Kaizen Exercise

Order to Delivery Process

The morning of December 9th Bob and his Kaizen team decided to conduct a detailed
interview with employees that were connected with the order to delivery process.
Members representing Field Sales. Customer Service, Order Entry, Credit, Billing.
Production Scheduling, Printing, Assembly (Binding), and Logistics (Shipping) were
present.
Bob:
Good morning folks. Thanks for attending this meeting. Last month, we were able to
establish relationship among various functions, within BPG. We know how information
and work flows among functional departments in a broad sense. Rich and senior
management team have identified that the critical business issue in front of us is to retain
our existing customers, deliver quality products on time, be cost competitive and design
and develop new products at a much faster rate. We have chosen to being by looking for
ways to improve the order to deliver process. This will address the business issues
which management feels are most important. Please remember that we will most likely
focus on the other processes later, but to get the ball rolling, we will start here. We must
map this process, as it exists to analyze and kaizen. Why dont we start by having you all
explain the details of receiving, processing and shipping an order. Lets being with the
customer first.
Lisa, why dont you start?
Lisa:
OK Bob. I will skip the quoting process. Lets assume that we developed a prototype
SPECIFICATION manual and it has been approved by the customer. We sit with the
customer and go through various sales parameters such as price, quantity, lead-time etc.
When the customer signs off on the overall proposal, we normally receive a confirmed
purchase order by fax and/or mail. We translate the contents of this PO to our own
language and fill up a detailed sales order form and fax a copy to customer service. We
normally mail a copy also just in case the fax simply disappears into binary heaven!
Bob:
I wont ask individually each one of you. Just pick up the sequence and tell me what
happens next
Customer Service:
We receive orders from field sales from all the four regions. Faxes are put in a IN tray
throughout the day and the mail orders are opened by a clerk and are also added to the
IN tray by lunchtime. Every morning, we sort of pick the pile from the IN tray and
distribute them among ourselves
Bob:
How many of you work in customer service?

Customer Service:
There are four of us Bob. But we are not dedicated to any region like technical service.
Perhaps we should be! Any way, we examine each order and make sure that all sales
parameters are OK. We check part numbers, quantity, ship to and bill to address, PO
number, delivery dates and any special shipping instructions. Often, we edit manually the
orders because the information from the customers original PO does not match with the
field sales translated orders. We then make a copy of the edited order and log it into the
system. We try to process every order within a day or two.
Bob:
What happens if the order is not complete and you have major problem deciphering it?
Customer Service:
After we log the order, we fill out a form requesting additional information and fax it to
field sales. You know, sales people are on the road most of the time. Sometimes, it may
take one or two days to just get the message. They, they will have to either call their
customers or fax them a message asking for clarifications. Often, customers take 3 to 5
days to get back to field sales with clarifications. Field sales then faxes additional
information to us. When we receive them, they are normally put in a tray called More
Info. Every morning, the clerk sorts them out and hands them to the particular customer
service person who originally handled the order. They check the order again and log it
into the system with a date code on it. We then open an order pack
Bob:
Whats and order pack?
Customer Service:
Order pack is simply a thick envelope which will eventually contain every piece of
paper work that is related to a particular order including even product samples. We then
assign a unique order number and a customer number if the customer is new. If the
customer is an existing one, we will simply search the number on the computer and
record it on the order pack. We put these order packs in a tray marked OP Out as the
day progresses. Every morning, the clerk physically takes the entire tray to the order
entry section which is in the finance department in building 205
Bob:
So, you sort of work in batches. What happens if there is a rush order?
Customer Service:
It depends on who is pushing the order! We do favors some time, and we are getting
more of these. But, for a rush order, we all run around like chickens with our heads cut
off, then we scramble to finish up other things that we fell behind on because we ignored
them to do the rush job!
Bob:

OK. What happens next?

