Lean Six Sigma Case Study

How Lloyd's Register has applied quality principles to its bidding process

Winning business is important at any time in the economic cycle. This becomes even more apparent during an economic down-turn when the cost of acquiring new business is brought sharply into focus. It's not just about winning any type of new business either. It needs to be the "right" sort of new business: new business that we are confident we can deliver profitably while fully satisfying the customer's needs and expectations.

Regardless of whether it is new or repeat business with an existing customer or new business with a brand new customer, winning the right sort of business is becoming an increasingly challenging and time-consuming activity. With these factors in mind, the approach that any organisation takes to bid creation must be as efficient and effective as possible. If this is not the case, it runs the risk of not winning enough new business or winning the wrong sort of new business.

Analysis of process

Within Lloyd's Register's rail business, the bid creation process was under pressure to consistently deliver winning bids. As a result, the business improvement team was asked to explore the effectiveness of the current approach to bidding. In order to do this an initial diagnostic analysis was undertaken. This analysis considered historic bidding performance data, voice of the customer research and in-depth interviews with the people that worked the bid process.

The outputs of the diagnostic analysis highlighted the following findings:

• The majority of the bid content was created by engineers and subject matter experts. This meant that the technical content of the bids was always of a very high quality, but the quality of commercial content displayed much greater variability. This commercial content is the evidence that we have both recognised and understood what drives our customers' business as well as their individual needs and requirements. Sometimes this commercial content was wide of the mark, at other times it was given a cursory nod and often it was missing altogether
• The difference between explicit and unspoken customer needs was often misunderstood or not appreciated. The accurate interpretation of the unspoken needs can make the difference between a compliant bid and a winning bid. In some instances there was a lack of confidence to extract the unspoken needs directly from the customer because it went beyond the normal (comfortable) realms of the technical scope 
•  The absence of quality checks within the bidding process meant that re-work was a significant issue. It would invariably occur at the very end of the bidding process when the submission deadline was looming large
• Activity planning during the bid lifecycle was minimal. The majority of the effort was expended during the final few days before deadline
• Satisfying formal procurement requirements and processes sometimes diverted effort and focus away from addressing other business requirements.
  
  A period of desk research ensued, followed by a series of solution design workshops. It soon became apparent that the use of lean principles made perfect sense. Creating bids in a timely, efficient manner that were right first time had to be the smart thing to do. As a result, SMART bidding was conceived.

Examining bids

SMART bidding is not to be confused with the acronym for targets - it really translates as intelligent. Under SMART bidding, the solution-design workshops created a standardised eight-step process to maximise the chance of consistently
delivering winning bids. The eight steps are:

• Receipt of enquiry
• Bid/no bid decision
• Bid manager selection
• Bid creation/coordination
• Bid review and approval
• Bid submission and follow up
• Client decision
• Final follow-up and feedback.

While the process appears quite high level it is augmented by a series of guidelines and checklists that ensure specific factors are satisfied before the bid moves to the next step in the process.

A key step is bid/no bid. This brings some early discipline to proceedings because as soon as you start working on a bid the meter is running. This discipline also ensures time is only invested in pursuing the right business opportunities. Quips were made that the old process included this step but more from a bid/bid perspective! When approaching things from a lean perspective, it soon became apparent that we did not really understand what defects or a defective bid were. However, it was a safe bet that our customers would know one when they saw one.

Unsurprisingly, we found that submitting a bid that contained defects usually led to losing the business. A defect could mean that the bid was non-compliant from a technical perspective or that we had failed to accurately interpret an unspoken customer need. This is where the bid review guidelines and checklist added structure. It also improved our ability to reliably identify defects while enabling us to ask the customer appropriate clarification questions in order to validate our thinking.

Because bids now had to successfully pass the bid/no bid step before we would invest time working on them, we were actually starting to produce fewer bids. This situation was rather disconcerting to begin with as it felt as though we were placing our eggs in fewer baskets. However, this is where our attention turned to understanding our win probability. The bid win probability is reviewed during each step of the SMART bidding process with tangible actions devised and executed to address, mitigate and increase the win potential wherever possible.

Bid planning and management, which reduces and manages process cycle time, also became an important factor as our research suggested that from a customer perspective, early bids were perceived as stronger bids. This prompted the development of the internal delivery date - the date that the bid is complete and ready to deliver to the customer in advance of the official submission deadline.

Visual management also plays an important role in the new process. Visibility of the bid pipeline, bids under construction and bids that have been submitted require constant monitoring and management in order to optimise throughput while ensuring bid quality is not compromised. In the old process customer feedback was only sought in the cases where the bid had been unsuccessful. In the SMART bidding process, feedback is also actively pursued when bids are successful. This is a key activity as it enables validation of any assumptions made during the bid creation (including the interpretation of unspoken needs) while providing the opportunity to start understanding the customers' delivery expectations.

The SMART bidding journey has been challenging and interesting in equal measures. It has forced us to reconsider the importance of our relationships with all our customers and how we go about interpreting their explicit and unspoken needs. The shift in approach to bidding has been instrumental in landing high-profile and high-value business wins, as well as enabling us to win new business on a smaller scale. At both ends of the spectrum this is business that we wouldn't have previously won. This is important progress, particularly as this is the right sort of new business for Lloyd's Register