IMPROVEMENT THE ON-TIME DELIVERY RATE USING BUSINESS PROCESS REENGINEERING FOR ORDER PROCESSING PROCESS AT H COMPANY
By Liu Tong Tong ID No. 004201500042
A Thesis presented to the Faculty of Engineering President University in partial fulfillment of the requirements of Bachelor Degree in Engineering Major in Industrial Engineering
2019
A fundamental challenge that companies are facing today to become global competitors is that of devising and implementing strategies aimed at satisfying customers who require better levels in price/cost, quality, product design, delivery speed, reliability and on-time delivery. It is essential to accurately decide and maintain delivery times and quantities of consumer orders. This research will be guided by the following steps. Firstly, description about the problem background, problem statement, scope and assumption. Secondly, introduce the theory of BPR, symbols of BPD, and the tools for BPR. Thirdly, use the Cause and Effect Diagram, and Pareto to further find the root causes. Fourthly, use the Critical Success Factors, select sub-processes that affect the delivery rate. Fifthly, using Power Designer to draw the BPD, analyze and compare the results before and after the process optimization. Finally, it was found that order processing delay and duplicate works have resulted in low on-time delivery rate, after optimization, the result is an increase in on-time delivery rate from the previous 89.5% to 96%.
Keywords: Order processing process, On-time delivery rate, Business Process Reengineering, Business Process Diagram, Cause and effect diagram, Critical Success Factor, Pareto
I would like to specific my gratitude to all people who gave me support and warm from the very beginning of my study until the completion of this thesis. They are:
My Mom, Dad, my sister, and my beloved family. Thank you for supporting me in many ways and pray for my best.
My beloved Thesis Advisor, Sir Johan Krisnanto Runtuk. Thank you for all advices and support given to me during my thesis period and finally done this Thesis. Also, special thanks to Sir Johan for always inspiring and motivating me.
My IE lectures during my study, who are: Mam Andira, Mam Anas, Sir Johan, Sir Herwan, Sir Hery and so on. Thanks for your lessons and knowledge. I learned many things from all of you.
My classmates, Industrial Engineering 2015, my superb partners. Thank you for all support and shared lessons. Those are: Adel, Ayu, Banan, Chrisshyaren, Dhina, Dimas, Dita, Edgar, Edo, Elsa, Enrico, Evan, Gres, , Hafizi, Hanun, Jessica, Kelvin, Luiz, Muti, Mustaf, Nabila, Nandana, Nova, Raymond, Restu, Savira, Rivi, Ryan, Satrio, Selya, Vivian, Vovo, Wilson, Yudhika.
My roommate, Wang Beituo, she gave so much help and warm to me. Thanks a lot.
Others party that cannot be mentioned one by one. Thank you for everything.
TABLE OF CONTENTS
THESIS ADVISOR RECOMMENDATION LETTER ...... i
DECLARATION OF ORIGINALITY ...... ii
...... iii
ABSTRACT ...... iv
ACKNOWLEDGEMENT ...... v
TABLE OF CONTENTS ...... vi
LIST OF TABLES ...... xi
LIST OF FIGURES ...... xiii
LIST OF TERMINOLOGIES ...... xv
...... 1
1.1 Problem Background ...... 1
1.2 Problem Statement ...... 2
1.3 Objectives ...... 2
1.4 Scope ...... 2
1.5 Assumption ...... 2
1.6 Research Outline ...... 3
CHAPTER II LITERATURE STUDY ...... 4
2.1 The Way of Re-engineering ...... 4
2.2 Business Process Reengineering ...... 5
2.2.1 Definition of BPR ...... 5
2.2.2 The Objective of BPR ...... 7
2.2.3 Business Process Modeling and Notation ...... 8
2.2.3.1 The Symbol of Events for Business Process ...... 8
2.2.3.2 The Symbol of Activities for Business Process ...... 9
2.2.3.5 The Symbol of Data for Business Process ...... 9
2.2.3.6 The Symbol of Swim Lanes or Cross-Function for Business Process ...... 10
2.2.3.7 The Symbol of Flow for Business Process ...... 11
2.2.3.8 The Symbol of Gateways for Business Process ...... 11
2.2.5 The Choice of Tools for BPR ...... 11
2.2.5.1 Cause and Effect Diagram (Fishbone Diagram) ...... 11
2.2.5.2 Critical Success Factors ...... 13
2.2.5.3 Pareto Tool ...... 14
2.2.5.4 Flowchart ...... 16
2.3 The Implementation Steps of Business Process Re-engineering ...... 17
2.4 On-time Delivery Rate ...... 18
CHAPTER III RESEARCH METHODOLOGY ...... 19
3.1 Research Methodology...... 19
3.1.1 Initial Observation ...... 21
3.1.2 Problem Identification ...... 21
3.1.3 Literature Study ...... 22
3.1.4 Data Collection and Calculation ...... 22
3.1.5 Conclusion and Recommendation...... 22
3.2 Research Framework ...... 23
CHAPTER IV DATA ANALYSIS ...... 25
4.1 Initial Observation ...... 25
4.2 Business Process Diagram in H Company ...... 31
4.3 Order Processing Process Overall Framework Analysis for H Company .... 32
4.3.1 Order Processing Process Overall Framework ...... 32
4.3.2 Selection of Key Processes ...... 35
4.4 Order Comprehensive Review Process Diagnosis ...... 38
4.4.1 New Product Cost Evaluation Process ...... 45
4.4.2 Plan Evaluation Process of the Lead Time ...... 47
4.4.3 New Customer Evaluation Process ...... 47
4.5 The Application for Process Diagnosis Shortage Material ...... 49
4.5.1 The Description for Shortage Material Application...... 49
4.5.2 The Diagnosis of Shortage Material Application...... 52
4.6 Warehouse Receive and Shipment Process Diagnosis...... 56
4.6.1 The Description of Warehouse Receive and Shipment Process ...... 56
4.6.1.1 Description of Receive Process ...... 56
4.6.1.2 Description of Shipment Process ...... 57
4.6.2 Warehouse Receive and Shipment Process Diagnosis ...... 60
4.6.2.1 Receive Process Diagnosis ...... 60
4.6.2.2 Shipment Process Diagnosis ...... 64
4.7 The Summary and Solution of Current Process Problem ...... 67
4.7.1 Objectives of Process Optimization in H Company ...... 69
4.7.2 Order Comprehensive Review Process Optimization ...... 70
4.7.2.1 Optimize New Product Cost Evaluation Process ...... 70
4.7.2.2 Process Optimization of Planned On-time Delivery Evaluation...... 73
4.7.2.3 New Customer Credit Evaluation Process Optimization ...... 74
