MT236 Unit 8 Process Improvement Proposal Example

From 3.2 Days to 1.2: A Unit 8 Process Improvement Proposal for a Hot Sauce Maker's Order-to-Truck Time

[Student Name]

Purdue University Global

MT236: Introduction to Supply Chain Management

Unit 8 Process Improvement Proposal

[Instructor Name]

[Date]

Alamo Ridge Pepper Co., its orders, timings and every cost are composite and illustrative; bracketed figures stand where order records and quotes would supply the numbers; the sources cited are real.

The Problem

The Texas grocery chain's supplier rules require orders to ship within two business days of the purchase order. Alamo Ridge Pepper Co. averages about 3.2 days. Last year [81] of its [260] orders from the chain shipped late, and the chain charged [$125] for each, about [$10,125] in chargebacks. Late shipments also hurt the company's supplier rating, which the chain reviews twice a year.

How the Time Was Measured

Over six weeks, the operations coordinator timed [sixty] orders from the moment the purchase order arrived by email to the moment the truck left the dock, recording when each step started and ended. Rother and Shook (1999) recommend this kind of direct measurement when mapping a value stream, because the times people remember are usually shorter than the times the process actually takes.

Where the Days Go

The 3.2 days divide into four parts. About 0.9 days pass before the order is keyed, because the office enters all purchase orders in one batch at 2 p.m. each day, so a morning order waits most of a day and an afternoon order waits until the next. Picking and packing take about 0.5 days. About 1.4 days pass with the order staged on the dock, because the coordinator requests a carrier pickup only after picking is finished, and the chain's contracted carrier needs 24 to 48 hours of notice. Loading, paperwork and other steps take about 0.4 days.

Only the half day of picking and packing is work on the order. The other 2.7 days are waiting. Womack and Jones (2003) argued that most of the time products spend in a process is waiting rather than value-adding work, and that removing the waits usually gains more than speeding up the work.

Of the 3.2 days, the order is being worked on for half of one.

The Two Changes

The first change removes the keying wait. The chain can send purchase orders through electronic data interchange, which Alamo Ridge has never set up. An EDI translation service would import each order into the company's system as it arrives, with no manual keying. For orders still received by email, the office would key them within an hour of arrival rather than in a daily batch. The wait before keying would fall from about 0.9 days to about 0.2.

The second change removes most of the staging wait. The coordinator would request the carrier appointment at the moment the order is entered, not after picking. Because picking takes about half a day and the carrier needs 24 hours, the truck would arrive soon after the order is packed. Staging would fall from about 1.4 days to about 0.3.

With loading and paperwork trimmed slightly by preparing the bill of lading at order entry, the total falls to about 1.2 business days, well inside the chain's two-day rule.

Why Not Add a Picker

The owner's first idea was to hire a second warehouse worker so orders could be picked faster. The timing shows why that would not help. Picking and packing already take only half a day, and a second picker might cut that to a third of a day, saving perhaps 0.2 days. The order would still wait 0.9 days to be keyed and 1.4 days for a truck. Adding labor to the one step that is not the problem would cost about [$38,000] a year and leave the order late.

The timing also showed a pattern worth noting. Orders arriving on Thursday afternoon and Friday were the most often late, because the 2 p.m. batch and the carrier's notice period together pushed them past the weekend. Under the proposal, a Friday morning order would be keyed by midday, its appointment requested at once and its truck booked for Monday morning.

Cost and Savings

The EDI service costs about [$1,500] to set up and about [$200] a month, or [$2,400] a year. Requesting appointments earlier costs nothing but a change in routine. If late shipments fall from 81 to about [10] a year, chargebacks fall by about [$8,900]. The net saving in the first year is about [$5,000] after setup, rising to about [$6,500] a year after. Hopp and Spearman (2008) note that reducing the variability of waiting times also makes a process more predictable, which here would protect the company's supplier rating.

Risks

Two risks need attention. If picking takes longer than half a day on a large order, the truck could arrive before the order is ready; the coordinator should request appointments for large orders a half day later. And the EDI service will need testing with the chain's system before it goes live; a two-week trial running alongside email orders would catch errors.

Measures

The company will track purchase-order-to-truck time on every order, aiming for no more than a day and a half, the number of late shipments per quarter, with a target below three, and chargebacks per quarter.

References

Hopp, W. J., & Spearman, M. L. (2008). Factory physics (3rd ed.). McGraw-Hill.

Rother, M., & Shook, J. (1999). Learning to see: Value stream mapping to add value and eliminate muda. Lean Enterprise Institute.

Womack, J. P., & Jones, D. T. (2003). Lean thinking: Banish waste and create wealth in your corporation (Rev. ed.). Free Press.