Professional Documents
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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SG & A Opportunities are “Huge”
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
A Study by The Monitor Group found that most U.S.
Companies have a Poor Record of Managing SG & A…
Despite investments in productivity improvements, average SG & A spending as a
percent of sales continues to increase
$3,000
$2,500
$MM $2,000
$1,500
$1,000 Average OH
Spending 8.4%
$500
$0
1992 1997 2002
Average Overhead
Ratio 23.5% 22.5% 24.6%
(Overhead/ Sales)
15-30% 18%
Source: The Monitor Group
0% 5
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
…but…those companies who had a consistent
focus on SG & A were rewarded in the market…
Firms that managed their overhead ratio consistently over time achieved significantly
higher market value growth.
Aggregate Change in Overhead Ratio over Time: All Industries $500M+ (1997 – 2002)
100%
15% 12.6%
15-30% 15%
10%
6.0%
75% 5%
0–15% 34% 0%
-5%
Low Level of Consistency High Level of Consistency
50%
10%
33% 6.0%
0–15%
5%
25%
0%
15-30% 18% -1.9%
-5%
0% Low Level of Consistency High Level of Consistency
EFFICIENCY EFFECTIVENESS
• Process costs Process quality
• Productivity Supplier development/management
• Cycle times Analytics
• Technology application Value Stream Alignment
• Cost per transaction Spend Management
• Staffing Levels FTE allocation
Examples: Examples:
Cost as a % of spend % of suppliers comprising top 80% of spend
FTEs per $1B of spend Total spend cost reduction as a % of spend
# of POs processed per FTE Percent of spend under procurement
PO processing cycle time management influence
Staff time allocation by process Percent of procurement activity allocated to
Cost as a % of spend vs suppliers decision support
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Elements of SG & A
Finance
Sales &
Service Marketing Every element of
SG & A is made up
SG & A of various discrete
Human business processes
Procurement Resources
Information
Technology
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance
10 Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Why LeanSigma?
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Time is the Underlying Measurement of
LeanSigma…
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Core Value
Value is always defined from the customer’s
perspective
Value-Adding Activities
Transform products or information into
products and services the customer wants
Non-Value-Adding Activities
Consume resources, but don't directly
contribute to process or service
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Business Process Waste
SG&A costs, or
overhead, often are
related to non-value
added activities that
can be eliminated or
streamlined using
LeanSigma principles.
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
… focus for SG & A Improvement with
LeanSigma…
End-to-End Time Reduction
Identify and eliminate Procure to Pay (P2P)
waste
• Reduced invoice processing
• Defects and loop-backs time from 44 days to minutes
• Hand-offs • Increased FPY rate from 2% to
87%
• Over-producing • Decreased error rate from 80%
• Unnecessary to 0.7%
processing • Increased cash discount $300K
• Decisions in process • Reduced expenses of faxing,
bank fees, postage and forms
• Excess transportation $200K
• Waiting
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Improving the SG & A
Your most
powerful
competitive
advantages are
where the work
gets done
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
SG & A “Hunting Ground”
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
LeanSigma SG & A Optimization Roadmap
• Focus on Time and Customer Value
– Improve cost by improving customer value… Improve cost and
service and quality, same time… Identification and prioritization of
performance gaps
• Leverage Speed of Lean and Precision of Six Sigma
Statistical tools
– Rapid and collaborative approach… Analyze current SG&A…
Identify opportunities… fact-based and data driven
• Focus on both functional opportunities and cross-functional
opportunities
– Some of the “fastest” improvements can be made vertically
(functionally)
– The biggest impact improvements are found horizontally (cross-
functionally or end-to-end)
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Enterprise-wide SG & A Transformation
Future State
Realization
• Focus on the customer
Tactical “Quick Hit” • Lean, customer-centric
Improvements processes
• Functional opportunities with • Relentless focus on waste
limited impact on the customer • Leveraged for competitive
value stream advantage
Awareness & • Finance & Acctg.
