lean six sigma initiative manual invoice processing

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Lean Six Sigma Initiative Manual Invoice Processing

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Page 1: Lean Six Sigma Initiative Manual Invoice Processing

Lean Six Sigma Initiative

Manual Invoice Processing

Page 2: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 2

DEFINITIONS

Lean

• Eliminate non-value-add activities

• Eliminate waste• Just in Time (JIT) delivery;

customer pull

Lean can be used to:– Eliminate excess inventory– Reduce waiting time or

delay– Create continuous flow

Six Sigma

• Improve quality• Reduce defects• “Voice of the customer” –

meeting customer requirements

• “Voice of the data” – data driven problem solving

Six Sigma can be used to:– Reduce number of defects

per opportunity– Reduce variation in a

process

Page 3: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 3

DMAIC METHODOLOGY

Define

– state the problem in a measurable way

– identify the key output (Y)

Measure

– collect data to understand current process

– identify possible inputs (X’s) to the Y

Analyze

– document the process– narrow down the inputs

(X’s)

Improve– identify possible solutions– assess risks– pilot and implement

Control– document lessons learned– implement ongoing

measurement– quantify improvement

Page 4: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 4

INITIATIVE OVERVIEW

Lean

• Eliminate business non-value-add activities• Eliminate waste• Create continuous flow• Use Customer A as a pilot

Six Sigma

• Improve process once GSG has completed several iterations of data entry

• Reduce variation• Reduce number of defects• Roll out to all customers

Then…

Page 5: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 5

DEFINEProblem Statement

• Problem Statement - Account Managers spent 26% of their time from 12/19/2005 to

10/26/2006 processing manual invoices which takes time away from finding savings opportunities for customers.

• Goal Statement– Account Managers will spend no more than 5% of their time

processing manual invoices by 6/30/07

• Voice of the Customer – Decreasing Account Management time on non-value add or

business non-value add tasks and increasing time on value-add tasks will increase customer satisfaction.

• Potential Financial Benefit– Increase revenue– Reduce costs– Ability to scale Operations

Page 6: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 6

Acct Mgr

External Customer

Check issuer (e.g. Next Process)

Data entry resource trained on process and OneSource

View Invoice page resembles manual invoice 

Customer specific reqts. for AP report content

Frequency of batching

OneSource allows preview of AP report

Manual Invoice modeled in OneSource

AP report

Proce

ss Manu

al Invoic

es

Invoice is defect free and accurate (availability of document)

Inventory creation

Account management (associations/new account)

Charge Management

Allocations

Resources to handle volume

Data entry resource trained on process and OneSource

Paper Invoice or file within Email/Web page

Data entry of manual invoice

Customer input (phone calls, MACDs, etc.)

Batch invoices into AP record

Scanner hardware

Carrier

Data entry resource

External customer

Acct Mgr

StakeholdersRequirements

Process Deliverables

High Level Process DescriptionRequirements

Resources Required

Providers of the Resource

CustomersOutputsProcessInputsSuppliers

DEFINESIPOC Diagram

Preparation of manual invoices

Data entry into

OneSource

Review for accuracy and completeness

File manual invoice

AP report

Page 7: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 7

TaskValue add? Hours

Implementation BNVA 2151.67

Invoice Processing-Manual BNVA 1753.41

Account Management VA 1080.23

Other Internal Activities BNVA 346.17

Customer Service VA 322.83

Dispute Management VA 260.50

Invoice Processing-Electronic BNVA 258.83

Opening-Sorting Mail BNVA 227.25

Data Updates and Support VA 214.08

Ongoing New Bill/Inventory Setup VA 106.58

Optimization (Post Audit) VA 56.50

Billing BNVA 51.42

Audit VA 23.83

Order Management VA 8.00

Documentation BNVA 2.00

MEASUREHistorical Work Tracker Data

Date range – 12/19/05 to 10/26/06

= related to manual invoice processing

= directly impacts revenue

VA – value-addBNVA – business non-value addNVA – non value-add

Page 8: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 8

MEASUREAccount Managers were spending -

• 26% of their time on “manual invoice processing”

• 5% of their time on tasks that directly impact revenue

Acct Mgr Hours by Task 12/19/05 - 10/26/06

Audit0.3%

Optimization (Post Audit)

0.8%

Dispute Management

3.8%

Invoice Processing-

Manual25.5%

Page 9: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 9

MEASURETop 10 Customers - Acct Mgr Hours

12/19/05 - 10/26/06

0

200

400

600

800

1000

1200

1400

1600

1800

Custo

mer

A

Custo

mer

B

Custo

mer

CNon

e

Custo

mer

D

Custo

mer

E

Custo

mer

F

Custo

mer

G

Custo

mer

H

Custo

mer

I

Hrs

Total Acct Mgr hours "Invoice Processing-Manual" hours

Good candidate for pilot

Page 10: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 10

MEASUREHow reliable is

Work Tracker data?