4.7.3 Process Optimization Application of Material Shortage ...... 75
4.7.3.1 Simplify Approval Process ...... 75
4.7.3.2 ERP System Function Exploration ...... 77
4.7.3.3 Use Advanced Management Methods ...... 77
4.7.4 Warehouse Receive and Shipment Process Optimization ...... 78
4.7.4.1 Receive Process Optimization ...... 78
4.7.4.2 Shipping Process Optimization ...... 80
4.8 Analysis of the Implementation Effect of Process Optimization ...... 82
4.8.1 Comprehensive Order Review Process (After Optimization) ...... 82
4.8.2 Application Process of Shortage Material After Optimization ...... 87
4.8.3 Warehouse Receive and Shipment Process (After Optimization) ...... 90
4.8.3.1 Receive Process (After Optimization) ...... 90
4.8.3.2 Shipment Process (After Optimization) ...... 93
4.8.4 Overall Order Processing Process - after Optimization ...... 97
4.9 The Result of Optimization ...... 98
CHAPTER V CONCLUSION AND RECOMMENDATION ...... 99
5.1 Conclusion ...... 99
5.2 Recommendation...... 99
REFERENCES ...... 101
APPENDIX ...... 106
APPENDIX I: The Flowchart Symbol Cheat Sheet ...... 106
APPENDIX II: The Questioners about the factors in critical success factor ...... 107
Table 2.1 The Symbol of Events for Business Process ...... 9 Table 2.2 The Symbol of Activities for Business Process ...... 9 Table 2.3 The Symbol of Data for Business Process...... 10 Table 2.4 The Symbol of Swim Lanes for Business Process...... 10 Table 2.5 The Symbol of Flow for Business Process...... 11 Table 2.6 The Symbol of Gateways for Business Process...... 11 Table 2.7 The Common Symbols for Flowcha Table 4.1 Cost and Gross Profit of H Compa Table 4.2 The On-time Delivery Rate for in Recent Three Years ...... 29 Table 4.3 List of Sub-process of Order Processing Process ...... 34 Table 4.4 Critical Success Factor Affect the Weight Table...... 36 Table 4.5 The Score of Critical Success Factor...... 37 Table 4.6 Analysis of Order Comprehensive Review Activities...... 40 Table 4.7 Statistical Table of Delay Number of Order Comprehensive Review in 2017 Table 4.8 Sorting Table of Accumulative Delay in Comprehensive Order Review in 2017...... 43 Table 4.9 Analytical Table of Activities of Material Shortage Application P Table 4.10 Statistical Table of Delay Number of Material Shortage Application Process .53 Table 4.11 Sorting Table of Accumulative Number of Delays in Application Process Material Shortage ...... 54 Table 4.12 Analytical Table for Delays of Warehouse Receive Process Activities..60 Table 4.13 Statistics of Delay Number of Warehouse receive P ..62 Table 4.14 Sorting Table of Accumulative Delays in Warehouse Receive Process ..63
Table 4.15 Analytical Table for Delays of Warehouse Shipment Process A Table 4.16 Statistics of Delay Number of Warehouse Shipment Activities 65 Table 4.17 Sorting Table of Accumulative Delay in Warehouse Shipment Process Table 4.18 Approval Authority Form for Non-production Materials ...... 76 Table 4.19 Production Materials Approval Authority Form ...... 77 Table 4.20 The Comparison the Processing Time in Order Comprehensive Review Process Before and After O Table 4.21 The Comparison about Application of Shortage Material Before and After O Table 4.22 The Comparison about Warehouse Receive Process Before and After O 2 Table 4.23 The Comparison about Warehouse Shipment Process Before and After O 95 Table 4.24 On-time Delivery R ...... 98
Figure 2.1 The Process of Business Process Reengineering...... 7 Figure 2.2 The Cause and Effect D ...... 12 Figure 2.3 CSF, Missions and G Figure 2.4 Pareto Diagram E ...... 15 Figure 3.1 Research M ...... 20 Figure 3.2 Research F ...... 24 Figure 4.1 The Market Share of H Company in Recent Three Year 25 Figure 4.2 The Distribution Proportion of Order Cancellation...... 27 Figure 4.3 Distribution of Reasons for On-time Delivery in Order Cancellation...... 27 Figure 4.4 The Distribution of Customer Complaint in 2017...... 28 Figure 4.5 The Percentage of Complaint about On-time D ...... 29 Figure 4.6 Business Process D ...... 31 Figure 4.7 Order Processing Process Ov Figure 4.8 Order Comprehensive Review P ...... 39 Figure 4.9 Reasons for Delay in Comprehensive Review of Orders...... 44 Figure 4.10 New Product Quotation Processing Process...... 46 Figure 4.11 Process of Material Shortage Application P 51 Figure 4.12 Analysis of Reasons for Delay in the Processing of Material Shortage 54 Figure 4.13 Warehouse Receive P ...... 57 Figure 4.14 Warehouse Shipment P ...... 59 Figure 4.15 Analysis of Reasons for Delay in Warehouse Receive Process Activities...... 63 Figure 4.16 Reasons for Delays in Warehouse Shipment Process Activities...... 66 Figure 4.17 Information Sharing Platform...... 72 Figure 4.18 Order Comprehensive Review Process After Optimization...... 83 Figure 4.19 New Product Quotation Processing Process
Figure 4.20 Application Process of Shortage Material Figure 4.21 Warehouse Receive Process Figure 4.22 Warehouse Shipment Process Figure 4.23 Order Processing Process Aft
Business process improvement : Focus on the organization's business process, in order to meet the personalized needs and improve customer satisfaction as the goal, improve the enterprise existing business process step by step.
Business re-engineering work : It is the act of recreating a core business process with the goal of improving product output, quality, or reducing cost.
Cause and effect diagram : It is a diagram-based technique that helps you identify all of the likely causes of the problems
Key success factor : It is an information system (MIS) development and planning method originally proposed by Professor William Zani of Harvard University in 1970.
KPI : The total number of shipments received by customers on or before the committed ship or delivery date divided by the total number of shipments made over the same period of time, as a percentage.
Pareto : It is states that, for many events, roughly 80% of the effects come from 20% of the cause.
Re-engineering work : Fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical measures of performance such as cost, service, and speed.
