StDev SE Mean1 2111 0.0562 0.0342 0.000754 1495 0.0482 0.0320 0.00083Difference = mu (1) - mu (4)Estimate for difference: 0.00802695% CI for difference: (0.005841, 0.010211)T-Test of difference = 0 (vs not =): T-Value = 7.20 P-Value = 0.000 DF = 3341Minimum difference is $0.006/lb. Mean is $0.008/lb.Over 74,000,000 lbs in this weight range annuallyAnnual Cost savings at $0.008/lb. = $590,0003C.c Final Improvement Validation3C.c Final Improvement ValidationDD MM AA II CCMarkoA two sample t test had a P value of zero indicating that a shift in mean cost per pound from baseline to post improvement was statistically significant. We also checked the confidence interval and used it to provide our management sponsors and champions with a statistical projection of the upside and downside potential for savings.46BMS 6 May 2008 Page # 46ASQ Team Excellence CompetitionSection 4: Improvement ImplementationSection 4: Improvement ImplementationKristen47BMS 6 May 2008 Page # 47ASQ Team Excellence Competition4A.a Involvement of internal and external stakeholders in implementation4A.a Involvement of internal and external stakeholders in implementationInformedInformedCustomer ServiceInformedConsultedBayer Technology ServiceAccountableInformedFinanceInformedAccountableMaterial Master DataConsultedConsultedLogisticsAccountableAccountableTransport OpsInformedInformedBusiness IntelligenceAccountableAccountableCustomer Master DataResponsibleResponsibleBusiness ExcellenceImprovement ImplementationFinal ImprovementStakeholder GroupConsolidated Action PlanDD MM AA II CCKristenInternal stakeholders were integral to the selection and implementation of each improvement.Due to internal proprietary issues and legal implications of confidentiality agreements with our carriers, we could not involve them in the decision making process. Normal communications channels through our Logistics and Procurement Group were employed to obtain feedback from these external stakeholders.48BMS 6 May 2008 Page # 48ASQ Team Excellence Competition4A.b How resistance to change was identified and addressed4A.b How resistance to change was identified and addressed4. Have core team members actively communicate and solicit feedback from the groups they represent.New roleNeed to analyze results and impact of changeFinance3. Include core team members in identification of root cause and corrective action plan developmentTime required vs. benefitNeed to transfer material data to fieldsMaterial Master Data5. Proactive communication of core team decisions.Decline in service to customerCommunications with Transport opsCustomer Service7. Demonstrate consistent or improved resultsDamages / carrier rejectionsConsiderations for bidsLogistics Strategy6. Proactive meetings such as Lunch and Learn to communicate impending changes.Training on new proceduresProcedures and Methods for carrier decisionsTransport Ops2. Obtain respected members of each key stakeholder group to serve on the core team.New roleNeed to track resultsBusiness Intelligence1. Identify the key stakeholder groupsTime required vs. benefitNeed to map text messagesCustomer Master DataStrategy to Identify and Defuse ResistancePotential ResistanceChange RequiredStakeholder GroupKristenThe principal strategy to identify and address potential resistance to change was to ensure 1. we had the right stakeholder groups represented on the core team, 2. that stakeholder group was represented by respected people from that group 3. identification of root cause and planning for corrective action was a collaborative process4. core team stakeholder representatives provided good two way communication with members of their respective groups to discuss potential changes and resistance in advance of implementation49BMS 6 May 2008 Page # 49ASQ Team Excellence Competition4A.c How stakeholder buy-in was assured4A.c How stakeholder buy-in was assuredConsensus of core teamTwo-way communication of core team members with functional colleaguesImplementation involvement of core teamOn-going, formal updates to sponsor groupProject completion signoff by key stakeholdersDD MM AA II CCKristenStakeholder buy-in was assured first through consensus of the core team who represented all major stakeholder groups. In addition, core team representatives communicated with their colleagues