Business Process Management Applied: Creating the Value Managed Enterprise

265 Pages·2005·5.14 MB·English

by  Charles C. Poirier

BUSINESS
PROCESS
MANAGEMENT
APPLIED
Creating the Value
Managed Enterprise
Charles Poirier
Ian Walker
Copyright ©2005 by Charles C. Poirier and Ian Walker
ISBN 1-932159-33-9
Printed and bound in the U.S.A. Printed on acid-free paper
10 9 8 7 6 5 4 3 2 1
Library of Congress Cataloging-in-Publication Data
Poirier, Charles C., 1936–
Business process management applied : creating the value managed
enterprise / by Charles Poirier and Ian Walker.
p. cm.
Includes bibliographical references and index.
ISBN 1-932159-33-9 (hardback : alk. paper)
1. Business logistics—Management. 2. Process control. 3. Value added.
4. Corporate profits. 5. Industrial management. I. Walker, Ian, 1953– II.
Title.
HD38.5.P6373 2005
658.5—dc22 2005011230
This publication contains information obtained from authentic and highly regarded sources.
Reprinted material is used with permission, and sources are indicated. Reasonable effort has
been made to publish reliable data and information, but the author and the publisher cannot
assume responsibility for the validity of all materials or for the consequences of their use.
All rights reserved. Neither this publication nor any part thereof may be reproduced,
stored in a retrieval system or transmitted in any form or by any means, electronic, me-
chanical, photocopying, recording or otherwise, without the prior written permission of the
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The copyright owner’s consent does not extend to copying for general distribution for
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J. Ross Publishing for such purposes.
Direct all inquiries to J. Ross Publishing, Inc., 6501 Park of Commerce Blvd., Suite 200,
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DEDICATION
For Carol
—Chuck
For Faith
—Ian
iii

TABLE OF CONTENTS
Preface ............................................................................................................ vii
Acknowledgments ......................................................................................... xiii
About the Authors ......................................................................................... xv
About APICS ............................................................................................... xvii
Web Added Value™ .................................................................................... xix
Chapter 1. The Road to the Value-Managed Enterprise ............................ 1
Chapter 2. Business Process Management as the Enabling Ingredient ... 33
Chapter 3. The Process-Based Profit and Loss Statement
and Balance Sheet .................................................................... 55
Chapter 4. Getting Beyond the Supply Chain Roadblocks ...................... 79
Chapter 5. Moving Effectively to Advanced Levels of Progress .......... 101
Chapter 6. Achieving Dominance at the Higher Levels of Progress .... 119
Chapter 7. Aspirations and Realities of Level 5 .................................... 155
Chapter 8. Creating the Intelligent Value Network: A Blueprint for
Level 5 .................................................................................... 173
Chapter 9. Using Process Simulation to Minimize the Risk ................. 189
Chapter 10. Steps Forward ......................................................................... 209
Bibliography ................................................................................................. 227
Index ............................................................................................................. 229
v

