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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<ul><li><p>1</p><p>ASQ Team Excellence Competition</p><p>Optimizing the Truckload / Less Than Truckload (TL/LTL) Decision for Bayer MaterialScienceOptimizing the Truckload / Less Than Truckload (TL/LTL) Decision for Bayer MaterialScience</p><p>ASQ 2008 Team Excellence Competition</p></li><li><p>2</p><p>BMS 6 May 2008 Page # 2</p><p>ASQ Team Excellence Competition</p><p>Bayer MaterialScience Global Business UnitsBayer MaterialScience Global Business Units</p><p>Polyurethanes</p><p>Coatings, Adhesives,Specialties</p><p>Polycarbonates</p><p>InorganicBasic Chemicals</p><p>52 %52 %Euro10.4 billion</p><p>27 %</p><p>15%15%</p><p>4%4%2%2%</p><p>ThermoplasticPolyurethanes</p><p>Sean</p><p>Good Morning, Im Sean Ritchie </p><p>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.</p></li><li><p>3</p><p>BMS 6 May 2008 Page # 3</p><p>ASQ Team Excellence Competition</p><p>Transportation 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)</p><p>Carrier choice in the 16,000 to 25,000 pound range is a grey zone Optimal shipping cost depends on several factors</p><p>One transportation rep suspected this grey zone was causing problems He took a sample of recent shipments in that weight range and compared the cost </p><p>of each with the cost if optimal carrier choices had been made He found 83% of the shipments among his sample were sub-optimal</p><p>Bayer 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?</p><p>A team of experts and a disciplined method was needed to investigate this potential opportunity.</p><p>Bayer MaterialScience Ships a Large Volume of Packaged GoodsBayer MaterialScience Ships a Large Volume of Packaged Goods</p><p>Sean</p><p>Shipping costs are a significant component to the Cost of Goods Sold.</p><p>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. </p><p>Extrapolating this rate of sub-optimal shipping implied over $1 Million could be saved by shipping correctly.</p><p>But was his extrapolation valid? And if so, what were the root causes of failure in the shipping process?</p></li><li><p>4</p><p>BMS 6 May 2008 Page # 4</p><p>ASQ Team Excellence Competition</p><p>Introducing the TeamIntroducing the Team</p><p>Sean Ritchie Team Leader </p><p>Kristen Hermick Customer Master Data</p><p>Laurie Colao Business Intelligence</p><p>Sam Phipps Finance</p><p>Marko Dodig Technology Services</p><p>Ron Gadzinski Logistics</p><p>Amy Prevade Freight Payment &amp; Audit</p><p>Sean Ritchie Team Leader </p><p>Kristen Hermick Customer Master Data</p><p>Laurie Colao Business Intelligence</p><p>Sam Phipps Finance</p><p>Marko Dodig Technology Services</p><p>Ron Gadzinski Logistics</p><p>Amy Prevade Freight Payment &amp; Audit</p><p>Sean</p></li><li><p>5</p><p>BMS 6 May 2008 Page # 5</p><p>ASQ Team Excellence Competition</p><p>Section 1: Project Selection &amp; PurposeSection 1: Project Selection &amp; Purpose</p><p>Sean</p><p>Project Selection and Purpose</p></li><li><p>6</p><p>BMS 6 May 2008 Page # 6</p><p>ASQ Team Excellence Competition</p><p>HighLow</p><p>Medium</p><p>Medium</p><p>High</p><p>LowMedium LowHigh</p><p>Feasibility</p><p>ROI</p><p>Alignment</p><p>Alignment with Overarching Goals</p><p>Feasibility</p><p>Return on Investment (ROI)</p><p>Preliminary Assessment of Truckload versus Less </p><p>than Truckload Project Strong Alignment High ROI Highly Feasible</p><p>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 Why</p><p>Sean</p><p>A preliminary assessment of the problem led us to believe correcting it:</p><p>1. Strongly aligned with four overarching organizational goals:</p><p> Improving profitability. (Order to Cash thread)</p><p> Improving Customer Relations</p><p> Encouraging Grass Roots initiatives</p><p> Developing Lean Six Sigma as an Organizational Core Competency</p><p>2. The Return of Investment appeared high because we were confident the project would cost much less than the opportunity of $1 million</p><p>3. Was feasible because key stakeholders agreed that this was a significant problem they would provide resources to correct.