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• Contract Execution Lifecycle - Speed to Deal Cycle Time Reduction Mega- Project

Contracts were being lost to competition because of very long approval times. Lengthy approval

times were a result of corporate mergers and different processes. Goal was to reduce cycle times

in 4 channels of trade – wholesale branded/retail branded/specialty/unbranded to benchmarks &

entitlements while maintaining financial controls. Process steps in scope include

- Post Pre-Negotiation (post prospect mining or contract renewal), Proposal formulation

- Finance Review, Proposal Approval

- Contract Preparation, Finance Review

- Contract Execution, IT/IS Systems Updating

- Billing Activated

- Compliance Monitoring

- Billing Validation

o B2B Wholesale (Branded) Distributor Contract Formulation Process Cycle Time (CT) Reduction – create Ship-To’s

• 50% time reduction in contracts & customer service group process.

• $55MM/year sales increase @ 1.5% gross margin.

o B2B Retail (Branded) Distributor Contract Formulation Process CT Reduction

Create Sold-To’s & Ship-To’s

• 65% time reduction.

• $113MM/year sales increase @ 1.5% gross margin

o B2B Specialty Distributor Contract Formulation Process Create Sold-To’s

• Formulated a standardized best practice process from the best process steps of 3 pre-merger processes.

• Preliminary results indicate a 50% +/- cycle time reduction

o Multi-Channel of Trade Non-Standard Contract Formulation Process CT Reduction

• Best practices identified, documented & shared.

• Results under evaluation

o Electronic Signature Platform

• Implementation of existing system capability to meet legal needs.

o Sales Authorization Clearance Improvement

• Many new or re-authorized customers were rejected by semi-automated system.

• Measurement system invented and implemented.

• Best practices identified, documented & shared.

• Valid customers’ new authorization clearance increased from 68% to 95%.

o Self-Amortized Loan Approval Process CT Reduction

• Guided/coached Texas A&M graduate student team,

• current state mapped,

• ideal future state implemented with measurement system formulated & implemented,

• preliminary results indicate a 30% +/- reduction in cycle time.

• Perfect (Customer) Order (Fulfillment) Mega-Project

Reduce short ships, late ships, incorrect invoicing, increase accurate ships in 3000 SKU division.

Fulfillment % = (late ship %) X (incomplete shipment %) X (inaccurate shipment %) X (wrong

invoice %)

Kaizen Events to reduce cycle time on order fulfillment process and on warehouse product

inventory accounting process.

o Implemented the Perfect Warehouse for Package Goods.

• Long picking times were causing a need for relatively large batches to be produced.

• Literature searched identified rough benchmark.

• Products’ pick frequency warehouse setup along with inventory optimization & 5S.

• Material accounting processes updated & bar coding implemented.

• Truck loading cycle time reduction of 20% attained.

• 3 manufacturing plants’ warehouses inventory optimized.

• $370 M inventory reduction.

o Package and Drum Line Batch Change-Over Time Reduction

• Several plants had relatively long change-over times from product to product.

• Baseline data obtained and process mapping completed.

• Dynamic model built to test proposals.

• Simulations run with simple process changes as inputs.

• Low cost, easy & quick changes made.

• Preliminary results indicated a 25 – 50% cycle time reduction attained.

o Vendor Products Lead-Time Reduction

• Baseline data obtained, customer to self to vendor communications processes mapped.

• Self to vendor communications process changed & improved.

• 2 vendor warehouse inventory levels reset, re-visit action plans implemented.

• Lead time decreased from 19 days +/- 10 days to 15 +/- 6

• $120 M inventory reduction at company warehouses.

o Implemented Bulk Goods Loading Cycle Time Reduction

• Kaizen Event.

• Redundant & unnecessary paperwork eliminated.

• Excessive truck travel reduced by cycle time analysis, improved scheduling and loading dispatch, value stream mapping of flow.

• Set up Total Productive Maintenance program for gov’t validated flowmeters thus eliminating re-weighing of truck with each compartment fill.

• $1 MM capital investment avoidance for budgeted secondary weigh station.

• Perfect (Customer) Order (Fulfillment) Mega-Project continued……….

o Customer “Order to Fill” Cycle Time Reduction

• Time to fill orders was taking close to double the time identified from both benchmarking & entitlement. This sometimes resulted in missed orders or partial shipments with additional LTL costs.

• Transactional process value stream mapped & documented,

• Improvements identified with major sources of wasted time and motion eliminated.

• New process implemented, time stamps being collected with analysis underway.