1.1 Problem Background Due to the rapid growth of technological innovation, the product life cycle of new products is much shorter than earlier (Karim, Smith, and Halgamuge, 2008). Decreasing the delivery time reduces expenses and creates value in those markets. In nowadays, exceedingly competitive market wherein technological innovation and its growth are very significant, on-time delivery is a totally crucial component, among many different things, for the fulfillment of a product. In response to technological innovation and constantly varying customer necessities, a shift from traditional mass production to batch production has been accelerated in recent years.
- increasing rate. To respond to these forces, radical changes in organizations have become necessary (Gunasekarn and Tirtiroglu, 2001). The viability of a company now relies upon largely on how well it can responding to consumer requirements while turning into lean. It is becoming increasing difficult and less reasonable for companies to deliver their desires on their own. Companies ought to seek to deliver products that meet customer requirements within the shortest possible time to advantage an edge in a competitive market.
H Company's products are mainly soda water, through soda water to develop wine, eye drops, masks, and other sidelines. H Company attaches an excessive amount of importance to formal department of responsibilities and internal restraint, which leads to the total mismatch between departments. At the same time, the promised or actual delivery time is regularly greater than the customer's expectations, even so, the on-time delivery is still not satisfactory. According to the annual report, the on-time delivery rates of H Company in 2015, 2016 and 2017 are respectively: 89.5%, 89% and 90%,
which was still far from the 95% target value (Key Performance Indicator) set by the company. Through the observation and collection data, H Company found that the order processing delay accounts for 60% of various reasons for order cancellations in 2017. Besides, customer complaints about delivery time continue to rise, and customer complaints about on-time delivery of H Company account for 58% of the total number of complaints, which has seriously affected the customer satisfaction index. Lead to some orders have even been lost.
1.2 Problem Statement
1.3 Objectives
1.4 Scope Due to restricted time and resources in doing this studies, there might be some scope within the observation.
1.5 Assumption Some assumption ought to make to be able to run this model properly.
1.6 Research Outline This study implemented associated theories and techniques of order processing process and did the survey in H Company, analyzing the present problem, then giving the affordable order processing process optimization plan to the corresponding problems, also the corresponding assurance measures. CHAPTER I This chapter includes the background of the problem, problem identification, objectives, scope, and assumption of the study. CHAPTER II This chapter introduces the background and development of business process reengineering theory. Then it elaborates the basic concept and theoretical framework of reengineering, based on which, it further considers the implementation of process reengineering, methods and specific steps. CHAPTER III Analysis of the current of H company -- through the elaboration of the external (market) environment and internal (business status) environment, the motivation and necessity of implementing process optimization are discussed. CHAPTER IV
CHAPTER V
2.1 The Way of Re-engineering Reengineering is a restructuring of an organization or part of organization by removing non value adding processes or adding value adding processes through renovation, automation and networking (Joseph and Philibert, 2014). According to Hammer and achieve dramatic improvements in critical measures of performance such as cost, -engineering" has at least two meanings: on the one hand, it states that the object of re-engineering is a project which has been rigorously demonstrated and implemented at the beginning of the project; on the other hand, it states that the re-engineering activity is still an engineering activity and still follows the scientific and rigorous principle. That is to say, we should put the process at the center of organization and management, overcome the shortcomings of traditional organization and management methods in terms of efficiency and flexibility, and improve the efficiency and flexibility of enterprises in order to adapt to the current market environment.
Since the 1980s, the management and business have set off a wave of process change. In this process, managers first proposed process improvement (BPI). Now process re- engineering methods can be divided into Business Process Re-engineering (BPR) and Business Process Improvement (BPI) (Harrington, 1991).
With the application of BPI theory, people found that BPI cannot fundamentally solve the challenges faced by enterprises. Enterprises need more radical changes. BPR is a comprehensive and thorough transformation of enterprises, most of the existing system will be broken and restructured. Enterprises can only survive in the future market if they attach importance to customers, care about processes and operate efficiently. Its main feature is collaboration, not rank order. In order to improve management efficiency, we should establish control procedures, compress management levels and establish flat management organizations in business processes. As an extremely avant- garde management idea, BPR has the significance of renewing management idea, emancipating management thought and innovating process model.
2.2 Business Process Reengineering 2.2.1 Definition of BPR -changing world, the business environment throughout the world is also going through a continuous and rapid change. Increasingly driven by consumers, change and competition, companies are now vigorously looking for new ways to make their organizations and businesses more efficient and competitive (Asli, Beliz and Ozalp, 2012).
(Yih-Chang Chen, 2001).
BPR is defined as consisting of three key words: Fundamental, Radical and Dramatic:
Source: https://www.toolshero.com Figure 2.1 The Process of Business Process Reengineering
2.2.2 The Objective of BPR The objectives of using a BPR model may be classified as communication, analysis and control (Bassam, Hassam, and Ayman et al., 2013). Regarding communication, facilitating the understanding of business processes may be the primary objective of using a BPR model (Hussein 2008). It aims to achieve improvements in performance by redesigning the processes through which an organization operates, maximizing their value added content and minimizing everything else (Hari and Singh, 2014).
There are objectives of BPR by Sonia Pearson written:
2.2.3 Business Process Modeling and Notation BPMN is a graphical notation that describes the common logic of steps in a business process. BPMN is thought to be established, cost efficient, rational, standardized, intuitive and flexible (Hubert et al., 2012). The notation inherits and combines elements from a number of previously proposed notations for business process modeling (Dijkman, Remco, Dumas, & Ouyang, 2008). BPMN defines the notation and semantics of a Business Process Diagram (BPD).
aphical sequence of all the activities that happen during a process. It also includes all relative data for making an analysis. BPD is a chart designed for the utilization of process analysts who design, control and manipulate processes. A BPD is a representation of the operation process. By analyzing this map, it enables to see the all processes in H Company. Business Process Mapping details the steps that a business takes to complete a process.
2.2.3.1 The Symbol of Events for Business Process Events play an important position in business process management, taking into that they are the paste between situations inside the actual world and processes that will respond to these events. Events in a commercial business process can be parceled into three sorts, fundamentally dependent on their situation: start events are utilized trigger processes, intermediate events can postpone processes, and end events signal the end of processes.
Table 2.1 The Symbol of Events for Business Process Types Name Description Start event A trigger that starts, modifies a process. Event
types include message, timer, error, compensation, signal, cancel, escalation, link and others. They are shown by circles containing other symbols based on event type End Event A trigger that completes a process.
2.2.3.2 The Symbol of Activities for Business Process Activities are units of work. They are the key elements of business processes. The BPD offers means for expressing different types of activities.