</p></li><li><p>7</p><p>BMS 6 May 2008 Page # 7</p><p>ASQ Team Excellence Competition</p><p>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 Why</p><p>Sample</p><p>Sam</p><p>ple</p><p> Mea</p><p>n</p><p>JanDecNovOctSepAugJul</p><p>0.060</p><p>0.055</p><p>0.050</p><p>__X=0.05624</p><p>UCL=0.06209</p><p>LCL=0.05039</p><p>Sample</p><p>Sam</p><p>ple </p><p>Ran</p><p>ge</p><p>JanDecNovOctSepAugJul</p><p>0.275</p><p>0.250</p><p>0.225</p><p>0.200</p><p>Xbar-R Chart of Cost / LbsJuly 2005 to January 2006</p><p>Perc</p><p>ent </p><p>of T</p><p>OTS</p><p>HIP</p><p>WGT</p><p>TYPEWeight Bracket</p><p>LTLTL123123</p><p>70</p><p>60</p><p>50</p><p>40</p><p>30</p><p>20</p><p>10</p><p>0</p><p>Percent within levels of TYPE.</p><p>Mode of Shipment versus Weight BracketsJuly 2005 to January 2006</p><p>1 = 14 to 16K 2 = 16 to 20K 3 = 20 to 25K</p><p> TL LTL Process.igx</p><p>Revised 5/19/2006</p><p>Cus</p><p>tom</p><p>erR</p><p>egio</p><p>nal S</p><p>ervi</p><p>ce C</p><p>ente</p><p>r</p><p>Cust</p><p>omer</p><p> Ser</p><p>vice</p><p>Logi</p><p>stic</p><p>s</p><p>Logi</p><p>stic</p><p>s S</p><p>trate</p><p>gyLo</p><p>gist</p><p>ics </p><p>Ope</p><p>ratio</p><p>ns</p><p>Plan</p><p>t / W</p><p>hse</p><p>CTL</p><p>Order Preparation Phase</p><p>Order Preparation Phase</p><p>Shipment Preparation Phase</p><p>Shipment Preparation Phase</p><p>Start 1</p><p>Create SAP Delivery</p><p>4</p><p>Carrier Bid Results</p><p>26</p><p>Select open TR, review </p><p>requirements / notes</p><p>6</p><p>Transportat ion Request sent to TM3 f rom SAP</p><p>5</p><p>Tender TL Load to preferred carrier</p><p>9</p><p>Carrier Accept load?</p><p>10</p><p>O rder Q uantity</p><p>31</p><p>Update PVD Tables</p><p>29</p><p>Prepare PVD update </p><p>spreadsheet</p><p>27</p><p>Select TL carrier and tender load</p><p>25</p><p>No</p><p>Load Carrier</p><p>11</p><p>G enerate BOL</p><p>13</p><p>Enter PGI</p><p>14</p><p>Daily File? to CTL</p><p>15</p><p>Carrier Freight Bill</p><p>24</p><p>Network Optimizat ion</p><p>Results</p><p>2</p><p>BMS Carrier rates (TL by lane, LTL general </p><p>discount only)</p><p>28</p><p>Place O rder</p><p>30Material Type</p><p>32Delivery </p><p>Date</p><p>33Ship to Location</p><p>34Special </p><p>Inst ructions</p><p>35</p><p>Plant Schedules Pickup with LTL Carrier</p><p>41</p><p>Receive Shipment</p><p>42</p><p>Preferred Carrier from </p><p>PVD</p><p>43</p><p>Transport Query YTO4</p><p>45</p><p>Send Shipment Unit to Plant / </p><p>Whse</p><p>46</p><p>KNMT Customer Material Record</p><p>47</p><p>Consolidate Shipments TL / LTL</p><p>50 Yes</p><p>Ship asTL or LTL</p><p>51</p><p>O verride Preferred TL Carrier</p><p>53</p><p>No</p><p>No</p><p>Yes</p><p>Yes</p><p>Missing Data - Transport Rep does not see rates!</p><p>59</p><p>Ship as TL</p><p>60</p><p>Ship as LTL</p><p>61O verride Preferred </p><p>LTL Carrier</p><p>62</p><p>No</p><p>Yes</p><p>End22</p><p>Tender LTL Load to </p><p>preferred carrier</p><p>63</p><p>Carrier Accept load?</p><p>64</p><p>No</p><p>Yes</p><p>Select LTL carrier and tender load</p><p>65</p><p>TL</p><p>LTL</p><p>Yes</p><p>Missing Data - TM3 does not show </p><p>consolidat ions in an easy format</p><p>66</p><p>How is the choice made to consolidate on TL or LTL . How is master bill of lading generated - load nose or tail? How does </p><p>system pull PVD for consolidation</p><p>67</p><p>Trend Analysis Voice of the Customer Voice of the Business Baseline Statistics</p><p>SIPOC</p><p>Project Charter</p><p>Process Mapping Discovery Kaizen</p><p>Gantt ChartStakeholder Mapping</p><p>Sean</p><p>Our first step was to identify potential stakeholders and bring them together in a Discovery Kaizen event. </p><p>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. </p><p>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.