• Confusion on using “Invoice Processing – Manual” or “Account Management” for time spent on AP report creation.

• Operations “re-worked” Work Tracker tasks and re-trained each Account Manager on entering his/her time.

Old Tasks New Tasks

Account Management

Account Management (includes hours from old Order Management)

Audit Audit

Billing Billing

Customer Service Customer Service

Data Updates and Support

Post Implementation Bill/Inventory Updates(includes hours from Ongoing New Bill/Inventory Setup)

Dispute Management (obsolete)

Documentation Documentation

Implementation Implementation

Invoice Processing-Electronic Invoice Processing-Electronic

Invoice Processing-Manual Invoice Processing-Manual

Ongoing New Bill/Inventory Setup (obsolete)

Opening-Sorting Mail Opening-Sorting Mail

Optimization (Post Audit)

Optimization and Disputes for Savings (includes hours from Dispute Management)

Order Management (obsolete)

Other Internal Activities Other Internal Activities= related to manual invoice processing

Page 11: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 11

ANALYZEFinal Value Add Analysis

= related to manual invoice processing

= directly impacts revenue

Old Tasks New TasksValueadd? Hours

Implementation Implementation BNVA 2198.17

Invoice Processing-Manual Invoice Processing-Manual BNVA 1807.58

Account Management

Account Management (includes hours from old OrderManagement) VA 1122.57

Other Internal Activities Other Internal Activities BNVA 360.00

Customer Service Customer Service VA 346.58

Optimization (Post Audit)

Optimization and Disputes for Savings(includes hours from Dispute Management) VA 341.33

Data Updates and Support

Post Implementation Bill/InventoryUpdates(includes hours from Ongoing NewBill/Inventory Setup) VA 334.75

Invoice Processing-Electronic Invoice Processing-Electronic BNVA 261.33

Opening-Sorting Mail Opening-Sorting Mail BNVA 227.25

Billing Billing BNVA 66.50

Audit Audit VA 23.83

Documentation Documentation BNVA 2.00

Dispute Management (obsolete)    

Ongoing New Bill/InventorySetup (obsolete)    

Order Management (obsolete)    

Date range – 12/19/05 to 10/26/06

VA – value-addBNVA – business non-value addNVA – non value-add

Page 12: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 12

ANALYZEDetailed Process Map (from SIPOC diagram)

Preparation of manual invoices

AP report

File manualinvoice

Data entry intoOneSource

Review for accuracy and completeness

Add invoices to AP record

Review Manage Audits page for unassociated accounts

and unallocated cost centers

Query for pending invoices

Create AP record Generate AP report (daily)

Invoices filed

Open mailStamp invoice

with receipt dateOrganize invoices by carrier

and due date

Create bill in OneSource

Add invoiceAdd new accounts

(if applicable)

Add / Edit associations (if applicable)

Add / Edit charges (if applicable)

Review View Invoice page in OneSource

Add / Edit inventory (if applicable)

Repeat for each invoice

Page 13: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 13

ANALYZEDetailed Process Map (from SIPOC diagram)

Preparation of manual invoices

AP report

File manualinvoice

Data entry intoOneSource

Review for accuracy and completeness

Add invoices to AP record

Review Manage Audits page for unassociated accounts

and unallocated cost centers

Query for pending invoices

Create AP record Generate AP report (daily)

Invoices filed

Open mailStamp invoice

with receipt dateOrganize invoices by carrier

and due date

Create bill in OneSource

Add invoiceAdd new accounts

(if applicable)

Add / Edit associations (if applicable)

Add / Edit charges (if applicable)

Review View Invoice page in OneSource

Add / Edit inventory (if applicable)

Outsourced steps

Page 14: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 14

IMPROVENew Customer A “Pilot” Process Map

BSI scans Customer A

invoices

BSI FTP’s pdf files to GSG and emails notice (by

5 pm EST)

GSG creates invoice log

GSG enters manual invoices (by 8 am EST)

