ASQ 2008 Team Excellence Competition Optimizing the Truckload / Less Than Truckload (TL/LTL) Optimizing the Truckload / Less Than Truckload (TL/LTL) Decision for Bayer MaterialScience Decision for Bayer MaterialScience ASQ Team Excellence Competition 1
Bayer MaterialScience Global Business Units Bayer MaterialScience Global Business Units Inorganic Thermoplastic Basic Chemicals Polyurethanes 2% 2% 4% 4% Coatings, Adhesives, Specialties 15% 15% Euro Polyurethanes 52 % 52 % 10.4 billion Polycarbonates 27 % ASQ Team Excellence Competition BMS • 6 May 2008 • Page # 2 Sean Good Morning, I’m 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. 2
Bayer MaterialScience Ships a Large Volume of Packaged Goods Bayer MaterialScience Ships a Large Volume of Packaged Goods 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…. ASQ Team Excellence Competition BMS • 6 May 2008 • Page # 3 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? 3
Introducing the Team Introducing the Team Sean Ritchie Sean Ritchie Team Leader Team Leader Kristen Hermick Kristen Hermick Customer Master Data Customer Master Data Laurie Colao Business Intelligence Laurie Colao Business Intelligence Sam Phipps Finance Sam Phipps Finance Marko Dodig Technology Services Marko Dodig Technology Services Ron Gadzinski Ron Gadzinski Logistics Logistics Amy Prevade Amy Prevade Freight Payment & Audit Freight Payment & Audit ASQ Team Excellence Competition BMS • 6 May 2008 • Page # 4 Sean 4
Section 1: Project Selection & Purpose Section 1: Project Selection & Purpose ASQ Team Excellence Competition BMS • 6 May 2008 • Page # 5 Sean Project Selection and Purpose 5
1A.a Types of Data and Tools Used to Select the Project and Why 1A.a Types of Data and Tools Used to Select the Project and Why Alignment with Overarching Goals Preliminary Assessment of Truckload versus Less Feasibility than Truckload Project • Strong Alignment Return on Investment (ROI) • High ROI • Highly Feasible High Feasibility Medium High Low Medium ROI Low Medium Low High Alignment ASQ Team Excellence Competition BMS • 6 May 2008 • Page # 6 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. 6
1A.a Types of Data and Tools Used to Select the Project and Why 1A.a Types of Data and Tools Used to Select the Project and Why Voice of the Customer Voice of the Business Trend Analysis Baseline Statistics Xbar-R Chart of Cost / Lbs July 2005 to January 2006 Mode of Shipment versus Weight Brackets UCL= 0.06209 July 2005 to January 2006 0.060 Sample Mean 70 _ _ X= 0.05624 60 0.055 T Percent of TOTSHIPWG 50 0.050 LCL= 0.05039 40 Jul Aug ep S Oct Nov Dec Jan Sample 30 0.275 20 Sample Range 0.250 10 0.225 0 Weight Bracket 3 2 1 3 2 1 0.200 TYPE TL LTL Jul Aug S ep Oct Nov Dec Jan Sample 1 = 14 to 16K 2 = 16 to 20K 3 = 20 to 25K Percent within levels of TYPE. Discovery Kaizen Process Mapping SIPOC TL LTL Pro cess.igx Order Preparation Phase Shipment Preparation Phase stomer 1 31 32 3 3 34 35 3 0 Re ceive 4 2 Cu Start Q u antity O rder Materia Type l Delivery Date Ship to L ocation Spe Instructio cial ns Place O rder Shipment mer Service KNMT Cu 47 stomer ate Cre 4 SAP nspo Tra rtation 5 usto Ma terial Reco rd De live ry Re quest sent to TM3 from SAP C 67 y Network 2 istics Strateg Results Optimiza tion master b How is the choice ill o f la ding gene made to co rated - lo nsolidate on TL o ad nose or tail? How does r LTL . How is system pull PVD for co nsolidation Carrier Bid 2 6 Prepare PVD 27 og L Results spread up shee date t Yes 29 43 45 6 53 9 25 en ter Upda te PVD Prefe rred Transp ort Select ope TR, review n 60 O verride No Tende d to Loa r TL carrier and Select TL al Service C Tab le s Carrier fro PVD m YTO4 Query requirements / s ote n Ship as TL TL Prefe Carrier rred p referred carrier er load tend 2 2 End Region ogistics Missing Data 66 - TM3 5 0 Yes TL 51 10 Carrier No 1 5 L do es not sh ow Co nsolidate Ship a sTL Accept ad? lo Daily File? to CTL eration s consolid asy fo e ation s in an rmat Shipments TL / LTL o r LTL No gistics Op LTL Yes 62 s Ye Lo 61 O verride No Tender L 6 TL 3 ct LTL le Se 65 Ship as LTL LTL Ca Preferre d rrie r Lo pre ferred ad to carrier and tend er load carrier Send Shipment 46 64 Unit to Pla nt / Yes Accept Carrier No Wh se lo ad? hse 41 Plant / W Da ta - Tra 59 nspo Missing rt Rep Plan t 13 1 1 1 4 does no t see rates! Pickup with Schedules G e nerate BOL Load Carrier Enter PGI LTL Ca rrie r Yes 2 8 TL by lane, L BMS Carrier rate TL g eneral s (TL Carrier Fre 4 2 ht ig C disco unt on ly) Bill Order Preparation Phase Shipment Preparation Phase Revised 5/1 006 9/2 Gantt Chart Stakeholder Mapping Project Charter ASQ Team Excellence Competition BMS • 6 May 2008 • Page # 7 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 is” process 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. 7
1A.a Types of Data and Tools Used to Select the Project and Why 1A.a Types of Data and Tools Used to Select the Project and Why The Bayer MaterialScience Lean Six Sigma Process DEFINE MEASURE ANALYZE IMPROVE CONTROL DEFINE MEASURE ANALYZE IMPROVE CONTROL � Stakeholder Mapping � Voice of the Customer Alignment � Voice of the Business Feasibility � Data Supporting Case for Change � High Level Process Map (SIPOC Diagram) Return on Investment � Cross Functional Process Mapping � Discovery Kaizen � Project Charter A Compelling Case for Change? ASQ Team Excellence Competition BMS • 6 May 2008 • Page # 8 Sean 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 8
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