Table 2.2 The Symbol of Activities for Business Process Types Name Description Task A Task is a unit of work, the job to be performed.
2.2.3.5 The Symbol of Data for Business Process All business processes manage data or physical artefacts. To represent them, BPD gives data objects. The relationships between data objects and activities or, more generally, flow objects are determined by information associations.
Table 2.3 The Symbol of Data for Business Process Types Name Description Data object Represent information flowing through the process,
2.2.3.6 The Symbol of Swim Lanes or Cross-Function for Business Process A swim lane diagram, on occasion referred to as a cross-functional diagram, is a procedure flowchart that provides richer information on who does what. It can also be improve to show times when tasks are done and how long they take.
Table 2.4 The Symbol of Swim Lanes for Business Process Types Name Description Pools Represent responsibilities for (participants) activities in a process. and lanes
Each pool may specify a concrete organization, but it may also represent a placeholder for a specific organization, that is, a role. When it comes to enacting business processes, concrete organizations are bound to these roles, so that one concrete supplier interacts with a specific manufacturer, which interacts with a specific set of customers.
2.2.3.7 The Symbol of Flow for Business Process Sequence flow is represented by solid arrows between flow objects, that is, activities, events, and gateways. BPD supports several types of sequence flow, including sequence flow, default flow, conditional flow.
Table 2.5 The Symbol of Flow for Business Process Types Name Description Sequence Define the execution order of activities. flow
2.2.3.8 The Symbol of Gateways for Business Process In BPD, each gateway acts as a join node or as a split node. Join nodes have at least two incoming edges and exactly one outgoing edge.
Table 2.6 The Symbol of Gateways for Business Process Types Name Description Gateway Decision point that can adjust the path based on conditions or events. They are shown as diamonds. They can be exclusive or inclusive, parallel, complex, or based on data or events.
2.2.5 The Choice of Tools for BPR 2.2.5.1 Cause and Effect Diagram (Fishbone Diagram) Cause and effect diagram is an analysis tool that provides a systematic way of looking at effects and the causes that causes that create or contribute to those effects (Ioannis and Theodoros, 2006).
Then, the fish bones were drawn in a certain order. The fish head is the characteristic or result of the problem. The main bone connects the fish head and extends several large bones. The large bone is the main factor affecting the result. Through causal
analysis diagram, the causes and primary and secondary relationships of problems can be quickly clarified, so as to provide the direction and focus for the solution of problems, and carry out process re-engineering and optimization in a targeted and hierarchical manner.
The diagrams are revised as solutions are found and improvements are made. The diagrams are useful in (Masoud, 2011):
The cause and effect diagram consists of two parts: effect and cause, as shown in Figure 2.1.
Source: http://www.au.af.mil.com Figure 2.2 The Cause and Effect Diagram
2.2.5.2 Critical Success Factors CSF (critical success factors) is an information system (MIS) development and planning method originally proposed by Professor William Zani of Harvard University in 1970. Based on how to combine the advantages of the enterprise itself, deal with various important requirements in the environment, to promote the enterprise to obtain better performance. There are many variables in the internal and external environment of the enterprise, which will affect the realization of the goal. Some factors are very important and are crucial to the success of the enterprise, that is, the so-called "key success factors". CSF models have been applied to general project management problems, manufacturing system implementation, and reengineering (Kyung-Kwon and Young-Gul, 2001). Critical success factors are variables or conditions that are
Critical success factors usually have the following steps:
The critical success factor method has a strong pertinence, and enterprises can focus on the investment of resources on the basis of identifying these factors and quickly obtain benefits.
Source: https://www.mindtools.com Figure 2.3 CSF, Missions and G
2.2.5.3 Pareto Tool The Pareto Principle, named after economist Vilfredo Pareto, specifies that 80 percent of consequences come from 20 percent of the causes, or an unequal relationship between inputs and outputs. This principle serves as a general reminder that the relationship between inputs and outputs is not balanced (Will, 2018). Pareto charts are used to identify major problems or major factors affecting quality. It consists of two ordinates, one abscissa, several rectangles arranged in order of height and a cumulative percentage curve. The basic figure of Pareto diagram is shown in Figure 2.12.
Source: https://asq.org/quality-resources/pareto.com Figure 2.4 Pareto Diagram Example
The purpose of Pareto diagram is to find out the main problems from many problems and to express them intuitively by graphic method. Generally, problems are divided into three categories. Category A is the main or key issue, with a cumulative percentage of about 80%. Category B is a minor problem, with a cumulative percentage of 80% to 95%. Category C is less important, in the cumulative percentage of 95% to 100%. However, in practical application, the main problem cannot be determined mechanically by 80%. It mainly aims at the principle of "critical minority, secondary majority" and gives a certain range of division. The three types of ABC should be selected according to the specific conditions. Pareto chart directly shows the main problems affecting the quality of products, so that we can know where to improve the quality of products and concentrate on solving the problems, which can achieve remarkable results. Pareto diagram can not only solve the problem of product quality, but also improve the quality of other work, such as saving energy, reducing consumption and safety in production.
2.2.5.4 Flowchart Flowchart is a tool for analyzing processes. It allows to interrupt any process down into individual events or activities and to display these in shorthand form showing the logical relationships between them. Constructing flowcharts promotes better understanding of processes, and better understanding of processes is a pre-requisite for improvement.
Advantages of using flowchart:
Today the term process mapping is often used interchangeably with flowcharting, the distinction being that process mapping refers mainly to the activities happening within with an intention of exposing weaknesses that need to be addressed. Once a company develops a process map, it can perform a gap analysis that is an assessment of disparities between how the process currently works and how the organization wants it to work. Table 2.7 The Common Symbols for Flowchart Shape Name Description Flowline Shows the process's order of operation. Terminal Indicates the beginning and ending of a program or sub- process. Process Represents a set of operations that changes value, form, or location of data.
Table 2.7 The Common Symbols for Flowchart (Continued) Shape Name Description Decision Shows a conditional operation that determines which one of the two paths the program will take. Data Indicates the process of inputting and outputting data, as in (Input/Output) entering data or displaying results. On-page Pairs of labeled connectors replace long or confusing lines Connector on a flowchart page. Off-page A labeled connector for use when the target is on another Connector page.
