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HCL’s End Outcome Enablement Framework - IT Driven Continuous Business Process Improvement

Framework for Consumer Goods Companies

2© 2013, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.

HCL’s End Outcome Enablement Framework APRIL 2013

TABlE OF CONTENTS

SETTiNg ThE CONTExT 3

hCl’S ENd OuTCOmE ENABlEmENT FrAmEwOrk 4

dEFiNiNg ThE ApprOACh 5

hCl SuCCESS STOry 8

ABOuT ThE AuThOr 9

ABOuT hCl 10



SETTInG THE COnTExT

Consumer goods companies face multiple challenges in achieving sustainable growth because of uncertain market and economic conditions. Some of the challenges are:

• Highly mobile and increasingly value conscious consumers

• Evolving tastes and methods of purchase

• Popularity of private label products with retailers

• Retailer controlling the consumer relationship

• Spiraling commodity costs

• Global sourcing opportunities

Similarly, increased margin pressure and reduced wallet share of the consumer are compelling companies to seek better tools to mine the entire value chain for opportunities that will enable them to power growth, improve productivity and drive sustainability.

From a purely IT perspective, most CIOs’ are continuously endeavoring to address the technology challenges in their enterprise and trying to address another critical question, i.e., of improving “organizational relevance” at the same time.

This ever-changing nature of contributing factors and the silo nature of many a business environment means, Consumer Packaged Goods (CPG) manufacturers have to adopt a holistic approach to understand the true impact on their businesses and to identify innovative methods for achieving sustainable and continuous improvement.

From HCL’s point of view, CIO’s are best placed to drive enterprise wide continuous improvement initiatives, as they are the “overall master” of enterprise wide information and enterprise applications.



hCl’S ENd OuTCOmE ENABlEmENT FrAmEwOrk

HCL’s End Outcome Enablement Framework lays the foundation for improved value chain performance visibility to respond to changing requirements at an enterprise level and address them in a holistic manner s to deliver a positive impact across the entire value chain. The adjacent diagram gives a high-level view of the framework.

The diagram below gives a high-level view of the framework.

Business outcomes are impacted by distinct elements. From a top down perspective, a company realigns its strategies in accordance with the shifting needs of the market and the competitive environment. These strategies can be broken down into a series of well-defined action plans with a key performance indicator.

From the bottom up view, people, process and technology drive the goal and business objectives of an organization. The interplay between people, process and technology are measured by the operational KPIs’ that typically revolve around three key elements i.e., responsiveness of the process, quality of the output of the process, and the cost of executing the process.

Data relevant to the measurement of these operational KPIs resides in the organization’s database. This data can be used for business process improvement.

HCL suggests setting up a decision support system across critical process areas as a launch pad for continuous improvement.

The various stages of the framework described below form the critical components in defining the path for continuous improvement.



dEFiNiNg ThE ApprOACh

HCL proposes a 5-stage approach for continuous improvement:

An overview of the 5 stages is given below:

Assess:

This phase entails measuring performance across critical parameters impacting the key goals and objectives of the organization. Performance measures are the operational KPIs and reflect the responsiveness, quality and cost of executing the processes that impact the goals and objectives. Each of the operational KPIs has a hierarchy i.e. each “Mother” KPI can be broken down into subsets of child KPIs. This sort of assessment allows stakeholders to articulate clearly, which of the child KPIs will lead to biggest benefit to the mother KPI. In some, the mother KPIs are a direct arithmetical function of the child KPIs while in others their relationship has a statistical correlation based on the data attributes of the company.



Diagnose:

The objective is to articulate the process inefficiencies that cause a negative impact on key operation KPIs. There are two distinct elements in this stage:

1. Defect Analysis

2. Process Analysis followed by a disconnect analysis

3. Defect analysis involves breaking down the root causes of the process performance failures. HCL recommends carrying out this exercise using Lean manufacturing’s “TIMWOOD” principles of waste. Defects/Breakpoints typically can be:

• Rework leading to delays (Defect from TIMWOOD principles)

• Non-optimal frequency in data inputs (Over processing from TIMWOOD principles)

• Delay in receipt of information (Transport from TIMWOOD principles) which may be typically IT related

• Delay in execution of plan by partner (Waiting under TIMWOOD principles) which may be purely business driven in nature

• For maximum benefit, it is critical to identify and articulate the major buckets and segregate the random defects into the “Others” bucket. Based on the impact on the key operational KPIs, weightage is assigned to these defects.



This is followed by a detailed study of all the underlying processes and assessed based on the following parameters:

1. Activity input parameters

2. Activity level time stamping & Time lining

3. Activity level failure/Rework rates

4. Manual effort/Interventions mapping

5. Standard practice vs. Best practice analysis

Internal best practices can be established by assessing individual/location performance against organizational performance.

