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EDITION ONE Š
CLOSEWORK CELERANT CONSULTING Down on the ground helping to drive results up. Global Review 2010
Green Production: It Affects Your Future Trading Up: The Urgent Leadership Challenge Helping NASA Pioneer The Future LEAN: How To Guarantee It Works
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
Celerant is one of the world’s Top 20 Operational
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Management Consultancies*
*Kennedy Information.
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DNA
For over 20 years, Celerant Consulting has delivered successful, sustainable change for the world’s leading companies in the Energy, Chemicals, Manufacturing, Consumer Goods, Life Sciences and Aerospace & Defence industries. For
over 10 years, we have successfully helped
Utilities, Telecoms, Healthcare, Consumer Services, Financial Services, Private Equity and Public organisations. Our expertise covers the entire spectrum of the Operations
Management ecosystem, with a core focus on Performance Improvement & Behavioural Change Management. Every project is a strategic partnership where we get down on the ground to identify and analyse a Client’s most significant business challenges, then work with them to drive up results. With over 550 team members and offices in 11 countries, we help implement customised solutions that capitalise on existing systems, processes and people and
substantial benefits for Clients. We change business for good and over 90% of our Clients say they would work with us again.
deliver
CELERANTCONSULTING.COM
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Agenda
Down on the ground helping to drive results up Driving Change 32
Global Project Snapshots
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Transport, Manufacturing, Life Sciences, Energy.
CLOSEWORK® When people know what is expected of them, companies thrive.
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Repositioning to become the UK’s N0.1 Workwear Apparel Company.
Global Project Snapshots Construction, Manufacturing, Chemicals, Metals & Mining.
Green Production
Driving Talent
Build a Greenprint for the future.
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How Military Strategies Can Win Corporate Hearts & Minds
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An interview with Gil Baldwin OBE, ex Military Strategist and CEO.
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The Burning Platform C-Cube. A Unique Club For Masters Of Change Professionals in Change Management share experiences, ideas and ambitions.
Driving Performance 8
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Increasing throughput to serve 2,000,000 patients worldwide.
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Global Project Snapshots Chemical, Telco, Energy, Utilities.
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West Meets East
Rising To The Top Becoming a leading player in the European Bakery Business.
How to reap the benefits of focussed innovation.
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Outsourcing & Offshoring: Panacea Or Problems? Cathy Johnson believes there are 4 threats to a successful road trip.
Moving Up A Gear A Vital Component In The Fight Against Aids
Down On The Ground Helping To Drive Results Up Antoine Dionis du Sejour explains why the new office in Abu Dhabi will become a regional powerhouse.
A double digit increase in truck availability.
Global Project Snapshots Trading Up: The Urgent Leadership Challenge
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Inking In The New Strategy 3 paint manufacturing plants. 2 tasks. 1 Consultancy.
Energy, IT Solutions, FMCG, Utilities.
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Keeping Global Brands Rolling Off The Line
So What Went Wrong At Toyota? Stan Gwizdak and Dennis McRae separate fact from fiction.
A multi-site, multi-culture Change Programme.
LEAN: How to guarantee it works.
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Driving Results
Don’t get caught on the wrong side of change.
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Global Project Snapshots Energy, Production, FMCG, Aerospace & Defence.
If You Make Apparel For Surgeons, Your Operation Has To Be Spot On
The Man With The Plan 44
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David Smith explains how Gulf National Oil Companies are reviewing their operations.
Unleash The Inner Power Of Your Workforce Matthew Marciniak shows how the Celerant 2010 Workforce Impactability Study will impact on everyone.
Helping NASA Pioneer The Future Launching the new IDEA course. Change Programme.
The M&A Decade.
Closework® Global Review 2010 is a magazine published by Celerant Publishing on behalf of Celerant Consulting. Edition One - June 2010. Publication Director: Thibaut Bataille. Chief Editor: Lisa Smith. Contributors: Thank you at all who contributed to this publication by sharing their exceptional experiences and knowledge with us. Editorial conception and realisation: Patrick Keating. Design conception and realisation: Andrew Barnes Jones. Printing: Nelson Direct Mail Services Ltd. The words, photos and images in this publication cannot be used without the express consent of the Publication Director.
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Driving Results All thoughts must be distilled into action and action that brings results.
KEEPING GLOBAL BRANDS As a world leader in liquid foods packaging solutions, Sidel has installed 20,000 machines in over 150 countries. Recent installation cost and lead time overruns meant it was struggling to match client satisfaction levels. The customer is King. So Celerant Consulting was appointed to drive a global Change Programme.
he equipment installation phase is a highly visible element of Sidel’s value chain. Having an installation that starts and finishes on time, and runs at its full potential, builds trust and enables Sidel’s clients to meet their operational targets. So focussing on this critical phase would improve business performance and provide a true competitive advantage in a tough economic environment.
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To achieve this Sidel decided to launch The SIX Project (Sidel Installation Excellence) to drive installation practices at a world class level by implementing global shared ways of working and contributing to the business EBITDA and service excellence. Celerant Consulting was appointed because it demonstrated deep expertise in managing complex projects in a multi-site and multi-cultural context and this decision was confirmed by the impressive results that Celerant had already delivered across the manufacturing sector. Transforming 6 zones in 15 months Celerant was tasked with enhancing customer satisfaction and reducing installation cost by 23% through:
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‘Our top client scored us as the best performer on installation among its different suppliers.’ Client VP Western Europe & Africa
ROLLING OFF THE LINE • Decreasing lead time of installation. • Improving installation quality before leaving manufacturing facilities. • Sharing best practices and developing management and technical skills at all levels. • Creating a Continuous Improvement culture and applying anticipation. The project was deployed over 15 months in Europe, Africa, Latin America, North America, China and South East Asia Pacific and jointly managed by an international Celerant - Sidel team in most of those locations. Celerant developed and implemented common working practices, to avoid any extra costs linked to quality issues and to provide more reliable solutions for Sidel’s clients. Behavioural change from bottom to top The big challenge was to implement these solutions globally in 6 different commercial zones, each managing its activity in an autonomous way and involving 500 people from Field Technicians to Vice Presidents. Behavioural Change Management was therefore a critical aspect of the project so that everyone became involved in the new ways of working and the creation of a culture
of Continuous Improvement. Celerant’s experts drove this by providing more than 400 Closework® coaching sessions at every level, gaining people’s trust and a high level of commitment. They also deployed Celerant’s MCRS® to play a critical role in developing the new cross-functional way of working. It was designed to systematically manage the performance of the key installation processes to both anticipate any issues and provide the most effective corrective action should they occur. The whole organisation learnt fast and is still learning In the space of just a couple of months, shared reporting tools, effective process measurements and efficient decision making that linked every level from bottom to top were designed and installed across the globe. Alongside all this, a new Transversal Project Management Process was defined to closely monitor the Engineering, Development and Manufacturing steps that were needed for such complex projects. Formalised internal quality gates and criteria were defined to place the global order fulfilment process under strict control,
and ensure that the organisation was learning all the time. Today, all the engineering processes are more efficient, shared and understood within the 6 commercial zones.
ROLLING RESULTS • Around €7m recurrent cost reduction on installation - €1m more than the target In just over a year, Celerant Consulting helped reduce installation costs by 23% • 30% reduction on installation leadtime down from 24 weeks to 17 The project was not just a matter of reducing cost or lead times, it’s ultimate goal was to regain customer confidence and satisfaction and it emphatically achieved that • A changed working culture It also embedded the cross collaboration and Continuous Improvement culture that are stepping stones for further growth
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough
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LEAN can improve your processes, but if you don’t improve the mindset of your process operators, it will never deliver real value. Correctly applied, LEAN programmes can deliver outstanding value to the Transportation Industry. But how do you correctly apply them? Here we examine the difference between theory and practice and show how, by implementing the Celerant Production System , you can guarantee that LEAN delivers. TM
oyota developed their LEAN production system in the 1950’s against an economic backdrop of hyper-competition and cost pressure that is remarkably similar to today. It delivered phenomenal results and despite recent problems has kept Toyota as the world’s No 1 car manufacturer and a benchmark company.
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Over the years, the tools have evolved and the principles have been applied in most major industries. Yet the results have been nowhere near as impressive.
For example, in a USA Today Business article, only 19% of companies which deployed LEAN stated that their programmes had achieved expectations. So what’s going wrong? Too much process focus, too little people focus We believe the answer is simple. There’s been too much focus on process improvement and not enough on people improvement. LEAN and Six Sigma techniques originate from the discipline of Quality Management and therefore have a tendency towards technical complexity and an over-emphasis on training. In our opinion, the terminology, statistics and elitism
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough
have unintentionally alienated the workforce. Another criticism of LEAN is that it manages to overcomplicate the problem before offering tangible solutions and results. That’s why we emphasise to clients that success can only come through a motivated workforce seeing rapid results. A long period of statistical analysis followed by few results for weeks is a luxury no one can afford. Every initiative must rapidly add to the end-to-end value stream and increase competitiveness. You can legitimately tap into the LEAN toolbox and drive focused improvements without having to go through time consuming training programmes. The skill is getting the right person to use the right tool in the right circumstance.
fully engaged and so the key to making LEAN a success, deep seated and clearly understood behavioural change, is not happening. A further problem is that executives often raise the bar too high. Expecting ‘Real cultural change’ or ‘LEAN becoming part of our DNA’ is simply not going to happen in a short space of time. What can happen though, are rapid results and real bottom-line benefits that every member of the project team can see. To guarantee this, we have developed the Celerant Production SystemTM which is based on our extensive experience of successful Change Programmes across industries and focuses on both the technical and the change dimensions of a LEAN deployment.
The key is deep-seated behavioural change LEAN programmes are primarily designed to reduce waste in a process and the most effective way to do this is to engage the people who are closest to the process and therefore best able to see that waste.
It also guarantees that the equation: Effect (Result) = Quality of Improvement x Making the Changes Stick will never end up as a big zero.
Yet according to a survey of 2,500 business people by LEAN Enterprise Institute, the top 4 obstacles to sustainable LEAN programmes are: • Middle management resistance (36.1%) • Lack of implementation know-how (31.0%) • Employee resistance (27. 7%) • Supervisor resistance (23. 0%) The people who hold the answers are not being
‘To maximise the impact of LEAN, change must be embedded in the mind. Not simply ticked in the box.’
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Projects involving LEAN or Six Sigma don’t have to be complicated. With the right sensitivity our comprehensive approach has engaged and inspired each workforce and provided really sustainable results. Applying LEAN in the Transportation Industry LEAN methodology focuses on reducing waste in a process, increasing quality and stability, decreasing variance, cutting cycle times and improving on-time delivery. Every element is linked, but the first is the core and the most
widely known. When correctly applied, it can deliver real value by reducing: • Over-production: Making sure that only items for which there are orders are produced, therefore reducing storage needs and the costs of overstaffing and transportation. • Unnecessary transport: Minimising the distance between processes and the movement of materials and finished goods in and out of storage. • Unnecessary inventory: Reducing the inventory of raw materials, work in process (WIP) or finished goods that drive capital employed and can hide problems like late delivery from suppliers, long set up times and defects. • Waiting time: Ensuring people can work effectively at all times by minimising processing delays, equipment downtimes, capacity bottle necks etc. • Over-processing: Removing any unnecessary steps taken to process parts and focusing on what’s really needed to comply with customer expectations. • Rework: Removing the need to rework or scrap faulty products by getting it right first time.
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• Excess movement: Ensuring tools can be found in one place and organising workstations so there’s no need to reach for parts and materials. • Inadequate knowledge use: Listening and engaging employees to make sure that ideas, skills and improvement opportunities are not lost. Once a programme is underway, the next challenge is to make the changes stick. Engage and Inspire your Workforce Celerant is one of the largest independent players in the operations sector of the global consultancy market and our experience has shown that a successful Change Programme must address 3 interlocking issues: • People: As we’ve stated earlier, the key to successfully changing a process is to change the mindset of the processes operators. To fully embed a new way of working, people at each level of the business must understand why it’s necessary, own the solution, have an opportunity to try it in practice and see the fruits of their efforts. This requires support, communication, coaching and perseverance. Our approach to this behavioural change is called Closework® and it delivers sustainable results by getting people to do their work differently and challenging their peers to do the same.
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• Processes: The danger here is that often senior management don’t have the full process picture and rely on how they think it is operating, rather than how it actually is operating. So it’s crucial that, supported by a dynamic leadership team, LEAN must be a bottom up approach. It’s far easier to identify and eliminate waste in a process when you are closely involved in that process. • Systems: All too often, the question: ‘How are you managing your day to day systems?’ is answered by showing meeting agendas or drafts of complex reports, when what’s really needed is a transparent management system that goes far beyond this in both content and importance. That’s why we developed MCRS®. It ensures the right information is available to the right people at the right time. It also establishes decision making based on fact, not anecdotal opinion, and provides a tightly disciplined follow up for every action taken. Everyone must have a sense of ownership Success can be guaranteed provided there’s a real commitment at senior level and a recognition that external support will almost certainly be required. Once a LEAN initiative has been given the green light, it’s imperative that everyone keeps their eyes on the prize. They must fully understand the short, medium and long term objectives.
The people at the sharp end must be passionately committed to making the changes work and be supported by a strong leadership team. There must be quick, proven results to keep the forward momentum and an ongoing measurement system for results and performance. Above all, there must be a strong sense of ownership by the process operators and a belief that waste is not acceptable to anyone within the organisation.
SATISFIED CLIENTS A Major European Airline • $19m inventory reduction • Reduction of inventory storage costs of greater than $1m per annum • New ways of managing the repair cycle delivering real performance improvements from suppliers A Major European Airport • 17% process time decrease • Increased customer satisfaction • Continuous improvement culture • All key processes have measurable targets and specifications defining performance
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Driving Talent Success always demands a greater effort.
So What Went Wrong At Toyota? Some commentators are pointing to the recent problems at Toyota and saying that LEAN and the Toyota Production System doesn’t work. Stan Gwizdak and Dennis McRae, VPs at Celerant Consulting Americas, strongly disagree.
x here can be no doubt whatsoever that LEAN and the Toyota Production System (TPS) works. It reduces variation, waste, complexity and supplier numbers, allowing companies to standardise the products they manufacture.