2.3 The Implementation Steps of Business Process Re-engineering Different enterprise have different situations, and their management level, organizational structure and resource allocation are not the same. The objectives, entry points, scope and range of process re-engineering are also very different. The implementation steps are also diverse. Compare with representative is the six-stage model (James, 2018):
2.4 On-time Delivery Rate The on-time delivery rate refers to the percentage of on-time delivery times of lower suppliers in a specific period of time. The low on-time delivery rate of provides demonstrates that their collaborative production capacity limit cannot meet the necessities, or the organization and management of production process cannot keep up with the requirements of supply chain operation; the high on-time delivery rate of suppliers indicates their strong production capacity and high level of production management. How to ensure the timely delivery of customer orders is an important issue that enterprises must face in the fierce market competition. The control and management of due date can be explored from the following formulas:
The factors affecting on-time delivery involve all aspects of the process from receiving customer orders, raw material procurement, arranging production and product inspection to arriving at the customer's hands, and are included in the whole process.
3.1 Research Methodology Research is defined as a careful consideration of study regarding a particular concern or a problem using scientific methods. According to the American sociologist Earl control the observed phenomenon. Research involves inductive and deductive he precise procedures or techniques used to identify, select, process, and analyze information approximately a topic. In a study, the and reliability.
The various steps involved in the research methodology will be explained and discussed in this chapter. It consists of several steps in Figure 3.1, such as initial observation, problem identification, literature study, data collection and data calculation, conclusion and recommendation. Each component of the research methodology consist of several sub-steps and will be discussed in detail.
Initial Observation
Initial Observation
The market share of H Company in 2017 Cost and gross profit of the company The distribution of order cancellation The distribution about causes of inaccurate delivery rate The percentage of customer complaint in 2017 The percentage of on-time delivery complaint The on-time delivery rate for in recent years Analyze the current process.
Conclusion and Recommendation Conclusion for the optimization, collection, and analysis result Recommendation for further optimization
Figure 3.1 Research Methodology
3.1.1 Initial Observation The initial observation was conducted the process, H Company by having an interview with some employees about the condition of current problem in process. It was found that the low on-time delivery rate, caused by the order processing delay and defects in order processing process. In year 2015 2017, the average on-time delivery rates of H Company is 89.5% lower than 95% target value set by the company. It will affect the customer satisfaction in recent three years, only 42%, out of target determined by the company which is 90%.
After conduct observation and interviewing some employees, this problem happened because of order processing process. There are significant that have many superfluous and repetitive task. If the task is duplicate and superfluous, it might cause overwhelmed with the job at hand to make lower efficiency, and long processing time lead to customer complaints. Hence, this research was conducted to solve the problem and conduct business process reengineering to reduce unnecessary tasks to improve the on- time delivery rate and level of customer satisfaction.
3.1.2 Problem Identification After conducting the initial observation, it was decided that H Company will reduce unnecessary tasks to improve the on-time delivery and level of customer satisfaction and conduct continuous improvement by using reengineering work. Due to limited time, this research will be focused on the order processing process with high demand based on annual report and historical demand May September 2018, which is the soda water company. Therefore, the objectives of this research will be optimization the order processing process, increasing the efficiency and at the end will improve the on-time delivery rate by using re-engineering work.
3.1.3 Literature Study The research is strengthening by several literature due to the fact the reference; these literature are coming from Journal, Book, Website, or another Research that is related to the subjects. Importance of research is also established to provide a strong basic for the research. Basic knowledge used in this research listed in the following below:
3.1.4 Data Collection and Calculation In this segment, all data needed to support the research will be observed and collected. All data in this research is obtained through several ways, such as:
3.1.5 Conclusion and Recommendation In this chapter, make the research framework to determine the initial observation, problem identification, literature study, data collection and calculation. Calculation, in
this section. In addition, some recommendations for further research or study will be provided.
3.2 Research Framework The research framework in Figure 3.2, shows the detail steps taken to conduct and complete this research.
Start
Identify the research objective Define the low on-time delivery rate
Find the on-time delivery rate is 89.5% and the Analyze the collected data and current condition causes of low on-time delivery rate
Find and determine the order processing process as Select the sub-processes using critical success main optimization process factor
Draw the sub-processes by Business Process Diagram
Improve the current sub-processes, and increase the on-time delivery rate from 89.5% to 95% (>95%)
No Success?
Yes Summarized the results
Conclusion and recommendation
End
Figure 3.2 Research Framework
CHAPTER IV DATA ANALYSIS
In this paper, it is of typical significance to select the order processing process as the research objective. Generally, the processing time of documents is much longer than the actual manufacturing time of products in production enterprises. By optimizing the process of directly facing customers, the service to customers can be significantly improved, the reputation of the company can be improved, the satisfaction of customers and the market share can be increased, the operating efficiency and performance of the enterprise can be improved, and the competitive advantages of the enterprise can be maintained and expanded.
4.1 Initial Observation Based on four months' observation and collected the annual report in recent three years, H Company as a whole accounts for 15% of the Chinese market share and 23% of the regional market share in 2017.
2015 2016 2017 % 5 3 % 0 3 % 3 2 % 0 2 % % 6 5 1 1
MARKET SHARE IN CHINA MARKET SHARE IN REGION
Figure 4.1 The Market Share of H Company in Recent Three Years
Through Figure 4.1, can see that in the 2015, 2016, and 2017, China's market share has decreased from 20% in 2015 to 15% in 2017, and the regional market share has decreased from 35% to 23%, ,showing a downward trend year by year.
Through the company's annual report for 2015, 2016 and 2017, the following data can be obtained:
Table 4.1 Cost and Gross Profit of H Company Year 2015 2016 2017 Sales amount (Unit: IDR million) 12032.4 15081.2 16008.6 Direct materials account of sales (%) 57 59 60 Direct labor of sales (%) 8 10 13 Direct expenses for sales (%) 14 11 14 Gross profit (%) 21 20 13
Can be seen from the table 4.1, from 2015 to 2017, with increase sales in H Company, but gross profit continued to decline from 21% to 13%, while the external market in consumer soda water, China market share from 20% before falling to 15% in 2017. The management is facing great pressure, must actively explore how to expand the market, improve enterprise performance. At the same time, customers canceled orders due to various reasons in 2017, resulting in sales loss accounting for about 2% of the annual sales, amounting to IDR 320 million. Reasons for the cancellation can be roughly divided into order processing delay, less customer demand, quality problems and other issues such as after-sales service.
8%
15%
60% 17%
On-time delivery Less customer demand Quality problem Others
Figure 4.2 The Distribution Proportion of Order Cancellation
As can be seen from the Figure 4.2, the order cancellation caused by the on-time delivery problem accounts for 60%, amounting to IDR 192 million, which is usually caused by order processing delay, capacity bottleneck, manufacturing defects, material shortage and so on.