• Preliminary results indicate cycle time reduced by around 25%.

Customer “right the first time” (Perfect Order) order fulfillment increased from

• 2 plants increased from 80%+/- to 95%+/-

• Additional special freight & demurrage savings not quantified.

• Division overall increased from 65% +/- to 90%+.

• Price Change Management Process Cycle Time Reduction

o Focused on the Sales organization and Operations interface.

o Competitions’ pricing & costs were changing about twice as fast as list price updating speed.

o Antiquated pricing update process with lots of batching & queing.

o Value stream mapped for both domestic & international changes

o Waste identified and much eliminated.

o 80 people-weeks down to 15 people-weeks to formulate, issue list prices & pricing letters.

o Prices more closely reflecting cost & competitors’ pricing changes

o Neither AR nor revenue value quantified, no O&O reduction taken.

• Consigned Product Inventory Optimization

o Focused on Sales

o Company owned product at major oil customer site.

o Inventory desired by customer too high for consumption & replenishment time variation.

o $450M contract bargaining value identified, used to show customer how they are valued by company.

• Product Commercialization Process Implementation

o Focused on R&D, Marketing, Operations

o Designed a “LEANed” stage-gate Speed-to-Market type process.

o LEAN principles applied to generate “must-deliverables” and “deliver-as-appropriate” based in innovation risk level.

o Quicker “kills” in place to stop funding on poor business case products.

o Implementation underway, first products show quicker commercialization with higher probability of success.

• Sales Services Value Improvement

o Focused on Sales

o 200 +/- services offered with products

o Adds cost & complexity

o Paid by pricing or market share?

o Kano survey formulation, competitive pricing and cost analysis completed

o Some features & benefits were self-perceived, but not wanted and added costs to customers

o Weighted rank ordered value to customer & company

o Lower value services being eliminated.

• Customer Inventory Management & Replenishment Short Load Optimization

o Provide cost basis for a win-win incentive system with customers.

o Fast inventory turns, full loads.

o Slow turns, partial loads with 1 truck to several clustered sites.

o $700 M/year O&O savings underway.

• Contract Compliance Auditing & Oversight

o Logistics constraints, inability to respond timely to changing market conditions and the limited number of sites able to be tested severely limited the efficiency and accuracy of a compliance auditing program.

o Defect was # of sites not monitored for potential contact violations.

o $700 M annual O&O savings attained by use of an existing proxy data collection system.

• Document Records Management & Retention Compliance

o Policy separated into 2 parts; contracts & general business

o Records management and retention systems out of compliance, Legal risk heightened.

o Improvements noticed with training implemented but measurement system analysis of auditors underway to insure detection capability.

o Contract image scanning process implemented with retrieval and search capability

o $2.1MM/year O&O reduction in searching for records plus improved compliance

o Non-contract records retention compliance process formulated, implemented and measurements being obtained.

• MSDS Formulation Cycle Time Reduction

o Current state value stream mapped.

o Team identified & eliminated wasted time by future state mapping with parallel pathing.

o 0.8% value-add time increased to 8% with 4 day Kaizen event.

o Cycle time decreased from 4 months to10 business days plus a very short queue time.

o Planned FTE hire avoided.

• Joint Venture Pricing Strategy Implementation at Internal Product Distribution Centers

o Defect was volume/margin lost at centers where joint venture pulls significant volume and they get a spot price compared to contract price.

o Joint venture would pull lower cost product from competitor.

o Root cause identified as an incorrect pricing input in software for invoicing

o $526M/year increased revenue for parent company.

• IT Value Measurement System

o Defect was any value claimed for an IT project reached outside a new standardized business case build.

o Solution provided IT credibility.

• Market Responsiveness Forecasting with Product Pricing Changes

o Defect was a daily pricing move that caused the competition to over-react as defined by a goal price reaction. The incorrect response affected sales volume vs. target.

o Regression analysis provided a higher prediction correlation resulting in a $425M/year revenue increase.

o Leveraged to include a secondary product line, $100M additional revenue.

• Order Fulfillment Process Cycle Time Reduction

o Pre-event process was competitive with other companies however improvement was desirable.

o Cycle time reduced by 10 days average, 5-day Kaizen event.

o Market share increase by faster customer response, revenue increase estimated to be several $10MM’s per year as spread across several plants.

• Process for Setting Daily Allocations when Product Supply Disrupted

o Stock-outs occurred too often as a function of external unplanned or unforeseen events. This project was executed until those front end issues could be solved or minimized.

o Decision basis and rationale for setting allocations by channels of trade and by customers in such determined by project team.

o Guidelines set in place & process implemented.