throughout all phases of the project.Logistics and Procurement communicated with carriers as appropriate.50BMS 6 May 2008 Page # 50ASQ Team Excellence Competition4B.a Plan Developed to Implement Solutions - Consolidated Work Plan (Sample)4B.a Plan Developed to Implement Solutions - Consolidated Work Plan (Sample)MS Project Web Access PlanConsolidated Action Items PlanKristenA detailed action plan was developed for implementation in which each task was identified, assigned and a deadline established. The core team met regularly to assess progress and make adjustments as necessary. By meeting and communicating regularly we were able to stick pretty close to our original plan.51BMS 6 May 2008 Page # 51ASQ Team Excellence Competition4B.b Approach Used to Implement Improvements4B.b Approach Used to Implement Improvements1. Established New Weight Breakpoint in Carrier TablesApproach: Hard coding breakpoint into the carrier tables was made live on a proscribed date and communicated to all users. Result: Eliminated potential errors due to judgment or training.2. Improved Sorting Capability in Transportation SoftwareApproach: Sorting capability changes implemented based on core team directions and communicated to all users outside the core team through one-on-one training sessions. Result: Enhanced consolidation opportunity visibility.3. Enhanced Carrier Table Update ProcessApproach: Systematizing the carrier table update process was implemented based on core team directions and communicated to users outside the core team through formal training sessions. Result: Eliminated previous process of guessing.4. Enabled Use of Routing GuidesApproach: Users were retrained on the use of Routing Guides. Result: Routing guides provide four carrier choices and a freight payment rating system is available for new customer locations.DD MM AA II CCRonThe team implemented four major changes through Kaizen events.1) We established a new TL/LTL weight breakpoint and entered carrier recommendations into our system.2) We improved the ability to sort based on origin, destination and weight. 3) We enhanced the carrier tables through a software and process execution upgrade to provide transportation reps with accurate carrier recommendations based on weight and origin-destination pair.4) We provided routing guides and trained reps on their use. We kept in touch with our stakeholders needs and educated production planners to take advantage of lower cost intermodal freight. We also verified text messages as they were converted into Master data and eliminated whisper down the lane errors.52BMS 6 May 2008 Page # 52ASQ Team Excellence Competition4B.c Creation/Installation of Measuring System4B.c Creation/Installation of Measuring SystemRouting Guides Indicates preferred carriers Published and educated reps MS Excel-based Sortable Origin Destination Zip Code Includes hazardous and temperature information Based on actual BMS customers Online lane rating tool Freight Payment Vendor rates lanes on request Provides actual carrier ratesWhse Origin City ST Zip Destination City ST Zip Miles TempHaz-Mat TOFC Carrier #1 Carrier #2 Carrier #3 Carrier #43612 COLUMBUS GA 31907 CARSON CA 90810 2177 N N Exel National Stevens Marten Bear3612 COLUMBUS GA 31907 ONTARIO CA 91761 2141 N N Exel Metropolitan National Arctic Landstar3612 COLUMBUS GA 31907 CLEARWATER FL 33760 436 N N National Empire Marten Bear3612 COLUMBUS GA 31907 COVINGTON GA 30209 132 N N Dart Marten Empire Bear3612 COLUMBUS GA 31907 ELLAVILLE GA 31806 51 N N Dart Empire Landstar Bear3612 COLUMBUS GA 31907 BELLWOOD IL 60104 832 N N National Central Ref Waller Bear3612 COLUMBUS GA 31907 CALUMET CITY IL 60409 798 N N National Central Ref Marten Bear3612 COLUMBUS GA 31907 COLUMBIA IL 62236 662 N N Waller National Central Ref Bear3612 COLUMBUS GA 31907 ELGIN IL 60120 854 N N National Central Ref Waller Bear3612 COLUMBUS GA 31907 MELROSE PARK IL 60160 835 N N National Metropolitan Arctic Dandy3612 COLUMBUS GA 31907 ROCKFORD IL 61102 902 N N National Central Ref Marten Bear3612 COLUMBUS GA 31907 TINLEY PARK IL 60477 810 N N National Central Ref Waller Bear3612 COLUMBUS GA 31907 WARSAW IN 46580 750 N N National Central Ref Arctic Bear3612 COLUMBUS GA 31907 LOUISVILLE KY 40299 520 N N Empire Marten National Bear3612 COLUMBUS GA 31907 BROWNSVILLE