7%
3% Order processing delay 10% Capacity bottleneck Manufacturing defects 60% Material shortage 20% others
Figure 4.3 Distribution of Reasons for On-time delivery in Order Cancellation
As shown in the Figure 4.3, the order processing delay accounts for 60%, which is IDR 144 million. Therefore, solving the problems in the order processing process plays a crucial role in improving the on-time delivery rate and shortening the delivery cycle.
5% 6% 8%
5% 4% 58% 14%
On-time delivery Product quality Package Transportion Response speed Invoice in finance Others
Figure 4.4 The Distribution of Customer Complaint in 2017
H Company usually receives customer complaints in the aspects of quality, price, delivery time, response speed and so on. Figure 4.4 shows that in 2017, customer complaints about on-time delivery of H Company account for 58% of the total number of complaints, which has seriously affected the customer satisfaction index.
% 8 5 % 6 3 % 8 1
2015 2016 2017
Figure 4.5 The Percentage of Complaint about On-time Delivery
At the same time, it can be visible from the figure 4.5 that the complaint of H Company's on-time delivery rate has been rising continuously in recent three years, and the customer satisfaction index has not reached the expected value of the enterprise, which has a greater negative effect on the core competitiveness of the enterprise. Especially when H Company's market position is not as good as before, the lack of competitive delivery date will lead to customer loss and market share reduction.
Table 4.2 The On-time Delivery Rate in Recent Three Years First Quarter Second Third Fourth Annual Quarter Quarter Quarter Average for 2017 On-time 89% 90% 88% 93% 90% delivery rate in 2015
Table 4.2 The On-time Delivery Rate in Recent Three Years (Continued) First Quarter Second Third Fourth Annual Quarter Quarter Quarter Average for 2017 On-time 90% 88% 92% 86% 89% delivery rate in 2016 On-time 87% 92% 90% 89% 89.5% delivery rate in 2017
As shown in table 4.2, the on-time delivery rate of orders of H Company continued to fluctuate between 85% and 90% in recent three years, which was still far from the 95% target value (KPI) set by the company. The on-time delivery is not good, and the slow response speed has become a constraint factor for the further development of H Company. In view of the trend of increasing complaints about on-time delivery and decreasing customer satisfaction, H Company should take measures to quickly reverse the adverse situation, improve on-time delivery rate, improve customer satisfaction, and prevent the risk of order reduction and customer loss.
There are some difficulties in material organization, production planning and capacity planning of H Company. Processing order processing process, which runs through the main line from input to output of the enterprise, is regarded as a breakthrough point. By applying process optimization theory, the reasons for delayed delivery are analyzed, and the optimization scheme is designed and implemented, which can not only directly improve the index of on-time delivery rate, but also effectively integrate enterprise resources. To promote the work of sales, planning, production and logistics departments, to communicate and cooperate closely to achieve the established goals.
According to data collection and calculation, besides, H Company by having an interview and survey with employees about the condition of current problem in process. It was found that the low on-time delivery rate caused by the order processing delay and defects in order processing process. So choose the order processing process as the main process to need to optimize. Order processing process plays a key role in improving H Company's timely delivery indicators.
A complete order processing process, usually consisting of two phases and six parts. The two phases are ordering and payment. The six parts are customer, customer service department, finance department, warehouse, purchasing department and production department. If it is only from the user's point of view, it is difficult to consider various judgments and operations in the background. It becomes the task flow chart, and the figure 4.6 contains the order arrival and processing of the order process, which reflects the functions required for order processing and the support of each department.
4.3 Order Processing Process Overall Framework Analysis for H Company 4.3.1 Order Processing Process Overall Framework In order to find out the current problems, it is necessary to further analyze the important sub-processes, identify and select sub-processes as optimization objects by using the critical success factor method, and improve the efficiency of process optimization.
The whole process framework of order processing of H Company is shown in figure 4.7. As the basis of analyzing and combing the sub-processes, the problems affecting the lead time delay in the process are found out, and the key sub-processes are identified as the optimization focus according to their importance.
Table 4.3 List of Sub-processes of Order Processing Process No The name of sub-process Mainly content
1 Order comprehensive Customer service department: business review, review process including price, transaction terms, credit review, etc. Engineering department: technology, process, environmental requirements review; Planning department: delivery time evaluation, including material status, capacity arrangement, personnel deployment, etc. 2 Check and entry the order Accept qualified customer order, check all elements, and input ERP system. 3 Application for shortage Apply, approve and issue purchase order for material shortage material 4 Warehouse receipt and Incoming goods collection, order shipment delivery the products 5 Quotation and approval Product quotation, according to the profit rate of different authorization level to approval 6 Production of product Make sample according to customer's requirement, samples obtain customer's confirmation 7 Transportation management Transport arrangement, products to the client
There are seven sub-processes in the order processing process, which covers the whole process of receiving customer demands or orders, conducting comprehensive evaluation, including commerce, technology, delivery date, sample preparation and confirmation, and finally completing the order, shipment to the client and meeting
customer needs. Not all sub-processes need to be optimized because of limited resources and differences in importance. Through detailed analysis of several sub- processes, the key to timely delivery of H Company is found, which serves as the basis for the implementation of process optimization, and as an opportunity to promote successful experience, promote the overall operating efficiency of the company and improve customer service awareness, so as to achieve twice the result with half the effort.
4.3.2 Selection of Key Processes Follow these steps to use the key success factor method to select sub-processes as optimization objects.
H Company has strong R&D ability and technological advantages. It has obvious competitive advantage in soda water market. In order to maintain and expand this advantage, company must seek to break through the bottleneck of the lack of competitiveness in on-time delivery, and the unsatisfactory delivery situation hinders its further development, so as to improve customer satisfaction, win customers, expand the market and create new competitive advantages for enterprises.
Each critical success factor needs to be assigned a weighting from 0.1 to 1.0, with a lower weighting meaning that factor is not particularly important in determining the success of a business, and a higher rating meaning that factor is critically important in determining the success of a business. In order to achieve this goal, order processing process is taken as a breakthrough point to improve the ability of timely delivery, rapid
response service level, communication and coordination management ability, and cost control ability. According to the degree of impact of these aspects on the company's current development goals, determine the weight of their impact on key success factors, as shown in the table 4.4. These factors affecting the low on-time delivery rate were discussed by the company's staff. At the same time, the calculation of weight of these factors was voted by a total of 88 workers of the company.
