Panasonic is in the process of modernizing its systems to promote DX. However, the company had many sites to modernize, making it difficult to migrate to a new platform. The company has adopted "process mining" to address this issue.
August 10, 2022 10:00 am Published.
[Masahiro Dohi, ITmedia]
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Inefficiencies hidden in business operations are "silent killers" of business performance, i.e., unnecessary and wasteful processes. Discovering and addressing them is an important milestone not only for business efficiency improvement but also for DX (Digital Transformation).
Process Mining" is a solution that visualizes business processes by collecting data from existing systems. In 2020, the German/US-based Celonis process mining tool vendor will launch its cloud platform "Execution Management System" (EMS), which will have business execution management functions in addition to process visualization. According to Celonis, the system not only helps optimize business processes, but also creates a mechanism for automatic execution of operations at the right time by integrating with ERP.
Following an overview introduction of process mining by Celonis (Note 1), this article looks at how process mining is used in "PX," the DX promoted by Panasonic.
This article is based on a case study session at the "Celonis World Tour 2022 Tokyo" held on June 28, 2022, and has been reorganized by the editorial department.
How to modernize the huge system of more than 1200?
Panasonic has shifted to a holding company system from April 2022, and each business field is now managed as a business company. Each company is promoting Panasonic-style DX, named "PX," which aims to speed up management by transforming the way they work and do business. The company has announced that it will utilize "process mining" provided by Celonis for the modernization of its business platform, a key element of this process.
Hajime Tamaki, who has served as the Panasonic Group CIO (Chief Information Officer) since May 2021 (also President of Panasonic Information Systems), is moving away from legacy systems based on his experience in promoting DX in his previous position.
At the "Celonis World Tour 2022 Tokyo" held on June 28, 2022, Mr. Tamaki spoke about DX, "DX (in the world) has become a tool for consultants and SIers to make money. （DX is a tool for consultants and SIers to make money.
He continued by defining PX as "an initiative to change the entire process, culture, and mindset," and expressed his intention to promote high value-added business through DX in both B2C (business-to-consumer) and B2B (business-to-business) with the keyword "making people's lives and work happier through the power of digital and people.
Mr. Tamaki, Panasonic
Mr. Tamaki, Panasonic
Mr. Tamaki said, "The IT innovation project that was deployed in the early 2000s created a four-digit order of systems. Even today, there are more than 1,200 systems, and many of them are huge, with hundreds of thousands of steps (programs) in a single system," he said. We are also working to rectify SCM (supply chain management)," he says.
Process Review and Data Integration to Enhance SCM
Mr. Tomie, Panasonic Information Systems
Mr. Tomie, Panasonic Information Systems
Shoichi Tomie, General Manager of the Overseas Solutions Division of Panasonic Information Systems, who will play a role in promoting PX, says, "We will enhance the competitiveness of our business by pursuing essential customer value and eliminating waste and stagnation from two perspectives: DX for customer service and DX for business operations.
The company has set the following two themes as initiatives to strengthen SCM in business operations.
Review of SCM processes: A comprehensive review of SCM processes (marketing, design/development, procurement, production, sales/logistics, after-sales service, and other departments) related to each of the many business models inherent in the group.
Data integration: Integrate and manage the minimum master integration required for SCM optimization, such as item masters and customer masters, using an MDM (Master Data Management) system.
Figure 1 Initiatives to enhance SCM (Source: Panasonic Corporation, Mr. Tomie's presentation material)
Figure 1: Efforts to enhance SCM (Source: Presentation materials by Mr. Tomie, Panasonic)
SAP S/4HANA Cloud will be adopted and implemented by the company as the system infrastructure for the entire group to support this initiative. The existing core system will be modernized using this service. In line with the shift to cloud computing, the core business operations that have been realized using standard ERP functions and numerous add-ons will be standardized and utilized in line with standard functions as much as possible (Side by Side development based on the Fit to Standard concept) (Fig. 2).
Figure 2: Concept of Core System Modernization (Source: Panasonic Corporation, Mr. Tomie's presentation material)
Figure 2: Concept of Core System Modernization (Source: Panasonic presentation material by Mr. Tomie)
The problem that emerges here is the large number of sites subject to modernization. Currently, SAP products are running at about 100 sites where on-premise systems have been built, and many add-on programs exist at each site. Therefore, the company faces the situation that it cannot easily migrate to a new platform.
Therefore, it was decided to use SAP S/4HANA as a template (standardization) and deploy it within the region. We identified where there was waste and unevenness in the current business processes, and discussed standardization based on objective data that would convince stakeholders.
A vast number of process patterns emerged from process mining.
The process mining method used in this project was Celonis. As a proof-of-concept (PoC) case, the company visualized the processes from order receipt to shipment and payment for the current system used by two overseas sales companies. At the same time, the status of add-ons was investigated using data collected from audit logs. The results were astonishing. Rino Shintani of the company's Overseas Solutions Division, while presenting the figures, said
Ms. Shintani of Panasonic Information Systems
Ms. Shintani of Panasonic Information Systems
Company A has a simple business process of order receipt, shipment, delivery, and payment, and we found 33,276 process patterns. There are 82 users, so you can imagine how busy they are with their work. We discovered that the reason for this was the frequent changes in order quantities, prices, payment terms, and so on.
Once this was understood, the company was able to narrow down the point of solution to the reason for the changes: "It may be due to insufficient inventory or inconsistencies in the price master," and the possibility of standardizing operations with a more appropriate process came into view.
Company B discovered that there were 228,996 order cancellations per year. Of these, 70% were manual cancellations, and it was found that certain operators were disproportionately performing manual cancellations. The company therefore hypothesized that many of the cancellations were the result of errors by a few people. It was also found that 50% of the cancellations were for specific products, and it was thought that the reason was "expiration of orders due to lack of product stock.
Figure 3: An example of "visualization" of business improvement points (Source: Panasonic Shintani's presentation material)
Figure 3: An example of "visualization" of business improvement points (Source: Panasonic Shintani's presentation material)
The advantage of process mining is that problems and supporting figures can be seen in this way, and can be used as material for consideration for business improvement. When proposing process improvement or standardization to upper management, the power of persuasion will be much stronger if it is backed up by solid figures.
80%" of add-on programs can be reduced or standardized
The company has 707 add-on programs at two locations, of which 383 are unused and 77 are used less than once a month. A survey of the entire system by business area and function revealed that 80% of the add-ons could be reduced or standardized.
The cost and time required for add-on development is a major issue when implementing, upgrading, or migrating ERP. It will be easier to persuade upper management and departments that add-ons can be reduced or standardized and that it is necessary, based on objective evidence such as frequency of use.
Figure 4: Analysis of add-ons that can be reduced and standardized (Source: Panasonic Shintani's presentation material)
Figure 4 Analysis of add-ons that can be reduced and standardized (Source: Panasonic presentation material by Mr. Shintani)
Mr. Tamaki commented on the significance of process mining: "Process mining makes processes visible as data, and this data can be used as a common language to discuss with everyone until they are satisfied. Numbers are the common language not only in the field, but also in the middle level and with management," he said.
He went on to talk about the group's future use of the data. We want to use process mining in supply chains other than ERP. Panasonic shares the same challenges with other Japanese manufacturing companies, and I am sure that the DX that has been successful at Panasonic will be useful at other companies as well. I look forward to working with them on initiatives that will energize Japan."
(Note 1) What is the "silent killer" in business? Process Mining to uncover the causes of reduced business efficiency
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