TX 78527 1074 N N Exel National Arctic Landstar3612 COLUMBUS GA 31907 GAINESVILLE TX 76240 802 N N Exel National Central Ref Arctic3612 COLUMBUS GA 31907 HOUSTON TX 77041 721 N N Exel National Arctic Landstar3612 COLUMBUS GA 31907 LAREDO TX 78045 1072 N N Exel National Waller Arctic3612 COLUMBUS GA 31907 PASADENA TX 77507 717 N N Exel National Landstar Arctic Metropolitan3612 COLUMBUS GA 31907 WYTHEVILLE VA 24382 483 N N Empire National Central RefCANADIAN3612 COLUMBUS OH 43207 SAINT-LAURENT QC H4S1Y1 899 N N CanaAmTra Wheels ChallengerMEXICAN - DAF Border3612 COLUMBUS GA 31907 LERMA TX Laredo 1072 N N National Landstar Wheels3612 COLUMBUS GA 31907 MONTERRAY NL TX Laredo 1072 N N National Landstar Wheels3612 COLUMBUS GA 31907 AQUASCALIENTES TX Laredo 1072 N N National Landstar Arctic3612 COLUMBUS GA 31907 RUSTICA XABOSTOC TX Laredo 1072 N N National Landstar Arctic3612 COLUMBUS GA 31907 NUEVO LEON TX Laredo 1072 N N National Landstar Arctic3612 COLUMBUS GA 31907 SANTA CLARA TX Brwns 1074 N N National Landstar ArcticDD MM AA II CCRonA Microsoft Excel based lane-rating measurement tool was published, distributed and personnel trained for the Logistics Reps to use when choosing carriers. This tool provided a simple, sort-able method to show which carrier would be preferred for a particular shipment. In addition, the freight payment vendor has an online query available to rate lanes that include the actual cost for the shipment. This is particularly useful when shipping to a new customer location. Coding the information from the routing guides into our transportation management software provided a virtually mistake proof or Poke Yoke way for transportation reps to chose an appropriate carrier. 53BMS 6 May 2008 Page # 53ASQ Team Excellence CompetitionAugJulJunMayAprMarFebJanDecNovOctSepAugJul0.70.60.50.40.30.2MonthPercent Shipped TL Instead of LTL_P=0.4368UCL=0.5596LCL=0.3141111P Chart of Shipments in 16 -20 K Weight Range Defect Defined As a TL Shipment as Opposed to an LTL Shipment 1 Sigma2 SigmaNote: Sigma Levels Assume a Goal of Zero TL in This Weight RangeAugJulJunMayAprMarFebJanDecNovOctSepAugJul0.0600.0550.0500.045MonthSample Mean__X=0.04821UCL=0.05255LCL=0.043881 2 3 4AugJulJunMayAprMarFebJanDecNovOctSepAugJul0.0400.0350.030MonthSample StDev_S=0.03200UCL=0.03507LCL=0.028941 2 3 41Baseline and Improvement Stages July 2005 through Aug 2006Xbar-S Chart of Cost per Pound by PeriodTests performed with unequal sample sizes4C.a Validation of Sustained Tangible Results4C.a Validation of Sustained Tangible ResultsDEFINEDEFINE MEASUREMEASURE ANALYZEANALYZE IMPROVEIMPROVE CONTROLCONTROLSamAs we said, we ranked improvements based on feasibility. Those which could, were implemented immediately, followed within a month or two by a next wave as we developed and implemented changes to SAP software. Here we see the impact of improvements over these various implementation phases. Note: Not only did the mean cost per pound decrease in a statistically significant way, the variance in cost decreased as well.. This p-chart in the lower right hand corner is another way to monitor improvement. It tracks when a shipment should have gone LTL but was incorrectly shipped via a full truckload carrier. 54BMS 6 May 2008 Page # 54ASQ Team Excellence CompetitionProject Charter is used to summarize alignment with BMS overarching goalsProject Charter is used to summarize alignment with BMS overarching goals4C.b Link to Organizational Goals4C.b Link to Organizational GoalsSamBayer MaterialScience goals, performance measures and strategies were linked to our project through the charter and ended up in positive territory as a result of the teams efforts.55BMS 6 May 2008 Page # 55ASQ Team Excellence Competition4C.b Link to Organizational Goals4C.b Link to Organizational GoalsStrategiesPerformance MeasuresProject CharterResultsGoalsUtilized Bayer Lean Six Sigma Methodology in Process ImprovementRoll out Bayer Lean Six Sigma Black Belt MethodologyLean Six Sigma CompetencyGained Visibility into Sub-Processes and Enabled Cost ReductionPush Beyond Mode, Source, Carrier ViewPremium Freight SynergyEnabled Best value Decision makingSimplify, Standardize and Automate TransportationOrder to Cash ObjectivesReduced by 30 to 50%Hold Constant or ReduceCarrier Turndown RatesIncreased Slightly (2%)Hold Constant or IncreaseOn Time in Full (OTIF)0.8 cents per pound0.6 cents per poundCost per lbEliminated Five NVA StepsReduce Process ComplexitySimplification$800,000 Annually$600,000 AnnuallyCost ReductionDD MM AA II CCSamShipping cost per pound went down by eight tenths of a cent. Given the size of our transportation expenses, this small amount translated to $800,000 dollars per year of cost reduction. Elimination of 5 non-value added steps reduced process complexity hence supporting Bayers goal of simplification. On Time in Full is a key performance indicator of importance to our customers. We managed to reduce cost without adversely affecting On time in Full, in fact the metric edged up a bit. 56BMS 6 May 2008 Page # 56ASQ Team Excellence Competition4C.c How Results were Shared with Stakeholders4C.c How Results were Shared with StakeholdersDD MM AA II CCSamBusiness stakeholders (Customer Service, Transportation, Product Planning and Master Data) were provided with the opportunity to attend lunch and learns. These meetings were well attended by management stakeholders and persons involved in the transportation decision making process. Following completion of the project we also communicated results to the project sponsor and key stakeholders.57BMS 6 May 2008 Page # 57ASQ Team Excellence CompetitionSection 5: Team Management and Project PresentationLaurie58BMS 6 May 2008 Page # 58ASQ Team Excellence CompetitionTL LTL Process.igxRevised 5/19/2006CustomerRegional Service CenterCustomer ServiceLogisticsLogistics StrategyLogistics OperationsPlant / WhseCTLOrder Preparation PhaseOrder Preparation PhaseShipment Preparation PhaseShipment Preparation PhaseStart 1Create SAP Delivery4Carrier Bid Results26Select open TR, review requirements / notes6Transportat ion Request sent to TM3 from SAP5Tender TL Load to preferred carrier9Carrier Accept load?10Order Quant ity31Update PVD Tables29Prepare PVD update spreadsheet27Select TL carrier and tender load25NoLoad Carrier11Generate BOL13Enter PGI14Daily File? to CTL15Carrier Freight Bill24Network OptimizationResults2BMS Carrier rates (TL by lane, LTL general discount only)28Place Order30Material Type32Delivery Date33Ship to Location34Special Inst ructions35Plant Schedules Pickup with LTL Carrier41Receive Shipment42Preferred Carrier from PVD43Transport Query YTO445Send Shipment Unit to Plant / Whse46KNMT Customer Material Record47Consolidate Shipments TL / LTL50 YesShip asTL or LTL51Override Preferred TL Carrier53NoNoYesYesMissing Data - Transport Rep does not see rates!59Ship as TL60Ship as LTL61Override Preferred LTL Carrier62NoYesEnd22Tender LTL Load to preferred carrier63Carrier Accept load?64NoYesSelect LTL carrier and tender load65TLLTLYesMissing Data - TM3 does not show consolidat ions in an easy format66How is the choice made to consolidate on TL or LTL . How is master bill of lading generated - load nose or tail? How does system pull PVD for consolidation67SIPOC Value Stream MapPotential Internal and External StakeholdersGantt Chart5A Selection of Team Members and Their Involvement5A Selection of Team Members and Their InvolvementLaurieThe first step in identifying team members occurred during our Define Phase in which we used a high level SIPOC, process map and preliminary Gantt chart to identify functional groups involved in the process, potentially impacted by any change to the process, and technical support functions required to obtain data, analyze data and help implement any required changes to software or SOPs. 59BMS 6 May 2008 Page # 59ASQ Team Excellence Competition5A Selection of Team Members and Their Involvement5A Selection of Team Members and Their InvolvementParticipantParticipantParticipantFacilitatorParticipantParticipantFacilitatorTraining FacilitationParticipantAdvisorParticipantParticipantParticipantParticipantExpertLean Six Sigma SkillsMarko DodigAdvisorExpertParticipantBayer Technology ServicesSam PhippsParticipantExpertAdvisorFinanceKristin HermickParticipantAdvisorExpertMaterial Master DataRon GadzinskiParticipantFacilitatorExpertLogisticsLaurie ColaoParticipantExpertAdvisorBusiness IntelligenceKristin HermickParticipantAdvisorExpertCustomer Master DataSean RitchieExpertAdvisorFacilitatorBusiness ExcellencePerson SelectedTeam Facilitation SkillsDataminingExpertiseProcess