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BASF’s SCM Learning System. Southeast District Meeting February 08-09, 2008 Alan L. Milliken CFPIM CIRM CSCP. Value-Based Management Approach. The company’s definition of success will define the contents of the learning system.

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basf s scm learning system

BASF’s SCM Learning System

Southeast District Meeting

February 08-09, 2008

Alan L. Milliken CFPIM CIRM CSCP

slide2

Value-Based Management Approach

The company’s definition of success will define the contents of the learning system.

slide3

Where does Supply Chain Capability Fit in the Operations Planning & Execution Model?

Identification of Customers, Products, Competition, Socioeconomic Environment

Market & External Environment Analyses

Overall missions & goals of the Organization, Recognition of Distinctive Competencies.

Corporate

Strategy

Must develop the supply chain expertise required to plan & execute strategy.

Competitive Priorities(Cost, Quality, Time, Price, etc..)

Future Direction (Global Strategy, New Products & Services, etc…)

Capabilities

current

needed

plans

Functional Area Strategies

Finance

Marketing

Operations

others

Source: Operations Management, Fifth Edition, Krajewski & Ritzman

slide4

BASF’s Vision 2015

Form the best team in theindustry

Help our customers to be more successful

Earn a premium on our cost

of capital

Ensure sustainabledevelopment

None of these strategies can be achieved without competent employees who have been provided the necessary capabilities (behavior, knowledge, & skills) to succeed.

slide5

Value-Based Management Concept

Value can be created by:

  • increasing Profit and/or
  • reducing capital employed(e.g., inventories, receivables)

Profit

Reducingcapitalemployed

Source: Kurt Bock – Chief Financial Officer – BASF Group

slide6

Who in the Organization Can Create Value?

All employees can create value by optimizing the value drivers in their day-to-day business, e.g., by:

  • increasing sales through higher prices and/or sales volumes
  • reducing costs
  • optimizing inventories and receivables
  • using production plants optimally

Source: Kurt Bock – Chief Financial Officer – BASF Group

slide7

Value Creation Driver Tree

Value Drivers

  • Pricing
  • Product mix
  • Business model
  • Innovation (product and business models)

+

Sales

revenue

Profit

  • Variable manufacturing costs
  • Raw materials costs
  • Shipping costs
  • Packaging costs
  • Transport costs

-

Variablecosts

EVA after

costs of

capital

  • Fixed manufacturing costs
  • Process innovation

Fixedcosts

-

  • Inventories
  • Receivables
  • Forecast reliability
  • Payment terms/dunning

Working

capital

Costs of

capital

X%

  • New investments
  • Investments in expansions
  • Debottlenecking

Fixedassets

Source: Kurt Bock – Chief Financial Officer – BASF Group

slide8

Example: Supply Chain/Marketing & SalesCase study from a BASF business unit

  • Sustainable reduction in current assets by $120m (= ca. 25%)
  • Streamlining of product range
  • Forecast reliability
  • Batch size optimization
  • Simplification of global warehouse structures
  • Shorter payment terms
  • Improved Inventory Control

Sales

revenue

Profit

Variablecosts

EVA after

costs of

capital

Fixedcosts

Working

capital

Costs of

capital

Fixedassets

Source: Kurt Bock – Chief Financial Officer – BASF Group

slide10

Adding Value through Individual Competency

The “Best Team” can be built by fostering the use of personal and professional competencies. Competencies describe the personal behavior, skills, and knowledge of a person. Competencies differentiate individual performance and contribution to the team. There are two types of competencies:

Describe capabilities in a specific area of knowledge (e.g. Supply Chain Management) and are based on education & experience.

Refer to capabilities based on personality, personal trait, and values.

Success

Competencies enable employees to create value!

slide11

Examples of Personal Competencies

Improve your ability to guide and inspire employees to meet their maximum potential and the ability to work on a team.

Improve your ability to develop and maintain collaborative working relationships (inside & outside the firm) and express facts and ideas in a convincing manner.

Lead to better utilization of resources, improved decision making, more creativity, and the ability to manage change.

slide12

Sample Definition of a Personal Competency

Once the list of personal competencies is developed, a detailed definition of each is required. For example many supply chain roles require competency in “Analytical Thinking.”