PREFACE
The search for savings and improvements within a business is a never-ending
quest. It occupies the minds and energies of virtually every business, at all time,
in every type of enterprise. Throughout the world, companies have launched a
myriad of efforts to meet this need and to transfer the results of continuous
improvement to the profitability of their businesses. During the past two de-
cades, in particular, an ever-increasing number of firms have opted to bring
these efforts under an umbrella improvement technique dubbed supply chain.
With that orientation, the effort becomes focused on the end-to-end process
steps that occur from wherever is the appropriate place to start the chain of
supplies or services — through manufacturing, production, or delivery — to
final consumption by a business customer or end consumer. When returns are
considered as well, this focus is truly across the total processing that could occur
from beginning to end of an extended enterprise business system.
Unfortunately, the actual results from supply chain efforts have been widely
varied. Some firms, across all parts of the globe and in many sectors, have been
successful in transitioning their continuous improvement efforts into an appro-
priate form of supply chain focus and can document significant savings — from
three to eight points of new profit margin. Similar results seem to be elusive
for other companies, even after a score of years of trying. Surveys by Computer
Sciences Corporation (CSC), Supply Chain Management Review magazine, and
other qualified and respected organizations verify the possibility of using supply
chain as an effective tool for further enhancement of virtually any business
improvement effort. At the same time, these studies show that the majority of
firms have not reaped the full benefits found by the leaders in an industry, as
the followers remain bogged down in the preliminary levels of their supply
chain effort or stuck with cultural imperatives that limit enterprise collaboration.
vii
viii Business Process Management Applied
Much work apparently remains, to get the intended results reflected in operating
income, in particular using the benefits of supply chain not only to reduce costs
but to increase revenues.
THERE ARE MISSING INGREDIENTS
The ability to attain the desired results should not be that difficult, based on
the documentation reported, much of which we will reference and consider.
Two ingredients seem to be missing. First, there is an absence of a concerted
effort across the full business, focused on the type of improvements that will
enhance customer satisfaction while bringing verifiable savings to the firm
extending the effort — an effort that brings attention to the importance of the
top line (revenues) as well as the bottom line (earnings). Second, there is an
equal absence of a means to access the various databases involved in inter-
enterprise processing, for the purpose of exchanging knowledge vital to any
effort aimed at optimization across the end-to-end value chain. Most firms
seem to be unaware of the advantages offered by business process management
(BPM) and its enabling language and system (BPML and BPMS) to facilitate
such data sharing.
As supply chain efforts, designed to identify and secure the full benefits for
a firm, have matured, a framework for moving to the most advantageous po-
sition has emerged and guided many businesses to very impressive improve-
ments. Leading companies appear to have advanced beyond industry competi-
tors, as they are better able to implement against this framework, which requires
a substantial commitment to using collaboration and technology through exter-
nal alliances. They do so with a greater understanding of the importance of
bringing a deeper focus to the key process steps in what becomes an intelligent
value network, connecting multiple enterprises with their customers. Such a
network is oriented toward the acquisition, management, and integration of
customer information to create a differentiating customer value proposition, a
commodity missing in action in most supply chain efforts.
In terms of profitability, positions achieved by industry-leading organiza-
tions, such as Colgate-Palmolive, Dell, Intel, Nestlé, Nike, Procter & Gamble,
Tesco, Toyota, and Wal-Mart, have brought anywhere from one to three (for
a three-year concerted effort) to five to eight (for a five- to ten-year effort)
points of new profit to their bottom lines. The laggards have failed to generate
any appreciable return on investment (ROI) that can be documented. The lead-
ers have discovered the advantages offered by moving their supply chains into
a position of having superior capabilities, gained through greater access to
knowledge across what becomes an intelligent value chain network. The lag-
Preface ix
gards continue to hammer away at cost reduction, primarily through continued
pressure on suppliers for price concessions and attempts to take business pro-
cesses to offshore locations with much lower labor rates.
From another aspect, distancing an individual business from its competitors
in areas of importance in a market has long been the goal of most enterprises.
With the breakthrough possibilities introduced with BPM techniques, a new
vista appears. The chances to optimize operating conditions and extend market
leadership have become concurrent possibilities. Gaining a dominant market
position through the application of collaboration and technology focused on
customer satisfaction, the key ingredient of the intelligent value network, has
become a viable option — for those businesses willing to overcome normal
cultural barriers and the traditional unwillingness to work cooperatively with
external resources. The final part of the effort, bringing clear documentation of
the savings into view, takes the journey full circle and substantiates the position
gained by the leaders, often one of market dominance.
OUR PURPOSES AND EXPERIENCES
VALIDATE THE SAVINGS
In this book, we will explore the maturity of supply chain efforts and document
the specific savings that are possible from a sustained effort. We will go further
and explain how a firm can accomplish the most difficult part of the effort,
which is to validly track the actual improvements and monetary savings to the
profit and loss (P&L) statement. Along the way, actual case studies and ex-
amples of successful implementations will be documented to substantiate the
arguments being presented. Throughout the text, generic and specific models
will be used, from many industries and companies, to illustrate how firms can
develop specific solutions that will distinguish their customer offerings. Several
collaborating organizations, in particular ArvinMeritor™, Lanner, Yantra, and
Stratascope, have supplied details of their experiences in bringing leadership
positions to firms willing to follow the roadmap and to make certain the ROI
meets difficult parameters set on any investment of the type needed to carry out
an extended enterprise supply chain effort. This information will be included
as well, to bring a flavor for actual potential to the various chapters.
We intend to help the reader understand how process improvement can add
value for any firm of any size in any business, how BPM becomes the key
enabler in the process, and the way to track those savings to verify the ROI
achieved. In a step-by-step manner, we will outline how progress is made with
the supply chain framework and substantial improvements are achieved. A
simulation technique will be explained as well, to help any firm experiment with