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It has also allowed Toyota to grow and prosper from the early beginnings to the largest car company in the world. Toyota has been benchmarked and many companies globally have adopted the TPS into their own operations. Others have their own production system modeled after Toyota’s. Toyota has an operating model to run their business and everyone from the lowest level in the company to the CEO knows the rules and the game plan. As long as they were sticking
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to the game plan, Toyota was able to sustain a very strong quality system. Where Toyota went wrong was in not following its own playbook. The 4 areas that drove Toyota off track As we heard in the recent US Congressional Hearings, Toyota’s drive to be No.1 led to the situation the company finds itself in today. In the desire for growth, internal resources and the supply chain were stretched by the opening of so many new plants and locations around the world. Quality and Genchi Genbutsu (Go to the source to get the facts) are hallmarks of the Toyota Production System. These fundamentals are what drove Toyota to become a large respected company, and abandoning them is how things began to go wrong. There were 4 key problem areas:
The Drive to be No1 In 2002, Toyota set a target to be the No.1 Global Automobile Manufacturing Company in the world, an aggressive goal that required 50% growth. This is the equivalent of Toyota starting up a company the size of Honda Automotive in just 7 years. Because of this focus, Toyota decided to stop their goal of slow and steady growth, which had allowed them to continue to make quality cars and grow market share. This growth stretched their resources and their supply base. It became harder for them to stay focused on quality when they were growing so fast. Complacency Toyota invented the TPS and it was working so well that they felt they didn’t need to worry
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x x x about being vigilant with their manufacturing processes anymore. They believed that they had all of the answers and took their eye off the ball. In fact, Katsuaki Watanabe, the former President of Toyota, admitted in 2006 that the company had quality problems. At that time, Watanabe acknowledged that lengthening development times might be necessary. Instead, the company continued its drive for rapid growth.
corporate headquarters in Japan continued to make the decisions at a distance instead of taking input from local ‘sources’ where the factories were located. Cost Reduction Pressures In response to a pressure that all automobile manufactures were feeling Toyota started a programme of buying products manufactured locally to their plants, instead of shipping in all components from Japan.
Top Down Decision Making Toyota’s philosophy of ‘Genchi Genbutsu’ (Go to the source to get the facts) became harder when there were many levels of management between the decision makers and the problems.
This created more suppliers and more complexity in the Toyota system. It also put additional strain on the engineering teams and the business as they also were growing at a fast pace.
As a result of their rapid growth, manufacturing was taking place all over the world. However,
The Lesson? As we’ve seen this play out in the news over
the last several months, it is clear that other factors also contributed to the scale and public fallout of Toyota’s difficulties. No doubt a faster response to customer complaints, more visibility of the CEO and better public relations could have limited the level of damage to the company. Nevertheless, the problems began in manufacturing, and the lesson other manufacturing companies can learn is that it is vital to be constantly checking that the principles of LEAN are being applied - and that implementing these principles is an ongoing process.
The opinions expressed are those of the authors and not necessarily Celerant Consulting.
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough.
Ensuring A Smooth Handover
One Company. One World.
BUSINESS CHALLENGE 10 years of high growth in W. Africa for this global energy leader had led to an increased demand on Logistics support across multiple on/offshore locations. Its Aviation and Marine departments had no management system or defined processes to consistently ensure safe, reliable operations. There was also a lack of HSE focus and both expat senior management positions had to be filled by local nationals.
BUSINESS CHALLENGE The client’s ambition is to become one of the world’s Top 5 players, but it operates in a highly competitive market with price pressures and low customer loyalty. It was also lacking a One-Company approach to drive quality and operational improvements in its complex, 20 country business. The challenge was to change all that.
CELERANT SOLUTION Celerant was brought in to deliver a comprehensive and flexible management system that would support the day-to-day delivery of the company’s Operations Management System within the Aviation and Marine departments - and to provide training and coaching to build a strong base for future growth. Efficiency and effectiveness KPI reviews were held with frontline customers, resulting in a root-cause analysis, the identification of key actions needed to address gaps and a customer Service Level Agreement. Then, as the first step towards an integrated Logistics schedule, a weekly rolling Boat Schedule was agreed. Reviewed daily to incorporate changes, it was integrated with the Aviation schedule to optimise movement between offshore installations. Weekly and monthly Team meetings between Marine and Aviation departments reviewed efficiency and effectiveness KPIs, focussing on reasons for delays and low asset utilisation. All department members attended to improve communication and information flow and the inclusion of Health & Safety in these meetings led to a dramatic increase in HSE-related indicators, making HSE leaders within their departments.
CELERANT SOLUTION Working closely with the client team, Celerant designed and implemented a global Six Sigma programme that established a One - Company approach to quality improvements through: • A Programme Governance structure • Aligned training and coaching support in 20 countries • A web-based tracking methodology for over 100 parallel projects per wave • A step-by-step handover of responsibilities to internal functions RESULTS The client saw a dramatic improvement in the cost - NPV €250m - and quality of its operations through reduced major incidents and improved SLA compliance. It also saw its customer satisfaction soar by 20% in an external survey. Across the globe a One-Company, autonomous Continuous Improvement programme was developed, with more than 20 Master Black Belts and 100 Black Belts in 20 countries. ‘Six Sigma became for us a key enabler for our vision to achieve success and implement change. Celerant was and is a reliable partner on this journey of change.’ Head of Process & Quality Management
RESULTS $4m annualised savings in Fleet fuel costs. •Planning accuracy increased by over 50%. •Flight delays by the sole air services supplier decreased by 44%. •As a direct result of Celerant’s coaching programmes to improve skills, the company felt confident about promoting two local nationals to key Management positions where they have established themselves as highly regarded professionals. •The client now feels they are managing an organisation built for scalability and ready to integrate additional customer contracts and optimise future growth.
Energy
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IT Solutions
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Correct Data. Correct Decision.
Building A Powerhouse
BUSINESS CHALLENGE The client is one of the world’s leading suppliers of carton based packaging systems for liquid food and non-food products. Production normally operated at maximum capacity, so each market unit was fighting to get its orders in on time, in full. But with no structured approach to prioritising customers and a poor structure of the general S&OP process, including roles & responsibilities, the organisation was experiencing a lot of noise and stress because the correct data for accurate decision making was not readily available.
BUSINESS CHALLENGE With over 1.5 million customers, the client is one of the largest players in the Belgian energy market. It was born as a conglomerate of local electricity companies and focuses on generating electricity (Generation) and well as sales in the wholesale (Trading) and consumer (Retail) markets. Celerant first worked with the company in the Generation area i.e. 21 power plants each with their own maintenance and operations organisation. By installing a common-way-of-working in one national organisational model Celerant successfully brought a culture of transparency and continuous improvement. ‘You have done in 40 weeks what has not been possible for us to do in 40 years!’ The CEO then decided to push forward the company’s cultural integration by launching a second improvement initiative, this time putting all other departments in scope, and the Best-in-Class programme 2010 (BIC 2010) was born.
CELERANT SOLUTION A new management system was needed and Celerant was chosen to help build it using our proprietary MCRS®.To make this S&OP project work, Celerant involved extensive numbers of people from the 3 production facilities, together with key people from the 5 most significant market units. It also developed cross-function meetings and workshops to ensure a wide buy-in and acceptance for the changes that the project was bringing. Individual Client-Consultant groups developed fit-for-purpose management systems (MCRS®), and an overarching S&OP MCRS® linked them all together. Enabling tools, including a new forecast machine and an integrated planning system to ensure the new ways of working were sustainable were also deployed. RESULTS Total annualised benefits of around €365k. It also benefited from increased delivery performance, effective performance management through relevant KPIs and MCRS®, a structured customer segmentation prioritisation and service level management, the integration and alignment of activities along value chain - and most importantly, greatly improved customer satisfaction. ‘Due to the supply chain project, the right people now make the right decisions, based on up-to-date data’ Managing Director
CELERANT SOLUTION By including all departments, BIC 2010 needed to improve customer satisfaction, reduce cost and increase profitably through the implementation of ‘Best-in-Class’ end-to-end processes. Retail: The service centre consists of a call centre and a back office. Both became more effective through improved service levels, leaner processes and a ‘Right First Time’ attitude. Using our proprietary MCRS®, the company better understood why customers were calling and was able to better forecast workload. This in turn led to better staffing models, better service levels and better customer satisfaction. Other improvements included better Contract Registration, Cash Collection and Sales Force efficiency. Trading: Celerant helped the client optimise its asset portfolio by creating a transparent link between the company’s gross margin and the different value drivers. As a result, it can now steer its financial performance much more pro-actively. IT - Business Solutions: Celerant’s experts helped IT move from black box to a service oriented business partner with a clear service portfolio, significantly improved project management and clearly defined roles and responsibilities. Other Departments: BRIC 2010 also involved Procurement, Finance, Legal, HR, Safety, Quality, Corporate Affairs and Risk Management. RESULTS €15.6m annualised savings. •More than 430 milestone deliverables. •Financial results at the end of the 1st year that exceeded plan by 70%. •A companywide centralisation involving more than 1,000 people.
FMCG
Utilities
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
Celerant’s team of 44 different nationalities guarantees a locally customised solution to every problem
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Driving Results All thoughts must be distilled into action and action that brings results.
INKING IN THE NEW STRATEGY When Flint Group wanted to transform the working practices at its printing ink manufacturing plants in Stuttgart, Milan and Barcelona, Celerant Consulting was given a blank sheet of paper.
lint Group is one of the leading international suppliers of printing inks for the global packaging and print media industries. It currently employs 7,800 people and achieved its position as No.1 or No.2 in every region it supplies through several rounds of consolidation within the fragmented european printing ink industry.
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3 Sites. 2 Tasks. 1 Consultancy. For it’s Sheet Offset Printing Inks operation, Flint Group combined several strong brands to form the Sheetfed Europe Division, with its 3 most important production sites in Stuttgart, Milan and Barcelona. Following the mergers, Flint Sheetfed Europe decided on a double strategy of consolidation and centralisation. First, each production site was to concentrate on specific product lines to lower production costs and improve both quality and product availability. Second, tied-up capital was to be reduced across the whole operation. To help drive both these initiatives, Celerant Consulting was called in. A Double Whammy Celerant’s analysis showed that both the large product portfolio and the high level of product variations were having a negative impact on the stock situation. Short-term reductions in costs had been achieved by consolidation, but
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‘Celerant achieved sustainable stock reductions for our company of approximately 30%. One year later these results have even been surpassed.’ Dirk Wollenweber, Director of Operations, Sheetfed Europe
they necessitated adjustments of the supply chain and supply concept. At the same time demands on the management of tied-up capital were increasing. So the project focused on reducing floating assets and production costs through the development of a new production and stockage strategy. The levers for achieving this were the modification of operational and organisational processes, the introduction of sales and operation planning (S&OP) and a new manufacturing concept.
categories. Items that were to be manufactured and stored (SKU) were identified and optimised through a newly developed calculation model and a new forecasting (FC) process. Then, with the aid of a modified SAP module, new information was extracted on trends, seasonal variations and consumption patterns. This was complemented by a systematic customer segmentation, which made it possible to obtain further precise and prioritised data for production purposes.
The catalyst for change The catalyst for change was the introduction of Celerant’s MCRS®. Its indices were developed jointly with Sheetfed Europe’s management and geared to the new manufacturing concept. In addition, a new distribution concept was developed and the immediate implementation of the inventory/stock force meant that all stock could now be quickly checked. These changes were successfully implemented at all 3 sites and at the end of the project, various service level agreements (SLA) were drawn up within the organisation and recorded in the supply chain manual.
STRIKING RESULTS • STOCK REDUCTIONS OF APPROX 30%. • FIXED COSTS REDUCED CONSIDERABLY. • New stockage strategy developed through implementing improved operating processes • New distribution concept developed to supply products direct from production sites • Stock turnover and warehouse capacity controlling system reorganised • Responsibilities between Sales, Logistics and Production reorganised to maximise profitability. • New system parameter model for stock control developed and programmed • New forecasting process to match new Sales & Marketing structure developed • Profitability through systematic customer segmentation optimised • Balanced score card to monitor and continuously improve S&OP process introduced
New methods brought new information To maximise Sales & Operational Planning, the products were classified and, for the purposes of the new stockpiling concept, split into various
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Driving Talent Success always demands a greater effort.
DOWN ON THE GROUND HELPING TO DRIVE RESULTS UP
Last year, as a result of strong regional demand, Celerant Consulting expanded its global presence with a new office in Abu Dhabi.
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elerant had already been advising some of the world’s largest national oil companies in the region for nearly 10 years. Now, with a permanent presence, the priority is regional growth.
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‘Celerant already has significant relationships with a range of leading Abu Dhabi and Gulf organisations, and it’s vital to our partnership model that we’re here to support them locally. Celerant’s business model is based on working alongside our clients to implement what are often complex operational
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and behavioural change programmes to deliver tangible, sustainable results. The UAE and wider region present an interesting challenge for business because trust is everything. Our expertise supports the economic vision of the UAE’s ruling families and that is what really matters to them. We have also developed a unique perspective on skills transfer - a process that is invaluable to any organisation dealing with local human capacity building.’ Antoine Dionis du Sejour Executive VP Celerant Consulting Middle East & Head of Regional Operations
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Driving Talent Success always demands a greater effort.
Outsourcing & Offshoring: Panacea or Problems? Over 80% of large companies in Europe, North America and Asia have outsourcing arrangements, but almost half say that these arrangements fall short of expectations. So what’s going wrong? Cathy Johnson, VP at Celerant Consulting UK, believes there are four threats to making a successful road trip.
he bottom line is that outsourcing is a new build. In a new culture, with new and sometimes inexperienced people. It’s complex, highly challenging and if it can go wrong, it will. So you have to be absolutely sure what you’re getting into and what you want to get out of it. Above all, you have to remember that the key to success is behavioural change.
T
Beware the myth of massive savings In survey after survey, the main driver for outsourcing is cost reduction. Yet all too often, senior executives don’t have a clear idea of the details of the operations they’re planning to outsource or offshore. So they jump to solutions before examining all the options. The result? Savings aren’t as substantial as first envisaged and not measured to the bottom line. Technology would seem an obvious route to cost reduction. It provides a global business with the opportunity to operate virtually and is a critical element of process delivery in today’s environment. The downside is that there’s inconsistent visibility and understanding of the real impact it has on an operational environment. So if the way forward is determined solely by a technically focused staff group, rather than those accountable for service delivery at the sharp end, it can result in technology being
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selected which determines how business processes should work, rather than supporting them. And that’s not a sensible way to save money.
the best possible shape before you offshore, it’s crucial that you don’t take inefficiencies with you.