  • Analytical Thinking is the ability to identify key issues and relationships, patterns and connections buried in a mass of data. A person in a job role requiring this competency should demonstrate:
  • the ability to break down problems and identify basic relationships
  • see inter-relationships in complex information
  • do complex analyses including “what-if” and “if-then” scenarios
slide13

Examples of SCM Technical Competencies

  • Information Technology
  • ERP System
  • Advanced Systems
  • PC Skills
  • SCM Competencies
  • Demand Planning
  • Supply Planning
  • Execution & Control
  • Inventory Management
  • Distribution & Transportation
  • Foreign Trade
  • General Skills
  • Continuous Improvement
  • Project Management
  • Contract Management
  • Data Analysis

Technical Competencies describe capabilities in a specific functional area and are based on education and experience. Each operational function must define those Technical Competencies needed to successfully implement their strategies.

slide14

Define Levels of Technical Competency

Once Technical Competencies are identified, definitions of progressive levels are needed to define specific job requirements.

  • Competency:Business Applications Knowledge – ERP System
  • Level 1: Beginning
  • Completed ERP Overview Training for SCM
  • Know how and where to find and use ERP tip sheets
  • Can use ERP online help functions
  • Understand basic system operations and/or commands within ERP System
  • Can modify a user profile
  • Know how to enter master data in your area of responsibility
  • Understand how others are impacted by your inputs into the ERP System
  • Can enter a Help desk ticket for the ERP System
slide15

Define Levels of Technical Competency

(Continued)

  • Competency:Business Applications Knowledge – ERP System
  • Level 2: Contributing
  • Can use the ERP System to support daily job activities
  • Know how to use display and reporting functionalities to find information outside your immediate area
  • Understand how to maintain material master data and implications for other functions
  • Can identify and resolve routine errors in configuration and data entry
  • Know basic configuration settings and how to modify these to meet business needs
  • Make suggestions on how to use the ERP System more effectively
  • Monitor and provide feedback regarding how well the system is being used
slide17

Major Components of the Technical Competency Curriculum

APICS

Certified in Production & Inventory Management (CPIM) is a BASF global standard for supply chain planners (e.g. Master Schedulers, Demand Planners, Material Planners, etc..). The five CPIM modules are available via the on-line Supply Chain Academy, through local APICS chapters, and through self-study. Certified Supply Chain Professional (CSCP) is recommended for those who already achieved CPIM Certification or persons in supply chain functions other than production & inventory management who meet the eligibility requirements.

SAP R3 Training

SAP specific concepts, processes and transactions training is available via the SAP Training website.

Supply Chain Academy (SCA)

SCA is an on-line education & training tool used at BASF. It contains approximately 200 on-line courses including the APICS CPIM body-of-knowledge.

In-House Classes

BASF offers in-house classes that focus on supply chain management at BASF in SAP R3.

slide18

Strategic

Management of Resources

Master

Planning

of

Resources

Detailed

Scheduling

&

Planning

Execution

&

Control

of

Operations

Philosophies Strategies Targets

Product Demand

Material Plan

Internal Resource

Capacity Plan

External Resource

Supplier Plan

BASICS of SUPPLY CHAIN MANAGEMENT

APICS CPIM House of Knowledge

slide19

Typical Education Approach

Master Planning of Resources

F

O

R

E

C

A

S

T

I

N

G

S

&

OP

M

A

S

T

E

R

P

L

N

G.

Strategic

Plans

Financial

Plans

Business

Planning

Sales & Operations

Planning

Rough-cut Capacity

Planning

Demand

Management

Master

Scheduling

APICS CPIM Approach

The CPIM program emphasizes process including integration points, measurement & feedback, and business specific application.

slide21

Sample of Supply Chain Academy (SCA) Courses

Sales & Operations Planning

SCA Sales and Operations Planning Concepts

(MFG107)

Self

-

Study

.5 Hour

l

The sales and operations planning process is impacted by various

elements of the business

environment, integrates the multiple plans of a business, and pr

ovides direction for subsequent more

detailed and near

-

term planning. This course explores the concepts that impact the

sales and operations

planning process and the ways that the process can be adapted to

fit various environments.

