1、1CU7030298IMBAuthor: Laird ReedReviewers: Sarah Millard, Jason Trevison bcBDPMarch 1998Copyright 1998 Bain & Company, Inc. bcBOS Copyright 1998 Bain & Company, Inc. 2CU7122997KRABDPAgenda The Best Demonstrated Practices (BDP) ConceptApplicationsBDP StepsClient ExampleKey TakeawaysbcBOS Copyright 199
2、8 Bain & Company, Inc. 3CU7122997KRABDPAgenda The Best Demonstrated Practices (BDP) ConceptApplicationsBDP StepsClient ExampleKey TakeawaysbcBOS Copyright 1998 Bain & Company, Inc. 4CU7122997KRABDPDescription*Whereas an RCP always deals with costs, a BDP could deal with costs or revenuesBDP is used
3、to identify the best practices - those leading to the most revenue at the least cost - inside of or outside of a company.BDP - practices leading to the most revenue at the least cost* InternalExternalBetween organizationsHistoricalCompetitorsCompanies in different industriesbcBOS Copyright 1998 Bain
4、 & Company, Inc. 5CU7122997KRABDPInternal vs. External Internal BDPs are more straightforward to conduct than are external BDPs, but they tend to lead to less dramatic, though often significant, change.Gathering data:Degree of change:BDPInternalExternalBetween organizationsHistoricalCompetitorsCompa
5、nies in different industriesStraightforwardContinuous improvementDifficultDramatic changebcBOS Copyright 1998 Bain & Company, Inc. 6CU7122997KRABDPPossible Reasons for Better Performance More consolidated supply (VMRs)Lower cost raw materialsHigher quality raw materialsMore parts outsourcedMore part
6、s made in lower-cost countriesProductsSimpler productsFewer product variationsPlantsFewer, more highly-focused plantsMore efficient production process (longer runs, less waste)Better equipmentBetter quality controlLaborLonger-term contractsBetter structured incentivesBetter supervisor-to-labor ratio
7、Following is a list of possible reasons some companies perform better than others:PurchasingManufacturingDistributionSellingBetter delivery method (truck vs. train vs. airplane)More (or less) frequent deliveriesLarger (or smaller) delivery sizesBetter trained salesforceLarger salesforceBetter organi
8、zed salesforce (by region, by product, by industry)Better structured incentivesbcBOS Copyright 1998 Bain & Company, Inc. 7CU7122997KRABDPBDP in Theory In theory, by applying BDP practices, you could create a BDP company.PurchasingManu-facturingDistributionSellingCorporatePurchasingManu-facturingDist
9、ributionSellingCorporatePurchasingManu-facturingDistributionSellingCorporateClientCompetitor ACompetitor BBDP CompanyNon-BDPBDPbcBOS Copyright 1998 Bain & Company, Inc. 8CU7122997KRABDPBDP in Practice In practice, BDP analysis is used only in areas of the company where it can have a significant impa
10、ct.Manufacturing BDPSalesforce BDP Non-BDPBDPSituation:Before BDP:After BDP:CorporatePurchasingManufacturing DistributionSelling CorporatePurchasingManufacturing DistributionSellingManufacturing costs are a significant portion of total costs, and the client is far from BDP in manufacturing.Revenue p
11、er sales representative is a major driver of profitability, and the clients sales representatives are far from BDP in revenue per representative.Corporate CorporateActions:Purchase new equipmentRearrange equipment to improve production flowRecycle wasteDecrease supervisor to labor ratioIncrease amou
12、nt of trainingReorganize salesforce by industryRestructure incentives to encourage cross-sellingbcBOS Copyright 1998 Bain & Company, Inc. 9CU7122997KRABDPReasons for Using BDP Because BDP is simple, pragmatic, and positive (it focuses on what the client does best), it helps us achieve results.BDP he
13、lps us achieve resultsSimplePragmaticPositiveSimple methodologyEasy to explain to clientStraightforward to implementEasy to measure resultsFocuses on existing businessFocuses on most leveraged areasAllows for quantification of potential improvementLeads to concrete actionsBuilds morale at the client