Before any major strategic decisions are taken, it’s essential to identify any issues within the existing operation and formulate an effective plan to deal with them. A broken process is a broken process, wherever you locate it. In fact, there’s a real danger that you could actually end up in a worse position, because inexperienced people in a new, remote location will never be a successful substitute for a highly skilled onshore workforce that has learned, sometimes over decades, to compensate for broken processes. It could also prove very costly if these processes aren’t handed over in the best possible shape even taking labour rate arbitrage into account. With labour rate inflation in parts of the new economies now running at 60%, getting fit for purpose is not just desirable from a control point of view, it’s a fundamental cost imperative.
Sustainability is about achieving the correct and lasting alignment between the work that needs to be done and the best ways to do it. So reorganise key functions around processes to achieve that alignment. Automate key activities so that the potential for variation is reduced to a minimum and ensure that you can continue to manage all aspects of performance. Set accountability for the design of the new operation before deciding on the solution, then set accountability for delivery at every level of the operation. Measure the performance of your current operation so that you can deliver a bottom line improvement in the new model. All this can be done through a robust management system, MCRS® in our language, which glues together the transformation programme and manages the transition of the project into the new way of working.
Beware the ‘Lift and Shift’ mentality Only a small percentage of companies confirm that they have achieved or exceeded the up-front cost saving promise of outsourcing. The aim must be to join them. Opting to simply ‘Lift and Shift’ won’t cut it anymore - if it ever did. ‘Improve - then Move’ must be the watchwords. Even if it’s not possible to get an operation into
Beware the challenges of the ultimate change programme It’s pointless improving the processes within an operation if you neglect the people. How many outsourcing decisions are taken using people as a criteria? All too often they are not given the support they need to make outsourcing, and particularly offshoring, a success. A new
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report ‘How companies are managing change in a recession’ from The Economist Intelligence Unit and sponsored by Celerant, clearly shows that the two main reasons change programmes fail is a lack of clearly defined or achievable milestones and objectives and the inability of management to win the hearts and minds of their senior managers and employees. Outsourcing is the ultimate change programme. So leaders have to demonstrate that they are totally committed to a best practice transfer. This will help them secure real support from people at all levels of the business, particularly those leading the project. They also have to ensure that they can embed behavioural change within all the employees involved. These people will undergo an emotional journey throughout the process and it can be uncomfortable at times, so they need to be fully supported and coached. This is particularly true of mid-level managers who, despite being at the sharp end, are often brought in later. Behavioural change is the key to a successful transfer. Leaders must get commitment to results and buy-in through effective communication management. They must make it happen through support and leadership and then make it stick through coaching and training.
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Beware the spikes in the road Change is never simple, but if it’s properly planned towards the business objectives and then well executed, it will deliver real value in these challenging times. Recognising the complexity of the processes behind the operations intended for outsourcing and the need to get them right is only half the battle. To win, you need to think through the implementation process; acquiring the knowledge on how. BASELINE: It’s crucial to gain a deep understanding of how key processes currently operate in your organisation and how the work really gets done. What goes wrong most often and why? What are the hidden workarounds? What is the size of the prize to outsource? What levers will deliver the improvement and how will you manage the new operation? GET LEAN: Using the baseline, implement a quick win plan that tackles the inefficiencies in key processes fast. Combine activities and improve communication. Make sure everyone understands the impact of their work on others. IMPROVE: Implement a plan for deep improvement that will prepare the operation for real transformation. Measure the work that most directly relates to real output. Eliminate root causes of variation and error. Create solutions
that reduce complexity and improve performance. TRANSFORM: Align your processes to the excellent experience your customers demand. Re-define your performance management systems and set accountability at each level of the organisation to measure and drive performance. SUSTAIN: The ultimate measure of success with process excellence is sustainability. The goal is a positive legacy. ‘Improve - then Move’ with a set of processes that will go on adding value anywhere in the world and ensure that you’re ready for the challenges of Next Generation outsourcing. Remember, it’s not your location. It's your culture Finally and most crucially, you have to create a culture of continuous improvement. A culture that is endemic to the way you do business. It should be able to evolve with your changing needs and the growing expectations of your customers. Above all though, it must be portable, so that your business will continue to benefit, no matter where your process operations are located.
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough.
TRADING UP:
The Urgent Leadership Challenge With the global economy continuing to ride a recessionary rollercoaster, it’s vital that companies Trade Up to a New Way of Working and reap the benefits of focused innovation. adical changes are taking place across the world of business. Models that have been with us for years have been swept aside and new ones are rising in their place.
R
So it’s vital that organisations do all they can to future-proof their business. A fundamental rethink now will lead to a fundamentally better performance when the economy gathers steam. So all eyes turn to the leadership team. ‘Where to now?’ Tough times to live. Even tougher times to lead. Rising loan defaults, deleveraging of household debt, increasing taxation and deteriorating employment numbers will continue to stifle consumption in 2010. Even after that, the prospects for any significant growth in GDP remain weak. So it’s time for leaders to recognise that the new constant of business is that nothing remains constant. A culture of ‘This is the way we’ve always done it’ must be ruthlessly challenged and innovation and experimentation must become an integral part of every business and leadership approach. Management systems must be social, inclusive and critical of out of date assumptions.
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Processes must be designed with an embedded ability to evolve. Oganisational environments must be architected to encourage real learning through action. And the customer must be the alpha and the omega. Go back to go forwards. It’s no surprise that the future starts with the customer. But unless leaders go back and test all their natural assumptions, not only those that are stated and explicit, but also those that are implied by action or behaviour, the right way forward will continue to be elusive - despite the comfort of a well intentioned customer focus. So start by mapping all the stakeholders across your value chain, from order to fulfilment. Including the customer and all suppliers of material, parts, finance and information.
operationally. You may in fact weaken it, as your security of supply is threatened and your future ability to respond is damaged. Remember, success is a moving target. Having identified any weak links in your value chain, listened to the real voice of your customer and gathered all the ‘best available’ knowledge, leaders must now create the right decision making system for their leadership team. A system that: • Accepts that the ‘best available’ knowledge is just that. The best at any precise moment and not something that roadblocks the future. • Routinely captures data on the current reality, destroys out of date perceptions and illustrates how the work really gets done. • Encourages real collaboration by making information available when and where it’s most needed.
From this, you can identify any weak links and judge what the consequences might be of any short term actions on your operational model's ability to respond to changing customer needs and expectations.
They must then give their best people the authority and accountability to study the data and encourage well designed experiments to deliver improvements.
For example, it might seem like an easy, short term win to extend payment terms to your suppliers. But if your underlying planning systems don’t improve and your back office cycle times aren't reduced, you won’t actually improve your business
Innovation. Not complication. It’s a fact that the best innovation is focused innovation. Test it - Prove it - Apply it. It’s as simple as that and anything that complicates matters must be torn up. It’s also a fact that
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After making all the obvious cuts, there comes a time when Leaders must move their people forward, because there is nowhere left to retreat. people learn most effectively through ‘practice’. So every innovation must be backed up by ‘positive practice’. That way you stimulate your organisation's ability to evolve and determine the new competitive frontier. Finally, when delivery has been proven in each area, Leaders must ensure that all the benefits of this major investment of leadership time and energy are given real momentum by deploying best practice right across their organisation. Do amazing things. In ‘The Art of War’, Sun Tzu observed that when troops are faced with no possible escape, they do amazing things. So after making all the obvious cuts, there comes a time when Leaders must move their people forward because there’s nowhere left to retreat. That time is now. And Celerant can help. We have worked with major companies from every industrial and commercial sector to help them to Trade Up. And the delivered benefits of that successful change have increased their shareholder value and grown their market share.
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough
Improving From The Inside Out
‘Right First Time’
BUSINESS CHALLENGE One of the client’s Swedish plants had tremendous growth opportunities, but faced some tough internal challenges to achieve it. Strong demand for its principal product meant an urgent need to: •Maximise output with less variance. •Increase plant availability. •Improve planning & control of maintenance and contractors. •Achieve an internal and external culture of collaboration.
BUSINESS CHALLENGE As one of the southern hemisphere’s major Telcos, this client wanted to improve customer satisfaction by making sure that all the services it provided were ‘Right First Time’. It also wanted to reduce costs, build programme management capabilities and install a companywide culture of Continuous Improvement.
CELERANT SOLUTION Celerant already had a track-record of success with this client, so it was brought in to help design and drive a Change Programme that focussed on 3 areas: Production Excellence Understanding the reasons for process variation enabled the introduction of improved process controls, including clear roles and responsibilities. An Effective Management System Implementing Celerant’s MCRS® and supporting it with clear KPIs and bottom-up reporting meant more transparency and control. Maintenance Excellence Optimising maintenance systems and controls and improving the management of its contractor interfaces meant the company could implement an improved approach to Maintenance. Regular cross-functional meetings delivered closer co-operation between internal maintenance co-ordinators, the service provider and production functions. Everyone understood both the common problems and the specific needs of each party. New KPIs, with daily and weekly reports, provided transparency and a framework for effective decision making. Once the technical management routines were in place, Celerant shifted the focus towards Closework® tactical and behavioural training to ensure sustainability. RESULTS Financial benefits 50% above target. •Increased production output with much less variation. •Cross-functional co-operation in root cause analysis and problem solving. •Behaviour change throughout the organisation. •Upgraded management systems. •New maintenance contractor selected. ‘4 months after the consultants left, all 3 of our plants achieved 100% availability for the first time ever!’ Manufacturing Manager.
Chemicals
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CELERANT SOLUTION Working closely with the client Management Team, Celerant developed a fit for purpose Change Programme that was implemented with representatives of the various businesses. All processes that related directly to the customer were standardised and improved from end-to-end and specific ‘Right First Time’ measures were built and implemented, - ensuring that the promise ‘Right First Time’ was delivered every time. These improvements were supported by a solid Performance Management System (MCRS®) that provided clarity and an ability to steer, based on data in every step of the process. The programme was also aimed at specifically building the organisation’s ability to develop future waves of improvements, so a solid Programme Management Office was built and trained to run further projects aimed at improving the customer experience. RESULTS Over 40m dollars of benefits have been approved by the business. A culture of Continuous Improvement and ‘new ways of working’ has been developed, with more than 800 people trained on topics like problem solving, performance management and root cause analysis. After an intensive design and implementation period, the client is now extremely confident that by leveraging its new internal coaches, it can go on to achieve its goal of being the best performing, customer focused online and communications company in Australasia. ‘Right First Time’ has quickly become the widely accepted way of working in our business. Celerant supported us to build the framework, driving the delivery and increasing our capability to continue improving customer experience. I’m convinced RFT will continue to add value as we use the framework.’
Telco
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Ahead Of Every Target
Performance To Match Demand
BUSINESS CHALLENGE The client is one of the Middle East’s largest oil producers and wanted to improve its operations in 3 main areas: •Increase production efficiency by 5% points at project week 40, equating to an annualised benefit of $31m @ $25.5 BO (or $65m in real market terms). •Increase the efficiency and integrity of the operational environment by implementing a sustainable Continuous Improvement Programme that could be expanded across all customer operations. •Implement tools and systems that would increase nationalisation (transferring roles to local national citizens) in the field of 95%.
BUSINESS CHALLENGE This electricity generating site is crucial to supplying the needs of a major european country, but site performance was not matching management expectations. The challenge was to increase organisational efficiency, boost equipment availability to 90% and empower the maintenance workforce.
CELERANT SOLUTION To break down a culture of departmental silos, Celerant designed and implemented an integrated management system (MCRS®) that ensured all operational departments were aligned and shared the overall customer business goals and objectives. This immediately led to real time operational performance information, better strategic and operational planning and enhanced collaborative team working. Key Performance Indicators were developed for the business goals to provide a field balance score card, which was cascaded all the way down to operator and technician levels. Alongside this, structured departmental and cross functional meetings were installed, based on performance management for fact based decision making. RESULTS •A 6% increase in production efficiency. •$23.7m cumulative benefit - ahead of the $12.8m target. •$36m annualised benefit. •An increase in nationalisation from 90% to 96.3% - 1 year ahead of target. •By project end, 56 positions, including 10 Leadership and Supervisory roles, had been nationalised.
CELERANT SOLUTION To competitively and sustainably produce MWe that would match the plant’s key role, management launched a 3 Year Plan. Celerant was brought in to conduct an analysis and help drive a Change Programme that would increase the availability and performance of one 250MWe and two 600MWe power units by focusing on maintenance accuracy and efficiency, and the impact of operating equipment and reliability. Celerant and client teams worked closely to combine the necessary skills to drive changes. To meet the Management group vision, Celerant addressed the issues through 4 workstreams: Maintenance Effectiveness Celerant supported the production unit in defining strategic /critical equipment and an associated maintenance plan, with the result that the Engineering department now knows exactly how to analyse failures, measure their impact and avoid them. Maintenance Planning & Scheduling Planning and reporting meetings were made more effective to steer activity and KPIs highlighted performance accomplishments and opportunities for further improvements. All planning was shared with other departments. Maintenance Work Execution (In-house and contractors). New procedures and tools were deployed to support the team to follow up on operations. These new system elements are now used during all breakdowns/ planned shutdowns. MCRS® This system covered all processes and helped Management drive performance to new levels. RESULTS The site’s image radically changed in the eyes of the entire organisation and its contribution now represents a significant percentage of profits achieved by the coal-fired power division. ‘I am impressed by the project quality and the amount of work accomplished, especially in this challenging social environment. We are on the right track’.
Energy
Utilities
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Driving Results All thoughts must be distilled into action and action that brings results.
MOVING UP A GEAR Shell Albian Sands is among the largest developers of the Canadian Oil Sands, transporting surface-mined oil sand in mega Caterpillar trucks. They recently launched the Mobile Maintenance Excellence Initiative (MMEI) in partnership with Celerant Consulting, Caterpillar and Finning. The objective? An ambitious double-digit increase in truck availability.
‘We didn’t get bogged down in conducting a prolonged analysis. We got right down to business.’
A
bout 2 tons of oil sand, a blend of clay, sand, water and bitumen, are required to produce a single barrel of oil.
