# S02E07 - Profit - Play a kind of TETRIS® with your business or: digitally defragment your value chain to push customer satisfaction, revenue, margins, and speed to new heights

[00:00:00] Welcome to the supply chain dialogue season two, episode seven. I'm Daniel Helmig.

and I am AIMEE, the AI voice generated co-host of this show. This topic is fascinating, so I was eager to come back for this episode, hope Noah doesn't mind.

In this episode, we talk about defragmenting, your business via process mining. And I know, I know. Many of you are about to switch to a different podcast or the newest released Beatles or Taylor swift song, but humor me and stay on it for three more minutes. Allow me to tell you how I come to realize the benefits from process mining. And I will tell you a real story that might change your mind. From there it is then just a small step to help your company find ways to gain speed cashflow and profitability in days. Not months or years, any longer.

Now let's talk about what the fragmenting is. Do you still remember the act of defragmenting on your computer? Amy for [00:01:00] those less, it inclined working with iOS or I have computers with these SSDs . Please give us a short metaphor of what defragmentation is

No problem: Just think of your computer playing perfect tetris on your harddrive: Every gap is closed, and files and sections are packaged neatly together. When finished, your computer runs quicker - as it was designed to do.

Now what would happen if you could different meant your whole business? Finding gaps, rearranging processes into blocks. And getting your firm to run. As it is supposed to run fast, agile and even more profitable.

So, let me tell you the story of Nazir. A local country manager in a large firm doing precisely this.

Let's say two years ago. The company sales team in the, his country was constantly in arms since they were left in the dust by their competitors, products were arriving late on their shelves. And the replenishment time was absolutely miserable. Customers. We're fed up [00:02:00] and voted with our feet and walked away. Nazir, incentivized on sales was getting desperate. And by accident during coffee break with a corporate head of supply chain. Nazia learned about a new operations process that they were testing called process mining. Seemingly, they use an external software to automatically rummage through all databases and find gaps.

Delays. And circumvention of defined processes. And since we will talk about this briefly later in lean, you would call over the, of this muda. Which is Japanese for waste. Well with nothing to lose. And his job on the line. Nazir gave the needed instruction next day, already the corporate supply chain folks. ascended it on this country and had access to the local systems. They reviewed with the process mining software, every activity performed for the products. Two days later, just two days later. [00:03:00] The problem was found. Order entry or field sales personnel, or subjected to additional approvals. By two local managers in supply chain before audit execution could even commence. When questioned the managers argued, you know, we had issues in the past with wrong order entries by those. Sales folks. So we wanted to check first to get it right. Since we were understaffed. We believe that as long as we lock the orders in batches before the month and says report, no one would care. So all those were delayed internally by up to three weeks. And this in the business, but customers were counting hours to get the needed products.

The supply chain and country sales team immediately changed from pre to post control process. And which the order was now directly processed. Only one manager got the daily report. To validate the orders. And by the way, no problems were found. Since the delivery time from a regional warehouse was two days. [00:04:00] And the two to three weeks, all the entry process was now zero. The customers receive their products. Now about 90%. I say it again, 90% quicker than before. This improved, direct cashflow, and most importantly, customer buying behavior shifted. Which increased sales by 30% in just three months after the change. Later that year. Sales stabilized. Three times higher than before the change. Now having smelled the roses Nazir. Let the software run.

So all audit to cash processes and products. Discovering hundreds of gaps and broken processes that they're fixed relentlessly. But there, the story did not end. The following spring Nazir and his team were named at MIPS. So most improved players on stage before the global management team of the company. They had the highest sales and customer satisfaction increase ever [00:05:00] recorded in the company. After dinner that evening our Nazir. Also the most sought after conversation partner by all is. Other country and divisional sales colleagues. I learned recently that my friend Nazir is now the CEO of a successful company in his region. talking about career success through digitalization.

It seems, Process Mining is like digitalising Lean and Six Sigma - bringing them into the 21st century?

You nailed it. How many non-documented exception process are done by well-meaning employees daily in our companies without process mining. It isn't easy to tell, but since you brought up lean, let's use the decades of analog lean process analysis done by thousands of companies. On average value, add activities require only 20 to 40% of the fulfillment time. All systems can be processed mined.

All systems in your company do transaction journaling. Which maintains an audit trail for all [00:06:00] system activities and can be used for troubleshooting system analysis and security. This information can be critical for identifying issues or arrows tracking system performance and detecting security breaches, or unauthorized access. The application of process mining to increase revenues, margins and customers.

Satisfaction is sheer endless. All it takes is one. data lakes. Or data warehouses filled with all available data along the value chain or at least an ERP system. Something we already talked about in our season, one podcast, four and 15. Second. The right capability of personnel internal or externally hired. On the digital and analog side.