14、 by focusing on what client does bestProvides a framework for continuous learningbcBOS Copyright 1998 Bain & Company, Inc. 10CU7122997KRABDPAgenda The Best Demonstrated Practices (BDP) ConceptApplicationsBDP StepsClient ExampleKey TakeawaysbcBOS Copyright 1998 Bain & Company, Inc. 11CU7122997KRABDPA
15、pplications A large European paperboard manufacturer operated seven plants throughout Europe. A Bain team analyzed unit costs at each plant and identified a number of best practices worth $20MM or 40% of total operating expenses.A Spanish steel producers margins were coming under pressure from falli
16、ng trade barriers. The company asked Bain to conduct an analysis of the technology and practices of its global competitors. The BDP resulted in dramatic cuts in labor costs and a reduction in the cost per kilogram of steel of 20%.The CEO of an Italian supermarket chain demanded cost cuts his managem
17、ent team could not deliver. A Bain BDP revealed 10-15% productivity gaps between departments in the chains 200 stores. The full scale BDP led to an average cost improvement of 10% per store. Bain has used BDP in hundreds of cases and in dozens of industries. Some examples of our work include:bcBOS C
18、opyright 1998 Bain & Company, Inc. 12CU7122997KRABDPAgenda The Best Demonstrated Practices (BDP) ConceptApplicationsBDP StepsClient ExampleKey TakeawaysbcBOS Copyright 1998 Bain & Company, Inc. 13CU7122997KRABDPBDP Steps Process StepKey Success FactorsSelect comparableorganizations for BDPDisaggrega
19、te organizationsinto major processesConstruct first-cut BDPConstruct adjusted BDPQuantify impact“Peel the Onion” inleveraged areasDevelop an action planImplementOrganizations should produce similar products/services under similar operating conditionsLay out major (3-5) processesGather dataIdentify b
20、est practice organization for each processAdjust data for uncontrollable elements (e.g., labor rates, product mix) to ensure an “apples-to-apples” comparisonCalculate potential impact (revenue increase or cost savings) by unit and by processFocus on organizations and processes with the most potentia
21、lDetermine drivers of differences at a more disaggregated levelSet a BDP targetEstablish a detailed scheduleAssign responsibilitiesObtain commitment at all levels of the organizationCommunicate goals, deadlines and responsibilitiesCelebrate successes along the wayDoing a BDP analysis involves severa
22、l steps.bcBOS Copyright 1998 Bain & Company, Inc. 14CU7122997KRABDPAgenda The Best Demonstrated Practices (BDP) ConceptApplicationsBDP StepsClient ExampleKey TakeawaysbcBOS Copyright 1998 Bain & Company, Inc. 15CU7122997KRABDPSticky Tape* - Background*Disguised client caseSituation:The client, Stick
23、y Tape, is the the market leader in the adhesive tape industry and has four plants making duct tape and masking tape. There is significant cost sharing between these two productsComplication:The CEO is concerned that Sticky Tapes cost advantage might be eroding and he is eager to find ways to cut ma
24、nufacturing costsQuestion:How can Sticky Tape identify the most leveraged areas for cost reduction, the cost reduction potential, and ways to implement the cost reduction opportunities?Bain used BDP to help our client, Sticky Tape, reduce its manufacturing costs.bcBOS Copyright 1998 Bain & Company,
25、Inc. 16CU7122997KRABDPBDP Steps Process StepKey Success FactorsSelect comparable organizations for BDPDisaggregate organizations into major processesConstruct first-cut BDPConstruct adjusted BDPQuantify impact“Peel the Onion” in leveraged areasDevelop an action planImplementOrganizations should prod
26、uce similar products/services under similar operating conditionsbcBOS Copyright 1998 Bain & Company, Inc. 17CU7122997KRABDPSticky Tape - Comparable OrganizationsAcross the most important screening criteria, Sticky Tapes four plants and its competitors plants are roughly comparable.Comparable organiz
27、ationsSimilar products, product mixes, and volumesSimilar customer requirements and business practicesSimilar technologySimilar product designsSimilar accounting practicesbcBOS Copyright 1998 Bain & Company, Inc. 18CU7122997KRABDPBDP Steps Process StepKey Success FactorsSelect comparable organizatio
