Applying LEAN
TO NONMANUFACTURING
SUPPLY CHAIN
Purchase Order to Pay
Optimization
Elm Valle, Pride International, Process ...
• Introduction
•
| Our World is Getting Deeper
Agenda
Company Overviews
PRIDE INTERNATIONAL
Headquartered in Houston, Texas, Pride International,
Inc. is one of the world's lar...
The Background (timeline)
Brought on as a Consultant for Pride International – to “Fix”
their Received Not Voucher backlog...
The Challenge
Oil & Gas Company
Non Manufacturing
Vague or No Documentation of Processes / Procedures
Siloed Work
No Proce...
Strategy Overview
PDCA
Plan
Do
Check
Act
DMAIC
Define
Measure
Analyze
Improve
Control
Control
ACTION
What is the
problem?
...
Plan, Do, Check, Act
Identify Problem Statement / Challenges
Benchmark against Industry & Best Practice
Acquire Support fr...
Activity
Requirements Gathering
Planning & Analysis
Design
Workshop
Develop Future State
Pilot
Implement & Monitor
2010
AP...
Marketing Strategy
Understand Agree Document
Problem Statement - Cost
Pride International: $30/ Invoice
In 2009, Pride had an opportunity to save over $8MM in prompt p...
15% of Purchase Orders are Cancelled
20% go through Change Order process
32% of PO Receipt fell into OS&D
20% of All Invoi...
PO Mgmt
PO
Approval
Publish
PO
Receive
Material
Invoice
Receive
Voucher
PO
Pay
PO
Requisition
Queue
Understand Agree Docum...
| Our World is Getting Deeper
Scope of Project
PO
Mgmt
PO
Approval
Publish
PO
Receive
Material
Invoice
Receive
Voucher
PO
...
• Direct Objectives:
Cycle Times – Reduce Cycle Times in the P2P process
First Pass Yield – Reduce rework or recycle of ...
| Our World is Getting Deeper
•Example Map
•Session Work
•Consolidation
Day 1-
Current
State
•Example VSM
•Session Work
•C...
| Our World is Getting Deeper
Service Team Maturity Model
Characteristics of the business process at each maturation
level...
| Our World is Getting Deeper
Identify Value/Waste
Using the
Current State
Map. Identify
activities within
the process tha...
| Our World is Getting Deeper
Current State Result Mapping
Current State Mapping & Analysis
Value Stream Analysis Results
Minimize
Non-Value Add
RequiredActivity
Eliminate
Improve
Monitor
Value Add
Non-Required
Act...
Total of 173 Improvements were identified to support our Process Maps and
Future State.
Shared Ownership with split respo...
Ongoing Project Discovery
Policy Requirements – Integration into new SOP
Desktop Manual – Complete End to End
Process Maps...
Pride Platform – Training Guides
The Test Pilot
Three Buyers / 2 Expeditors / 2 Accounts Payables
Random population of Purchase Orders
Track them against o...
KPI Improvements
Comparison to YTD 2010 vs. 2011 YTD Running JAN FEB
P2P Metric % Improvement % Improvement
REQ to PO Time...
| Our World is Getting Deeper
Instill the Culture
Current State
Future State
Q1 - Work Plan
&
Implementation
Q2 - Work Pla...
Pride Procurement Lean
Pride Procurement Lean
of 27

