lean six sigma initiative manual invoice processing
TRANSCRIPT
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
© 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
© 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…
© 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
© 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
© 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
© 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%
© 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
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G
Custo
mer
H
Custo
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Hrs
Total Acct Mgr hours "Invoice Processing-Manual" hours
Good candidate for pilot
© 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
© 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
© 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
© 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
© 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
© 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
© 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.
© 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”
© 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 (%)
© 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
© 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