Amusement Parks, Happy Hour and Lean Procurement - ESM ...
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Amusement Parks, Happy Hour and Lean Procurement
A word from our Sponsor
E&I At-a-Glance
E&I is the member-owned, not-for-profit sourcing
cooperative focused on education.
! Our na'onwide membership comprises approximately 4,000 colleges,
universi'es, and K-12 school districts
! We offer more than 100 contracts, 96% compe''vely awarded with
industry-leading suppliers
In 2015 Members:
! purchased over $2.5 billion in goods and services
! saved over $200 million
! received more than $14 million in contract rebates
A proud and committed partner of ESM Solutions
Our Suppliers
…and now back to our regularly schedued programing....
Our Speaker
Blake Reagan
Director of Procurement Services
The University of Tennessee
! Attorney; certified Lean Six Sigma Green Belt.
! 9 years of experience in government.
! Website: RFX-Pro.com
© 2016 ESM Solutions Corporation
Overview
Happy Hour & Amusement Parks
Intro to Lean Six Sigma
Basics of Queues and Queuing Theory
Negotiation: quick tips
Practical Lean Six Sigma techniques
Q&A
Quick note: this presentation is a high-level review of Lean and Six Sigma concepts.
Contact Blake for his recommended reading list.
What do amusement parks and happy hour
have to do with Procurement anyhow?
! Tactics very applicable to Procurement
! Queueing
! Optimizing scarce resources
! Common techniques you can glean from
the concept of Lean Six Sigma
Procurement
Why Change?
“The most damaging phrase in the English
language is
‘We’ve always done it this way!’”
~ Rear Admiral Grace Murray Hopper
Information Week
March 9, 1987
© 2016 ESM Solutions Corporation
Why Care?
" There are proven ways to improve.
" Improve quality, customer-service, reduce wastes, etc.
" Link operations (processes) to strategy.
© 2016 ESM Solutions CorporationNOT rival methods/philosophies
Lean SixSigma
© 2016 ESM Solutions CorporationWhat is a process?
" “A process is a transformation of inputs into outputs through a network of activities
and buffers, utilizing resources.”
Activities
Inputs Outputs
and buffers
© 2016 ESM Solutions Corporation“Lean”
" Some of the origins date back to
Henry Ford.
" Most current Lean principles were
born as the Toyota Production
System.
• Created by Taiichi Ohno shortly after
World War 2.
• Why the name change? Marketing!
“Having no problems
is the biggest problem
of all.”
~Taiichi Ohno
© 2016 ESM Solutions CorporationLean
" Lean:
• Maximizes process speed.
" Less time.
" Less effort.
" Lower costs.
• Focus on increased value for customers by improving
processes and eliminating wastes.
• Mostly associated with manufacturing, but applies to the
service industry, too! EPA and other government agencies.
© 2016 ESM Solutions CorporationLean Principles
1. Long-term philosophy and strive to be a learning organization.
2. Correct processes will produce correct results
(said another way: your processes drive results).
3. Eliminate wastes.
4. Build culture of continuous improvement (Kaizen).
5. Level the workload.
6. Build culture that stops incorrect work: build-in responsibility for quality at every step.
7. Build-in mistake proofing (Poka Yokes)
© 2016 ESM Solutions CorporationLean Principles
7. Standardized tasks.
8. Kanban and workflow management. (check out Kanban Flow!)
9. Reduce variability: standardized work and processes.
10. Go and see for yourself (Genchi Genbutsu).
11. Just-in-time (“J.I.T.”).
• Keep inventories very low
• Re-ordering system
© 2016 ESM Solutions CorporationLean
Gap between ideal process and current process
= waste
© 2016 ESM Solutions CorporationLean: The 7* Wastes
© 2016 ESM Solutions CorporationLean: The 8 Wastes
© 2016 ESM Solutions CorporationLean: At its core, what is waste?
* Anything that does not contribute to value-added work
from the customer’s point-of-view.
Two types of wastes:
" Type 1: necessary non-value-added activities, such as complying
with legal requirements (e.g. illegal immigrant attestation form).
" Type 2: unnecessary non-value-added activities.
© 2016 ESM Solutions CorporationSix Sigma
" Developed by Bill Smith at Motorola in
the 1980s.
" Jack Welch made Six Sigma a key
part of GE’s business strategy.
" In short, six sigma is about quality.
" “Variation is evil.” – Jack Welch.
© 2016 ESM Solutions CorporationSix Sigma
" a systematic approach to eliminating defects.
" Often relies on data-driven decisions.
" “A six sigma process is one in which 99.99966% of all opportunities to produce
some feature of a part are statistically expected to be free of defects
(3.4 defective features per million opportunities).”
