Tier 1 transmission producer uses back office process improvement to streamline administrative processes and support future business growth.
Anticipating 50 percent projected growth, the leadership team at German transmission manufacturer Getrag saw an opportunity to maximise future profitability by streamlining administrative processes.
More and more large, global manufacturers are recognising the opportunity to reduce costs through streamlining support processes. Business leaders have seen how removing non-value-added activity in production improves margins, and recognise that the same dynamic applies to other business functions outside of production.
This case study reports on the specific improvements made in three pilot areas. The process improvement work continues to move forward in other support services at Getrag, which will capture additional opportunities for improvement uncovered during process mapping and future-state planning.
Challenge: Expecting growth of 50% or more, Getrag wanted to leverage that growth by improving administrative processes.
The objectives and tools used to improve administrative and production areas—eliminating all forms of waste, engaging the innovativeness of people most familiar with the processes, and emphasising creativity above capital—are basically the same. But changing culture in administrative functions, Turpin has found, requires significantly more effort to involve and engage people than on the plant floor.
“On the production floor, labour tends to be more interchangeable,” recalls Marc Turpin, Senior Management Consultant at TBM Consulting Group. “The only reason administrative functions exist is to do specific types of work. Every improvement or change touches somebody’s job and could even result in those activities being eliminated. Still, in such a growth environment, it’s possible to both eliminate a substantial amount of effort and still find a place in other areas for people who might be displaced.”
At Getrag the administrative improvements started with pilot projects focused on three processes under the purview of the finance department: 1) the monthly financial close, 2) the monthly forecast, and 3) internal cost-down projects.
Solution: Finance pilot projects for month-end closing, reporting and forecasting, and cost studies supporting RFQs. Develop current and future state KPIs, implement standard schedules for close and forecast and set up boards to monitor KPIs and countermeasures.
The first process tackled was the monthly financial close. After reviewing the then-current process and identifying both non-value-added activities and waiting time, the cross-functional improvement team reduced the month-end close process from 10 days to 4.5 days.
During the process improvement work, the team also identified opportunities to reduce the flow of incoming paper invoices to the accounts payable function by 50 percent.
In the past forecasting required as much as 11 to 12 days of preparation plus at least three days of review. The forecast process improvement team created recommendations for a two-stage process for monthly forecasting that replaces the existing multi-stage, multi-function process. The new process will require five days or less of preparation and two days of review.
“Significantly reducing the forecast time is always important,” Turpin says. “Finance is the language of business, so the sooner the management group has information about what happened in the closing month and what’s going on in the forecast, the sooner they can respond to any problems or opportunities.”
The finance department prepares product cost estimates for multiple purposes, including responses to customer RFQs. For this process, the objective is to finalise cost studies as quickly as possible without errors.
By analysing existing projects, the improvement team developed quality standards for information inputs to the cost study process, ensuring that accurate and pertinent information was available to start the process. The team reduced process variability by clearly defining expected outputs for different categories of cost studies. They also developed a standard process for project review and approval.
“Reducing response time to a customer RFQ offers a clear competitive advantage,” Turpin says. “Long lead times tell potential customers that a company doesn’t have its processes under control.
Results: A quicker completion of the monthly financial close from 10 days to 4.5 days; a better forecast process that enables managers to response quickly when performance isn't in line with expectations; and faster cost studies that reduce response time to customer RFQs.
For any major change initiative, Turpin notes that it’s essential to have “some type of burning platform” to help motivate people and encourage those who are open to change. “You have to go in there—as we did at Getrag—with some sort of impetus that things need to change, and identify the people who are ‘raring to go’ and get them involved in the initial tasks.”
Finally, as with lean efforts in production areas, significant results can be achieved quickly by encouraging creativity and trying new approaches as they arise. “Seeing is believing,” Turpin adds. “We tell them: ‘Let’s give this a shot and see what happens. If it works, everyone is better off; if not, we’ll try something else until we get it right.’”