So I'm talking data scientists, machine learning, engineers. And process change experts. And three, the fitting process, mining software provider. Feel free to send me an email to [00:07:00] dialogues@helmigadvisory.com. And I will send you a list of companies. I think. All the most relevant today.

So every process you have in your company can be processed mind. If there is a computer system or server involved. Amy. You have a nice list propelled. Tell us all the processes you can process mine in a company.

Sure, let me go through them all: Planning and Performance Management, Record to Report, Concept to Launch, Campaign to Opportunity, Opportunity to Order, Order to Cash, Purchase to pay, and Hire to retire.

Many leaders. See the organization has a bunch of departments and responsibilities. But if you look at it from the end in mind and greetings, go out to Stephen Covey, wherever you are in the multi-verse, you understand the reality. Everything we do in a corporation is a flow. A flow of information. A flow of material. Uh, floor thoughts. Many of those I, in our age captured in systems.

Hence we can [00:08:00] dig in this fertile data, dirt to mine, the gold nuggets hidden. Okay. That was enough metaphors in one sentence. Since it fits well, let's get to a process that we used in season one, religiously to do the next steps. We will try to understand the status quo in your firm. We look at the size of the prize. And then set out. A path for the future state. So let's use our helmig advisory questionnaire to assess where you are on the excellence

spectrum of process mining.

Process mining software is utilised throughout our company, and management is trained to interpret the results and take appropriate action.

This is a very easy one. Either you do it or you don't do it.

We utilise cloud stacks such as Microsoft Azure for our products, customer interface, and internal operations.

Unless your whole company is running on just one ERP system. You will need a secondary data lake environment to be able to not only [00:09:00] process many individual systems, but as well, the whole process structure.

In other words, process mining gets you the highest benefits. If it transcends organizational boundaries and the insula system environment.

We have created new job roles for data scientists and machine learning engineers who can translate our data and process designs into the cloud computing platforms.

We talked about this in other podcasts before these folks are smart. Young and very experienced in the area. They know how I've a little yet about the world of the rest of us folks living the nightmare of day-to-day office in manufacturing and sales live. To let their brains and skills run wild.

They need to be co-located for a while with the rest of the organization, to feel the inertia of this ball that we are rolling up the hill every day. Then, and only then will you get excellent results from these people? There are many ways to get them initiated from circling departments throughout the [00:10:00] value chain or shadowing the journey of the product or service respectful from the customer in real life. It's just important to do it.

We understand the distinction between data, information, and insights.

I didn't know about this distinction before a former colleague of mine, Michael Loechle,. Now CIO of Hitachi energy explained the difference.

He drew a pyramid on a napkin where the data is at the base information is in the middle. And the top of the pyramid. His insights. To understand the difference for yourself. Take a neutral look at the reports you get regularly. How many are nothing more than a dump display of data? How many consolidate data, at least into information. And how many insights do you get automatically? I doubt you have any reports or dashboards doing the letter. Now just consider if you would not need reports, but your dashboards would advise you where things are starting to get out of order. Or even better opportunities arise. This is true [00:11:00] digitalization.

We have a zero-tolerance policy for any unapproved or "shadow" processing outside of our E R P, M E S, and S and O P systems, and as well H R systems for good measure.

. As mentioned before there is a prevailing misconception in most companies that data belong to the respective organization rather than the company. Combined clear swim lanes on what you expect with regard to the use of your corporate or approved systems. And that unapproved or shadow processing is no longer accepted. Give a leniency period for a couple of months, record the outliers. And after that zero tolerance your way or the highway.

We have reached out to our suppliers and customers to expand the data stacks with their for us relevant data to identify further optimisation potential.

If you look at your value chain as a continuum of processes. It becomes quickly clear that just tracking your own data inside the confines of your four walls. Is myopic [00:12:00] at best. Most data. Lie outside your company. May they be with your supply base, your customers? Our retailers. Your markets where you compete or want to compete. Even your regulators and governments. As a Chinese general Sun Tzu already understood 3,500 years ago.

And I translate loosely from the art of war treaty. Treaty. The more, you know, about your counterparts and the environment you interact. The probably is your, win.

If you answered yes to most questions. Great. You have your 21st century data and process mining strategy under control. Congratulations. Do not listen further, you have better things to do, like digging up for the gold nuggets.

Oh, you're still there. That's great. So you probably have answered several questions with a no, or unsure. You will be able to add significant cashflow revenue and margin to your bottom line. How much it is.

Is very difficult to say here in the [00:13:00] podcast, not knowing you and your company. But the benefits. If led at the right level of your organization can be revolutionary. After all process mining. Is a hardcore digitalization process. And digitalization is called the fourth industrial revolution for a reason. Here now are some pointers to let you think through what is the art of the possible.