" What is an opportunity? A small step.
For example building a house might have a million opportunities.
© 2016 ESM Solutions CorporationGE’s website
Critical to Quality: Attributes most important to the customer
Defect: Failing to deliver what the customer wants
Process Capability: What your process can deliver
Variation: What the customer sees and feels
Ensuring consistent, predictable processes to improve
Stable Operations:
what the customer sees and feels
Design for Six Sigma: Designing to meet customer needs and process capability
© 2016 ESM Solutions CorporationLean Six Sigma: Some examples
E&I’s contracts
" Are you really adding value by bidding everything? No.
" Great deals. Faster.
© 2016 ESM Solutions CorporationLean Six Sigma: Some examples
ESM’s catalogs
" Speed: eliminate the need to review repetitive purchases.
" Consistency: consistent pricing with your suppliers.
• Easier to do compliance checks for pricing.
© 2016 ESM Solutions CorporationLean Six Sigma: Some examples
ESM’s contract management system:
" “Re-ordering”
Departments are notified well in advance before a PO or contract expires.
• Levels-out the workload.
• Stable processes.
• Reduces audit risks.
© 2016 ESM Solutions CorporationLean Six Sigma: Some examples
ESM’s bid board
" Visual management: what’s being bid?
" Consistent process.
© 2016 ESM Solutions CorporationESM Catalogs
Links to negotiated rates for
airlines and rental cars:
• Reduce mistakes: end users
might forget to use a certain
corporate code.
• Ensure consistent pricing.
© 2016 ESM Solutions CorporationLean Six Sigma: Some examples
Poka Yokes: mistake proofing.
" UT’s “business
classification form.”
© 2016 ESM Solutions CorporationLean Six Sigma:
Some examples
Amusement Parks:
" Queue management with digital queuing.
" Reduces waiting!
Restaurants:
" Happy hours: meant to encourage customers to
attend at slower times, and pull those
customers from busier times.
" Not just for more profits, but to reduce waiting
for customers during busy times.
© 2016 ESM Solutions CorporationLean Six Sigma:
Some examples
Hotel check-in: scripted
" Consistent quality
" Contract Management Manual
Consistent negotiation
" Consistent language
© 2016 ESM Solutions CorporationLean Six Sigma: Some examples
Master Agreements:
" Reduced library contracts by over 70%
Framework orders:
" Microscopes: why bid these individually?
" Hotels.
© 2016 ESM Solutions CorporationLean Six Sigma:
Some examples
" Digital records: why keep so much paper?
• Digital signature: DocuSign
• ESM’s contract management module
has the ability to fully integrate with
DocuSign—an even leaner process.
© 2016 ESM Solutions CorporationItem Waits in
Processed
arrives queueUT Procurement Services “Fast Track” and “Slow Track”
Fast
Decision:
Entry approved
fast or
point
slow
Slow17 hours 2 1 3 1 1 4 3 2
10 hours; 7 hours
3 4 3
2 1 1 1 2But…
" Won’t adding more staff solve the problem?
• No! Sufficient capacity is necessary, but not sufficient, to good queue
management.
• Why do “big box grocery stores” have the “10 items or less” lanes?Fundamental queue formation:
" There is a right way and a wrong way to design a queue.
Worker
Entry
Assignment Worker
Point
WorkerNegotiation
" Can’t learn negotiation in an hour, much less a few minutes.
" Not about “dirty tricks.”
" Overarching principle: leverage matters tremendously.
" Social influence matters.
" Often overlooked or completely ignored.
© 2016 ESM Solutions CorporationNegotiation
" Well-trained salespeople know these skills, and you need to know when to spot them.
" Think back to the last really charismatic salesperson you encountered:
• Did they allegedly
" Grow-up in the same town as you? Or, did they visit that down and “love it?”
" Like the same clothing designer?
" Like the same food? Music? Vacation destination?
" Have a close loved-one with the same name?
" Compliment you?
" Make you feel immediately comfortable?
© 2016 ESM Solutions CorporationNegotiation
" Dr. Robert Cialdini’s 6 key principles:
1. Reciprocity
2. Commitment and Consistency
3. Social Proof
4. Authority
5. Liking
6. Scarcity
" Discussion of each
© 2016 ESM Solutions CorporationNegotiation
" Dr. Jack Schafer, The Like Switch
• Friendship formula
" Friendship = Proximity + Frequency + Duration + Intensity
• Body language and non-verbal communication
" Warm and cold body posture
© 2016 ESM Solutions CorporationQA
© 2016 ESM Solutions Corporation. All rights reserved.
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