RE-ENGINEERING
Applying Moore’s Law to
Business Processes
Aarti Ramana
Vice President, Genpact
The pioneering concepts of process efficiency that originated on the production floor
have, sadly, not yet been applied to the business processes supporting the creation of
many of today’s high-tech products. A look at why that is, and why it needs to change.
Our relentless quest to improve the quality and output of
severely impacted. This erosion of consistency and reliability
manufacturing processes has paid many dividends over time.
is largely attributable to five factors: (1) convoluted, complex
This quest has bettered the configurations, capabilities and
processes; (2) disparate, disjointed systems; (3) lack of granular
yields of countless products, and given rise to new “high tech”
metrics (4) lack of a robust feedback mechanism, and (5)
industries beyond the imagination of anyone in 1975.
departmental silos and lack of coordination.
That was the year Intel cofounder Gordon Moore famously
Typical problems across the Supply Chain
observed that integrated-circuit capacity seemed to double
every 18 to 24 months. In the decades since, the steady
continuance of this doubling – a.k.a., “Moore’s Law” –
Supplier
Qualification
1. Convoluted, Complex
Processes
has opened an almost magical door, enabling Digital Age
enterprises to pack ever-more innovation in ever-slimmer,
less-expensive packages, first shrinking room-sized computers
Part Qualification
to desktop PCs of greater power and ability, and then bringing
us flat screen TVs, smart phones, and, most recently, PC
tablets. But as silicon chips become more potent, and the
2. Disparate, Disjointed Systems
Supplier
Manufacturing
Process
products in the hands of the consumer more state-of-the-art,
a discomforting question presents itself: Have comparable
advances been made in the underlying business processes
3. Lack of Granular Metrics
Supplier Process
Controls
that support the sophisticated, robot-driven, automated
manufacturing lines that make those wonderful products?
Our experiences suggest “no.”
4. Lack of robust feedback
mechanism
Supplier
Evaluation/
Metrics
5. Departmental Silos/ lack of
coordination
By not giving enough attention to efficiency and effectiveness
of processes, companies have seen the key business outcomes
of customer satisfaction, on-time delivery and cost of quality
Supplier
Development
Convoluted, Complex Processes
As manufacturers have had to rapidly adapt to the economic
realities of a global supply chain, the business processes linking
the customer and their numerous suppliers have not adapted
at the same pace. Processes are often not looked at end-end,
leading to multiple manual steps and handoffs that add layers
of unintended bureaucracy and complexity. To understand this
“non-critical” parts changes. This exposes the company to a
high degree of failures and customer dissatisfaction.
One high-tech client’s ERP did not require all qualification
requests to be processed before accepting materials from
the supplier. In another instance, almost two dozen systems
were “touched” in the end-to-end change-order process from
suppliers. Here, processing the change took only days, but
complexity, let’s look at a part-failure process we analyzed.
wait times and delays could stretch out the overall cycle for
Our work revealed the entire “reverse logistics” of shipping a
months. The good news: By consolidating all “touches” into
damaged but repairable part often uses complicated manual
one all-encompassing platform (that also automatically tracks
and paper-intensive processes. That increases cost and
compliance with changes made) we designed a process capable
resolution time, and creates a perception of unresponsiveness.
of ensuring timely, effective change-control. But no matter how
In one example, we found delays in “ownership” of a failed
part in the system, and the lack of assignment to an “owner,”
contributed to 20 percent of the end-end cycle time. This, in
turn, delayed formal initiation of part-failure analysis. Logistical
much rigor is applied to supplier on-boarding and evaluation
or ongoing monitoring of ensuing work, production-floor
breakdowns remain inevitable. And once they have occurred,
determining how to prioritize and fix problems is crucial.