Assessment • HR
– Leadership Engagement and • Legal
Buy-in • Aligned to end-to-end as well to
– Pilot End-to-End & manage cross-impacts
Functional Assessments • Leverage collaborative problem
• Value Stream Maps solving to develop solutions and
• Metrics/KPIs rapidly implement
• Volume Data • Begin end-to-end/systemic
• Supplier Performance improvement
• Business Case • Start with the customer
• Prioritized Improvement and work backward to the
Opportunities
vendor
• Scorecard
– Organiztional Awareness
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Typical SG & A Timeline
6 – 8 Weeks 3 – 4 Months 4 + Months
Alignment, Awareness &
Tactical Improvements End-to-End Focus
Assessment
Financial
Benefit
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Lessons Learned
• Active leadership and ownership from Senior Leadership
– Top organizational talent should be assigned to the effort to drive the on-going change
– Aligned metrics and incentives
– Everyone has to play
– Create a “burning platform” if one does not exist
– Walk the talk
• Build “tension” – stretch goals
• Connections – integrate with other initiatives and teams, customer councils, governance
• Invite self and promote contributions
• Service Level Agreements – two way relationship
• Communicate, communicate, communicate
– WIIFM
– Solicit participation at every level
– Complaints are a gift
• Passion around Process
– LeanSigma
– Metric-centric: (scorecards, business reviews, operating reviews, performance boards)
• Quality, Cost, Delivery
– End-to-End Focus
• Savings and improvements need to be integrated into the on-going budgeting process
• Do not mistake effort for results
• Expect results – not “let’s see if it works”
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Water and Fueling Systems Manufacturer
The Need WTS Tech Support
Opportunity
• Average call abandon rate is 49%
• Average weekly overtime is 29 hours
500
450
400
350
Abandon call
reporting not
available until
50
45
40
35
Management Reporting – Rebate Accrual
Demonstrates waste of
Resource Hours
5/13
Call Volume
• 800 number on packaging is directed to 300 30
5/1/09
5/4/09
5/5/09
5/6/09
5/7/09
5/8/09
5/1 1/09
5/1 2/09
5/1 3/09
5/1 4/09
5/1 5/09
5/1 8/09
5/1 9/09
5/2 0/09
5/2 1/09
5/2 2/09
5/2 6/09
5/2 7/09
5/2 8/09
5/2 9/09
6/1/09
6/2/09
6/3/09
6/4/09
6/5/09
additional 10-60% FTE required to
had experienced 87% growth over three years while eliminate overtime and handle calls
Supplies
Approach Impact
CallsTaken
ScheduledHrs
RequiredHoursCT
AbdCalls
OvertimeHrs
RequiredHour sPD
Span of Control
8 • $3.0M … Span 3-4
7
6 • $4.6M … Span 5+
Approach Impact
2
4
3
4 3.5
Approach
Facilities
Cross-Functional Improvement $100 $150 $523 $689 $172 $265 $153 $238 $948 $1,342
Management and Financial
Reporting, Concessions,
Marketing Spend
Shared Services $200 $300 $194 $338 $394 $638
Customer Service, Marketing
Services
TOTAL $3,345 $4,441 $2,114 $3,750 $1,669 $2,590 $921 $1,444 $440 $1,090 $8,489 $13,315
opportunities
• Performed detailed analysis within high-impact
SG&A functions, focusing on organizational design,
Results
performance management, process efficiency and • $8.5M reduction in costs, a reduction in SG&A of
effectiveness, and spend management. 6%
• Developed execution roadmap for quantified
opportunities
• Executed a series of Kaizen events to redesign
processes
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© 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Functional Examples
• Support Call Center
– Focus: Sales concessions and customer support
– Approach: 2 kaizen events
– Result:
• Productivity improvement by 20% on Call Center operation
• Improve customer experience =>decrease call volume
• $1.2 million in savings
• Marketing
– Focus: Poorly executed shared services model for managing
marketing collateral, advertizing spend, etc.
– Approach: 3 kaizen events
– Result:
• Exhibit & Trade Show costs reduced by $-220K
• Collateral costs reduced by $310K
• Promotional costs reduced by $150K
• Overall reduction in Marketing costs of 18%
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Thank you
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.