Strategy of two banking giants BY robtnq2905 Table of Contents Introduction For this weeks case we take a look at the difficulties the company Desko is facing with its order process. Desko is an American company which produces office furniture. Desko does not only produce its products but also delivers them to their American and Canadian customers. After having received cancellations from a major customer Desko decided to further analyze its order process in order to improve this. We will draw a map of its order process and create a list of problems which are tied to it.
Above that we will complete the map of the credit verification sub-process and come up with ideas to improve this. Question 1: If you were Mr. Moore, and based on the information provided in the case, how would you draw (map) Desko’s order process? In order to draw a process map of Desko’s order process which will not be 5 pages long, we only use the level 1 processes. A level 1 map shows the processes at its highest level. It is typically five to seven steps long and it is very useful to get an understanding of the big picture. The level 1 map Just shows the basic steps required to convert an input into an output.
So the level 1 map is a short summary of the entire process. Order process map of Desko As you can see, the first thing that happens at Desko’s order process is the receiving of customer orders. They receive orders from customers through mails, faxes, e-mails or electronic data interchange. The orders are printed and placed in the pigeonhole of the dedicated account manager. Then, the account manager creates the order, which is the second process. Once the order is created, the account manager sends the order to the credit department. The credit department evaluates the customer’s creditworthiness.
Once the customer’s creditworthiness is approved, the order is transferred to the production department. At the production department, all orders sort the orders according to customers’ geographic location and assign them for distribution. Subsequently, the products are shipped to the customer. When the customer received his order, he has to finish the payment. This is the last step of the order process. Question 2. Complete the mapping of the credit verification sub-process. Credit When an order comes in the ERP automatically checks blocks the orders that don’t meet the requirements.
Every blocked order is checked by the clerk. Even though the clerk is able to release the blocked order if the customer credit is sufficient, it has to pass all questionable order to McMaster every day. McMaster goes through the list and eventually decides whether these are released or blocked. She does this by asking the clerk or checking the customer’s profile information. So the final decision is basically with McMaster self. All released order go to the plant supervisor which sends it to the MTO or MTS, according to what they require. All blocked orders go to the collection clerk.
Debt Collection The clerk makes a ‘list of past dues’, stating the orders to be collected. He phones the relevant customers. They get a notice to pay within 5 days. The customers that aren’t able to pay or don’t want to pay can sometimes get an additional time to pay, but the clerk doesn’t agree on it, the clerk can send the collection agency. The order also can be cancelled, this can happen for instance because of a wrongly processed order or when someone wanted to return a product Question 3 and 4 3. Create a list of the problems tied to the order process raised by Desko’s managers.
Are there any others that Mr. Moore should identify? 4. If you were Mr. Moore, what recommendations would you make to improve your sub-process? If needed, feel free to draw a new sub-process to show your recommendations. Identified problems, sorted by their chronological order in the process: Customer Service: Errors while creating a customer order Pricing error, product code error, purchase order description Different delivery addresses (ERP) Manual allocation of stocks (doesn’t meet precise demand of the customers) ERP does not take cancellation in account ERP only supports 2 delivery points per client
Return of items entails issuing a replace order (creation of second invoice) Credit is only given when item is returned Item can only be collected when route to customer is favorable (takes too long) Furthermore, that customer may be still placed on the” list of past dues” Production Production planning process Production schedule is not flexible enough (only minor changes can be made) One planner uses ERP others use excel Major customers can send forecast, but balance of reserved inventory stays the same Order forecasts are made only once a year (based on sales figures and production ost) Annual sales forecast is based on sales of last 13 months No consideration of current market trends MTO production Planners don’t have information regarding production of units Kanban leads to out of stock problems ERP stock allocation analysis is incorrect Distribution Large volumes of items in inventory in distribution center, warehouse or trailers Collection method is to long and involves too many workers Too many storage sights Difficulty locating item Useless manipulations Conclusion: Many complaints have been received regarding the delays and errors in the order rocess. As a consequence, important clients have terminated the business with Desko. The above analyzed flaws and deficiencies contribute to the consistency of delays. Some flaws cannot be easily corrected, such as the errors made while creating the order in the ERP systems, or losing orders during the transportation to the account manager. However, other deficiencies which exacerbate the overall process with a larger magnitude can be identified and possibly corrected through strategic changes. The focus in this segment will be primarily on two stages of the rder process, namely the shipping and the production.
In the entire process, production and shipping appear to be the bottleneck, due to a lack of flexibility in manufacturing and storage issues in distribution. In order to emphasize these shortcomings, a process map is depicted below. Depicted in the flow chart is the sub-process of the production stage. At first the ERP system determines whether the product is Make-To-order (MTO) or Make-To -Stock (MTS). MTO production is used for products that are specifically requested by a company and MTS production goes straight to inventory. The planning department prepares the stock keeping unit (SW) list in respect of the sales budget and the production rate.
As mentioned earlier this forecasting procedure takes into account the sales of the last 13 months but not the current trends or MTO production. The MTO production could be ideally used to forecast, since it perfectly reflects its customer’s tendencies. The SKU is then sent to the plant supervisor, who will in turn create a schedule for production. The flexibility of the production is very important to customer satisfaction. Desko has implemented the Kanban philosophy for its MTO roduction. Kanban usually assures a constant level of inventory for preassembled parts, but neglects the variability of finished products even though MTO is very customer specific.
The consequences Desko experienced were out of stock problems, which in turn resulted in delivery delays. In conclusion, the pure forms of MTO and MTS do not meet the requirements of the customers and the company. Regarding the production process, it seems apparent that the customer order decoupling point (CODP), takes place even before the production begins. Since the MTO and MTS products are manufactured in the same lants and on the same assembly lines, many set-ups are necessary to fulfill the customers need. A rearrangement of the CODP could therefore solve problems with delays in production. However, in order to change the CODP, either the MTO products have to become less variable or MTS products have to become more specific.
The logical choice would be to still offer MTO products, but the customization would only take place after the physical process derived by forecast already took place. A simplified example: The physical process derived by forecast is a common wooden table. It is standardized, however after the CODP, the color could be determined. The production process would start with the forecasting for the standardized part of the product. Forecasting should include historic as well as present data. Current market trends need to be considered in the analysis, from other firms as well as Desko. After the standardized part of the product is determined, it is scheduled with the plant supervisors. If the schedule is approved, the standardized part can be produced.
When an MTO order is received, the according plant supervisor is contacted and prepares the products. It might seem as if the customer loses variety in products, however numerous specifications can still be made and merely the point in time where specification happens is altered. With this process, it is possible to improve flexibility and time reduction by combining MTS and MTO strategies. Set-up times are reduced, communication between MTO and MTS production is improved and fewer production planning errors are made. This is one step to improving the production process, however this alone will not turn around the company. Rather than a quick fix solution, an organizational wide strategy must be implementedl .