delays in taking receipt of the part added another 25 percent
Given the volume of parts and complexity associated with
to cycle time. Often, part movements within a company were
modern manufacturing, this is not easy. To quickly determine
the main culprit, with a part failing in Asia and being shipped
which Non-Conformances (NCs) to look at first, we built
to a North American depot, only to be sent back to an Asian
automated scoring into the system. Prioritization based on
supplier. Even before the request for failure analysis was
scoring helped in timely containment and prevention of
reviewed and approved, there was much physical movement
recurrences. It also ensured a standardized approach for all the
of parts across continents. Our fix: enable direct-to-customer
engineers, removing the possibility for errors their “manual
shipment, minimize handoffs and fix system complexity (by
judgments” can produce. Correction of high-priority defects
reducing, say, the number of ERP menu options by half).
can sometimes be delayed due to incomplete information, too.
Earlier, there were multiple nodes between the company and
the supplier. And since the supplier was not import/export
capable, it had not been set up as such in the sales and
purchasing org of the ERP. Direct shipment from company to
supplier resolved this issue, halving typical cycle time from as
many as 100 days to as few as 50. Another simple solution
was to initiate planning and purchasing tasks in parallel to
logistics steps rather than serially. Multiple gatekeepers were
removed by moving to a single platform with a clear set of
acceptance criteria, and one-step approval for part analysis. By
applying process improvement principles, eliminating waste,
The simple fix of recreating the service order form (to make
it sufficiently intuitive and comprehensive) helps “get it right
the first time.” By improving data-transfer accuracy between
systems we improved completeness of forms and lowered
wait times often associated with NC assignment to the right
department/people.
Lack of Granular Metrics
Lack of clear mechanisms to enforce consistency across
the supply chain frequently leads to variation in output
and, eventually, in product quality. Failure to link supplier
and reducing manual steps (and resultant rework loops) we
qualification with “granularity” at a part level often just
enhanced process efficiency and achieved $3 million in business
means “on paper” skills and competencies not backed by part
impact.
performance. For example, supplier scoring on a 10-point scale
Disparate, Disjointed systems
One common problem encountered in modern manufacturing
every quarter lacks granularity. The average failure rate of a
part, meanwhile, is very granular, so by not linking the two
meaningful insights are missed.
(and compounded by acquisition-driven growth and
Not drilling down to part or supplier-location levels can prevent
globalization) is “lack of uniformity” between systems and IT
corrective action. And attempting to aggregate data across all
solutions across geographies and divisions. Though much effort
parts for a supplier will not highlight worst offenders. Bottom
may go into upfront part qualification, for example, limited IT
line: clearly communicating supplier evaluation criteria at first,
monitoring of disjointed “post qualification” process flows can
but then failing to maintain that clarity throughout ongoing
spell trouble. Certain suppliers, for example, may be locked in
evaluation and enforcement of improvement plans can lead to a
for “critical” parts while no risk assessments are initiated for
high rate of NC defects and cost companies millions of dollars.
This problem can be addressed by establishing procedures
stakeholder groups engaged with managing suppliers
to periodically audit “supplier compliance” against original
harmoniously is also important. Establishing clear owners with
manufacturing-process “qualification requirements.” But such
accountability for each task and empowering them with the
audits can suffer from low coverage, with no audits for non-
weight of metrics to monitor adherence is essential, too.
critical parts (which, ironically, make up 80 to 90 percent of
parts volume). Our solution – which involves designing an audit
methodology that ensures representative samples – yields more
balanced results. This evaluative approach focused on critical
metrics (completion rate of audits, compliance score of audited
suppliers, on-time closure of findings, reduction of defects, etc.)
to ensure a closed loop and effective process.