Finally, conduct a disconnect analysis to connect the ‘Why’ to ‘What’ caused the defects. Disconnect, by definition, is any issue or barrier to achieving the desired state of performance and the primary purpose of disconnect analysis is as follows:

1. Marry the data collected in defect analysis & process analysis with people’s experience of issues (disconnects)

2. To link disconnects to metrics using affinity diagramming

This systematic approach helps in developing a preliminary improvement opportunity list – aggregating issues to problems and then problems to improvement opportunities.

Note: It is best to involve the business process owners at this stage. However, IT managers can create their own hypothesis based on relevant knowledge and validate them later with the business process owners.

Define:

The objective of this phase is to build the business case for each of the improvement opportunities. By definition, business case articulates the potential benefit of implementing the opportunity vs. the approximate cost of making those process changes/cost and the timeline for implementing those changes from an IT perspective. The prioritization portfolio that defines the roadmap for complete transformation of the process area is created based on ROI mapping. HCL considers this to be the opportunate moment to share the business case for all the improvement opportunities to the stakeholders and ensure their buy in and endorsement.



Deploy:

Once the buy in and the required funding is available, HCL recommends the agile deployment methodology to deliver quick gains for the business. Change management wherever required is carefully and adequately planned, to sustain change in the long run.

Monitor:

What gets measured, gets delivered. As had been suggested earlier, HCL recommends one-time setting up of a decision support system across critical process areas to ensure continuous improvement. The existing BI environment can be leveraged for setting up this decision support system.

hCl SuCCESS STOry

A leading beverage manufacturer in the United States sought to identify business outcome improvement opportunities by assessing the recently installed bolt on the “pull replenishment” application for one of their business units

HCL conducted a consulting exercise to assess the as-is state of the business, identify the pain points and propose a to-be state roadmap. The assessment included:

• Current usage rates of the system generated demand plan

• Degree of rework on the system generated demand plan

• Break point analysis of the dependant processes

• Historical trend analysis

• Functional fit of the current application functionality mapping to the business requirement

HCL discovered that the beverage manufacturer was not using the current usage rate of the pull replenishment output to determine the actual need because of the following reasons:

• System -physical inventory mismatch

• Inadequate parameters for defining the system pull



HCL proposed a short term and a long-term solution to address the issues:

1. Exception monitoring for minimizing the physical-system inventory mismatch as a short-term solution. Specific monitors were detailed out as a part of this exercise

2. HCL recommended a long term solution for the complete over haul of the Order to delivery process

3. Additional parameters were defined in the pull calculators was defined to ensure that the system pull mirrors the business need

Business Benefits:

• Reduced inventory levels by 4 days

• Increased service levels to 98 per cent

• Reduced manual effort significantly through increased usage of system based pull

• Delivered consistency of performance across multiple DCs’

ABOuT ThE AuThOr

G Krishna Rao is a Sr. Solutions Principal at HCL’s CPG and Retail Consulting practice and brings over 13 years of industry experience. Over the past two years at HCL Krishna has been advising the IT organization of HCL’s CPG Customers on how to align themselves as preferred partners to Business. His experience prior to joining HCL includes working across diverse industry segments like Retail, Consumer Products, &

3rd Party Logistics and brings with him an excellent understanding in the business areas of Demand Planning, Inventory Management & Warehouse Operations.

Certification

Krishna has a B. Tech in Civil Engineering from NIT-Bhopal, India and a MBA from Asian Institute of Management, Manila, Philippines

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About HCL Technologies

HCL Technologies is a leading global IT services company, working with clients in the areas that impact and redefine the core of their businesses. Since its inception into the global landscape after its IPO in 1999, HCL focuses on ‘transformational outsourcing’, underlined by innovation and value creation, and offers integrated portfolio of services including software-led IT solutions, remote infrastructure management, engineering and R&D services and BPO. HCL leverages its extensive global offshore infrastructure and network of offices in 31 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare. HCL takes pride in its philosophy of ‘Employees First, Customers Second’ which empowers our 85,194 transformers to create a real value for the customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 4.4 billion (23,499 crores), as on 31 Dec 2012 (on LTM basis). For more information, please visit www.hcltech.com

About HCL Enterprise

HCL is a $6.3 billion leading global technology and IT enterprise comprising two companies listed in India – HCL Technologies and HCL Infosystems. Founded in 1976, HCL is one of India’s original IT garage start-ups. A pioneer of modern computing, HCL is a global transformational enterprise today. Its range of offerings includes product engineering, custom & package applications, BPO, IT infrastructure services, IT hardware, systems integration, and distribution of information and communications technology (ICT) products across a wide range of focused industry verticals. The HCL team consists of over 90,000 professionals of diverse nationalities, who operate from 31 countries including over 500 points of presence in India. For more information, please visit www.hcl.com

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HCL’s End Outcome Enablement Framework · HCL’s End Outcome Enablement Framework ... States sought to identify business outcome improvement opportunities by assessing the recently