28、ns for BDPDisaggregate organizations into major processesConstruct first-cut BDPConstruct adjusted BDPQuantify impact“Peel the Onion” in leveraged areasDevelop an action planImplementLay out major (3-5) processesbcBOS Copyright 1998 Bain & Company, Inc. 19CU7122997KRABDPSticky Tape - Major Processes
29、 Making tape involves three major processes:RewindingSlittingPackagingBase material runs from a core rollAdhesive material is added and curedBase material plus adhesive is fed onto a master rollMaster roll is slit into final widthsVarious sized units are packagedbcBOS Copyright 1998 Bain & Company,
30、Inc. 20CU7122997KRABDPBDP Steps Process StepKey Success FactorsSelect comparable organizations for BDPDisaggregate organizations into major processesConstruct first-cut BDPConstruct adjusted BDPQuantify impact“Peel the Onion” in leveraged areasDevelop an action planImplement Gather dataIdentify best
31、 practice organization for each processbcBOS Copyright 1998 Bain & Company, Inc. 21CU7122997KRABDPSticky Tape - Overall Cost Position Sticky TapeCompetitor ACompetitor BCompetitor C$0.29$0.35$0.36$0.38$0.00$0.10$0.20$0.30$0.40Manufacturing Cost per RollOverall, Sticky Tape is the lowest cost manufac
32、turer.bcBOS Copyright 1998 Bain & Company, Inc. 22CU7122997KRABDPSticky Tape - First-Cut BDP*Competitors B and C had no BDPsPackageSlitRewindABCDCompetitorA*BDP$0.30$0.32$0.30$0.25$0.35$0.17$0.00$0.10$0.20$0.30$0.40Manufacturing Cost per RollAlthough Sticky Tape is already the lowest cost manufactur
33、er, none of its plants is BDP in every process, and Competitor A is the BDP in packaging.BDPCompetitor APlant DPlants A and CSticky Tape$0.15$0.05$0.10$0.10$0.07$0.15$0.10$0.10$0.10$0.08$0.02$0.15$0.10$0.05$0.20$0.02$0.05$0.10bcBOS Copyright 1998 Bain & Company, Inc. 23CU7122997KRABDPBDP Steps Proce
34、ss StepKey Success FactorsSelect comparable organizations for BDPDisaggregate organizations into major processesConstruct first-cut BDPConstruct adjusted BDPQuantify impact“Peel the Onion” in leveraged areasDevelop an action planImplementAdjust data for uncontrollable elements (e.g., labor rates, pr
35、oduct mix) to ensure an “apples-to-apples” comparisonbcBOS Copyright 1998 Bain & Company, Inc. 24CU7122997KRABDPControllable vs. Uncontrollable Costs For analysis to be meaningful (and believable), costs must be adjusted for those that are beyond the control of operating managers.ControllableUncontr
36、ollableRaw materialscost/unitusageQualityLabor hoursOverhead staffingSpace utilizationProduct mixLabor ratesUnion-imposed costsRental ratesUtility ratesInsuranceTaxesAccounting proceduresbcBOS Copyright 1998 Bain & Company, Inc. 25CU7122997KRABDPSticky Tape - Uncontrollable Costs Different plants ha
37、ve different uncontrollable costs.“An unadjusted comparison is unfair. Weve got the highest labor rates in the country.”- Supervisor, Plant A“Were making masking tape over 30% of the time. That stuff rips all the time. Let me run duct tape all day and Ill beat any plant.”- Rewinder, Plant C“Were a u
38、nion shop. Our work rules create costs the other plants dont have.”- Plant manager, Plant DbcBOS Copyright 1998 Bain & Company, Inc. 26CU7122997KRABDPSticky Tape - Adjusted* BDP*Adjusted for labor and utility rates and product mix*In this particular case, the overall BDP does not happen to change. T
39、he components, however, do change.UnadjustedAdjustedUnadjustedAdjustedUnadjustedAdjustedUnadjustedAdjustedUnadjustedAdjustedUnadjustedBDPAdjustedBDP$0.30$0.27$0.32$0.30$0.30$0.25$0.25$0.20$0.35$0.32$0.17 $0.17*$0.00$0.05$0.10$0.15$0.20$0.25$0.30$0.35Manufacturing Cost per RollAdjusting for uncontrol
40、lable costs has a significant impact on the costs for each plant.BDP (adjusted)BDP (unadjusted)RewindSlitPackagePlant APlant BPlant CPlant DCompetitor A$0.15$0.05$0.05$0.07$0.10$0.15$0.10$0.05$0.07$0.07$0.15$0.18$0.10$0.08$0.10$0.08$0.10$0.09$0.08$0.05$0.02$0.03$0.15$0.12$0.05$0.05$0.10$0.09$0.20$0.