</p><p>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. </p><p>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.</p></li><li><p>8</p><p>BMS 6 May 2008 Page # 8</p><p>ASQ Team Excellence Competition</p><p>Stakeholder MappingVoice of the CustomerVoice of the BusinessData Supporting Case for ChangeHigh Level Process Map (SIPOC Diagram)Cross Functional Process MappingDiscovery KaizenProject Charter</p><p>DEFINEDEFINE MEASUREMEASURE ANALYZEANALYZE IMPROVEIMPROVE CONTROLCONTROL</p><p>The Bayer MaterialScience Lean Six Sigma Process</p><p>Alignment </p><p>Feasibility</p><p>Return on Investment</p><p>A Compelling Case for Change?</p><p>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 Why</p><p>Sean</p><p>The 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 resources</p></li><li><p>9</p><p>BMS 6 May 2008 Page # 9</p><p>ASQ Team Excellence Competition</p><p>Sample</p><p>Sam</p><p>ple </p><p>Mea</p><p>n</p><p>JanDecNovOctSepAugJul</p><p>0.060</p><p>0.055</p><p>0.050</p><p>__X=0.05624</p><p>UCL=0.06209</p><p>LCL=0.05039</p><p>Sample</p><p>Sam</p><p>ple </p><p>Ran</p><p>ge</p><p>JanDecNovOctSepAugJul</p><p>0.275</p><p>0.250</p><p>0.225</p><p>0.200</p><p>Xbar-R Chart of Cost / LbsJuly 2005 to January 2006</p><p>Perc</p><p>ent </p><p>of T</p><p>OTS</p><p>HIP</p><p>WGT</p><p>TYPEWeight Bracket</p><p>LTLTL123123</p><p>70</p><p>60</p><p>50</p><p>40</p><p>30</p><p>20</p><p>10</p><p>0</p><p>Percent w ithin levels of TYPE.</p><p>Mode of Shipment versus Weight BracketsJuly 2005 to January 2006</p><p>1 = 14 to 16K 2 = 16 to 20K 3 = 20 to 25K</p><p>A larger sample size and segmentation of data both chronologically and by mode, increased our confidence in the extrapolation estimate of $1 million.</p><p> TL LTL Process.igx</p><p>Revised 5/19/2006</p><p>Cus</p><p>tom</p><p>erRe</p><p>gion</p><p>al S</p><p>ervi</p><p>ce C</p><p>ente</p><p>r</p><p>Cus</p><p>tom</p><p>er S</p><p>ervi</p><p>ceLo</p><p>gist</p><p>ics</p><p>Logi</p><p>stic</p><p>s S</p><p>trat</p><p>egy</p><p>Logi</p><p>stic</p><p>s O</p><p>pera</p><p>tions</p><p>Plan</p><p>t / W</p><p>hse</p><p>CTL</p><p>Order Preparation Phase</p><p>Order Preparation Phase</p><p>Shipment Preparation Phase</p><p>Shipment Preparation Phase</p><p>Start 1</p><p>Create SAP Delivery</p><p>4</p><p>Carrier Bid Results</p><p>26</p><p>Select open TR, review </p><p>requirements / notes</p><p>6</p><p>Transportation Request sent to TM3 from SAP</p><p>5</p><p>Tender TL Load to </p><p>preferred carrier</p><p>9</p><p>Carrier Accept </p><p>load?</p><p>10</p><p>Order Quant ity</p><p>31</p><p>Update PVD Tables</p><p>29</p><p>Prepare PVD update </p><p>spreadsheet</p><p>27</p><p>Select TL carrier and tender load</p><p>25</p><p>No</p><p>Load Carrier</p><p>11</p><p>Generate BOL</p><p>13</p><p>Enter PGI</p><p>14</p><p>Daily File? to CTL</p><p>15</p><p>Carrier Freight Bill</p><p>24</p><p>Network Optimization</p><p>Results</p><p>2</p><p>BMS Carrier rates (TL by lane, LTL general </p><p>discount only)</p><p>28</p><p>Place Order</p><p>30Material Type</p><p>32Delivery </p><p>Date</p><p>33Ship to </p><p>Locat ion</p><p>34Special </p><p>Instructions</p><p>35</p><p>Plant Schedules Pickup with LTL Carrier</p><p>41</p><p>Receive Shipment</p><p>42</p><p>Preferred Carrier f rom </p><p>PVD</p><p>43</p><p>Transport Query YTO4</p><p>45</p><p>Send Shipment Unit to Plant / </p><p>Whse</p><p>46</p><p>KNMT Customer Material Record</p><p>47</p><p>Consolidate Shipments TL / LTL</p><p>50 Yes</p><p>Ship asTL or LTL</p><p>51</p><p>Override Preferred TL Carrier</p><p>53</p><p>No</p><p>No</p><p>Yes</p><p>Yes</p><p>Missing Data - Transport Rep </p><p>does not see rates!