Case Study

Identifying & Defining Process Improvement Opportunities at an international building materials and construction company

Project
Summary

A 6-week proof of value project was successfully completed at an international building materials and construction company. This project utilised BPM-D’s rapid process improvement approach to setup and gain insights using Signavio’s Process Intelligence Tool Suite. The results highlighted automation potentials, identified process bottlenecks and provided insights into the root causes of underperforming KPIs.

Organization
Background

A global leader in the building materials business, with 79,200 members operating in 30 countries. This organization supplies materials such as cement & asphalt whilst also producing construction accessories and architectural products.

The organization was able to establish 21 key performance indicators across it’s procure to pay process. These KPIs prompted areas which required a deep dive analysis both within procurement and accounts payable.

Business
Challenge & Process Mining Opportunity

The Procure to Pay process was chosen because it had a noticeably high average cycle time despite having significantly greater resourcing levels compared to the industry benchmark. Resource rebalancing was high on the senior board’s agenda; however, they did not know the root causes of the inefficiencies which were causing the high cycle times and resource costs.

Deploying process mining provided the company with several valuable opportunities. These included:

  • Process bottleneck identification.
  • Conformance checking against the ‘As-Is’ process.
  • Regional performance analysis which can be broken down to plant level.
  • Evaluation of rework root causes.
  • KPI monitoring for procurement and accounts payable.
  • Automation potentials to help reduce repetitive work (and associated errors), as well as incidences of non-compliant behaviour.
  • Ability to harness existing internal data to improve compliance-related decision making by highlighting and monitoring risk and compliance issues e.g. duplicated invoices.
  • Data-driven improvement plan which formed a valuable business case.

Our
Approach

The organization was able to establish 21 key performance indicators across it’s procure to pay process. These KPIs prompted areas which required a deep dive analysis both within procurement and accounts payable.

By using the process mining tool along with simulation, they generated the following key insights:

  • Calculated the three-way match failure rate as 28% and subsequently investigated the root cause of the failure: 82% of all 3-way match failures were caused by the Goods Receipt.
  • Investigated the cycle time impact of failed three-way matches: Unsuccessful 3-way matches had a P2P cycle time which was 22 days greater than successful 3-way matches.
  • Analysed the cycle time effect of After the Fact POs: 
    • Reduces the procurement average cycle time by 7 days.
    • Increases the accounts payable average cycle time by 11 days.
    • 85% of After the Fact POs involved rework.
  • Investigated delivery delays: 71% of the urgent POs have a delayed delivery instance.
  • Highlighted key cycle time sinks: 8% of POs take longer than 2 days to be approved.

Average cycle time increased by 17 days when the Goods Receipt was recorded after the invoice was created.

The streamlined procurement flow decreased the procurement cycle time by 16 days however the overall cycle time for P2P was the same because it created more rework in the accounts payable side of the process.

BPM-D
Results

Key Insights

The organization was able to establish 21 key performance indicators across it’s procure to pay process. These KPIs prompted areas which required a deep dive analysis both within procurement and accounts payable.

By using the process mining tool along with simulation, they generated the following key insights:

  1. Calculated the three-way match failure rate as 28% and subsequently investigated the root cause of the failure:
    • 82% of all 3-way match failures were caused by the Goods Receipt.
  2. Investigated the cycle time impact of failed three-way matches:
    • Unsuccessful 3-way matches had a P2P cycle time which was 22 days greater than successful 3-way matches.
  3. Analysed the cycle time effect of After the Fact POs:
    • Reduces the procurement average cycle time by 7 days
    • Increases the accounts payable average cycle time by 11 days
    • 85% of After the Fact POs involved rework.
  4. Investigated delivery delays:
    • 71% of the urgent POs have a delayed delivery instance
  5. Highlighted key cycle time sinks:
    • 8% of POs take longer than 2 days to be approved
    • Average cycle time increased by 17 days when the Goods Receipt was recorded after the invoice was created
    • The streamlined procurement flow decreased the procurement cycle time by 16 days however the overall cycle time for P2P was the same because it created more rework in the accounts payable side of the process.

 

Increased Visibility of Process Performance

The various tools within the Signavio suite worked together to optimize our approach and the outcome of the project. The Signavio Process Manager simulation tool was used to test and prove the business case for improvement initiatives. Incorporating cost, time and resource figures into the process allows the user to simulate an As-Is and a To-Be scenario. This removes uncertainty and adds real weight to business cases. To enable the organization to continuously monitor their KPI’s, we utilized the Signavio Hub. The Hub’s ‘Live Insights’ feature lets users stay updated on key metrics such as the average procure-to-pay cycle time. This seamlessly connected the process repository to the process mining dashboard using operational insight elements. 

From
The Paper