Pride Procurement Lean

Published on: Mar 4, 2016
Source: www.slideshare.net


Transcripts - Pride Procurement Lean

  • 1. Applying LEAN TO NONMANUFACTURING SUPPLY CHAIN Purchase Order to Pay Optimization Elm Valle, Pride International, Process Improvement Lead
  • 2. • Introduction • | Our World is Getting Deeper Agenda
  • 3. Company Overviews PRIDE INTERNATIONAL Headquartered in Houston, Texas, Pride International, Inc. is one of the world's largest offshore drilling contractors. Pride provides contract drilling and related services to oil and gas companies worldwide. With approximately 4,000 employees, Pride offers a multinational workforce with offices in the United States, Angola, Brazil, and Saudi Arabia. We have positioned our fleet in some of the world's largest and most active exploration and production basins. In 2010, Pride had $1.5 billion in revenues. Our fleet and operations currently consists of the following: 5 Deepwater drillships 2 Deepwater drillships under construction 6 Deepwater Semisubmersible 6 Midwater Semisubmersible 7 Jackups 2 Managed deepwater units UHY ADVISORS Headquartered in Houston, Texas, Pride International, Inc. is one of the world's largest offshore drilling contractors. Pride provides contract drilling and related services to oil and gas companies worldwide. With approximately 4,000 employees, Pride offers a multinational workforce with offices in the United States, Angola, Brazil, and Saudi Arabia. We have positioned our fleet in some of the world's largest and most active exploration and production basins. In 2010, Pride had $1.5 billion in revenues. Our fleet and operations currently consists of the following: 5 Deepwater drillships 2 Deepwater drillships under construction 6 Deepwater Semisubmersible 6 Midwater Semisubmersible 7 Jackups 2 Managed deepwater units
  • 4. The Background (timeline) Brought on as a Consultant for Pride International – to “Fix” their Received Not Voucher backlog. Hired on Full Time as the Process Improvement Lead Myriad of Opportunities in the Procure to Pay Process Enlisted Aid from UHY Advisors Requested Full Blown Project to be initiated
  • 5. The Challenge Oil & Gas Company Non Manufacturing Vague or No Documentation of Processes / Procedures Siloed Work No Process Improvement Culture or Experience
  • 6. Strategy Overview PDCA Plan Do Check Act DMAIC Define Measure Analyze Improve Control Control ACTION What is the problem? How are we doing? Fix It Hold & Sustain Gains Project Mgmt • Identify Opportunities • Scope Project • Analyze the Process • Define Outcomes • Prioritize • Refine • Implement • Measure Outcomes • Acknowledge
  • 7. Plan, Do, Check, Act Identify Problem Statement / Challenges Benchmark against Industry & Best Practice Acquire Support from Leadership Validate and Continue Data Gathering Define Current State & Metrics Create Key Performance Indicators Evangelize and Socialize at all levels Create Future State Document the Future State – Process Maps Pilot and Validate Implement the Future State
  • 8. Activity Requirements Gathering Planning & Analysis Design Workshop Develop Future State Pilot Implement & Monitor 2010 APRJAN FEB MAR 2011 JUL AUG SEP OCT NOV DEC Note: Business Gathering was over a span of 1 year prior to Project Timeline
  • 9. Marketing Strategy Understand Agree Document
  • 10. Problem Statement - Cost Pride International: $30/ Invoice In 2009, Pride had an opportunity to save over $8MM in prompt pay discounts. Actual Prompt Pay Discount Taken: $0.00 The 30% rework cost Pride additional $50 per invoice In 2009, Pride’s First Pass Yield for Purchase Order to Pay transactions was 70%. Category Annualized 2010 Invoices to be Processed PSC 16,432 Brazil 67,627 Angola 9,830 All Others 41,455 TOTAL 144,070
  • 11. 15% of Purchase Orders are Cancelled 20% go through Change Order process 32% of PO Receipt fell into OS&D 20% of All Invoices Lost Clearly Defined Process Map or Procedures did not exist Lack of SOP’s or Desktop Procedures Transaction Oriented (Firefighting) Problem Statement - Waste Lacking Knowledge or Culture for Process Improvement / LEAN / Six Sigma 20% Re-Work Rate Additional Costs
  • 12. PO Mgmt PO Approval Publish PO Receive Material Invoice Receive Voucher PO Pay PO Requisition Queue Understand Agree Document Overall Cycle Time - Inefficiency 2 Days Days a Req sits. Metrics are in “average” days. 7 Days Conversion of Req to PO 15 Days Time to Approve & Publish 90 Days Time Supplier receives approval to Pride receives material at K&N 24 Days Supplier’s Date of Invoice vs. Invoice Received Date logged in E1 15 Days Invoice Received Date vs. Date Vouchered 7 Days Lead Time for Batching Process & Physical Payment Total Average Cycle Time = 160 Days First Pass Yield = 70%
