Author: Laird ReedReviewers: Sarah Millard, Jason TrevisonbcBDPMarch 1998Copyright 1998 Bain communicating clearly about goals, deadlines, and responsibilities; and celebrating achievements made in reaching goals.CommitmentMorale boostingAt senior management levelAt operating management levelAt operating non- management levelAnnouncements as milestones are reachedA running tally of cost savingsRewards for superior achievementsCommunicationGoalsDeadlinesResponsibilities38CU7122997KRAbcBOS Copyright 1998 Bain & Company, Inc. BDP Sticky Tape - Lessons LearnedCompanies that are BDPs in an aggregate view are not necessarily BDPs in everythingThey can often learn from examining their own operations as well as othersIt is necessary to disaggregate cost elements (“Peel the Onion”) and get down to cost drivers to determine appropriate action stepsAction steps must be agreed upon and committed to at all levels of the client organization 39CU7122997KRAbcBOS Copyright 1998 Bain & Company, Inc. BDP AgendaThe Best Demonstrated Practices (BDP) ConceptApplicationsBDP StepsClient ExampleKey Takeaways40CU7122997KRAbcBOS Copyright 1998 Bain & Company, Inc. BDP Key TakeawaysBDP is used to identify the best practices - those leading to the most revenue at the least cost - inside of or outside of a company Internal BDPs can be done between organizations or against historical data. External BDPs can be done against direct competitors or against companies in a different industry. Internal BDPs are more straightforward to conduct than are external BDPs, but they tend to lead to less dramatic, though often significant, changeBDP OverviewBDP StepsKey Success Factors Key success factors include: understanding the client operations at a detailed level, looking at relevant internal and external comparables, focusing on the most leveraged areas, gathering and analyzing data, obtaining commitment at all levels of the client organization, and communicating clearlyThere are eight steps in doing a BDP: Select comparable organizations for BDP Disaggregate organizations into major processes Construct first-cut BDP Construct adjusted BDP Quantify impact “Peel the Onion” in leveraged areas Develop an action plan Implement41CU7122997KRAbcBOS Copyright 1998 Bain & Company, Inc. BDP Takeaway Slides (1)BDP - practices leading to the most revenue at the least costInternalExternalBetween organizationsHistoricalCompetitorsCompanies in different industriesInternal and External BDPsReasons for Better PerformanceBDP StepsProcess 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 produce similar products/services under similar operating conditionsLay out major (3-5) processesGather data Identify best 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 potential Determine drivers of differences at a more disaggregated levelSet a BDP target Establish a detailed scheduleAssign responsibilitiesObtain commitment at all levels of the organization Communicate goals, deadlines and responsibilitiesCelebrate small successes along the wayBDP Bar ChartProcess CProcess BProcess ACBACBACompany Z Company YCompany XCompany XCompany YCompany ZBDP$0.00$0.10$0.20$0.30$0.40Dollar per UnitMore consolidated supply (VMRs) Lower cost raw materials Higher quality raw materials More parts outsourced More parts made in lower-cost countriesProducts Simpler products Fewer product variations Plants Fewer, more highly- focused plants More efficient production process (longer runs, less waste) Better equipment Better quality control Labor Longer-term contracts Better structured incentives Better supervisor-to- labor ratioPurchasingManufacturingDistributionSellingBetter delivery method (truck vs. train vs. airplane) More (or less) frequent deliveries Larger (or smaller) delivery sizesBetter trained salesforce Larger salesforce Better organized salesforce (by region, by product, by industry) Better structured incentives42CU7122997KRAbcBOS Copyright 1998 Bain & Company, Inc. BDP Takeaway Slides (2)Adjusted BDPPriority MatrixPotential ImpactAction PlanUnadjustedAdjustedUnadjustedAdjustedUnadjusted AdjustedUnadjusted Adjusted$0.00$0.05$0.10$0.15$0.20$0.25$0.30$0.35Dollars per UnitCompany XCompany YCompany ZBDPUnattainablesBack burnerHighLow LowHighAbility to ImplementImpactQuick hitsTop priorityStepImpactTimingResponsibility$Total ImpactImpact per Unit43CU7122997KRA