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In This HP Cloud Source Blog, HP Expert, Christian Verstraete will examine cloud computing challenges, discuss practical approaches to cloud computing and suggest realistic solutions.

Could cloud improve operational excellence

Operational Excellence.jpgLast week, I had the opportunity to speak at the Opexcon conference in Prague. The subject of the conference was sustainable operational excellence. I ended up being the last speaker of the conference, as I focused on the use of technology as a vehicle for operational excellence. I highlighted that technology can really help in two areas. First, by becoming the reservoir of real time information, it provides the company with an up to date status of all areas of the enterprise and its eco-system. Second through the use of automation, the execution of routine tasks can be automated, ensuring processes are performed in a repeatable and compliant way.

 

Let me describe in some more details what I mean by both of those points and give you some examples.

 

Building eco-system visibility

When talking about operational excellence, lea and six sigma often appear in the discussion. Through an in depth understanding of the operations, waste can be spotted and removed. In its original implementation, Toyota recognizes seven wastes. They consist of unnecessary transportation, inventory, motion consisting of damage inflicted to equipment or personal during unnecessary movements of products, waiting time, over-processing (more work done than necessary or use of overqualified components), over-production, product defects.

 

The easiest way to spot those is to see them happening in front of you. Lean manufacturing is all about walking the factory floor asking why things are done. It works and it works well. Unfortunately, making a factory, or by a matter of fact, any department in a company lean, is all about sub-optimization. And here we need to pay attention. Let me take the example of automotive OEMs. As Toyota became successful in Europe and the US, and as the book “the Machine that changed the World” became a best seller, most European OEMs decided they needed to follow course. They became extremely lean, but did it by pushing inventory out to suppliers (using the just in time approach) and finished goods inventory to the channel.

 

I as an end customer will have to pay for the inventory, regardless of which member of the eco-system is actually owning this inventory or one of the players will go bankrupt. So, fundamentally, from an eco-system perspective, they haven’t changed anything operationally in the supply chain.

 

The problem is, it’s easy to spot waste in the factory, it’s more difficult to do so in a supply chain. And here is where technology overall and cloud in particular can help. Indeed, what is required is visibility. Seeing what happens, so we can understand how things can be improved.

 

Building such visibility requires three things. First there is a need for trust between the partners in the eco-system, second, there is need for a common yardstick so numbers have the same meaning for all, and third, there must be a mechanism through which information from all corners of the eco-system are consolidated for analysis.

 

The most difficult is building the trust. Indeed, companies have treated their suppliers adversely for years. Even if they now change course, it will take time for them to build that trust. One way they can do it is by starting with sharing information (for example forecasts) with their suppliers, and explain them why they take the decisions they take. The result of trust is that the supplier will be ready to share information, and that is critical to gain the visibility.

 

Once that far, it is key to ensure a consistent way to share the information. This require consistent KPIs. The easiest way to do this is to use a reference framework identifying what measure is taken when. As the examples I use are related to eco-systems, I’d like to propose the use of the Supply Chain Reference Model (SCOR) pulled together and maintained by the Supply Chain Council. They provide close to 300 KPIs related to every step in the supply chain. They are documented, and more importantly, the way to measure them is clearly defined. Using such model avoids the sterile discussions around what to measure. It’s a standard, it’s not developed by one of the parties in the eco-system, so is often easier to swallow.

 

If we now have the trust and the information that needs to be gathered, what we are left with is gathering the information and making it available to all parties. Here comes a small caveat. Some members of the eco-system may be competitors in other eco-systems, so, they may not wish their counterparts to know the details of their operations. So, it’s important to have a platform that is multi-tenant, in other words, where people can be shielded of from each other.

A cloud environment in general, and a community cloud (as defined by NiST) is an ideal platform to implement such environment. Most often it is maintained by a neutral party, not by the OEM. This increases the trust in the platform. Also, cloud technology can ventilate the cost of the platform in line with the actual consumption of the partners. Who uses it most pays most.

 

Once the data is available, real time visibility can be provided. This gives practitioners the opportunity to analyze the actual behavior of the eco-system and allows them to improve the operations to gain operational excellence. But by keeping the data and analyzing it over time, the dynamics of the eco-system can be discovered. 

 

In the old days, in process control, keeping the data over longer periods of time was called “The Historian”. The name is actually quite well chosen as it gives you a history of how things evolve. You decide to put a buffer stock somewhere in the supply chain. How large does that buffer stock need to be. Well experience (often resuming to … we have always done it that way) has resulted in you putting the safety stock at X. Frankly, do you really need that quantity? How often do you get to the bottom of it or nearly? Seeing the trends will allow you to make the proper decision. This is just an

example, but there are plenty of these.

 

It also allows you to judge your suppliers. You have service level agreements, well now you can monitor how often those are breached over time and potentially take action.

 

But that is not all, understanding the dynamics of the eco-system allows us to model the eco-system and simulate scenarios. How robust is my eco-system. How can I make it more robust, what do I need to change? If I decide to move a factory or to change supplier or transportation route, what are the implications? Again, you understand where I’m going.

 

Combining the three allow you to better serve your customers while building a more robust eco-system, optimized from an operational perspective. Isn’t that operational excellence?

 

Automating routine tasks.

Operational excellence includes both the quality of the operations as well as its repetitivity. Many business processes are performed many times a day and use information technology in support of the process. Dividing the process in its elementary steps and attach cloud services to each step in the process is an easy way to ensure consistent operations.

This can then be complemented with a workflow management system guiding the users through the steps in the process. It implies however a service oriented mentality both in the business and the IT teams, but once that has been built up, operational excellence can be achieved through automation.

 

I discussed elsewhere how an IT department can become a shared service center and what service dimensions it needs to implement. Assessing maturity and understanding how to evolve that maturity will help you in your quest to operational excellence.

 

Conclusion

In the actual presentation I gave some more examples of where and how companies can take advantage of technology to improve the way they run their operations.  It’s in creating a self-service organization where users can request specific services, whether these are related to understanding the information available or performing a business process, that an enterprise develops the responsive environment needed in today’s business world. So, what are you waiting for to exploit technology to improve your operations?

 

If you are interested in the actual slides I used during the OpexCon presentation, you can find them on slideshare.

Labels: cloud| CloudSource
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About the Author
Christian is responsible for building services focused on advising clients in their move to cloud, particularly from a business process and ...
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