Rugged conditions tax heavy vehicles to breaking point, but Oil Sands operators can't afford excuses. ‘Operating costs in the Oil Sands are inherently high,’ says Thomas Zengerly, Shell Canada’s VP for Heavy Oil Operations. ‘So you can’t be a high cost competitor, in a high cost sector, and expect success.’ Keeping the trucks moving At the Muskeg River Mine in Alberta, giant shovels load surface-mined oil sand onto the world’s largest trucks, Caterpillar 797Bs, for transportation to bitumen extraction facilities. This extremely heavy crude is then solvent diluted and transported via pipeline to be upgraded and refined into a wide range of synthetic crude oils. The shovel-and-truck operation runs 24/7. 365 days a year. So high truck availability is an absolute imperative to achieving production that's at or near the mine’s design capacity of 155,000 barrels per day. ‘When I arrived in mid-2008, I was surprised to see our truck fleet availability numbers were benchmarking down in the 4th quartile,’ recalls John Rhind, General Manager of Shell Albian Sands. To drive it up, Zengerly and Rhind launched MMEI. ‘As the fleet at the mine grew, we were challenged to sustain truck availability at a rate that met
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expectations,’ recalls Larry Gouthro, Finning’s Regional General Manager for the Oil Sands. ‘We supply the trucks and the mechanics, so Shell Albian’s management saw us as part of the solution and invited both us and Caterpillar to participate in MMEI. Our companies devoted substantial resources to the project. We were there from the start, working in the MMEI team to define the right crew structure, the right supervisory structure, and the right number of people to overcome our truck maintenance backlog.’ The other team member was Celerant Consulting. ‘We’d had good previous experience with Celerant’ says Rhind. ‘Bringing them to Albian Sands sent a message that we were serious about increasing truck availability. We were making this investment and we expected to see results.’ Getting a clear view of the road ahead Celerant’s analysis of the situation immediately identified several root causes for low truck availability, including: •Urgent repairs to broken equipment, at the expense of preventive activities, perpetuating low equipment availability •A weak planning process to ensure completion of preventive maintenance (PMs) •A lack of active management on the ground ‘Trucks working essentially out in the wild, in extreme temperatures, climbing steep grades and travelling unpaved surfaces, are going to break down. That’s a given,’ observes Mike Eidet, Team Lead with front-line responsibility
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for maintenance and repair of heavy equipment. ‘But we had a fire fighting mentality. We were doing everything we could to get trucks repaired and out working in the mine as fast as possible. Our mechanics were so focused on urgent repairs, PMs weren't getting done. That led to even more trucks needing repairs. It was a losing battle.’
the Maintenance operations, working side by side with teams of mechanics and providing real time coaching to supervisors. The coaching helped supervisors secure a more visible, involved presence on the shop floor, engaging with the mechanics and tracking data to ensure a smooth execution of the planned and unplanned maintenance tasks.
Moving up a gear Celerant’s core recommendations were to: •Define a clear Preventive Maintenance Strategy, dedicating 20% of mechanics to PMs, regardless of the demand for truck repairs •Design a more robust planning process •Implement a management system (MCRS®) to ensure that people had the right data to make the right decisions, based on their role in the organisation •Implement ‘Short Interval Controls’ to ensure people knew what was happening, what they should do, where the issues were and how they were performing against the plan and using white boards to keep everyone informed and involved •Implement more active management behaviours and provide intensive on-the-ground coaching to supervisory staff.
‘Our supervisors typically have a strong technical background, but not necessarily a lot of experience being leaders,’ notes Eidet. ‘Celerant coached us to spend at least half our time out on the floor. We learned how to interact more effectively with the mechanics. Now we put our heads together as we work through a shift and at shift changes, so we can make smarter decisions. Instead of rushing through a PM and putting a truck back into service with a broken headlight, only to have it come back in for a headlight repair during the night shift, we fix it right then. We try to make the most of each time a truck is in our bays. We’re clearer now on what matters, and we’re very good at getting it done.’
‘The goal was aggressive’ says Andy Carter, Manager of the Muskeg River Mine and immediate sponsor of the Mobile Maintenance Excellence Initiative. ‘On a fleet our size, increasing truck availability from the low 70’s to the low 80’s would allow us to move about a million more tons of material every month - with virtually no additional costs. I was pleasantly surprised how quickly we achieved that step change in performance.’ A Closework® Partnership MMEI is a clear example of the consulting approach that Celerant call Closework®. Celerant held weekly meetings with all the MMEI members to: •Shape the improvement initiative •Define and document the improved processes and the respective roles and responsibilities •Review project progress and assign new action items to remove barriers and move things forward. ‘We didn’t get bogged down in conducting a prolonged analysis,’ says Zengerly. ‘We got right down to business - and Celerant gave us very good implementation support on the ground.’
Celerant also worked with the MMEI team using Celerant’s proprietary MCRS® to help the team customise its management system. Today that new MCRS® drives timely, coordinated decision making and ensures that people at each level of authority have access to critical data and the power to influence the results for which they’re accountable. ‘We gave people systems that eliminated the chaos we had experienced all too often before,’ says Linus Nurkowski, Manager of Execution at the mine. ‘And we listened to the people closest to the work. 90% of the time they’re the ones who have the answers you need. MMEI was successful largely because it gave our people on the floor more of a voice.’
AGGRESSIVE TARGETS IMPRESSIVE RESULTS •Truck availability increases to 83% and sustains at that level, dramatically improving the mine’s production potential •Operating costs are trimmed by more than $30 million •Mean Time between truck stoppages increases from 42 to 72 hours •Preventive Maintenance completion rate improves from 52% to 100%
Celerant consultants immersed themselves in
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough.
West Meets East
he opportunity for regional M&A by European and North American Chemicals companies has all but dried up.
T
80’s 90’s The Opportunity
The Focus
Sell Western made chemicals to a growing Asian market
Procure base chemicals and intermediates to use in the West
On the one hand, focussing on Asian targets makes perfect sense because there are huge ROIC improvement opportunities. On the other, integrating cross-continental organisations will create a unique and complex set of challenges which must be overcome.
Celerant Research Dollar Value of M&A vs No. of Global Chemical Co. 10 9
Total Mkt Cap $282,819
Total $Bn M&A
8 7 6
Total Mkt Cap $288,943
5
Serious rivals lie in wait While Western Chemical companies are best placed to execute M&A in Asia, there are now leading Asian companies that also have the capability. They have the financial power, the cultural synergy and the premium equity valuations that can be used to leverage any acquisitions. There are around 20 of these potentially serious Asian acquirers, including major players in China, Japan and South Korea, together with a few leaders in countries like India and Thailand. So real competition exists. And it will get fiercer as regional and multinational producers slug it out for a significant share of this rapidly expanding market.
4 3 2
Total Mkt Cap $300,507
1 0 0
100
Americas
30
Asia
200
Europe
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300
400
The time is now Asia is ripe for M&A consolidation and integration. Asian players may largely lag their Western counterparts in terms of average returns, but future growth rates are expected to be considerably higher. Over the last 5 years, The Shanghai Composite Index has risen 162.5% - with the industry showing a greater 5- year revenue growth than its Western counterparts. A recent study by Celerant Consulting into the performance of 329 publically quoted Chemicals companies around the globe shows that there are 215 in Asia, compared to 61 in the Americas and 53 in Europe. Total market capitalisation for the companies in each region is similar at around $280bn-300bn. But the average values differ markedly. In the Americas, the average market capitalisation is $5.06bn, in Europe $5.88bn and in Asia it’s just $1.23bn. That makes them very attractive targets for M&A. And recent changes in the regulatory landscape have only improved that.
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Now Leaders are asking whether or not acquiring Asian targets would secure their growth and boost long-term profitability?
The M&A Decade
00’s 10’s Strong valuations Strong prospects Based on a variety of metrics, the valuations on Asian Chemicals companies are 30-40% higher than their Western counterparts. Their stock prices have also performed far better. The downside is that they underperform on nearly every operating metric. The market is still highly fragmented and dominated by a plethora of relatively small companies in terms of market capitalisation. But that’s also the opportunity. Particularly in the current economic climate with Asian economies growing faster than those in the West.
The Build Up
The Opportunity
Build capital expenditure and capacity in Asia then move products globally
West – East M&A to create truly global integrated producers
Celerant Research ROIC Improvement Opportunity for Chemical Co. 70
Celerant can point the way When considering an eastern merger or acquisition, cultural congruity, higher comparable valuations and less disciplined organisational processes will all come into the equation. For Western companies willing to meet these challenges by adjusting the internal business processes to reflect Western standards of efficiency, Celerant’s research demonstrates that a 179% increase in ROIC is realistically achievable. We are the global leaders in Post Merger Change Implementation and the best support partner to secure your company’s future growth.
Celerant’s chemical experts are well positioned to facilitate a strategy and targeting workshop with your executive team. Using the operational and financial data already collected on the 329 listed Chemical companies, we can rapidly prepare an analysis to demonstrate the financial and operational impact of future strategic decisions. Involving us as Operational Change experts from the outset will mean that the 2 largest acquisition risks, selecting the right target and operationally integrating the new company, are significantly reduced.
60 50 40 30 20 10
Rest of World Avg: 13.4 Asia Avg: 4.8
} 179%
0 -10 -20 -30
*Excludes a nominal amount of outliers for presentation
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
ÂŽ
CLOSEWORK : Companies run more efficiently because their as empowered individuals, not components. Layers and departm rather than compete. They’re given precise ways to measure w can use their initiative to improve. Operational areas perform they have a stake in the process of setting goals and can se achieved. Single individuals understand their role and their per performance, so their work becomes more satisfying. Everyone setting the targets, so they become a shared objective and a p pride. Wariness and rivalry give way to real respect and teamw improvements continue to be achieved long term because peop the results they create. Real behavioural and organisational cha Knowledge is power. When people know what is expected of them, c
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ÂŽ
: Companies run more efficiently because their workers connect ndividuals, not components. Layers and departments collaborate mpete. They’re given precise ways to measure what they do and nitiative to improve. Operational areas perform better because ke in the process of setting goals and can see what is being individuals understand their role and their personal impact on their work becomes more satisfying. Everyone plays a part in ets, so they become a shared objective and a point of personal and rivalry give way to real respect and teamwork. Optimum ontinue to be achieved long term because people feel central to create. Real behavioural and organisational change takes place. wer. When people know what is expected of them, companies thrive.
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
GreenProduction: IT AFFECTS YOUR COMPETITIVENESS. IT AFFECTS YOUR IMAGE. IT AFFECTS YOUR FUTURE. With energy costs rising and global resources falling, every business must scrutinise its consumption and produce a Greenprint to retain a competitive edge.
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Page 12
60
PAST
10
FUTURE
9 50
8 7
GB/YEAR
40
6 30
5 4
20
3 2
10
1 0 1930
1950
1970
1990
very single one of us, from major companies to private households, faces increasing energy costs. Our consumption may remain pretty static, but our bills keep going higher. And it’s going to get worse, because the world’s natural energy resources are limited, but our population keeps growing and growing.
E
In 1974, around 4 billion people lived on our planet. By 1999, this had jumped to 6 billion and it’s estimated that in 2050 there will be around 9.2 billion of us - an increase of 77 million or 1.2 % per year. Another troubling statistic is that currently, just 1.2 billion people live in well industrialised countries, so 5.2 billion people will increase their energy usage as they attempt to catch up.
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POPULATION DISCOVERY PRODUCTION
0 2050
Energy Management is not an option, it’s a necessity Faced with this growing population and dwindling natural energy resources, what parameters will an organisation need to set itself to ensure production or service provision competitiveness? One absolutely key measure will be the energy demand per item produced or service provided and the only way to efficiently deliver this is by implementing a load carrying and sustainable Energy Management that is driven by internal excellence and routine best practice. This will ensure the highest energy efficiency, predictable energy demand, reduced and controlled costs, and altered energy consumption behaviours and attitudes.
Contrast that to the obvious fact that, excluding renewables, the world’s energy resources are limited. The estimated lifespan for natural gas is approximately 65 years and 43 years for crude oil (for known exploration fields and constant energy demand).
How much, if anything at all, companies currently invest in Energy Management depends mainly on their size, as well as the attitude of their top management towards ‘GreenProduction’. The bigger the company and the higher their public profile, the more likely they are to adopt green solutions.
Energy and petrochemical companies are also producing 4-6 % less oil than in previous years. ‘The investment to keep the production level is around 30 billion dollars each year and a certain oil price is needed to invest’, Peter Vosser, CEO of Royal Dutch Shell recently told Germany’s Handelsblatt.
Bigger companies also have the advantage of being able to release employees from their ordinary work to focus full time on Energy Management. Medium-sized and smaller companies cannot normally afford this luxury. There can be no doubt though, that if a company can take the time and effort, and in some cases
Energy and Petrochemical companies are producing 4-6% less oil than in previous years.
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Driving Talent Success always demands a greater effort.
15-50% of energy costs can often be saved.
the investment, to really understand how energy efficiency can be improved, it will gain significant value and increased profitability.
which examines Energy Production and Energy Consumption across in every facet of their value chain.
15-50 % of energy costs can often be saved Different organisations face different energy challenges. Heating costs are the biggest problem for service providers, whereas in industry the challenge is reducing electricity costs. Many companies try to reduce their consumption, but fail due to lack of transparency, control, time, manpower, knowledge and sustainability. Energy consumption is also often taken for granted by employees, despite the fact that 15-50 % of the costs can often be saved.
Take for example, steam production. Imagine that a large waterspace boiler is operating as a steam producer for a chemical plant and has 2 MW power. The boiler efficiency is around 84 % and there are distribution losses of approximately 15%. So the overall efficiency of the system is around 70%, with an energy cost of 2.7 Cent per kilowatt hour (kWh).
To tap into an organisation’s full potential for energy saving, Celerant recommends that its Clients apply the Celerant 5 Box Model®,
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The boiler requires €300,000 each year to produce 1.4 tons of steam/hour at 7 bar pressure, assuming 8496 operating hours and one start. 15-20 % of the end energy equals €50,000 of the energy bill and by increasing efficiency that can be saved.
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• Start to monitor your energy consumption
steam boiler example, the investment in a new boiler and the optimisation of the distribution grid will save around 50,000 Euro/year (165,000 m3 natural gas). At current energy price levels, the payback period will be around 2.5 years. And with increasing price levels, it will be much shorter.
This should begin with the implementation of key performance indicators (KPIs) and a measurement system for energy consumption by type and area. The second step is to set an energy target for every service or produced item. This will enable you to prioritise and focus on the biggest energy consumers in your plant.
Practical steps Positive Solutions Every organisation can save energy and add value by conducting regular energy audits, implementing capacity planning, optimising roles and responsibilities and capturing and standardising best practices.
• Draw the process, locate the biggest consumers
Energy procurement alliances and negotiations with your energy supplier can further reduce your bill (In our example, a reduction of the energy price by 0.09 cent/kWh will result in €8000 per year savings).