Table 4.4 Critical Success Factors Affect the Weight Table Factor Frequency Percentage On-time delivery capability 31 35% Rapid response to service 26 30% levels Ability of communication and 18 20% management Cost control capability 13 15% Total 88 100%
The critical success factors include the following:
1.
2.
3.
4.
Score the influence of sub-processes of order processing on shortening lead time and improving on-time delivery rate:
According to the formula = , the final scores of key factors for the success of each sub-process are calculated.
Table 4.5 The Score of Critical Success Factor On-time Rapid Ability of Cost Total delivery response communication control capability to service and management capability levels Weight 35% 30% 20% 15% 100%
Order 3 3 3 2 2.9 comprehensive review process Check and entry 2 2 1 1 1.7 the order Application for 3 2 3 2 2.6 shortage material Warehouse 3 2 3 2 2.6 receive and shipment the products
Table 4.5 The Score of Critical Success Factor (Continued) On-time Rapid Ability of Cost Total delivery response communication control capability to service and management capability levels Weight 35% 30% 20% 15% 100% Quotation and 2 2 2 1 1.9 approval Sample making 2 2 2 1 1.9 Transportation 2 2 2 1 1.9 management
According to the scoring results in table 4.5, it can be seen that the sub-processes of order comprehensive review, application for shortage material and warehouse receipt and delivery the products have the highest score. As the object of process optimization, it has a significant effect on achieving the goal of shortening delivery cycle and improving on-time delivery rate, which can be preliminarily identified as the key process.
4.4 Order Comprehensive Review Process Diagnosis As shown in Figure 4.8, the comprehensive order review includes business review, engineering review and plan review, involving departments and communication parts, and is the main area of process delay. In this paper, cause and effect diagram and Pareto tools will be used to identify the main problems existing in the process and provide the basis for optimizing the design of the program. Business review refers to the customer service department in receiving customer requirements or orders, based on existing information to predict, including but not limited to: customer information, product information and customer communication, access to the necessary information and information, including product name, specifications, quantity of delivery, delivery date, quality requirements, packaging requirements, prices, payment methods, delivery methods, credit conditions and after-sales services.
Analyze the comprehensive review process activities and find out the main reasons for the process delay.
Table 4.6 Analysis of Order Comprehensive Review Activities Activities The content of Total time The analysis of activities activities hour 1 - 1 Query whether it is a 1 Customer service enquiries, non- mass production professionals spend time product 1 - 2 Check the quotation 1 Quotation records and query paper records, low efficiency 1 - 3 Query the cost of 1 Seek engineering help to confirm mass production information and communicate time 1 - 4 Waiting for 4 Communicate prices with confirmation of customers and wait for authorized quotation or approval personnel to approve for a long of low profit time quotation 1 - 5 Check for new 1 Customer information of ERP customers system is not standardized and query time-consuming 2 Print the customer 2 Delays in printing and delivery of requirement sheet paper documents and pass it on to the next step 3 - 1 Cost Estimation of 24 Paper documents are used for new products cross-departmental communication, which is inefficient and easy to lose.
Table 4.6 Analysis of Order Comprehensive Review Activities (Continued) Activities The content of Total time The analysis of activities activities hour 3 - 2 Waiting for 4 Communicate prices with confirmation of customers and wait for authorized quotation or approval personnel to approve for a long of low profit time quotation 3 - 3 Information 8 Paper documents are used for maintenance of ERP cross-departmental system for new communication, which is products inefficient and easy to lose. 4 - 1 New Customer 24 Collection of information, third- Credit Assessment, party agency evaluation report, Waiting for long waiting time Authorized Personnel's Approval 4 - 2 Waiting for client to 4 Repeated communication with accept credit customers on credit terms, time- conditions consuming 5 - 1 Check material status 2 Large orders, time-consuming for and follow-up inspection purchase plan for material shortage 5 - 2 Assessment of 2 Large orders, time-consuming for current plans and inspection human, computer integrated typesetting
Table 4.6 Analysis of Order Comprehensive Review Activities (Continued)
Activities The content of Total time The analysis of activities activities hour 6 Communicate 8 Repeated communication of transaction details delivery time, delay time and request formal orders from customers 7 Customer order input 1 ERP system
From Table 4.6, it can be seen that there are more or less time delays in the seven main activities of the comprehensive evaluation, which leads to the low overall efficiency of the processing process and directly affects the timeliness of punctual delivery. See Table 4.7 for the summary of the reasons and the statistical tables of the cases of delivery delays for the whole year of 2017.
Pareto, a process diagnostic tool, is further used to identify the main causes that really affect process delays by obtaining cumulative cases and cumulative percentages of various causes, such as the statistical results in Table 4.7.
Table 4.7 Statistical Table of Delay Number of Order Comprehensive Review in 2017 First Second Third Fourth Total quarter quarter quarter quarter
The delay of project new product 57 76 60 87 280 cost evaluation The inefficient of plan lead time 33 53 48 67 201 evaluation
Table 4.7 Statistical Table of Delay Number of Order Comprehensive Review in 2017 (Continued) First Second Third Fourth Total quarter quarter quarter quarter The long time for financial new 35 47 38 25 145 customer credit assessment The mode of information 7 10 13 9 39 transmission is backward Communication is inefficient and 8 12 10 9 39 repeated many times Database system is not complete, 7 9 6 10 32 query time 11 6 8 13 38 Waiting too long for approval
Total 158 213 183 220 774
According to the "28" principle, 80% of the problems are caused by 20% of the reasons. As shown in Table 4.8, solving the main contradictions can achieve twice the result with half the effort. Table 4.8 Sorting Table of Accumulative Delay in Comprehensive Order Review in 2017 The The percentage of Total cumulative Cumulative cases (%) The delay of project new product cost 280 280 36 evaluation The inefficient of plan lead time evaluation 201 481 62 The long time for financial new customer 145 626 81 credit assessment The mode of information transmission is 39 665 86 backward
Table 4.8 Sorting Table of Accumulative Delay in Comprehensive Order Review in 2017 (Continued) The The percentage of Total cumulative Cumulative cases (%) Communication is inefficient and repeated 39 704 91 many times Database system is not complete, query 32 736 95 time Waiting too long for approval 38 774 100
As shown in table 4.8, the cumulative number of delays caused by new product cost evaluation process, planned delivery time evaluation process and new customer credit evaluation process has reached 81% of the total. This paper focuses on the analysis of the main causes of delays caused by these three sub-processes and proposes optimization schemes, which can effectively improve the efficiency of order processing process and greatly help improve the delivery situation.
