To begin this process, it is recommended that a cross-functional team of representative users from each point of the process (including but not limited to engineers, buyers, clerks, accounting clerks, controllers, the district treasurer, director of operations, and the district superintendant) meet for a one day meeting to map out the process used for each type of order. As with all attempts at procedural change, especially across multiple departments, upper level management’s full support is essential.
Since both the director of operations and the district superintendent are interested in updating the organizations’ ordering methodologies to create a better system, they should be marked as the “Champions for Change” for the process. This will help convey the importance of the panel meeting to all of those chosen to be involved. The purchase order process mapping should be completed utilizing process flow charts to create a visual for everyone involved that shows where hang ups lie, bottle necks form, and where non-value-added activities create work where less is needed.
A process flow chart should be created for each type of purchase order or purchase order change function encountered on a daily basis. After the process flow charts have been created, the team members should be able to harness the concepts of continuous improvement to determine where changes, large and small, could be made. Since someone from each function of the process will be present at the meeting, issues with proposed changes could be addressed immediately.
For the larger procedural issues that cannot be solved in one day, a list should be made with someone assigned to manage the completion of the issue which should be met on within 5 business days. It will not be an easy process, but at the end of the day, some agreement should be able to be made to implement some changes to the order processing system for the betterment of the organization. Reduction of the number of small orders and/or the number of suppliers should be easily achievable.
These two things are the low-hanging fruit in the process of continuous improvement and should be able to be reduced quickly and efficiently. It is necessary to adjust these functions internally immediately before constraints (ie: minimum order charges) are placed upon the district by fed up suppliers end up costing the district more money and time. For all of the strengths in the continuous improvement process, there are just as many weaknesses; especially when the functions attempting to be improved cross so many departmental boundaries.
One issue that may arise is the unwillingness of a person or department to bend on an issue that could save time in another area of the process. Another issue could be the follow up required after the big meeting. Additionally, if the process becomes stagnant, the managerial “Champions for Change” must be able and willing to motivate the cross-functional team in a timely fashion to get the job done. If for some reason even the perception of managerial support slips, the team’s hopes for change may be dashed as well.
A second recommendation would be to encourage each school in the district to have a stock of inventory on hand in each building. This is not to say that each building should have storeroom after storeroom full of “just in case” supplies. Utilizing the most current, complete two years of data, an analysis of each school’s supplies should be conducted. From that information, which should be easy to obtain based on the amount of information that the accounting department requires for each and every order, it should be obvious what each school’s top ten regularly ordered supplies are.
By completing the school-by-school analysis and allowing each location to place a once-per-quarter or once-per-semester stock supply order, each school will reduce waste in the form of time and will save money by filling that time with a value-added function. Some issues that may arise with this solution are space issues, accounting issues, or order placers taking advantage of the minimal amount of leeway provided to them by allowing stock orders. Space issues can vary from building to building based on their amount of free space for storage of stock items and/or the physical size or volume of he products allotted to that school for the quarter or semester. The accounting issues encountered may not be of the, “How much did it cost? ” variety, but more of the vein of, “What was it used for? Who used it? When was it used? ” These issues could be solved using a product log. The person requiring the equipment would need to complete the log prior to obtaining the product. Each quarter, or more frequently if necessary, the log could be faxed or emailed to the accounting personnel.
The issue of employees taking advantage of the stocked supply for personal use is not an issue that is unique to any company. The best way to circumvent this practice is to know what supplies are going where per whom. This could be avoided by utilizing the same log system described in the accounting issues section. The third recommendation is to reduce the number of orders placed per month by centralizing the ordering process. When supplies are needed now, a purchase order system is utilized by the requestor.
These orders can be placed by anyone in the district and often result in multiple, tiny orders being placed with suppliers on a daily basis. Through the centralization of the ordering process, the number of orders placed per day could be reduced as could the number of suppliers utilized. There are currently 1,296 active suppliers on the supplier list. This number should be reduced to somewhere between 200 and 250 suppliers (possibly more if there are specialty items that cannot be provided by another vendor or if there are binding contracts in place) over the course of the next two years.