Involvement& ExpertiseSelection CriteriaLaurieOnce we had a list of functional groups required for the project, we began the process of selecting core team members. The criteria for selection varied depending on the functional group. We felt strongly that functional groups directly involved in the current process needed to have a representative on the core team with expertise in the details of their functional groups role in the process. They would not, however, necessarily require expertise in lets say the SAP system and its software. Likewise, those providing systems expertise in data mining or software development would not need to have prior intimate knowledge of the shipping process. We needed to find people with both the time, and the backing of their functional management to attend meetings and do the work required of the project. Our sponsor group helped us with this task.60BMS 6 May 2008 Page # 60ASQ Team Excellence Competition5B How the Team Prepared To Work Together5B How the Team Prepared To Work TogetherRoles and ResponsibilitiesLean Six Sigma OrientationPlanning/ Time ManagementMutual ExpectationsGoals Decision MakingCommunicationsManagement ExpectationsConcerns/ObstaclesTeam CompositionLaurieBefore we began to work on the project itself, we needed to talk about how we were going to work as a team. What were our relative roles and responsibilities? Did we need any additional team members? What were our mutual agreements regarding how we would conduct ourselves? What did we expect of each other? What did we think management expected? How much of our time will this require and over what period? How will we make decisions? What is Lean Six Sigma and how is it different from what weve been doing? We spent some extra time reviewing the DMAIC process and some of the tools we would be using along the way.Working out these basics before we began laid the foundation for us to be an effective team. 61BMS 6 May 2008 Page # 61ASQ Team Excellence Competition5C How We Managed Team Performance5C How We Managed Team PerformanceDD MM AA II CCLaurieWe didnt just talk about roles and responsibilities or mutual expectations in that first meeting and then forget about it. Here is an example page of our consolidated work plan. Having identified and prioritized improvement opportunities, we made commitments to one another relative to who would do what and when it should be completed. We published the list so that all could see if we were on track and make adjustments as necessary.62BMS 6 May 2008 Page # 62ASQ Team Excellence Competition5C How We Managed Team Performance5C How We Managed Team PerformanceSenior Management Champions & SponsorsCore Team Of Stakeholder RepresentativesTwo meetings per monthMinutes publishedCommitments to each otherDEFINEDEFINE MEASUREMEASURE ANALYZEANALYZE IMPROVEIMPROVE CONTROLCONTROLLaurieAs a part of our Lean Six Sigma methodology, the core team was required to provide regular, face to face, presentations to the sponsors and champions outlining the teams progress, findings, and performance against plan.This not only helped motivate and keep the team on track, but more importantly managed the expectations of the sponsors and provided regular and formal opportunities for the team to identify potential roadblocks and solicit the help of the sponsor group.As a team, we agreed to meet weekly or bi-weekly depending upon project objectives and resource loading. Project action item updates were published following meetings. We also ran special meetings whenever the team felt they were necessary to take remedial action to put things back on track. 63BMS 6 May 2008 Page # 63ASQ Team Excellence CompetitionBayer MaterialScience Science for a Better LifeBayer MaterialScience Science for a Better LifeWorking together as a cross-functional team utilizing the Bayer Lean Six Sigma Methodology, we were able to optimize the Truckload / Less than Truckload Decision Making Process and reduce Bayer MaterialScience Transportation costs by over $800M in 2007.Thank You for Your AttentionLaurieThank you for providing us the opportunity to obtain your feedback on our on-going process improvement endeavors. We would now like to take your questions.64Questions?Questions?ASQ Team Excellence CompetitionLaurie

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