• Customer & Sales Territory Value Analysis with Product Rationalization

o Sales & Marketing team invented process to systematically remove products from business.

o 350 products out of 1400 having < 15% gross margin examined.

o Cost accounting & allocation system reviewed.

o Pricing increase vs. potential lost revenue incentive calculations estimates made.

o Program implemented with cost savings and revenue losses being collected.

• Value Chain Continuous Improvement Leveraging

o Project setup with co-supplier to reduce services, equipment supply and startup cycle times

o Measurement system invented to identify cycle time impacts.

o Presentations made to Sales department to provide support to customers’ business & continuous improvement projects.

o Sales implementing ideal future state value stream map.

o Preliminary results indicate less rework, less coordination confusion and a 10 – 20% reduction in customer order to fulfillment cycle times.

• Inaccurate Invoicing by Vendors at 3rd Party Formulation & Distribution Sites

o High billing variation as normalized to other components.

o Measurement system formulated and implemented

• Several sources of errors identified including pricing entry and pricing assignment to product

o Solution implementation underway.

o Incentive not quantified.

• Take or Pay Contract Volume Improvement

o Supply contract set to take volume from other vendors to fulfill company’s sales contract

o Project established a monitor-to-action process to ensure there would not be a volume deficiency cost at the end of the contract. At the end of the first year, the company was in a negative position of $450 M. It was projected to be a $1.85 MM deficiency cost at the end of the 3 year contract if no action were taken.

o Control plan resulted in all of contracted material taken.

• Process for Obtaining and Communicating Product Outage and Allocation Changes

o Identified best internal practices with cross-functional team, 2 day Kaizen event.

o Documented by process map and SOP’s, implemented.

o Improved good will with stakeholder and customer base.

• Equipment Return Improvement

o Higher volume customers provided with free use of equipment at their sites.

o 65% of customers not returning equipment at end of contracts.

o Root causes were inadequate initial documentation & follow-up at end of contract.

o Rectification processes documented and attached to contracts.

o Preliminary improvement results indicate roughly 15% - 20% not returning equipment.

o Value not quantified.

• Customers’ Problem Quantification and Resolution

o Database of customer problems never examined, problems solved on a case-by-case basis.

o Several college interns working analysis by channel of trade, causes were summarized and Pareto analysis completed.

o Projects being formulated to address solutions and preventions to problems and standardized responses when not prevented.

• Retail Stores Contractor Service Charges Reduction

o Service truck utilization improvement, 5 day Kaizen event.

o Dispatch & scheduling process implemented.

o $300+ M/year O&O reduction at 1st plant site, implementation at additional sites underway.

• Effect of Special Event Advertising upon Sales Volume

o Identification of return by advertising type, medium, and amount during special events.

o Statistically designed experiments formulated and executed along with paired-T testing

o Results showed only 1 form of advertising had a statistically significant effect.

• Use of Services by Distributors at Unauthorized Sites

o Distributor owned sites were using services but not paying for them.

o Investigation showed no process present to check for authorization and no commonly known easy means for approvers to determine if site was authorized.

o Control & auditing process invented and implemented.

o Un-quantified reduction of risk, liability & cost

• Zero or Minimum Volume Customer Exposure/Risk Reduction

o Smaller customers could exceed pulling contracted volumes by significant amounts ahead of declaring bankruptcy

o Control system invented to both obtain key financials at regular intervals and a feedback loop to terminal manager when trucks pulled too much volume.

o Value not quantified.

• Margin Improvement at Retail Stores

o Defect was any product margin falling below a level set by product type & store location.

o Control plan set in place with IT warning system flagging low pricing or higher costs.

o Project implemented and on track to attain $1.3MM in additional gross margin.

• Measurement System Proxy as an Indicator for Total Sales

o It was desired to use a relatively simple measurement system to determine trends and relationships.

o Project designed to identify boundary range for correlating credit card receipts to total sales volumes.

o A relationship range was found for credit card sales to total sales which were then used in additional projects.

• Promotions Effectiveness on Credit Card Sales

o Goal was to identify return on spend as a function of geographical location during special events’ advertising.

o Paired T testing did not show that customer spending was a function of advertising spends during special events, no statistically based detection of improvement.

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Examples of Sales & Marketing Process Projects including both transactional and operational processes

Marketing & Sales Process Improvement Project Examples

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