What gets measured gets improved If a company wants to maintain its competitive edge, it's vital that it gets to grips with GreenProduction and encourages real behavioural change among its workforce:
A process map of your energy consumers and the value of their consumption will enable you to identify old or bad connections. Improvements can then be made and consumption and demand re-tracked and recalculated. • Select new equipment In the example mentioned earlier, a new highspeed steam-raising boiler was selected. The new boiler will be in the range of €100,000€125,000 (including erection and auxiliary equipment). The new boiler will be able to operate with constant efficiency at 94% in a load range from 20-100%. With a distribution efficiency of 90% the overall efficiency will increase up to 84%. • Train your operators in SIC As well as training on any new equipment, your workforce will also need training in short interval control, efficient meetings and reporting systems. This will help to ensure the sustainability of the monitoring of your energy consumption and support the maintenance routines and the decision making process. • Make optimized rebuild/replace decisions The availability and necessity of new equipment needs to be checked on a regular basis. Any investment decision can then be made on the basis of the measured consumption. In the
Financial Services, Telecoms, Utilities & Infrastructure organisations can also make further savings with a combination of: • Innovative techniques - the remote cut-off of air conditioning in unused meeting rooms, the installation of office lightning sensors etc • GreenIT - automatic standby of computers, screens with LED Technology, dynamic server cooling etc will reduce the energy bill up to 50% • Smart Metering - identifying and subsequently eliminating load peaks Further down the line, the production of energy, e.g. biomass energy, combined heat and power plants, wind power and photovoltaic, can result in independence from your energy supplier. What’s more, these opportunities are often state-aided and help to reduce payback periods. GreenProduction is a challenge and a real opportunity. Implementing it creates the framework for cost and consumption transparency. When monitored and controlled, this in turn creates tremendous value by strengthening a company’s competitiveness, improving the environment and creating a ‘clean’ image for customers, employees and society.
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough
Going With The Flow
Shining A Light On Success
BUSINESS CHALLENGE With almost 48 million passengers passing through this major european airport, providing good customer service, while maintaining full regulatory security compliance, was increasingly challenging. The task was: •Increase customer satisfaction without increasing costs. •Instil a more customer-focussed culture across the business.
BUSINESS CHALLENGE ‘I don’t want this organisation to be in the bottom quadrant.’ That was the rallying cry of the new CEO of a $400m leading lighting electronics company. To kick - start change, he wanted to improve EBITDA to 11% - 15% once a reduced cost base had been established and to improve overall corporate growth to 10% - 15%. All within 12 months.
CELERANT SOLUTION The project team identified 3 problem areas: Lack of Transparency between Departments. Simply co-ordinating the activities performed by a range of suppliers and in-house staff would not be sufficient. Everyone had to look at the business in a new way and understand the value of specific roles in a complete service experience picture. So the Celerant team interviewed more than 100 employees to get a ‘bottom-up’ view of key processes and identify effective metrics that would increase visibility into real day to day performance. Processes not fully supporting business objectives. A key issue In the area of security is the sheer number of stakeholders. Police, Immigration Services, Screening and Site Control all have to be co-ordinated, so a concentrated Six Sigma programme was deployed to create a culture of ownership among the 3,500 personnel involved. Improved productivity to increase passenger satisfaction. Six Sigma methodology was also vital in the analysis and improvement of passenger handling and the planning of security lanes. Agents now continuously measure process times in their own security lane.
CELERANT SOLUTION The Company asked Celerant to conduct a Productivity analysis and chose its factory in Mexico as the test bed. Working closely with the Client Team, Celerant identified 3 issues: •A lack of organisational clarity, particularly over duplication of roles between Mexico and Corporate. •Poor upfront planning and design that led to project delays. •Poor controls during project execution. The majority of these issues were driven by decisions made by Corporate. This contributed to what the company called ‘A Nervous Supply Chain’. On top of this, they were not enforcing their own policy around accepting returns ($1.2m identified). So the joint teams implemented a comprehensive Change Management Programme that: •Restructured the organisation with lower levels, higher control spans and clarified accountabilities. •Redesigned the supply chain architecture and created 4 integrated subprocesses. •Rationalised SKU’s and created an inventory/service level policy. •Expanded demand planning into the sales regions, with more rigour. •Adopted a one week frozen schedule. •Implemented OEE (productivity) metrics to drive Continuous Improvements. •Created a new inventory deployment process to increase service levels. To manage the Change Programme across Mexico and Corporate, Celerant also set up a Project Management Office to ensure centralised co-ordination on the Supply Chain project and 3 further projects – Pricing, SAP integration and HR.
RESULTS Lack of Transparency •Improved interdepartmental co-operation. •Improved decision-making linked to overall vision and strategy. Processes •All key processes have measurements, targets and specifications defining performance. •Six Sigma organisational structure supports Continuous Improvement. Productivity •17% process time improvement. •10% less time spent on passenger and luggage checks. •Increased customer satisfaction. ‘What makes Celerant different? They are very hands-on. They are very action-driven. And they are very results-driven. They have taken our people to a new level with a real sense of urgency I have not seen before.’ Airport EVP & COO
Transport
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RESULTS An organisational structure that is aligned with the company’s mission, vision and business imperatives. •$13.7m annualised savings. •$2.1m inventory reduction. •Customer service levels at 92%+. •20% Cycle time reduction to introduce new productions. •Decision made to keep production in Mexico due to improved service, lower costs and shorter lead times.
Manufacturing
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Motivating 11 Global Sites
Changing To Stay No.1
BUSINESS CHALLENGE Margins were under pressure at the Nutrition Division of this global Life Sciences & Materials Sciences Leader, so the challenge was to increase operational performance and engage and motivate 11 global sites to embrace Continuous Improvement.
BUSINESS CHALLENGE To maintain its leading position within the global nuclear power industry the client wanted to implement a major transformation programme across its Plants sector and create a new Reactors & Services Business Group. The objective was to enable it to deliver several nuclear plant building projects in parallel.
CELERANT SOLUTION The company wanted deep seated and positive change to occur. To help achieve this it produced a Process Excellence Programme (PEP) and as the preferred partner for strategy implementation, Celerant was brought in to help drive the new standardisation. The context was not easy. Workers had already spent a lot of energy on an earlier integration programme and the organisation’s desire for a predictable performance environment was further complicated by its own physical reality - 11 manufacturing sites, in culturally diverse locations from Europe to China. PEP began with pilot schemes at european and US plants where joint Celerant-Client teams developed and implemented sustainable change through process integration and optimisation, delivering target savings. The pace of work was fast: a 6 week analysis, then getting buy-in, roll-out and implementation in 12 months for each plant. In total over 100 employees became Change Champions to help with the anchoring of new process approaches. Within a short space of time, all the company’s sites had implemented PEP and the next steps to stabilise the improvements were underway. RESULTS €270m sustainable cost savings. •Ahead of the company’s 5-year strategic plan - stretch target exceeded by more than 20%. •Control and transparency - increased reliability through full control and insight into performance per site, production plant and product. •Productive interaction between employees through competence networks to exchange best practices. ‘Celerant absolutely matched our ambition and really adapted their approach to help us to steer our manufacturing base. Showing improvements and successes really helped anchor the changes in the organisation.’ Division President
Life Sciences
CELERANT SOLUTION Celerant was brought in to help set up the Programme Management Office for the change programme and to help design the organisational structure for the new R&S Business Group. Celerant developed a customised organisational Change Programme to prioritise and pilot the 12 transformation initiatives that were to cover the Plants sector until 2012. The team also helped the Change Management Officer to set up a Programme Management Office (PMO), motivate the transformation network of key project and business leaders and help provide an operational focus on key initatives to accelerate results. The creation of the new R&S Business Group required a smooth transition between two different organisations that employed 20.000 people, spread over 3 countries. During the transition phase, the Celerant team managed the PMO and key activities such as organisational design and position allocation. RESULTS Plants Transformation Programme •A clear vision for the Plants sector and an understanding of how each initiative contributes to the overall objective. •A simplified programme structure around the 12 initiatives and 5 key axes. •Common governance rules and management tools for the initiatives. •A programme MCRS® that allows better control, visibility and communication. •An ‘industrialised’ PMO that is a real decision-making tool for the Executive Management. R&S Business Group •A smooth and monitored transition. •Business Unit Managers supportive of the new ways of working. •Excellent management of interfaces and consistency at Business Group level. ‘You can be proud of the amazing job that has been done. Your Change expertise was key.’ R&S Business Group Snr Vice President
Energy
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Driving Results All thoughts must be distilled into action and action that brings results.
A vital component in the fight against AIDS.
Abbott Italia is the sole manufacturer of
the active ingredients of an HIV treatment drug. Faced with intense competition from India and China they needed to become more efficient to dramatically increase throughput and serve 2,000,000 patients worldwide.
ealthcare costs are rocketing worldwide and one way to reduce them is through the use of generics. So as a recognised centre of excellence, Abbott Italia was determined that its manufacturing plant would become more efficient to enable it to cut costs and deliver a final product that was competitively priced against competitors who were using cheaper raw materials.
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To begin this process, Management decided to perform a LEAN Diagnostic and brought in Celerant Consulting to help drive things forward. The diagnostic covered the entire plant and quickly showed that there were Continuous Improvement opportunities in the areas of Production, Quality and Maintenance. The opportunities identified were connected to poor visibility of daily and weekly activities, poor communication between the 3 areas,
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inconsistent equipment downtime data and analysis, and issues with information being shared too late and in an informal manner. To correct these problems, Celerant recommended implementing their proprietary MCRS®. Changing the way people think Celerant’s challenge at Abbott Italia was to change the culture and behaviour of a sizeable workforce in a short space of time. To do that, the team needed to install and teach new tools and methodologies to 200+ working 24/7. The Director of Operations had already stated that he would judge the success of the project by the feedback from his Directors. So it was vital for him to see a real change in the mindset of his people, because that would lead to real KPI improvements. 6 Steps to success After immersing themselves in the business,
Celerant's experts put together a 6 Step Plan which was then reviewed with the Workstream Leaders, so that they understood it's structure, appreciated it's discipline and recognised the benefits it would bring . 1 Definition of the project management structure. 2 Definition of team charters. 3 Development of SIC and steps to milestones for each Workstream. 4 Definition of the communication strategy. 5 Training of team members. 6 Closework® and tracking of activities to milestones and SIC. Celerant also provided each Workstream with its own set of goals and employed Closework® to help them achieve success. Production • Install an integrated Production MCRS® to manage plant performance against defined operational and financial targets. • Improve labour productivity through improved
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efficiency in daily/weekly planning, active supervision, and process improvements. Quality • Improve communication and coordination of activities among QC/IPC, Raw Materials Lab, Production and Receiving to maintain a high customer service in the face of changing volumes. • Install MCRS®, KPIs, and communication to make the right information available at the right frequency to drive decision making and improvements. Maintenance • Improve the integration and effectiveness of their planning and scheduling process in alignment with Production needs to better manage activities and labour productivity Warehouse • Improve efficiency to support planning production activities. Harnessing People Power The Abbott Italia Workstream Leads and Steering Group were highly educated, very technical people and they had challenged some of the analysis results from the LEAN Diagnostic. So In the beginning, it would be true to say that they were somewhat sceptical of some of the numbers provided and did not have complete trust in Celerant. However, working together on the project and experiencing the benefits of Closework® and Celerant’s MCRS® process, they quickly realised the real value of the work and totally committed themselves to the new ways of working.
LEANER, FITTER, MORE COMPETITIVE.
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‘For me the most crucial thing was to have Celerant help us keep the pace to maintain the direction of the project.’ DIRECTOR OF OPERATIONS
‘I owe a lot to Celerant.They showed me how to plan, use the tools, analyse data and how to behave in meetings.’ MAINTENANCE PLANNER
• $356K in savings for 2009 due to MCRS® improvements, plus additional savings from the LEAN Diagnostic • Enhanced capacity and resource planning on all departments • Maintenance past due reduction from 280 to 4 • Maintenance schedule compliance greater than 95% • QA weekly non conformities KPI reduction from 30 to 9
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Driving Results All thoughts must be distilled into action and action that brings results.
RISING TO THE TOP When Vandemoortele wanted to transform its Business Line Bakery Products into a leading player in the European Bakery Business, Celerant Consulting was a vital ingredient. perating in 12 European countries, the Belgian food group Vandemoortele focuses on 2 business segments: frozen bakery products and margarines and fats. One of its ambitions is to become a leading player in the European Bakery Business by 2012 through increased market share and total revenues, as well as improvements on EBIT and EBITDA.
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To achieve this, it appointed Celerant to help redesign its industrial business model with a focus on key accounts and an integrated European Supply Chain and to shift its corporate culture to become more proactive, making sound decisions based on facts and a Total Chain perception. The programme had 3 key objectives : • To install a culture of Continuous Improvement by helping to build and implement the new Vandemoortele Way of Working -WOW. • To realise an annualised P&L impact between €9m and €13.5m and reduce Working Capital by €6.7m to €11m. • To train and coach 15 Taskforces (internal consultants) and a Management Team to
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implement Waves 3 and 4 of the programme on their own. Creating the right mix Celerant’s experts immersed themselves in the business in order to deliver the programme benefits to Vandermoortele’s customers in 3 waves. Wave 1 focused on Supply Chain Optimisation and the design and implementation of WOW in 4 pilot sites. Wave 2 focused on rolling out WOW to 6 new sites, this time with the newly trained Vandemoortele Taskforces in the lead and Celerant coaching in the background. Waves 3 and 4 would be executed entirely by the Taskforces. To optimise the value chain Celerant installed LEAN principles, including a systematic monitoring of performance (lines availability and rates, overweight, waste etc), Key Performance Indicators, standards tools and a customised Celerant MCRS®. It also upgraded the production loss accounting system and implemented a best practices sharing process. Power to the people Arguably the most critical phase of the programme was the coaching and training of the 15 key
Taskforces and the Management Team to provide them with the skills and confidence to drive the programme once Celerant was no longer there to help. That involved an intensive Closework® partnership where they were shown how to change the culture, mentality and capabilities of the Business Line Bakery Division from reactive to proactive, from Silo to Total Chain and from ‘gut feel’ to ‘fact based’. They learnt quickly, performed brilliantly and now drive the programme. RESULTS The shift in corporate culture throughout the organisation went beyond expectations: • Business benefits were 20% above target • An annual P&L saving of €11.1m has been achieved • Working capital has been reduced by €6.7m • The ‘One Way Of Working -WOW’ has been successfully implemented with a great level of engagement by all stakeholders • 15 Celerant trained and coached internal consultants are now ready to further roll out the programme to all sites by the end of 2010
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‘ A programme of this magnitude has never been seen in the history ‘ What made the difference in my opinion? Engaged skills of Vandemoortele.We really and team work of the Celerant believe this programme lived and Vandemoortele team up to our expectations and we members… and a very robust could never have done it MCRS © for programme without Celerant.’ management. Eddy de Mûelenaere Managing Director Business Line Bakery Products
Antoine Wrobel Project Manager - Celerant Consulting
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Driving Talent Success always demands a greater effort.