What would a lead time improvement of 50% of your products mean to your cashflow revenue, margin and customer satisfaction? What would pruning your product portfolio mean for your complexity reduction, your production processes. What is your product? Derivatives complexity. Which currently caters for any whim of these customers. What would pruning the profitability of the customer base mean for your overdue performance? And here's something for the execute of port level.

Let's assume you augment internal data analytics with macroeconomic data sets. And could distill [00:14:00] parameters, does that influence your overall business performance? If you then smooth all your revenue patterns with the new Hine and foresight and provide better forecast. What would this do to your stock evaluations?

If you're interested in diving deeper into this. Check out the season one podcast, episode 15, about how to stop driving by looking just in your rear view mirror. .

Okay. Hope we caught your curiosity about what is possible today with process mining. Now let's talk about getting it actually done.

How much time does it take from start to finish? .

It takes all in all 24 months or less, depending on the lack of focus and how many islands of data are fiercely protected by Lords of intransparency in your firm. Here you first need to implement a change management process before you even get the data to data mine. The good news is that as soon as you start low hanging fruits will fall from the tree quicker than you are able to pick them up.

Who should be the Executive Board [00:15:00] Sponsor? .

It's the CEO or COO. This is huge hands. One of these two has to do it. And not the chief information officer. This is a business, not an it project. It is clearly an enabler, which is already a lot in this case.

Who should be selected as a Project Lead? .

Uh, senior project leader who knows the organization. She should have an it or lien and or six Sigma background reporting for this project directly to the COO.

What is the Project set-up?

Start with an execute of board show and tell session with companies from the process and data mining space. Best accompanied by a C level customer reference. Just run a test session before you need someone who can speak stories, not geek. Then, if the board agrees to run a short pilot on company data in the available it infrastructure. Pick something that matters and is currently a real [00:16:00] hurt point. Discuss it with the process mining supplier you pick for the pilot. They have normally a good understanding where potential gold nuggets may lay. By the way I do not advise to invest in replicating this functionality of process mining internally after all it is their front end at your backend. aSsuming you had success. You will return to the board and they have approved the budget for next year.

Then the real work starts, data lakes need to be established optimized. It experts teams need to be assembled and co-located to the operations team. When you have 80% of all your data and the data legs and your experts from the process, mining supplier and your internal it folks give you the thumbs up. Run further projects and sales, operations, procurement, finance, and R and service. All tightly supported.

As I mentioned by internal and external experts. And then only then. Set the target stage. [00:17:00] You do not know what you do not know. So you need a bit more insights under your feet. To look further out to set a stretch target on cost, speed, revenue, and margin. Then develop a blueprint with a full time cross-functional task force. Which meets daily in an agile approach with objectives based on your blueprint. And target state. And show a month reporting on board level by CEO with clear output KPIs. After the thing gains momentum, the CEO will be then eager to report quarterly to the supervisory board about her successful digitalization story.

How do you sustain success?

Integrate process and data mining into the training imprint.

When people join the company. And overall make continuous improvement, both analog and digital as a competency requirement in your company for everyone.

That all sounds great. But what about the cost? .

A company operating in over 100 [00:18:00] countries with over 1 million SQS has a digital twin data size of about 10 terabytes. The cost of maintaining this digital twin is currently in the low million USD range. The further cost of software to perform the mining. It depends on the provider and the task, but it's overall not an issue. The it team of data scientists and machine learning engineers needed should be small, but if you can find them field with a few 10 X performers. That means. They have 10 times the output asset peers, they're hyper performance and consequently, a hyper rare personnel to find. To get these folks into your company.

Understand what millennials, gen a and gen Z look for in a company besides owning money. I recommend here, our podcasts on diversity and inclusion in greenhouse gas emission is zero in 1000 days, just to get an idea.

Are there any typical issues one has to prepare for? ,

they will be black holes in data [00:19:00] transparency, but data are manipulated in local Exel and other databases before being batched into the. P You will not have a single source of truth in a data lake that is fed by dirty data puddles containing local and functional doubtful information. To give you an example of typical dirty data puddle. Is the MRP system and the Ima P runs that are either not use at all. Or duplicated outside of the application and then filled back. Next the behavior of the leadership team is important gaps. Golden nuggets. Need to be celebrated, not chided at it. You will find cover ops manipulation of data, et cetera, et cetera. Let that be a general amnesty and look forward. At the end manipulation of data in an intransparent system, jungle in every company is normal practice today.

Believe me.

Okay. If you want to significantly grow your revenues, response, time to [00:20:00] customer request and margins. Play perfect Tetris with your company's processes. Via process mining. Without leaving your desk. It shows you where the company deviates from your original design. Defragment and win?

Thank you for listening and thanks to Amy for stepping in for this episode, which was clearly. In your neck of the woods.

You're welcome. This was fun, and I developed an appetite to defragment myself a bit.

So, what remains to be said is

stay safe. Be bold. And see you next week.

These other supply chain dialogues, produced and copyrighted by helmig advisory AG