Assignment
Enterprise Process Improvement
The Order Fulfillment Process for Setterstrom Company:
The Setterstrom Company is a mail-order rug company that sells products within the continental U.S. To make potential customers aware of the products available for purchase, Setterstrom Co. distributes color catalogs detailing its inventory. Catalog recipients are identified either by a mailing list purchased from a marketing company (based on household demographic data) or through a direct request for a catalog by an individual.
The process of fulfilling an order begins when a customer places an order for a rug. This is accomplished by filling out an order slip, which is included with the catalog shipped to the customer. The customer must remit payment at the time of submitting the order slip by writing a check. Both the order slip and the check are mailed (via US postal service) by the customer to Setterstrom’s corporate office, which is located in Chicago. All US mail takes anywhere from three to seven days to be delivered. Most often, mail arrives in three days.
At Setterstrom Co., all incoming mail at the corporate office is handled by an administrative assistant. This assistant received his degree from Ohio State University’s College of Business. As can be expected, incoming mail typically sits in a pile on his desk for anywhere between two to three days (unusually three days) before he gets around to delivering it to the proper recipients within the office.
The first place an order is delivered is the accounting department. Setterstrom’s accounting department uses a computer with AccountPro software to track customer orders and to manage its accounting information. Each order is input into AccountPro and customer balances are closely monitored. Additionally, the customer’s check is applied to the customer’s order using the AccountPro software and is then scanned and recorded into AccountPro’s database. The accountant that works at Setterstrom Co. received her master’s degree in accounting from Northern Illinois University. Therefore, she is at the top of her game. On average, it takes her one day to complete any given data entry task. However, checks take three to five days to clear, with 3 being the average.
Setterstrom Co. has several distribution centers from which customer orders are fulfilled. Once payment for an order has cleared, the order is forwarded via US postal service from the corporate office to the appropriate distribution center. Rugs are kept in inventory to allow for a quick cycle time on orders. When a customer orders a rug that is in-stock, it is picked from the storage shelves, packaged, and shipped to the customer. The picking and packing processes take a combined two days to carry out. The shipping company Setterstrom Co. uses takes two to five days to deliver orders, depending on where the customer resides relative to the distribution center. However, shipping usually only takes three days. Once rugs are placed on the shipping deck to be picked up by the delivery firm, they are marked as “shipped” on the order form. Any orders from customers requesting a rug that is out of stock is marked “back-ordered” on the order form. The updated order form is then mailed via postal service to the central warehouse
The Setterstrom central warehouse receives a back-ordered form from a distribution center, it gets placed in a “to-do” pile. The senior warehouse manager used to be a professional guitarist, but his Korn cover band never really took off. In fact, the only reason he took the job at Setterstrom Co. was because his girlfriend kicked him out of her apartment and his parents would not let him move back home. Consequently, back-orders can sit in the to-do pile for anywhere from four to six days, though most often it takes six days. Once the senior operations manager begins processing a back-order, the back ordered rug is picked from the storage shelves, packaged, and shipped to the distribution center. The picking and packing processes take a combined two days to carry out. Shipping from the central warehouse to a distribution center only takes one to two days (usually two), as Setterstrom Co. handles its own shipping to distribution centers.
Back-orders are a priority for distribution centers. As rugs are unloaded from the delivery truck, items that belong to back-orders are pulled aside and packed for shipping. This process takes one day. Then, the orders are placed on the shipping deck to be picked up by the delivery firm. Once back-ordered rugs are placed on the shipping deck to be picked up by the delivery firm, they are changed to ‘shipped’ on the order form.
Order forms for completed orders (“shipped”) are mailed back to the corporate office on Mondays by the warehouse manager at the distribution center. Once received by the accounting department, AccountPro is updated to reflect that the sale was completed / inventory was reduced.
Assignment:
Step 1: Model this process using as a cross functional process map.
Step 2: Estimate the cycle time (in days) for this business process; specifically, what are the minimum (rug is in-stock) and maximum (rug is back-ordered) cycle times required to fulfill customer orders. Where necessary, make activity time estimates using the PERT distribution formula discussed in class. Additionally, identify which tasks have business value, real value, and no value? Present the results of this step using a table, as discussed in class.
Step 3: Discuss the efficiency of the modeled process. Point out places in the process that are candidates for process improvement and provide your reasoning for why they are candidates for improvement.
Steps 1 through 3 represent the as-is business process
Step 4: Improve this business process! Feel free to integrate IT into your answer, though it is not a requirement of the assignment. Provide me with
a. cross functional process map of the improved process
b. the new cycle time
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