THE MAN WITH THE PLAN Senior VP David Smith is a leading figure in Global Energy Operations for Celerant Consulting and heads the team that is helping Gulf National Oil Companies prepare their operations for a bumpy future. He explains why their expertise is in such demand.
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aving worked with 9 of the Top 10 industry leaders and delivered $2.5bn in client value, International oil companies have been Celerant’s traditional client base. Now though its expertise is coming to the aid of Gulf National Oil Companies (NOCs) struck by a dramatic reversal in their fortunes.
As prices continue to stabilise, the most pressing issue that may affect NOCs in the short term is a skills shortage. This could lead to bottlenecks in completing projects designed to ramp up capacity, as NOCs embark on infrastructure developments following a period of spending restraint when prices were lower.
their supply chain organisation more efficient and effective.
Raking in a mountain of petrodollars after oil reached a record peak of $147, NOCs in the world’s most oil rich region were able to embark on projects aimed at raising capacity in anticipation of a continued price climb. But a dramatic collapse to $32 slashed company profits and led to ambitious expansion plans being hastily moved to the backburner.
DS: The key thing that will affect NOCs now is that a skills shortage will start showing again. This could be particularly true in Iran as the government looks to raise production on the world’s second-largest oil and gas reserves. With places like Iran opening up in the region and with the fact the oil price is now looking attractive, the pace of projects will start increasing. That could mean we will start coming into some bottlenecks which were very much there a year back when NOCs couldn’t get the skills set they wanted.
In Oman, Celerant has worked closely with their client to boost the percentage of Omani nationals working for the company from 85% to 95% to meet a government-set quota, with the result that the number of Omanis at two oil fields has risen to 98.2%.
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Prices have since rallied, but an uncertain global economic future and question marks over near-term crude demand, have meant that the region’s big state-owned oil players are suddenly less optimistic about the future. DS: $32 oil definitely got people’s attention and there’s a realisation that it could go back there. A couple of years ago no one wanted to talk about costs as everyone was making so much money it didn’t come top of their list of items - now that’s changed. This turnaround persuaded Gulf NOCs to call on Celerant for the first time, with the result that it is now working on everything from improving the drilling rate at offshore oil rigs by 20% to increasing the number of Omani nationals at a US oil and gas firm’s operations in the Sultanate. DS: There’s not a lot been done around this region or in Saudi Arabia. I think some NOCs have used strategy consulting houses which give you ideas, but the danger is that those sit on the shelf and nothing happens. So there’s a certain amount of cynicism and disillusionment with strategy consulting. At Celerant, we work with our clients on implementation. We do an in-depth analysis to find out what needs to be done and then we partner with the client and work together towards the agreed result.
Working with one of the major NOCs in the region, Celerant’s objective is to improve the drilling rate at the company’s 5 offshore drilling rigs by a minimum of 20% over 9 months. DS: They had 5 offshore drilling rigs and were going to have to get another one, but we said as an alternative, ‘why don’t you improve the drilling rate at the ones you’ve got?’ That means they don’t need another rig, which is a lot of money. Taking steps to make the client’s existing workforce more productive was also a key way to increase efficiency. DS: We’ve found from elsewhere in the world that there’s a lot of lost time and a lot that gets in the way of things working in an ideal way and we identify what those problems are and make sure they get taken care of. A lot of it is around planning, as our experience is that people don’t plan enough. Planning will form a key role in a second project with this client where Celerant are demonstrating how they can reduce purchasing spend and make
DS: We have a unique way of looking at energy and know we can bring something to the party in terms of reducing energy cost, which is a huge expenditure in some of these plants.
DS: At a technician level it wasn’t a problem, but at the supervisory and management level, there weren’t many Omani nationals. Up until recently, the temptation for many national oil companies was to bring experienced expatriates over and not give local people the opportunity they could potentially take advantage of. But when you look at the skills that local people have, they’re often very capable. The key word however, is confidence as they’re used to an environment where they’re told what to do and have to get on with it and aren’t so used to taking responsibility.
‘ I think some NOCs have used strategy consulting houses which give you ideas, but the danger is that those sit on the shelf and nothing happens. So there’s a certain amount of cynicism and disillusionment with strategy consulting.’
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough
Collaboration - Not Frustration
The Rapid Route To Excellence
BUSINESS CHALLENGE The client is one of the world’s leading engineering companies in the design and construction of chemical, refining and other industrial plants. With a workforce of nearly 5,000 across multiple sites and countries in its Technologies segment, support was needed with a management system for the construction phase of projects to overcome the geographical and cultural challenges that existed between its home country Germany, Egypt and Romania. These included: •Significant cost and time overruns in mega-projects (100-500 million Euro projects). •Disconnect between Divisional Management (CM Division) and construction site Management teams. •A Management attitude that believed the establishment of handbooks, operating procedures, etc. was enough to change fundamental ways of working. •Project management teams with various backgrounds and standards (including many contractors) which made it difficult to enforce unified working and management methodologies. •Comprehensive SOPs, but little or no compliance. •A vicious circle of blame, with no issue resolution focus.
BUSINESS CHALLENGE From plants in North America and Mexico, the client provides the world’s best in innovative bonding and surfacing solutions, together with outstanding agricultural and natural resources applications. The CEO described the situation as: ‘We had good people, but we didn’t have good processes.’ That had to change and quickly. It had to be One Company, One System.
CELERANT SOLUTION Celerant was brought in to reshape the organisation’s working practices with the objective of increasing collaboration and alignment and reducing challenges and frustration. To achieve this, the Celerant team designed and implemented a comprehensive Group Construction MCRS®, then piloted it and rolled it out to the 2 construction sites in Egypt and Romania. They also integrated the Construction Division and Divisional Management MCRS® and used Closework® for knowledge transfer to key divisional and construction management personnel. Celerant also provide ongoing support in the roll out and implementation of the Group Construction Division MCRS®, to new construction sites as they come on line. RESULTS A worldwide standardised reporting structure for construction sites. •A worldwide standardised way of working. •Short Interval Controls implemented at the point of execution. •Improved Site Cost Management & Control. •Improved communication between different company interfaces. •Clear roles and responsibilities.
Construction
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CELERANT SOLUTION Charged with a fast turnaround, Celerant’s experts worked closely with a selected client team to: •Design a Sales & Operations Planning (S&OP) process to facilitate demand planning, inventory acquisition and control. •Create action plans to improve the efficiency and effectiveness in the Sales, General and Administrative functions. •Uncover ways to increase labour productivity in the plants. •Tackle opportunities for Batch Cycle Time reductions. •Collaborate on ways by which the company could optimise its formaldehyde production process and its associated sales. •Develop, understand and use standardised KPIs through the introduction of Celerant’s MCRS®. To summarise the task, the team developed the name E4 - Enhance Efficiency and Effectiveness for Excellence and deployed to the company’s plants in Canada, United States and Mexico to begin implementation. RESULTS Annualised savings of $2.61m against a plan of $741k - but the real story is the sheer volume of quality work that was completed in such a short time span. •At 11 plants across 4 time zones in 3 countries the E4 Taskforce installed a basic MCRS®, a Production Loss Accounting System, a DWOR system with universally defined KPI, Root Cause Analysis methodology and action plans, a Quick Wins programme and a detailed analysis of all work activities performed at the plants. •In addition, project work streams at client Headquarters laid the foundations for a complete S&OP system, a Sales, General & Administration system, and an Executive MCRS® system that tied it all together. ‘We have built One Company and it is sustainable. Everyone has stepped up.’ CEO.
Manufacturing
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Three Are Bad. One Is Good.
Leading From The Front
BUSINESS CHALLENGE With operations in more than 20 countries, the client is a worldwide and highly diversified leader in the niche markets of speciality chemicals, plastics converting, the gelatin industry, natural derivatives and agricultural solutions. In 2009, it realised that its PVC Business Unit was not in great shape. It had 3 plants in Belgium and France that were operating with absolutely no synergy. That had to change and fast. To prepare the future the decision was taken to merge its global strategy and create a single banner across all 3 plants that would bring back profitability, change behaviours and improve customer satisfaction.
BUSINESS CHALLENGE One of the world’s leading steel companies was experiencing problems at one of its major european sites. It had many strengths, but intense competition from low cost Asian producers seeking new markets in Europe, and higher structural costs due to its isolated position in the centre of France, meant there were real risks to its medium term sustainability. The challenge was to: •Radically improve operational performance in productivity, costs, customer service and cash management. •Implement organisational and cultural changes to deliver sustainable competitiveness.
CELERANT SOLUTION Celerant was brought in to design and implement a multi site Change Programme that would create a Business Unit driven by synergies and simplification. The project would impact significantly on both EBIT & Cash, from operations to sales, with financial objectives of €9m annualised REBIT, €3.8m cumulated REBIT and a €7.8m reduction in Working Capital. Results had to come quickly, so Celerant’s first task was to define and implement a visionary strategy, with a new organisational and BU MCRS® that would build the pillars of an efficient operation by improving productivity, quality and maintenance. Working closely with the Client Team, Celerant also implemented measures to control costs and cash flow, reduce stocks, rationalise products, rationalise and professionalise purchasing - and key to long term success, increase sales force effectiveness and customer satisfaction.
CELERANT SOLUTION Celerant was brought in to design and implement a 3 Stage LEAN programme that would increase 1st choice volume and customer service and lower inventory and costs. Stage 1 Working closely with the plant’s steering committee, Celerant’s experts used intensive Closework® coaching and training to begin sustainable cultural change. The results were an increase in performance, a reduction in costs and a clear demonstration that the required levels of stock and customer service could be achieved with no degradation of other performances. Stage 2 Celerant completed its background work on the restructuring processes and control systems for product quality, supply chain and maintenance. These organisational changes were then implemented and an internal project team established. Stage 3 Celerant then independently tested the internal resources and on achieving success were able to build an ambitious budget based on all the improvements made during the previous phases.
RESULTS YTD Annualised REBIT savings: €9.5m vs. €9m target. •YTD cumulated REBIT savings: €6.3m vs. €3.1m target. •YTD Working Capital savings: €9.5m vs. €7.8m target. •All Qualitative deliverables completed OTIF. •The new Business Unit has initiated a positive trend, reached its 2009 targets and is aligned with its 2010 objectives. ‘We are now more and more one single team who behave differently. We should have asked Celerant to come here 1 year before. If a big transformation programme comes up again, I won’t lose time. You delivered what you promised.’ Executive Committee Member.
Chemicals
RESULTS Annual volume increased by 21%. •Cost per tonne reduced by €22. •Stocks reduced by €60m. •Rate of Service (IRD) increased from 68% to 85%. ‘The Celerant project was a major success. The Management of the site is now confident that the sweeping changes that have been installed will allow us to maintain our position.’ CEO
Metals & Mining
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
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Celerant is a designated Consulting Partner for 90 of the World’s Top 500 Companies
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Driving Results All thoughts must be distilled into action and action that brings results.
Helping NASA engineers think outside the box
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As NASA enters a new era of space flight and exploration, its engineers must develop innovative designs that leverage the latest technology. This challenge required a new training course which Celerant was asked to design and instruct. ASA named the new course, the Innovative Design for Engineering Applications course (IDEA) and its Academy of Programme, Project & Engineering Leadership (APPEL) asked Celerant to, in essence, coach its engineers and designers to think outside the box.
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This would provide them with an understanding of the tools and processes that can be used to increase innovative thinking and help them move from fuzzy front end innovation to final design solutions. The work for this task was performed over 3 days at NASA's Kennedy Space Centre.
‘ Celerant is thrilled to have been selected for this essential programme and looks forward to a collaborative future with NASA.’ John Sturrock Celerant VP and Course Instructor
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
HOW MILITARY STRATEGIES CAN WIN CORPORATE HEARTS & MINDS
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For 3.5 years, CEO Gil Baldwin led the team that transformed the market positioning and organisational culture of Aviva Healthcare, increasing profits from just over £35m in 2005 to around £100m in 2009. Here he explains how that success was a direct result of 4 key themes he brought with him from the military. ost people would imagine that the strict chain of command in the military is the opposite of entrepreneurialism? It is and it isn’t. I believe that in peacetime the strict military command chain is the absolute antithesis of entrepreneurialism. However, the minute you go into somewhere like Iraq or Afghanistan, all bets are off because what you’re dealing with is chaos. You’re trying to bring order to chaos. And that is a very, very entrepreneurial situation. In my career, I’ve run everything from garment factories to a water utility. I’ve worked with the EU to get nationwide power running, dealt with organised crime and so on. Where do you get entrepreneurialism from? If you live in chaos, you either learn it or you don’t. I think it’s one of those things you’re born with or not and it develops with time and experience.
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So what were your first thoughts on taking up your new command as CEO? When I arrived the business was failing. So in my naivety, and by dint of my military training and experience, the first thing I did was to ask a simple question: Did we have the right strategy? Did we really understand what made the business work? As far as I could see, we didn’t. Now In the military we’re very rigorous about this sort of stuff. There’s a set format to determine a strategy. You look at: Enemy. Friendly Forces. Aim. Resources. In our case that meant: •Enemy: Both the Protection and Health Insurance markets had very dominant players
who derived significant competitive advantage from their size and positioning. So we could not possibly compete as the lowest cost player. But no one had actually articulated that. •Friendly Forces: On the other hand, we had a very loyal and sticky customer base who would probably stay with us while we reformed. We were also part of a Group who, if you made the right case, and my predecessor had, were prepared to invest. And that was critical to the turnaround. •Aim: This was clear - to double our profit contribution to Group. •Resources: They were very limited. So - and I also took this from the military - I was quite brutal about assessing my Leadership as a resource. Did they have the skill sets, capacity and entrepreneurial culture to really deliver this programme? And I have to say, I felt the answer was no. So over the next 2 years about 80% were changed, from the Board all the way down to the lowest management level. Without that, I don't think we could have done what we did.