SCA Sales and Operations Planning Process

(MFG108) Self

-

Study

1 Hour

l

This Online Self

-

Study course explores the five primary steps in the sales and op

erations planning

process. It also discusses the roles and responsibilities of ind

ividuals involved in each step.

SCA Developing and Validating the Production Plan

(MFG201)

Self

-

Study

1 Hour

l

The production plan is a key output of the sales and operations

planning process that sets product family

production volumes for all subsequent priority planning processe

s. This course explores the

development and validation of the production plan and the measur

ement of the performance of the

production planning process.

S&OP Basic Concepts

slide22

Sample of BASF In-House Classes

Sales and Operations Planning

  • Integration of Demand Planning (BASF-SOP-C1) 1 Hour
    • Review the output of Demand Management process flow. Determine the reasons to integrate the sales forecast and the appropriate levels. What are product families? How should they be applied? Definition of Roles and Responsibilities are established. SAP interface highlights – key transactions, and screen identification.
  • Integration of Supply Planning (BASF-SOP-C2) 1 Hour
    • This module covers the development of the Operations Plan – Volume and Rates at the family level. The technique of applying Rough-cut Capacity Planning is presented. Definition of Roles and Responsibilities are established. SAP interface highlights – key transactions, and screen identification.
  • Pre-S&OP: Supply / Demand Balancing (BASF-SOP-C4) 1 Hour
    • This class covers the balancing of operations to that of Demand / Supply strategies. Review the importance to identify resource conflicts and identifying those areas where agreement could not reached. SAP interface highlights – key transactions, and screen identification.

How to Do S&OP at BASF in SAP

slide23

BASF 2015

HPO 2006 Required Competencies

Training Available

Value Based Management (Learning Portal)

Earn a premium on our cost of capital

Business and Financial Acumen

Financial Essentials (HMMP)

Marketing Essentials (HMMP)

Focusing on your customer (HMMP)

Help our customers to be more successful

Customer Focus

Marketing Essentials (HMMP)

Marketing & Sales Academy

(to be launched in 2nd quarter)

Leading a team (HMMP)

Form the best team in industry

Leading Employees to Success/Teamworking

Keeping teams on target (HMMP)

Working with a virtual team (HMMP)

Ensure sustainable development

Environmental, Safety and Health Orientation

The Journey to EH&S Excellence (to be launched in 3rd quarter)

Harvard Mentor Management Program (HMMP) is used to support Global/Personal Competencies.

slide24

Curriculum for Technical Competencies

Once Technical Competencies are identified and defined, a curriculum must be identified and/or developed for each one. Below is a curriculum for Inventory Management.

***Note: Pre-requisite is APICS BSCM

slide26

Prioritize Competencies by Position/Role

In order to determine what education & training an employee needs, Competencies must be prioritized by job. Review of existing job descriptions, review of current objectives for the position, and surveys of experts, incumbents, and leaders can be used to prioritize Competencies.

Note: Some competencies are company specific (e.g. Product Knowledge, Manufacturing Knowledge, Internal Business Knowledge, etc..) and education & training must be developed in-house.

slide27

Evaluate Individual Needs & Develop Plans

Self Evaluation:

plus

Performance & Development Review with Your Leader

= a Plan

slide28

Example of an Individual Plan

Note: The Cost Center Leader must approve both the content and cost of each Plan in their group.

slide29

Assessments of Learning – Key Points

  • All courses should include post-assessment (e.g. review quiz, simulation of knowledge, etc..).
  • Major courses (e.g. >4 hours in duration) should also include pre-assessment to help in determining focus areas and periodic reviews to reinforce learning throughout the course.
  • Thresholds to pass internal assessments (not external certifications) should be set relatively low to motivate and reward participation.
  • Assessment results should always be kept confidential and only the highest score should be stored when multiple attempts are required.
slide30

Key Performance Indicators (KPIs)

KPI’s can be used to measure participation and confirmation of learning. Examples include:

  • No. of Education & Training Hours Taken per Year
  • No. & Percent of Employees Participating
  • Number of Exams Passed
  • Certifications Received
slide31

Measuring ROI on Learning Efforts

Note: It is not easy to tie individual learning directly to company performance, particularly given the limited span-of-control that most employees have and the fact knowledge is only one key factor in success. However, major education & training programs should result in overall improvement as well as individual improvement. Below is an example:

  • Actions Taken:
  • all Planners, Schedulers, and Buyers received APICS CPIM Education & Training
  • New knowledge was used to establish Inventory KPI’s for each group
  • New knowledge was used to improve inventory control processes and use of ERP system (e.g. update planning factors, discontinue spreadsheets, etc..)