GSG Quality Control resource

checks invoices on invoice log

GSG updates status and bill

notes on invoice log

GSG Quality Control updates status and bill notes on invoice

log

BSI reviews issues on invoice log and corrects problems

GSG email invoice log to BSI by 8 am

EST

Preparation of manual invoices

BSI opens mail

BSI stamps invoice with receipt date

BSI organizes invoices by carrier

and due date

Data entry intoOneSource

Review for accuracy and completeness

AP report

File manualinvoice

BSI adds invoices to

AP record

BSI reviews Manage Audits page for unassociated

accounts and unallocated cost centers

BSI queries for pending invoices

BSI creates AP record

BSI generates AP report (daily)

BSI files invoices

Page 15: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 15

IMPROVEFMEA exercise

Failure Mode and Effect Analysis – brainstormed what could go wrong (defects) before Customer A pilot started and possible solutions to mitigate the risks

Process Step / Input

Potential Failure Mode

Potential Failure Effects

SEV

PotentialCauses

OCC

Current Controls

DET

RPN

Action RespActions Taken / Timing

SEV

OCC

DET

RPN

BSI sends invoices to GSG by 5 pm our time

GSG does not receive all of the invoices (or incomplete invoices)

invoice not entered into OneSource; invoice gets paid late; BSI rework

7

Elaina fails to transmit all of the invoices

2 none 10 140

Missing Invoices Report(brand new bills 'may' slip through the cracks)

Elaina will notify GSG of her invoice count - then GSG will reconcile

Elaina

Jen to train Elaina week of 11/13/06

7 1 1 7

Page 16: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 16

Manual Invoice Processing Hrs - Customer A

0

20

40

60

80

100

120

140

Dec05

Jan06

Feb06

Mar06

April06

May06

Jun06

July06

Aug06

Sept06

Oct06

Nov06

Dec06

Jan07

Feb07

Wo

rk T

rack

er H

rs

IMPROVE

GSG started processing manual invoices in Nov 06.

Page 17: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 17

CONTROLLessons Learned

• Regular communication needed between GSG and BSI

• OneSource enhancements needed– “QC Complete” invoice status– invoice “requires attention” flag

• Need another Work Tracker bucket for “GSG Review”

Page 18: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 18

CONTROLControl Plan

Date"Manual Invoice Processing" Hrs Total Hrs Monthly %

SampleMean (%)

Sample Std

Deviation (%)

Lower Control Limit (%)

Upper Control Limit (%)

6/15/2007 14 160 8.75% 6.78% 2.93% 0.00% 15.58%

7/1/2007 13 159 8.18% 6.78% 2.93% 0.00% 15.58%

7/15/2007 17 157 10.83% 6.78% 2.93% 0.00% 15.58%

8/1/2007 14 157 8.92% 6.78% 2.93% 0.00% 15.58%

8/15/2007 12 159 7.55% 6.78% 2.93% 0.00% 15.58%

…….

0.00%

4.00%

8.00%

12.00%

16.00%

20.00%

Monthly % Sample Mean (%) Lower Control Limit (%) Upper Control Limit (%)

Page 19: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 19

CONTROLFinancial Benefit

Data Source

BSI Account Manager average hourly rate = $X Director of Operations

GSG resource average hourly rate = $Y Director of Operations

BSI average time per invoice = 5 min / invoice Work Tracker

GSG average time per invoice = 8 min / invoice Timesheets provided by GSGduring pilot phase

Average number of manual invoices for Customer A permonth = 1400

OneSource Production databasequery

Assumptions:• The average number of invoice for Customer A per month will not fluctuate greatly• BSI could not reduce its “time per invoice” metric without outsourcing the work

Known data:

Savings:• $22,196.96 per year for Customer A

Page 20: Lean Six Sigma Initiative Manual Invoice Processing

© 2007 BroadSource, Inc. 20

DEFINEProblem Statement

• Problem Statement– GSG throughput rate for manual invoice processing for the Customer

A pilot of 7.5 invoices per hour (8 minutes per invoice) is too low. BSI is fearful that some invoices will not be entered into OneSource in a timely fashion. This could delay the Account Managers creating customer’s AP reports which would result in late payment of invoices.

• Goal Statement – – GSG will achieve a throughput rate of 12 invoices per hour by

9/30/2007 for all customers

• Voice of the Customer– External customers require timely AP reports. GSG processing

more invoices per day would reduce risk of not having invoices in OneSource that need to be tied to an AP report

• Potential Financial Benefit– A higher throughput rate would decrease BSI’s costs and increase

the total financial benefit from outsourcing manual invoice processing