Order Entry:
Every morning at 9:30 AM, when the customer service clerk comes in rolling a cart of
order packs, another boring day starts for us! We log all the orders into the computer first
for tracking purposes. We then sort them by sales regions. We have four order entry
clerks who handle East, West, South and North regions. The clerk start entering the
orders into the AS/400 computer system (..if of course the system in not down). If we
have a new customer, it is very frustrating for us because, the computer wont accept the
order
Bob:
So, what do you do then?
Order Entry:
We have to pull those orders and put them in a try. Next morning, when the customer
service clerk arrives with a new batch of order packs, we attach a note and send back
these orders of new customers to customer service. They have to create customer
accounts in the computer and update customer profiles and other details. They are the
only ones who have access to this screen. We cant even edit those screens. Typically,
those order packs come back the next morning at the usual time. We then complete those
orders first and submit a batch order print. Check this out, Bob. we are located in the
sixth floor and our printers are in the first floor where the MIS department has its offices.
We run down every time we submit a batch print. You see, the problem is if you dont go
down and collect your output, its is going to get lost. Several divisions share the MIS
resources. The fellow who is responsible for printer outputs does not know BPG
employees. By the time he gets to know few people in the company, he either quits or
gets fired! And a new kid shows up there. It is very frustrating
Bob:
What do you with the print?
Order Entry:
We cross check every order for its accuracy against the original fax in the order pack
and make sure that we dont have any transposition errors. By the end of the day, we
assemble all completed order packs and put them in a cart. Every Tuesday and Thursday
mornings, a clerk from the finance department shows up here to pick them up for credit
check. This guy smokes something, I think. He is in his own world and I often wonder
what happens to the order packs he takes!
Credit:
Oh, cut it out! He is much better than the clerk you have who does nonstop chatting with
every human being she bumps into! Bob, twice a week we receive these order packs and
log them into the computer for recording their status. Field sales always wants to know
where a particular order is currently. We handle case by case here. If the customer is new,
we move them to a hold area and a clerk handles further processing on those cases. If

we have an order from an existing customer, we print out a credit and payment history.
We take a look at their AR balances and payment patterns. After some analysis, we either
approve or disapprove their credit and this takes only a day. Let me be honest here, Bob.
Every one blames Credit for holding up orders. But what they dont realize is that even if
one customer doesnt pay or ends up filing bankruptcy, everyone points fingers at us. So
over the years we have become very cautious and conservative in approving credits. We
also bring some old traditions from other Balathon divisions, you see.
Bob:
What happens next?
Credit:
Lets address new customer situation. We fill out a form requesting specific financial
information and bank references and fax it to customer service. They know how to get
hold of these invisible phantom creatures, I mean field sales people! In a couple of days,
they manage to get their hands on it and forward them to their customers. Customers have
to deal with their own internal organization. They request their finance group to handle it.
Eventually, they send all references and additional information to field sales. Sales then
forwards it to customer service. I t might sit there for a couple of days, who knows!
Typically, in about 15 to 18 days, we get what we requested for. We then work on those
cases by calling or faxing to their references, checking on Dun & Bradstreet ratings etc.
This process takes another 5 days before we make a decision on those cases.
Bob:
What happens if the credit is not approved in either case?
Credit:
Good question, Bob. Yet another long ordeal begins! We inform our decision to
customer service, who in turn informs field sales, and they inform their customers. The
customers at this point have a choice of proposing an alternate payment method, such as
COD or certified check or bank wire transfer, etc. If they are determined to only deal
with suppliers who can grant them credit, then they simply cancel the order and the whole
process abruptly ends. Typically, they propose alternate payment method through field
sales and customer service to us. This can take any where from 6 to 12 days. If we accept
this, we proceed forward. Otherwise, the whole cycle begins again!
Bob:
OK, credit is approved now. What happens to the order pack?
Credit:
The approved order packs are put in a tray throughout the day. Every morning, a clerk
from production (while dropping off shipping/bill of lading papers to billings), picks
them up and moves them to production scheduling.
Bob:
Finally, we are getting into actual production

