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  • 1

    ASQ Team Excellence Competition

    Optimizing the Truckload / Less Than Truckload (TL/LTL) Decision for Bayer MaterialScienceOptimizing the Truckload / Less Than Truckload (TL/LTL) Decision for Bayer MaterialScience

    ASQ 2008 Team Excellence Competition

  • 2

    BMS 6 May 2008 Page # 2

    ASQ Team Excellence Competition

    Bayer MaterialScience Global Business UnitsBayer MaterialScience Global Business Units

    Polyurethanes

    Coatings, Adhesives,Specialties

    Polycarbonates

    InorganicBasic Chemicals

    52 %52 %Euro10.4 billion

    27 %

    15%15%

    4%4%2%2%

    ThermoplasticPolyurethanes

    Sean

    Good 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.

  • 3

    BMS 6 May 2008 Page # 3

    ASQ Team Excellence Competition

    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)

    Carrier choice in the 16,000 to 25,000 pound range is a grey zone Optimal shipping cost depends on several factors

    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

    of each with the cost if optimal carrier choices had been made He found 83% of the shipments among his sample were sub-optimal

    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?

    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 Goods

    Sean

    Shipping 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?

  • 4

    BMS 6 May 2008 Page # 4

    ASQ Team Excellence Competition

    Introducing the TeamIntroducing the Team

    Sean Ritchie Team Leader

    Kristen Hermick Customer Master Data

    Laurie Colao Business Intelligence

    Sam Phipps Finance

    Marko Dodig Technology Services

    Ron Gadzinski Logistics

    Amy Prevade Freight Payment & Audit

    Sean Ritchie Team Leader

    Kristen Hermick Customer Master Data

    Laurie Colao Business Intelligence

    Sam Phipps Finance

    Marko Dodig Technology Services

    Ron Gadzinski Logistics

    Amy Prevade Freight Payment & Audit

    Sean

  • 5

    BMS 6 May 2008 Page # 5

    ASQ Team Excellence Competition

    Section 1: Project Selection & PurposeSection 1: Project Selection & Purpose

    Sean

    Project Selection and Purpose

  • 6

    BMS 6 May 2008 Page # 6

    ASQ Team Excellence Competition

    HighLow

    Medium

    Medium

    High

    LowMedium LowHigh

    Feasibility

    ROI

    Alignment

    Alignment with Overarching Goals

    Feasibility

    Return on Investment (ROI)

    Preliminary Assessment of Truckload versus Less

    than Truckload Project Strong Alignment High ROI Highly Feasible

    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

    Sean

    A 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 Competency

    2. The Return of Investment appeared high because we were confident the project would cost much less than the opportunity of $1 million

    3. Was feasible because key stakeholders agreed that this was a significant problem they would provide resources to correct.

  • 7

    BMS 6 May 2008 Page # 7

    ASQ Team Excellence Competition

    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

    Sample

    Sam

    ple

    Mea

    n

    JanDecNovOctSepAugJul

    0.060

    0.055

    0.050

    __X=0.05624

    UCL=0.06209

    LCL=0.05039

    Sample

    Sam

    ple

    Ran

    ge

    JanDecNovOctSepAugJul

    0.275

    0.250

    0.225

    0.200

    Xbar-R Chart of Cost / LbsJuly 2005 to January 2006

    Perc

    ent

    of T

    OTS

    HIP

    WGT

    TYPEWeight Bracket

    LTLTL123123

    70

    60

    50

    40

    30

    20

    10

    0

    Percent within levels of TYPE.

    Mode of Shipment versus Weight BracketsJuly 2005 to January 2006

    1 = 14 to 16K 2 = 16 to 20K 3 = 20 to 25K

    TL LTL Process.igx

    Revised 5/19/2006

    Cus

    tom

    erR

    egio

    nal S

    ervi

    ce C

    ente

    r

    Cust

    omer

    Ser

    vice

    Logi

    stic

    s

    Logi

    stic

    s S

    trate

    gyLo

    gist

    ics

    Ope

    ratio

    ns

    Plan

    t / W

    hse

    CTL

    Order Preparation Phase

    Order Preparation Phase

    Shipment Preparation Phase

    Shipment Preparation Phase

    Start 1

    Create SAP Delivery

    4

    Carrier Bid Results

    26

    Select open TR, review

    requirements / notes

    6

    Transportat ion Request sent to TM3 f rom SAP

    5

    Tender TL Load to preferred carrier

    9

    Carrier Accept load?

    10

    O rder Q uantity

    31

    Update PVD Tables

    29

    Prepare PVD update

    spreadsheet

    27

    Select TL carrier and tender load

    25

    No

    Load Carrier

    11

    G enerate BOL

    13

    Enter PGI

    14

    Daily File? to CTL

    15

    Carrier Freight Bill

    24

    Network Optimizat ion

    Results

    2

    BMS Carrier rates (TL by lane, LTL general

    discount only)

    28

    Place O rder

    30Material Type

    32Delivery

    Date

    33Ship to Location

    34Special

    Inst ructions

    35

    Plant Schedules Pickup with LTL Carrier

    41

    Receive Shipment

    42

    Preferred Carrier from

    PVD

    43

    Transport Query YTO4

    45

    Send Shipment Unit to Plant /

    Whse

    46

    KNMT Customer Material Record

    47

    Consolidate Shipments TL / LTL

    50 Yes

    Ship asTL or LTL

    51

    O verride Preferred TL Carrier

    53

    No

    No

    Yes

    Yes

    Missing Data - Transport Rep does not see rates!

    59

    Ship as TL

    60

    Ship as LTL

    61O verride Preferred

    LTL Carrier

    62

    No

    Yes

    End22

    Tender LTL Load to

    preferred carrier

    63

    Carrier Accept load?

    64

    No

    Yes

    Select LTL carrier and tender load

    65

    TL

    LTL

    Yes

    Missing Data - TM3 does not show

    consolidat ions in an easy format

    66

    How 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 consolidation

    67

    Trend Analysis Voice of the Customer Voice of the Business Baseline Statistics

    SIPOC

    Project Charter

    Process Mapping Discovery Kaizen

    Gantt ChartStakeholder Mapping

    Sean

    Our 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.

  • 8

    BMS 6 May 2008 Page # 8

    ASQ Team Excellence Competition

    Stakeholder MappingVoice of the CustomerVoice of the BusinessData Supporting Case for ChangeHigh Level Process Map (SIPOC Diagram)Cross Functional Process MappingDiscovery KaizenProject Charter

    DEFINEDEFINE MEASUREMEASURE ANALYZEANALYZE IMPROVEIMPROVE CONTROLCONTROL

    The Bayer MaterialScience Lean Six Sigma Process

    Alignment

    Fea