Think about it: If the same rigor that makes possible the
doubling of technological capability under Moore’s Law
were applied to every supporting business process, the result
would be dramatic. But instead, technical advances that
come with each new 18-to-24-month “Proof” of Moore are
quickly replicated by competitors. Forerunners of high-tech
product innovation must recognize that their real competitive
Lack of a Robust Feedback Mechanism
differentiator going forward rests with how well a product is
As much as global supply chains are a reality, so also is the
chains, (2) reduced logistical burdens in the management of
fact that suppliers often engage sub-tier suppliers to perform
their value chains, and (3) speedy, consistent delivery of the
certain aspects of the value chain for them. When designing a
latest groundbreaking offering. In other words, superfast
streamlined and compliant change-control process, for example,
product innovation must be matched by business processes of
any delay in implementing changes (or outright noncompliance
equal velocity and precision.
brought to market by way of (1) backward integration of supply
with change requests) lengthens cycle time and hurts customer
satisfaction. Lesson: Suppliers need controls to keep companies
aware of changes and ensure the end-end process functions as
one smooth continuum, not a disjointed sum of parts.
Closing every last loop to allow timely sharing of feedback
is paramount. Its importance is magnified in the capital
equipment industry, which supplies machines and tools for
If the same rigor that makes possible
the doubling of technological
capability under Moore’s Law were
applied to every supporting business
process, the result would be dramatic.
semiconductor companies, and averages upwards of 20,000
parts per tool/assembly shipped. In one instance, the probability
of a “standard build” system order (defined as one not
Lean Six Sigma, properly applied, can improve business-process
impacted by any change activity) was less than 5 percent on
capability, dramatically reduce cost of quality, and improve
average. This means an extremely high rate of change, which,
customer satisfaction – and, in so doing, shatter the long and
coupled with ever-shorter product lifecycles, underscores the
firmly held belief that cost and quality have to be traded for the
need to close the loop each and every time.
other. The most conservative of arithmetic bears this out. By
We further determined reducing excessive handoffs and
eliminating rework loops would yield a 10-to-20 percent FTE
productivity return, and $100,000-plus business impact. In
one instance, a 40 percent volume reduction in certain change
requests categories undid the need for multiple simultaneous
approvers. Eliminating such duplicative efforts generated almost
$2.5 million in annual impact.
assuming a servicing/labor/rework and lost-productivity cost per
process defect of $500, and that 20,000 process defects that
can be eliminated over the average two-year high-tech product
cycle, you arrive at a potential $10 million windfall. By that
math, the return on investment in straight-through processing,
with no errors, could actually eclipse the return associated with
a new product innovation before it obsolesces.
Departmental Silos/Lack of coordination
Despite this competitive reality, many companies continue
Every day new innovation frontiers are reached as countless
the expense of business-process investment, in some cases
millions of dollars are poured into research and development of
opting to pick off-the-shelf technology solutions. But it is
high-tech products. Indeed, while the engineering departments
the companies that have struck the right balance – between
continuously look at ways to “out compete” when it comes
innovation and consistent business-process performance –
to the configuration, capacity and capability of the product,
that are now grabbing market share. To be counted among
their “enabling functions” often add layers of bureaucracy
them in tomorrow’s marketplace means moving beyond a
and create multiple approval hoops through which to jump.
one-dimensional commitment to product innovation. It means
Alignment between manufacturing and the field is critical,
fully and completely embracing the cause of business-process
as it impacts product quality. But orchestrating the multiple
excellence.
to over invest in the latest manufacturing technologies at
About Genpact
About the Author:
Genpact Limited (NYSE: G), a global leader in business process management and technology
services, leverages the power of smarter processes, smarter analytics and smarter technology to
help its clients drive intelligence across the enterprise. Genpact’s Smart Enterprise Processes (SEPSM)
framework, its unique science of process combined with deep domain expertise in multiple industry
verticals, leads to superior business outcomes. Genpact’s Smart Decision Services deliver valuable
business insights to its clients through targeted analytics, reengineering expertise, and advanced risk
management. Making technology more intelligent by embedding it with process and data insights,
Genpact also offers a wide variety of technology solutions for better business outcomes.
Aarti Ramana leads Genpact’s High-Tech
Global Reengineering practice. In this role,
she is responsible for Manufacturing/Supply
Chain projects that drive business impact
for Genpact’s global customers. She can be
reached at [email protected]
For more information, visit www.genpact.com. Follow Genpact on Twitter, Facebook and LinkedIn.
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