Scheduling:
Not yet Bob, hold on! We have to do certain things before some one simply starts
printing. It is not that simple. Every morning 10 AM, as soon as we receive approved
order packs, a production clerk enters them into the MRP (Manufacturing Resource
Planning) system. This provides a date stamp for orders when they enter production area.
We run MRP on Mondays, Wednesdays and Fridays. Using these MRP runs and looking
into material availability, machine capacity and manning issues, we generate production
schedules for the next two days. For example, on Monday we schedule and freeze
production for Tuesday and Wednesday; on Wednesday, we schedule for Thursday and
Friday; on Friday, we schedule for Saturday and Monday. We work 3 shifts and 6 days
per week.
Bob:
This sounds very complex! I am tempted to ask why not schedule every morning for that
days production? I am sure you have your reasons. What happens next?
Scheduling:
We print out work orders (which have details of routing, material pick lists, quality
checks, specifications, etc.) and attach them to the order packs. These packs are then
physically moved to printing floor supervisors office. We also release requirements of
custom materials to purchasing. We normally require specific three ring binders printed
with customers logos and other display materials.
Bob:
Boy, do we finally print now?
Printing:
We are almost there, Bob! We have to first log all scheduled orders to our system. This
will help us to determine what specific piece of equipment is going to be used for what
specific order, when it is going to be run and who is going to do it. We also have to
sequence some of these productions steps. You see, we first print on very large sheets and
then fold and cut to achieve certain efficiency and sequence. We then being producing
the film and/or plates for the printing process. Normally, engineering would have sent all
camera ready typeset materials by now to us. Sometimes, we have difficulty in figuring
out what material goes in what order. The only common denominator is the customer
name. If a customer has multiple orders, we are in trouble. Engineering always sends
materials to us several days ahead of time because, it takes only three days for them to
put together all relevant pages and graphics.
Bob:
How long does it take to print SPECIFICATION Manuals?
Printing:

That depends on the order size. Normally, I would say any where from 2 to 10 days just
to print. We wait till the entire order is printed and before moving it to assembly or the
binder shop.
Bob:
Why?
Printing:
We are always concerned that pages from one order might get mixed with another order
or you may accidentally assemble one companys material in another companys binder!
We are big on quality, you see. Finally, we log all completed orders into our system for
labor and efficiency reporting. We are a union shop and we provide incentives based on
labor efficiency.
Bob:
Are we done now?
Assembly:
Hey, not yet. We receive pallets of printed material from the print shop every night. We
log all the incoming batches to the system and generate assembly schedules by the day.
We have different assembly options: 3-hole punching, 3-ring binders, shrink wrapping,
spiral binding, saddle stitches, book formats, work book formats, etc. We have to assign
people and machines because not all people are skilled to do all types of bindery work.
Almost every order requires some customized bindery material such as vinyl binders,
glossy covers, etc. The most important thing for us is to make sure that these materials
are available now. If they have not arrived yet, we call purchasing (which is almost an
everyday saga). Sometimes, we have to literally shut down because we dont have these
customized materials. If they are available, we proceed and assemble the order which
takes from 2 to 5 days. We log all assembly details on the computer for labor and
efficiency reporting. We pack them on wooden pallets, shrink wrap and move to staging
area.
Bob:
Who picks up the order?
Shipping:
We have contracts with several LTL (Less Than Truckload) carriers. It depends on the
region they are going to. We generate the shipping documents (bill of lading) and keep
them ready. All pick-ups are done after 6 PM. Normal surface transportation takes any
where from 4 to 12 days depending on the region again. Every morning, our clerk log in
all ship transactions, attaches a copy of the packing list, bill of lading, quality and
quantity checks to the order packs and sends them to billing in the finance department. If
we dont do ship to sales transactions, they cant generate invoices.
Bob:
Do you bill your customers immediately?

Billing:
No, we dont. It looks very bad if they receive an invoice before they receive their
shipments. We sort order packs by shipping regions and normally generate billing 2 days
after the scheduled delivery dates.
Bob:
How long does your customers take to pay their bills?
Billing:
You got to ask accounts receivable (AR) people for that statistic. I think the average is
running at over 60 days.
Bob:
Thanks folks. That was great. Lets map this whole process on a chart and put it on the
wall. We probably have to go around the entire conference room a few times!

Kaizen
Exercise
1. Read the Critical Business Issue case study.
2. Develop a cross-functional process map of the Order
to Delivery process as it exists today at Big
Publishing Group.
3. Based on the information provided in the case, and
using the supplied As-Is process map, determine the
following:
a. Cycle time for Order to Delivery process
shortest & longest
b. Number of hand off points best and worse
c. Number of decision points
d. Number of sub-departments involved
e. What other measures of performance would you
want to look at?
Have fun!