There are currently five employees staffed in Gene Smith’s department, excluding himself. There is an assistant, a stenographer, a clerk, and two buyers. There may need to be a reorganization of duties within the department. Could some of the stenographer’s work be absorbed by the clerk and/or assistant so the stenographer could manage some of the purchase orders coming in? By separating the orders alphabetically by supplier between the buyers and the buyers working together to make sure that order maximization occurs, the number of orders and suppliers could be reduced greatly.
Also, this separation by supplier would give requestors and suppliers with a direct contact every time a question or change is required. Issues with this plan may be that although product may available for a comparable price and quality, there may be situations where a specific supplier’s product is required and/or an unbreakable contract is in place. An additional issue that comes with any type of change, be it large or small, in any corporation is the resistance to change from those affected by it.
The best way to evade naysayers is to show how the changes make life easier, more time efficient, and more monetarily sound for the greater good of the company. It will take time, but if the process is a successful one, even the harshest critic will come around. PROPOSED COURSE OF ACTION The proposed courses of action we are recommending are the first two options. We believe that by executing these options, the goals of reducing the number of small orders and reducing the number of suppliers to create a more cohesive order processing system throughout the school district can be successfully achieved.
Option 1: The continuous improvement process mapping scenario promotes team work, understanding, and flexibility throughout the entire group of people responsible for getting the required product to the correct place in a timely and efficient manner. Having the managerial leadership to encourage the departments to work together and make the changes necessary could really be the key to making strides in the direction of eliminating waste from as many parts of the ordering process as possible.
Option 2: By allowing each school to carry a stock amount of their top ten regularly ordered products, the school district is allowing employees to place one order per quarter or semester instead of one order per day. By eliminating the waste associated with placing the same orders over and over again, the process is opening up time in the order placer’s day to provide their department with value-added processes. IMPLEMENTATION AND MONITORING Implementing these options may be time consuming. Trying to find a free day in the schedules of everyone who needs to be present at the process mapping meeting may prove difficult.
With any meeting of a cross-functional team, there will always be someone unwilling or unable to attend the meeting at the agreed upon time. The best way to avoid this is to have the meeting notice sent out by the highest-level manager involved, in this case, the district superintendent. This should give the resistors the additional push they need to show up and actively participate in the event. After implementing the changes agreed upon during the initial meeting, there needs to be follow up by the “Champions for Change”.
They need to make sure that the implementations are happening successfully with the intended results. When necessary, additional changes can be made, but all results, issues, and changes need to be communicated effectively throughout the group. For items that were too big to be solved during the initial meeting, additional meetings will need to take place. If the district superintendent cannot be present at those meetings, it is necessary that the director for operations attend as an active “Champion for Change”.
Just because the issues were not solved within the first day does not mean that they should be ignored or forgotten. Communication is imperative to the success of this function. Without communication, this function will fail. Implementation of the second option also falls in the category of an action that will require time and planning. The first step to this is to have the supply manager pull the required previous two years reports for each school to determine what each school’s top ten items acceptable for stocking use are.
After that, the average amounts of each product will need to be calculated so each school has a guideline for the amounts available for stock are per school year. Next, a communication will need to be put together that states what the stocking policy is. If the stock log option is required by the accounting department, the form and its instructions will need to be put together as well. Using a form letter and a mail merge function, each school could be notified of the new policy, their top ten items, their item amounts, and their number of allowable stock orders per school year.
Monitoring the viability of this program can be managed by auditing the first year’s stock orders and accounting departmental stock logs. If any impropriety is observed, that location could have the program suspended. At the end of the year, Gene Smith could run the same analysis of the school district’s orders to determine if there was a reduction in the total number of orders placed, the total number of suppliers ordered from, the number of orders with a value of less than $30, and the number of orders with a value between $30 and $100.
If the average value of all orders placed for the year goes up from this year’s $482. 21, the number of orders placed goes down from this year’s 31,164 (excluding change orders), and the volume of on-hand stock is not outside set guidelines, this function could be deemed successful. BIBLIOGRAPHY * Supply Management 8th Edition by Burt, Petcavage, and Pinkerton * The Oakland School District case study