An interview with Gil Baldwin MBE (Ex Military Strategist)
The Cabinet War Rooms, London. A Celerant ‘Iconic London’ corporate event.
‘If you want to win people’s hearts and minds, a good first step is to get to know them. When my direct reports told me they felt they were winning the hearts & minds of the people who worked for them, I asked when their direct reports birthdays were? What pastimes they had? How many children? What their names were and what schools they attended? I told them that this information is required knowledge for every soldier with accountability for others.’
It can often be difficult to get real ‘Intelligence’ about a business. Did you find that? As well as conducting a fundamental analysis of the situation I also needed to know what the key financial drivers were – and to be honest, it took about 9 months of me being quite difficult with my actuaries to discover that, in essence: •for every 1% of new business you put on, you make £X profit. •for every 1% you take out of your expense ratio, you make £3X profit.
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
‘Celerant helped us save over £14m by helping to introduce a culture of business measurement that determined if our processes were run efficiently.’
‘ I don’t think you can be a genuine leader unless you have a real interest in the people who work for you.’
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•for every 1% more customers you retain, you make £6X profit. •for every 1% you improve your loss ratio, you make £12X profit. At that point, our investment choices became very clear. It was all about keeping customers and giving a great service!
‘I won’t wait 15 weeks for the approval process to go all the way up and back down, because by that time one of our competitors will have nicked the opportunity.’ It took a long time and a great deal of effort, but that equation led to a fundamental and radical shift within the culture of the organisation.
Did that mean taking the company in a new direction? Absolutely. We set out on a strategy to completely change the dynamics of the business. We wanted to change from a Health Insurer to a Health & Wellness Provider - and build a psychological contract with our customers that encouraged them to look after their health and well being.
How did you balance this new entrepreneurialism with the controls necessary for a streamlined business? Let me answer that by using another military analogy. I think one of a leader’s greatest responsibilities is to not just set the direction of the strategy, but also to make certain that everyone understands the context of that direction. At Aviva, our strategy was to put clear blue water between us and the fourth player, so that we could go to the suppliers and say ‘We know you don’t like duopoly because they pressurise you. Look what we’ve done over the last 2 years. We’ve grown our market share by 3 - 4 %. If you give us a better deal we’re now really growing. And you’re a credible player in that.’ That’s about setting, to use military terms, the Left and Right Arc. Within those parameters, go and do it. Beyond those arcs, you need to come and ask me. And then of course, you set up systems, authorities and forums where everyone can feel comfortable about putting forward their ideas.
To do that, we invested heavily in: •Rebuilding our claims process to auto authorise minor treatments and give specialist help for complex ones. This led to better outcomes, lower loss ratio through managed care, better retention rates and greater operational efficiency, because in 90% of cases staff interventions were minimised. •Online services for health awareness and medical screening for those ‘at risk’, •Health services, both in house and with partners like Lloyds Pharmacy, that drove innovation to return people to health quickly and efficiently. •Redesigning our supplier relationships. The second military theme was the equation: The Ends (to be achieved) = The Means (resources, time, people) x The Way3 Why is The Way cubed? It’s cubed because The Means are always finite. There’s never enough time, money, smart IT people and so on, to do a task. So the really critical determiner in doing it optimally is The Way you go about it. How much did that impact on the existing culture? For us, this was a massive shift. As you can imagine, we were pretty hierarchical. That’s the way large corporate organisations work. Risk taking at an appropriate level, the governance that goes with that, the delegation of budget to do the right thing in the moment at the time, was all sucked upwards. Everyone said, ‘Here’s my plan boss, is that OK?’ Then his boss took it to his boss and so on. If you look at very entrepreneurial firms, all that gets cascaded down. So when there’s an opportunity ‘in the moment’ that person can do something about it.
The third theme you deployed was The OODA Loop. Where does that acronym come from? The OODA Loop was built by the US Air Force during the Korean War. In the early part of that war their technically superior aircraft were being shot out of the sky by a pretty rubbish North Korean aircraft and they wanted to know why? When they analysed the problem, they discovered that in a dog fight, their pilots were being ‘out decided’ by the opposition. That was the genesis for the OODA Loop Observe, Orientate, Decide, Act - and The Top Gun Programme. How did it work in real terms? It had a huge impact on both the structural organisation and culture of the business. I told my team that we were in a dog fight and if we were to be successful, we had to build an organisation where, even if we didn’t invent it, we heard about it before they announced it and announced it before they heard about it. My stated aim was that I wanted our competitors to wake up every Monday and feel sick about opening a newspaper and seeing what we’d just announced, because if you do that loop faster than your competitors, what happens
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is, they react to you. You'll then notice what they've done and get inside that loop again. Their reaction becomes ever more inappropriate to the point where they get to some sort of institutional paralysis. We were very successful at this. The final, and from your perspective, most important theme was the concept of The Main Effort - the critical part of a strategy that cannot fail, because if it does, the whole thing starts to unravel? That's right. In military terms The Main Effort derives from where do you place your artillery? You remember the equation, Ends, Means and Ways and my point about The Means always being insufficient? Well. You designate The Main Effort to resolve those resourcing conflicts. So when that resource crunch comes, when everyone is calling for the artillery, it's automatically slave to The Main Effort. Designating our loss ratio on Private Medical Insurance as the Main Effort was the turning point for the business. You see, all decisions about whether we cover you or not are human decisions. So designating our Main Effort as: ‘In all those decisions, if you do nothing else, err on the side of the company rather than the individual’ made a huge difference. Wasn't there a danger that some genuine claimants might miss out? No. It's not a weasel thing. If people are covered, they're covered. That's what we're here for. But what had been happening was that it was much easier to say yes to everything, because as human beings, that's what we like to do. Can you give us a specific example of how these themes won hearts and minds? I could give you quite a few. In 2008 and 2009, we hit or exceeded our targets in the worst recession we've all experienced. And they were stretching targets. Our customers told us that we were significantly better in all aspects and stayed with us. Our people also told us something. In January 2009, we decided to double our yearly Large Corporate new business target. By April we'd done a full year of that Large Corporate target. In order to get all this business on the books, we had 65 - 70% of my on-boarding staff coming in at 3 am so there would be no hiccups before the deadline. Nobody asked them to do it. There was no overtime. They just did it. They did it because they believed that what we were trying to do was right. They believed that we as a company were doing right by our customers.
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Was there anything you had to unlearn when you transitioned to the corporate environment? There were lots....not shouting at people? I think I had to learn a different leadership style. I have quite an eclectic brain and the way I learn is to ask questions. What I hadn’t realised was that in a very hierarchical FS type business like Aviva, every time I asked a question, that was seen as a ‘tell off’ from the boss. I’d ask someone in my Leadership a question and they thought it meant they had to do something. And before they got out the door, I’d asked another 3 questions, so they thought they had 4 things to do and it was causing absolute mayhem. It took me a while to see this. Eventually I had to call them all in and say ‘Listen guys, I don't want you to actually do anything. What I want you to do is write down my ideas and then come back tomorrow and say: ‘This one and this one are rubbish, but that one’s actually quite good, we can do something with that. That’s all you’ve got to do.’ It took me about 8 months to learn that. What about aligning the organisation to your ends? That was also a steep learning curve. In the military, there’s an assumption that because it's a volunteer army and by and large, young men and women quite like adventure, when you say, ‘Guys we’re off to war’ the alignment of the organisation to your ends is relatively straight forward. That's simply not the case with a corporate organisation. In the end, the way we did it was that I went and spoke to every single member of the organisation. I did something like 26 Road Shows in the space of 5 weeks. I went and explained exactly what we were trying to do, what was important and their part in it. On the back of that I instituted a huge leadership programme. Not only did we go through the Leadership and set the bar high, but those that were then left got leadership courses, mentoring rings, business coaches etc. So that those we felt were able to do the job were up to the requisite standard. We also did a whole host of other things, from little booklets that said what we stood for to databases that meant if you were fed up with the car parking arrangements you could put it on. You could put it on, but you couldn't hand it off. Your line manager will make certain that you resolve the issue and support you in that. But you can’t just absolve yourself from responsibility. So there was a huge alignment and cultural change programme. The final lesson? You can’t just say ‘Take the hill!’ It’s a bit more complex than that.
Profile: Gil Baldwin MBE was a Regimental Commander in Iraq and has extensive experience of the Balkans, both in the military and civil spheres. He was a key architect of the Madrid Peace Implementation Conference that began the process of returning 180,000 displaced persons to their homes and has extensive experience of international strategic policy formulation. He was then appointed Operations Director for the Stabilisation Unit, with particular responsibility for cross Whitehall strategic planning for Iraq, Afghanistan and Ache Province, Indonesia. On leaving the military, Gil joined Norwich Union as the Operations Director for all shared services in the UK and was subsequently appointed CEO of Aviva Healthcare. Gil is now a Director of Minerva Advisory Group which specialises in strategic risk analysis and integrated stabilisation planning.
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Driving Performance We must learn to be equally good at what is short and sharp, as what is long and tough
Doing What No One Else Does
Powering Up The Turbines
BUSINESS CHALLENGE The client’s operating fields in the North Sea are a prestige asset, producing around 400,000 BOE per day and representing around 10% of total revenues. To maximise their importance, it wanted to achieve top quartile cost and production performance and develop a sustainable culture of Continuous Improvement.
BUSINESS CHALLENGE The client is one of the world’s largest manufacturers of wind turbines and its Marketing and Projects Department is responsible for the configuration and sale of entire wind farms, including transportation (one turbine requires up to 10 heavy goods transporters), site preparation and supervision, turnkey installation and operational sign off. In recent years, delays in the construction of the turbines had led to missed customer handover deadlines and high contractual compensation payments. The challenge was to increase project efficiency and dramatically decrease penalty payments.
CELERANT SOLUTION The project was a strategic partnership, with a balance between consultant and client resources from all parts of the business, both onshore and offshore. One of the most successful deliverables was the overall Continuous Improvement work methodology. An annual operational baselining session determined the business goals and kick-started workstreams with individual goals to support them. Each workstream was cross-functional and consisted of a number of full time employees, supported by a Celerant consultant. The consultant and the client teams lived and worked together to achieve the business goals on time and in full. Offshore personnel on all platforms, shifts and rotations were trained in problem solving techniques, while onshore personnel were trained in areas such as Leadership & People Competence Development, Cost Management and Contract Management. In addition, Celerant certified 76 Black and Green Belts, as well as 2 Master Black Belts. After Celerant left, the newly trained Management Team sustained the Continuous Improvement methodology to drive operational business performance. RESULTS More than 3 billion Nok savings to date - of which 476 million Nok are OPEX. •Operational improvements that put the company top of the McKinsey benchmark study on Production Efficiency. •A culture of Continuous Improvement that generates savings and one that Industry regulators are extremely positive about. ‘No-one else in this industry is doing what we’re doing (IPL & IO)’. Operating Unit Manager.
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CELERANT SOLUTION Celerant had worked successfully with the client on other projects, so it was logical to entrust it with such an important task. The fact that only 75% of turbines were being completed on time convinced the team that it was dealing with a process problem and this was confirmed when a customer survey carried out by Celerant also raised process and project management issues. To solve them, the team focussed on 3 areas: Improvements to the organisational setup. •The introduction of a mandatory Stage-Gate process and the optimisation of supporting processes, such as transport planning and the ordering of options. •The introduction of operating figures, as well as meetings to direct business performance and project planning. The core element was the Stage-Gate process which involved all activities from initial customer contact to final turnkey handover. To drive this, Celerant’s experts used Closework® to build close collaboration with the workforce and to develop the skills, roles and responsibilities of the project planning department. Celerant’s experts were also members of the executive board. RESULTS The number of turbines completed on time rose to 90%. •Contractual penalties dropped dramatically. Only 50% of the budgeted sum was paid out, equivalent to just 15% of previous years. ‘The project was a complete success. One measurable result was the drastically reduced number of contractual penalties. In addition, we have a whole series of improvements in the Stage Gate Process which we have used to introduce clear guidelines on how to complete projects. And this Stage Gate process is now being consistently followed.’ Client Director
Production
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A Flagship LEAN Programme
All Sytems Go
BUSINESS CHALLENGE With rising raw material and utility costs, the client’s North American Morning Foods Division faced an extremely difficult environment. To meet budgetary goals, it needed to: Identify substantial cost savings. •Increase output of existing capacity. •Upgrade its Production System. •Increase the effectiveness of its management system. •Realign its organisational structure to meet best practise.
BUSINESS CHALLENGE The client is a multi-national, pan-european supplier of autonomic, guided, unmanned aerial vehicles, products and systems. In a changing economic and political climate where they compete with other global companies the challenge it faced was to: •Reduce the cost of its products and systems through activities/workstreams across the whole business grouped together in a single Change Programme. •Achieve a minimum cost reduction of excess €26m in its ‘cross-functional business’ activities by rationalising headcount across its European Operations.
CELERANT SOLUTION Celerant had already completed a Divisional project for the company where Management had completely embraced its Closework® approach. Now it designed and implemented a flagship LEAN Programme across the value stream that delivered sustainable results in 4 key areas: Production SICs and Visual Controls through LEAN principles increased production equipment availability, drove improvements in throughput and reduced total plant scrap. Maintenance SICs and Visual Controls reduced equipment downtime, unplanned/emergency work orders, MRO spend, maintenance overtime and contractor spend. Integration A project prioritisation tool selected and resourced key projects under a project management system that was integrated into a new plant wide MCRS®. Organisation Effectiveness. A core of LEAN Practitioners in Kaizen Continuous Improvement methodology was built to begin the realignment of the organisation to meet the company’s strategic objectives moving forward. RESULTS A visual MCRS® with integrated leading and lagging KPIs. •An upgraded Production Loss Accounting System. •An upgraded and integrated production and maintenance scheduling. •A preventive maintenance system that delivered a 50% availability improvement by reducing unplanned downtime and changeover cycle time. •Scrap reduction of 33%. •Improved organisational effectiveness through increased control spans and reduced supervision layers that enabled a reduced salary headcount. Celerant initially worked with the client at its Nebraska plant. Based on that success, work has expanded across North America and the globe in Morning Foods, Frozen Food and other Divisions.