  • 13. | Our World is Getting Deeper Scope of Project PO Mgmt PO Approval Publish PO Receive Material Invoice Receive Voucher PO Pay PO Level 1 Process Steps are denoted “LX.0” L1.0 L2.0 L3.0 L4.0 L5.0 L6.0 L7.0 POMgmt •Manual •Auto •Portal •Change •Cancel •Blanket? •Emergency? POApproval •Initial •Changes •AFE •Non-Capital AE •Budget Mgmt PublishPO •Manual •Portal •EDI • Supplier Acknowledge ment ReceiveMaterial •K&N Process •Pride Process •Recon •PO Status/Ship InvoiceReceived •Indexing •Accruals VoucherPO •Voucher Log •Normal •3 Way Match •No Match •No Invoice •No PO PayPO •Batching •Approving •Releasing •Confirmation
  • 14. • Direct Objectives: Cycle Times – Reduce Cycle Times in the P2P process First Pass Yield – Reduce rework or recycle of work (70%) Streamline – Remove unnecessary steps or steps that can be consolidated • Indirect Objectives: Reduced Costs (Rework of $300K) Import Export Compliance Increased Efficiencies (Lowest Credit Rating DnBi among Competitors) Meet Commercial Obligations (55% On Time Pay) Improve Savings (2% Prompt Pay Discount $8MM) Aligned with Internal Controls & Policies | Our World is Getting Deeper Project Objectives
  • 15. | Our World is Getting Deeper •Example Map •Session Work •Consolidation Day 1- Current State •Example VSM •Session Work •Consolidation Days 2,3- Value Stream • Session Work • Internal Controls • Consolidation Days 4,5- Future State Objectives Understand Agree Document SpiritTimeline Off-Site Workshop
  • 16. | Our World is Getting Deeper Service Team Maturity Model Characteristics of the business process at each maturation level include: 1. Initial  Initial learning phase for the team is determined.  Formal documented processes may not exist. 2. Repeatable  Informal, ad-hoc paths of communication are established.  A certain level of repeatability is attained. 3. Defined  Processes are well defined, documented, and standardized.  Repeatability and consistency is more commonplace. 4. Predictable  Integrated service management is present (e.g. quality controls, audit controls, preventive measures).  Focus is on measuring and communicating processes at the business level. 5. OPTIMIZING (targeted goal for a service department)  Departmental efficiencies are gained through refined processes.  Errors are almost non-existent. Initial Repeatable Defined Predictable Optimizing
  • 17. | Our World is Getting Deeper Identify Value/Waste Using the Current State Map. Identify activities within the process that can be “improved”. Level 1 Level 2 Level 3
  • 18. | Our World is Getting Deeper Current State Result Mapping Current State Mapping & Analysis
  • 19. Value Stream Analysis Results Minimize Non-Value Add RequiredActivity Eliminate Improve Monitor Value Add Non-Required Activity AUTOMATE  Required as checks due to number of exceptions  Required due to immature processes  Required due to lack of closed processes  Required due to lack of communication  Required due to lack of policy enforcement Total Activities Identified - 120  Required/Value Add 42%  Non Required/Value Add 0%  Required/Non Value Add 53%  Non Required/Non Value Add 6%
  • 20. Total of 173 Improvements were identified to support our Process Maps and Future State. Shared Ownership with split responsibilities for Voucher Log and Received Not Vouchered. Training! Training! Training! Lack of knowledge/ enforcement on Policies and Procedures has caused delays in the process or rework. Poke Yoke – Error Proofing on front end rather than mid-stream checks and reviews. Close the Loop – Understand and own the process.
  • 21. Ongoing Project Discovery Policy Requirements – Integration into new SOP Desktop Manual – Complete End to End Process Maps – 23 New Process Maps Sarbanes-Oxley 404 – New Controls & Integration Training Requirements – Process / Technology
  • 22. Pride Platform – Training Guides
  • 23. The Test Pilot Three Buyers / 2 Expeditors / 2 Accounts Payables Random population of Purchase Orders Track them against old metrics Period of One Month
  • 24. KPI Improvements Comparison to YTD 2010 vs. 2011 YTD Running JAN FEB P2P Metric % Improvement % Improvement REQ to PO Time (Days) 30% 15% Approval Time (Days) 67% 57% Supplier Shipment Time (Days) 51% 47% Invoice Date vs. Received Invoice Date (Days) 79% 79% Received Invoice Date to Voucher (Days) 80% 80% Total Cycle Time % Improvement % Improvement First Pass Yield [No Change PO, No Voucher Log] 37% 36% Received Not Vouchered (in Millions) 60% 56% Voucher Log (in Millions) 50% 67% KPI Description % Improvement % Improvement Line Items on Purchase Order that has uses a GIM number 2% 1% Items in GIM that has classification data required for Export 39% 42% Total Average Days Passed % Improvement % Improvement NO Touch PO [Auto PO] 100% 100% PO's with 3 Bids - exclud. Auto PO 60% 43%
  • 25. | Our World is Getting Deeper Instill the Culture Current State Future State Q1 - Work Plan & Implementation Q2 - Work Plan & Implementation Q3 - Work Plan & Implementation

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