Results:

slide32

Identify & Define Global (Personal) Competencies

Identify & Define Technical (SCM) Competencies

Prioritize Competencies by Position (4-6)

Develop Curriculum by Competency

Assess Individual Needs based on Position

Develop Individual Education & Training Plans

Monitor Progress and Provide Feedback

Summary of the Learning Process

slide35

APICS CPIM is a Global Standard at BASF

CPIM Certifications as of September, 2007

slide37

APICS CPIM Program in NAFTA (2008)

  • APICS CPIM Program to be offered in-house via intranet: - New SC Planner position requires APICS CPIM at level 3 & above - Acquisitions resulted in addition of over 60 Planners-Schedulers
  • Classes to be taught by Alan Milliken; Examples used in class will come from BASF and SAP R3.
  • Class enrollment for first class (Basics of Supply Chain Management) was 112 employees (64 from acquired businesses and 48 from legacy businesses)
  • Class enrollment for second class (Master Planning of Resources) is 136 employees.
  • Plan is to complete all five modules during next 15 months.
slide38

Status of SCM Learning at BASF

  • approximately 90 APICS CPIMs and 40-50 in progress globally
  • Thirteen Certified Supply Chain Professionals (CSCP’s)
  • Individual Training Plans in place for approximately 75% of SCM employees in NAFTA
  • usage of e-Learning tools has increased with 80-100 employees taking online supply chain courses globally each month
  • global roles and associated core competencies developed and agreed to
  • enhanced curriculum including BASF specific courses available
  • Over 100 employees enrolled in Advanced classes on how to do SCM at BASF in SAP R3.
  • 192 APICS Members in NAFTA via Enterprise Membership
slide39

BASF is Committed to Supply Chain Excellence

Award for Outstanding Supply Chain Performance

This year is the first of three consecutive years BASF is awarding the "Supply Chain Project of the year". The award is given for innovative solutions in supply chain management and outstanding performance in implementing supply chain concepts. Chief Financial Officer Dr. Kurt Bock is sponsoring the award. All employees in operational, service and functional units within the BASF Group – up to and including the director's level – can apply. Only teams can submit projects. Applications can be submitted through the Head of Business

slide40

2003-2006 BASF SCM/Logistics Competency Related Activities

Organization:

  • NAFTA Learning CoE Team formed (One representative from each function)
  • Global SCM Competency Team formed (one representative from each Region)
  • NAFTA MM Education & Training Team formed
  • NAFTA MM Job Structure Team Formed (HR, Bus. Log., Corp. Log)

2003

2004

2005

2006

Highlights:

  • Competency based Training Plans in place for approx. 75% of NAFTA Logistics Employees
  • Enhanced Technical Competency Curriculum under development for MM. (IT, Logistics)
  • MM Job Structure under review.
  • MM Job Structure (SC Plnr.) Finalized Approved.
  • MM Jobs Technical Curriculum& Courses Developed
  • NAFTA Logistics updated competencies by job role. Curriculums were developed for Technical Competencies
  • Global SCM Competency Team agreed upon standard roles & associated competencies. SCA adopted globally.
  • NAFTA Learning CoE developed curriculum for Global Competencies to be supported by HMMP
  • Supply Chain Academy (SCA) piloted globally. Global Team Began discussing PCDC effort.
  • APICS CPIM adopted Globally
slide42

Practice Exercise: Competencies by Job

SC/Logistics Mgr. – the person responsible for planning, organizing, and controlling supply chain/logistics activities.

Master Production Scheduler – the person charged with establishing, managing, reviewing, and maintaining a master schedule.