FMCG
CELERANT SOLUTION Celerant was brought in because of its unrivalled knowledge of the industry, the market place and an intimate understanding of the operations of the global sector leaders. Celerant put together a multi-lingual team to analyse where support function activity was undertaken, identify opportunities for headcount reduction and return a high level business case and implementation plan that would enable the company to make the necessary savings in a controlled manner, whilst protecting its on-going business. The assignment was completed in an intensive 8 week time frame. The team worked simultaneously across multiple sites and business functions in all countries to collect data and completed the analysis at the company’s headquarters as part of a joint Celerant - Company working team. During the analysis, periodic progress reports were made to a joint Celerant - Company Sponsor Board and a final results presentation was made to the company’s full executive team in early 2010. Celerant is now awaiting confirmation that the company are prepared to implement the plan and to understand what support they require. RESULTS Celerant confirmed that in excess of €26m savings were achievable through a combination of early retirements and cost-savings from better processes and the removal of duplicated effort. •Celerant also identified a more testing savings target of €48m and defined a high level implementation plan to achieve this. •The client was impressed by the work and confirmed that Celerant’s analysis had galvanised the top team into action and agreement around the necessity for change.
Aerospace & Defence
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Driving Results All thoughts must be distilled into action and action that brings results.
IF YOU MAKE APPAREL FOR SURGEONS, YOUR OPERATION HAS TO BE ABSOLUTELY SPOT ON. When Alexandra noticed a decline in profits and growing pressure to satisfy customer needs, Celerant was brought in to help. The objective? Improve the value chain.
anting to be No.1 in any business is a powerful motivator for change. So Celerant’s experts quickly diagnosed the main areas where Alexandra could improve, and then designed and implemented a comprehensive, rapid results Change Programme across all major business functions, including Sales, Customer Service, Purchasing & Supply Chain and Accounts Receivable.
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And start to reposition Alexandra as the UK’s No.1 Workwear Apparel company.
‘ People within the business have been well engaged throughout the project and their opinions and ideas have frequently been incorporated. The Celerant team were very flexible in their approach, however they ensured that we stay focused on our goals, even during tough times!’ Tim Gifford, CEO Alexandra
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A customer-centric programme to shape the future Working closely with the client team, Celerant focussed the new programme on 3 areas: One Shared Service Centre: To improve their interaction with customers, the Sales and Customer Service Teams needed to work together much more effectively. So Celerant consolidated 5 sites into one Shared Service Centre and completely redesigned their organisational structure, management systems and operating procedures. The improvements were immediate. Improved Cash Management: There was also a strong need to reduce both outstanding debt and slow and non-moving inventory, so a Rapid Cash Release programme was set up and a working capital management process designed and implemented. Improved Supply Chain Management: To get things moving more smoothly across the entire
supply chain, Celerant designed and implemented a new Production Management Forecasting System that included a new organisational structure and clear roles and responsibilities. It rapidly led to a clear visibility of business performance across all major functions. A Closework® Partnership Celerant used Closework® to coach and train Alexandra’s people in the new ways of working and to ensure they took ownership of the changes, so that together they could build a strong foundation for their 2010 strategic goals. The Client now believes it is ideally positioned to achieve its new performance targets and confident that its new ways of working are sustainable through any challenges that lie ahead.
SUCCESSFUl OPERATION SUCCESSFUL RESULTS • Over £6.9m business benefits from a new Shared Sales & Customer Service design structure, reduced slow and non-moving inventory and a significant improvement in overdue debt levels • A significant increase in customer satisfaction • A reduction in support function volumes due to a ‘Right First Time’ mentality
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
The Burning Platform: Don’t get caught on the wrong side of change Celerant Consulting is sponsoring a series of reports by The Economist Intelligence Unit on the major challenges facing business today. The latest is The Burning Platform: How companies are managing change in a recession. n order to assess the degree of change that companies have been experiencing since the onset of the economic crisis, and how they are handling its internal consequences, the Economist Intelligence Unit surveyed over 500 executives
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in Europe and the US in July-August 2009. Many firms find this an inauspicious environment in which to attempt fundamental change in processes, behaviours or structures, for fear of subjecting the organisation to even greater strain. Others, however, see the current crisis
as a unique opportunity to achieve just that. According to Harvard Business School professor John Kotter, the reason many change initiatives are unsuccessful is that they fail to establish a sense of urgency. The current economic crisis provides the perfect burning platform.
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REPORT CONCLUSION:
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Many businesses are certainly using the crisis
executives say half or more of their change
to their advantage, questioning old assumptions
initiatives have succeeded in the past 5 years.
In the recession of 2000, Johan Stael von
and using the burning platform to drive through
Holstein, then CEO of Letsbuyit.com, told The
change. And the news seems to be encouraging.
Employee resistance remains a constant challenge, but change projects mainly seem to fail because
Sunday Times newspaper, ‘This is a bad time Despite the previous 5 years showing a dismal
managers do not set clear objectives and
record of change implementation, most executives
achievable milestones. Perhaps because this is
Mr Holstein could have been speaking today.
in our survey believe that change at their
not deemed to be the most taxing part of a change
This recession has left no industry untouched
organisation is being handled well. There is a
initiative, it can be overlooked or rushed.
and, as our survey shows, no function untouched.
danger, however, that firms are using the crisis
for people who don’t like change.’
There is an unprecedented level of
to launch change initiatives too rapidly, with
If the success rate of Change Programmes is
too heavy a focus on short term objectives.
to improve, more time should be spent in the planning of projects, in order to ensure that the
organisational change. While the winning of hearts and minds is
objectives are understood by all stakeholders
Mr Trevor of Judge Business School describes
consistently cited as the most difficult aspect
and the milestones are attainable. The crisis
the degree of change as ‘quite humbling and,
of change, many firms must be achieving just
may have produced a sense of urgency, but a
at the same time, also quite exciting’.
this, judging by the finding that over 50% of
steady hand on the tiller is as critical as ever.
Economist Intelligence Unit To read the first report in the series: A Change for the Better - Steps for successful business transformation, go to celerantconsulting.com/ieu/change
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
In a world where 75%* of Change Initiatives fail
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% Celerant are so confident of delivering significant financial and operational results against client agreed targets, that we’re prepared to put some of our fees at risk against non-delivery.
of Celerant Programmes succeed. **
*The Economist Intelligence Unit global survey in 2009. **Based on payment of client success fees.
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Driving Talent Success always demands a greater effort.
UNLEASH THE INNER POWER OF YOUR WORKFORCE
The global business community is in the midst of an economic and demographic shift that is forcing companies to reshape the way they operate. Matthew Marciniak, Director of Strategy and Business Development, Celerant Consulting Americas, has produced The 2010 Workforce Impactability Study that demonstrates that adding value to employee contributions makes a huge difference.
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ith the emergence of economic powerhouses like China, India and Brazil, traditional Western giants are having to adapt to keep pace, so squeezing the most out of existing infrastructure has become a high priority. Reducing headcount is an obvious route, but Leaders sometimes underestimate the debilitating consequences of downsizing. They can put their company in a much stronger position by focussing instead on IMPACTABILITY - employing efficient levers that increase the value of workforce productivity, with no capital investment.
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Non Value Activity versus Value Activity Covering the period from 2007 to 2009, one of the most critical business cycles in recent history, the 2010 Celerant Consulting Impactability Study analysed the direct activities of 208 operators and supervisors in 4 different industries on a day to day basis. After assessing 11,000 work hours, common themes emerged by comparing time spent on activities that add no value (NVA) to the sale price of a company’s products or services, with those that do add value (VA). A third category was also considered, as time must be attributed to activities that are ‘non-value adding but required’ (NVAR) - for example, employee breaks.
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Impactable. Time spent correcting human error, attending unnecessary or poorly organised meetings, travelling and awaiting developments or approvals before taking next steps, can be condensed or eliminated with the right processes in place. There are 3 main areas that lend themselves to improvement: 1 Extract far more value from supervisors The study showed that operators generate a stunning 50% more value than supervisors. Much of this is because operators are in the trenches, and very little of their time is spent away from product development and delivery. Even so, that separation in NVA means that operators are 5.43 times more likely than supervisors to participate in focused, valueadding tasks. However, its encouraging to note that 43.5% of a supervisor’s daily work load can be effectively Impacted. Companies must take a closer look at supervisory activities and determine which portions of the day can be altered to make more effective use of their time. This means examining specific roles and ensuring that the right employees are performing the right tasks. Loosely defined roles and ineffective practices create a frustrating daily work experience with a great deal of lost time. Implementing a simple architecture with clear accountabilities is the first step in breaking this cycle.
Value Assessment by Major Industry ENERGY HEALTHCARE & LIFE SCIENCES
17% 27%
57% 56%
2% 17%
CHEMICALS
44%
52%
3%
CONSUMER STAPLES
50%
47%
3%
0% 20% 40% 60% 80% 100%
VA
NVA
NVAR
In all 4 industries surveyed Value Add activity accounted for just 50% or less of time spent on the job. Industries like Healthcare and Chemicals may be exposed to greater bureaucratic hurdles that direct more hours to approval processes, but there is no question that every industry can reduce costs by refocusing the contribution of its workforce. Improve the process and improve the operation Although the study demonstrates that NVA activity is extremely high, much of the waste is
2 Get it ‘Right First Time’ A tremendous amount of time and resource can be saved by correctly performing assigned tasks. No product is lost, no post-mortem is necessary to determine where the process broke down, and perhaps most importantly, related elements of the organisation can move forward uninterrupted. The study shows that the single most wasteful activity is rework, but as the root cause of rework is normally human error, it’s the most Impactable. Putting management control processes in place that open up communication is one step towards limiting rework. By getting the right information to the right people at the right time Leaders are better equipped to make decisions that drive Continuous Improvement. 3 Promote greater end-to-end understanding Throughout the study, NVA issues were stronger the further employees were from customer contact. This was especially true for companies that operate in silos with a focus on departmental performance, instead of effectiveness across the organisation. A lack of unilateral cohesion brings greater risk not
only for errors, but errors that often go unchecked until they have set back the whole operation. A holistic perspective and process allows management to make the right decisions, improves communication and reduces the negative effects of errors from one department to the next. In addition, a team that understands its contributions and feels connected to the entire business is more motivated to deliver results. Immediate benefits are within reach Enacting these 3 changes to impact NVA activities will substantially improve processes and reduce short term costs. The typical operator observed during the study had an average day comprised of 49% NVA activities. Assuming an annual salary of $50,000 ($24.04 per hour), the survey indicates that 3.92 hours of a standard 8 hour day or 2.45 days per week are being spent on NVA activity, resulting in an average employer cost of $24,501 per employee on an annual basis. However, 56.6% of the NVA activity of operators is Impactable, which translates into savings of $13,867 annually per operator. Given this information, it’s striking that in a separate 2009 report from the Economist Intelligence Unit and Celerant (The Burning Platform: How companies are managing change in a recession), only 22% of executives surveyed indicated that they implemented a change in business processes to offset the effects of the down economy. Both studies highlight the importance of having a sustainable business strategy that will create short term financial results, while propelling the organisation to long-term success. Altering processes to support this strategy often calls for a concerted change management effort, an initiative whose success rests with communication, measurement and accountability. Winning the hearts and minds of the entire organisation is crucial, so to promote buy-in, foster positive change and create a sense of unity it’s vital that companies: • Articulate a vision • Share ownership and establish financial Key Performance Indicators • Monitor and communicate progress to encourage ongoing buy-in. Change is always a difficult undertaking, but Celerant’s 2010 Workforce Impactability Study demonstrates the key way forward for most companies is to unleash workforce potential.
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Driving Change Change is the constant, the signal for rebirth, the egg of the phoenix.
C-Cube A Unique Club for Masters of Change
The Celerant Change Club brings together professionals in Change Management to share experience, ideas and ambitions.
hange Management is a major strategic issue for companies. It’s a subject that spans the spectrum of society from business professionals, to academics to journalists and other influencers. It’s also what Celerant Consulting has delivered for many of the world’s top companies over the past 23 years.
C
It was therefore a natural step to create C-Cube, a community of change agents and the perfect forum where Change Managers from both multi-national corporations and medium sized companies can share their ideas and issues with members of Celerant’s Operations teams.
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Members meet at quarterly roundtables and the topics under discussion include: The Mechanisms of Change, The Dynamics of Change and The Impact of Change. Interactive workshops have also been set up where Change Managers work together to pool their experiences and best practices. The ambition is to issue a comprehensive report ‘Change: From Ideas To Reality’ written and edited by C-Cube members. C-Cube promotes a culture of ‘step back’ in an area where constant adaptation is needed, enabling continuous improvement in the implementation of change and the opportunity for Change Managers to develop personal awareness and cement their credibility as leaders of internal change.
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Tanguy Appert Project Director The Dow Chemical Company
‘Being a C-Cube member is really enriching. All members are involved in change initiatives, sharing the same sense of urgency and pressure. The Club enables us to take distance and time to think about the strategic aspects. It helps us dealing with the high level of complexity of a Change Management Programme. Talking with peers from different sectors gives me a unique chance to benchmark my personal approach and find good ideas to reinvest in my company.’
Nicolas Orfanidis CFO, Rail Automation Business Unit Siemens Transportation Sytems
‘Thanks to the Club I meet different profiles of Change Managers. We can address the same Change Management issues through different aspects. This is a relevant source of inspiration and a perfect environment to challenge what makes a success or failure of a Change Programme. It gives us the time to re-think our strategy or approach and the elements to take right decisions.’
Isabelle Domergue Change Management Officer Areva Plants
‘We improve ourselves when we talk to our peers. This is especially relevant for Change Management as we engage the human part of a company. Change is science of the alive. In this Club, I get new and fresh ideas on change. We all want to learn from each other and get pleasure to meet other Change Managers. We discovered we have the same issues and don’t feel alone. Respect, Humility, Passion and Conviction are our common values.’
Régis Brachet Supply Chain Manager SKF
‘Above all, I think the Club provides a highly enriching opportunity for experience sharing with professionals facing similar situations. We also share our best practices concerning complex issues, which helps us to advance in our business. The Club broadens my vision of things, as it helps me take a step back from the day-to-day.’
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Americas + 1 781 674 0400 Belgium + 32 (0) 2 762 52 38 Denmark + 45 35 45 90 01 Finland + 358 10 396 8800 France + 33 (0) 1 56 69 53 00 Germany + 49 (0) 211 58 33 00 33 Netherlands + 31 (0) 20 570 5400 Norway + 47 22 43 29 23 Sweden + 46 (0) 8 670 6579 United Arab Emirates + 971 (0) 2 406 98 77 United Kingdom + 44 (0) 20 8338 5000
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