</p><p>59</p><p>Ship as TL</p><p>60</p><p>Ship as LTL</p><p>61Override Preferred </p><p>LTL Carrier</p><p>62</p><p>No</p><p>Yes</p><p>End22</p><p>Tender LTL Load to </p><p>preferred carrier</p><p>63</p><p>Carrier Accept </p><p>load?</p><p>64</p><p>No</p><p>Yes</p><p>Select LTL carrier and tender load</p><p>65</p><p>TL</p><p>LTL</p><p>Yes</p><p>Missing Data - TM3 does not show </p><p>consolidations in an easy format</p><p>66</p><p>How is the choice made to consolidate on TL or LTL . How is master bill of lading generated - load nose or tail? How does </p><p>system pull PVD for consolidat ion</p><p>67</p><p>Organizational Process Mapping revealed numerous hand-offs, opportunities for error, communication gaps and non-value added steps </p><p>Organizational Alignment</p><p> Improve profitability</p><p>Organizational Alignment</p><p> Encourage grassroots Initiatives Improve customer relations Opportunity to apply Lean Six Sigma Methodology</p><p>1A.b Reasons Why the Project Was Selected1A.b Reasons Why the Project Was Selected</p><p>Sean</p><p>The 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.</p><p>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.</p><p>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.</p></li><li><p>10</p><p>BMS 6 May 2008 Page # 10</p><p>ASQ Team Excellence Competition</p><p> Identification and involvement of stakeholders</p><p> Definition of process being studied</p><p> Clear boundaries of scope of the project</p><p> More accurate estimate of impact </p><p> Estimate of cost and time to implement</p><p> Assessment of alignment with overall organizational priorities</p><p>DEFINEDEFINE</p><p>The output deliverable of the Define Phase is a Project Charter which includes the following:</p><p>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.</p><p>1A.c Involvement of Potential Stakeholders in Project Selection1A.c Involvement of Potential Stakeholders in Project Selection</p><p>Sean</p><p>Bayers Define Phase is a rigorous study of the projects potential impact, cost and feasibility.</p><p>A project moves forward only if the stakeholders are enrolled and formally endorse the project.</p><p>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.</p><p>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.</p></li><li><p>11</p><p>BMS 6 May 2008 Page # 11</p><p>ASQ Team Excellence Competition</p><p>Senior Management Champions &amp; SponsorsProcess Owner Sponsor</p><p>Business Excellence ChampionFinance</p><p>Business ExcellenceTransportation Operations Logistics Strategy &amp; </p><p>Procurement</p><p>Customer Master Data Material Master Data</p><p>Core Team of Stakeholder </p><p>RepresentativesBusiness Intelligence Financial</p><p>Bayer Technology </p><p>ServicesCustomer Service</p><p>1A.c Involvement of Potential Stakeholders in Project Selection1A.c Involvement of Potential Stakeholders in Project Selection</p><p>Sean</p><p>Several 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.</p></li><li><p>12</p><p>BMS 6 May 2008 Page # 12</p><p>ASQ Team Excellence Competition</p><p>1B.a Affected Organizational Goals, Performance Measures, and Strategies</p><p>1B.a Affected Organizational Goals, Performance Measures, and Strategies</p><p>Goals Cost management Simplification</p><p>Performance Measures Cost per lb On Time in Full (OTIF) Carrier turndown rates</p><p>Strategies Overall Order to Cash objectives Premium Freight Development of Lean Six Sigma competency</p><p>Laurie</p><p>Another fundamental element of the project charter is an assessment of the degree of alignment of the project with overarching organizational goals. </p><p>We found this project to align strongly with...</p></li></ul>

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