41、18$0.05$0.03$0.02$0.09$0.10$0.05bcBOS Copyright 1998 Bain & Company, Inc. 27CU7122997KRABDPBDP Steps Process StepKey Success FactorsSelect comparable organizations for BDPDisaggregate organizations into major processesConstruct first-cut BDPConstruct adjusted BDPQuantify impact“Peel the Onion” in le
42、veraged areasDevelop an action planImplementCalculate potential impact (revenue increase or cost savings) by unit and by processbcBOS Copyright 1998 Bain & Company, Inc. 28CU7122997KRABDPSticky Tape - Potential Savings SlitRewindSlitRewindPackageSlitRewindPlant APlant BPlant CPlant D$0.10$0.13$0.08$
43、0.03$0.00$0.05$0.10$0.15Potential Annual Savings per Roll (in Dollars)Plant DPlant CPlant BPlant APackageSlitRewindBy plantBy process$5.6MM$5.6MM$0.0$2.0$4.0$6.0Potential Annual Savings ($MM)Sticky Tape can save an average of $0.08 per roll, or $5.6MM overall, by implementing best practices.Rolls pe
44、r year: 20MM 18MM6MM27MMPotential Savings per RollPotential Total SavingsAverage potential savings = $0.08bcBOS Copyright 1998 Bain & Company, Inc. 29CU7122997KRABDPSticky Tape - Backup for Potential Savings Total potential savings by plant:Total potential savings by process:Plant A savings per roll
45、XNumber of rolls= ()+Plant B savings per rollXNumber of rolls()Plant C savings per rollXNumber of rolls()+Plant D savings per rollXNumber of rolls()+= ($0.10 x 20MM) + ($0.13 x 18MM) + ($0.08 x 6MM) + ($0.03 x 27MM) = $5.6MM = Rewind savings at each plant + Slit savings for each plant + Package savi
46、ngs for each plant= ($0.06 x 20MM)+($0.09 x 18MM)+($0.03 x 27MM)+($0.04 x 20MM)+($0.04 x 18MM)+($0.05 x 6MM)+($0.03 x 6MM) = $5.6MM Rewind savings at each plantSlit savings for each plantPackage savings for each plant+=bcBOS Copyright 1998 Bain & Company, Inc. 30CU7122997KRABDPBDP Steps Process Step
47、Key Success FactorsSelect comparable organizations for BDPDisaggregate organizations into major processesConstruct first-cut BDPConstruct adjusted BDPQuantify impact“Peel the Onion” in leveraged areasDevelop an action planImplementFocus on organizations and processes with the most potentialDetermine
48、 drivers of differences at a more disaggregated levelbcBOS Copyright 1998 Bain & Company, Inc. 31CU7122997KRABDPPriority Matrix UnattainablesBack burnerHighLowLowHighAbility to ImplementImpactQuick hitsTop priorityFocus on those areas that will yield the greatest benefits.bcBOS Copyright 1998 Bain &
49、 Company, Inc. 32CU7122997KRABDPSticky Tape - Top Priorities The top priorities for Sticky Tape are plants A and B and rewinding.What do Plants C and D do differently that results in lower costs? What drives rewinding costs?Plant DPlant CPlant BPlant APackageSlitRewindBy plantBy process$5.6MM$5.6MM$
50、0.0$2.0$4.0$6.0Potential Annual Savings ($MM)Potential Total SavingsbcBOS Copyright 1998 Bain & Company, Inc. 33CU7122997KRABDPSticky Tape - Rewinding Costs*Utilities, occupancy, supplies, supervisionOverhead*RawmaterialsLaborPlant APlant BPlant CPlant DBDP$0.15$0.18$0.09$0.12$0.05$0.00$0.05$0.10$0.