900 800 700 600 500 400 300 200 100 0
Total The cumulative cases
Figure 4.9 Reasons for Delay in Comprehensive Review of Orders
4.4.1 New Product Cost Evaluation Process Generally, H Company's new product quotation takes 3-4 working days, of which the delivery and waiting time of documents account for about 70% of the total hours. Hand- filling and transferring paper documents, a common problem in H Company, is one of the main influencing factors. When customers have inquiry requirements, the customer service department fills in the paper "customer inquiry form" and transmits it to the engineering department for technical evaluation. It needs materials and dosage, process route and running time. The front-end does not screen the customer's needs, the customer's and customer's needs are not ranked in importance, and a large number of new product quotation demands flow to the engineering department, averaging about 10- to use H Company as a reference price, coupled with manual filling in too many "customer inquiry forms", which results in uneven workload of engineers and makes it difficult to arrange reasonably. Work, often this link caused backlog, 1-2 work days before the "customer inquiry form" to the procurement department inquiry purchase unit price. After filling in the unit price of material purchasing, the purchasing department transfers it to the Finance Department for manual cost accounting, fills in the detailed cost of the Customer Inquiry Form, and signs it back to the Customer Service Department, which quotes the price to the Customer accordingly. The specific process is shown in Figure 4.10.
Figure 4.10 New Product Quotation Processing Process
The problems in the whole quotation process are as follows:
4.4.2 Plan Evaluation Process of the Lead Time In the past, when the company was small, customer service personnel received customer needs and communicated with planners by telephone or face-to-face to anticipate delivery date, and then directly responded to customers. However, with the expansion of the company, many problems arise in this way. Customer service personnel and planners often quarrel and shirk responsibility when the actual delivery date and the expected delivery date deviate greatly. In order to clarify the responsibility, the customer service personnel then choose to print out the paper customer requirements, and send it to the planner to determine the expected delivery date, requiring the planner to sign and confirm. Afterwards, to determine the expected delivery date, this paper document has become the carrier of information transmission, although it plays a certain role, but at the same time, the negative effects cannot be underestimated, and there are major problems in the way of communication.
When the planner receives the paper customer demand list, the planner needs to check the material status of the system, the machine and personnel scheduling, and communicate with the purchasing staff about the follow-up material arrival schedule. Due to the scattered customer needs, planners usually do not check the relevant information at any time, but reply to the due date once a day and once in the afternoon. There is a backlog in the document delivery process, and subsequent activities will be affected. The planner prepares or adjusts the production plan, which is approved by the plan manager and arranged by the production department under the printed work order in the system. It takes a lot of time to wait for the approval and print the paper work order.
4.4.3 New Customer Evaluation Process H Company attaches great importance to the control of credit risk and implements strict credit control policy. Credit risk assessment is necessary before dealing with new customers. Collecting data, waiting for evaluation results, waiting for authorized person to approve credit conditions and customers own confirmation process all result
in a large amount of invalid time, which is more than ten times of the effective time. Emphasis should be placed on improving opportunities.
New customers who have never traded before must first determine the trading mode and credit limit through the credit evaluation process of new customers before they can accept customer orders and arrange production. Salesmen or customer service personnel usually use direct communication with customers to obtain relevant information, or through other companies dealing with this customer, collect their industry reputation, credit status, business performance, etc., fill in the "New Customer Application Form" and submit it to the Finance Department. The Finance Department reviews the submission information and, if necessary, seeks a third-party consulting company to investigate and confirm the customer's financial affairs. Different from the previous credit conditions, the application of credit terms and credit limits is proposed. Credit terms include advance payment, payment arrival and delivery, and other credit sales periods of different lengths. Customer service personnel will inform customers of the credit conditions provided by the company. If the customers have objections, they can flexibly grasp the policy through the authorized personnel of higher level according to market conditions and customer importance, judge whether they can relax the trading credit conditions, and find a balance between the risk of collecting money and exploiting the market and expanding sales. The first contact with customers is usually the sales staff. H Company pays more attention to the growth of sales volume than the rate of return. As a result, sales staff pay more attention to the growth of performance, get orders from customers, and intentionally or unintentionally neglect the in-depth investigation and study of customers' credit status. When the customer really needs, only when the company's credit policy is mandatory, can the customer credit record survey be filled in responsibly. As a result, it is difficult for the Finance Department to pass the credit conditions recommended by sales. Since then, the Finance Department has started the process of customer credit investigation in a real sense, and the promised delivery date for customers has been delayed, which has a great negative impact on customer satisfaction.
Customer service department prints out customer needs only after engineering evaluation, which belongs to the products with manufacturing capability of our company. After signing opinions, documents will be transmitted to Finance Department. Credit evaluation process takes a long time, especially for customers with large volume of transactions. Procedure requirements tend to be more rigorous, and evaluation process and approval process are longer. Long waiting time and harsh credit conditions may lead to the loss of customer orders.
4.5 The Application for Process Diagnosis Shortage Material Material shortage application is a part of the procurement process. Because it has a great impact on the overall efficiency of the order processing process, and its own operation efficiency is low, and the benefit of stage optimization is large, it can improve the delivery time. Therefore, only the problems of procurement application and procurement order processing process are selected to study.
4.5.1 The Description for Shortage Material Application The purchase application form is divided into two situations: indirect production materials and direct production materials. The general process is shown in figure 4.10.
(1) The non-production material purchase application form is filled out by the personnel of the demand department, and the estimated target price is specified in accordance with the principle of cost attribution control. After being examined by the Department manager, it is submitted to the manager of the finance department for review. Each element meets the requirements of the internal control system of the company. The purchase department completes the inquiry and price comparison with the supplier. If the actual purchase price is higher than the target price of the demand department, it returns to the demand department. Doors reassess and adjust target prices or cancel procurement requirements. If the demand of the use department cannot be cancelled, it shall be submitted to the general manager for a ruling. The purchase
application form is finally approved by the general manager and transferred to the procurement department to start the procurement work. If machinery and equipment, large-sum maintenance works, decoration works, etc. involve follow-up maintenance services, the contract must be jointly examined by relevant departments such as finance and engineering when the contract is signed, and the general manager or his authorized personnel may sign the contract before it becomes effective. The purchasing department shall select qualified suppliers to make inquiries and price comparisons. After examination and approval according to authority, the paper orders shall be maintained and printed out in ERP system. After the material manager signs and approves them, the general manager shall finally approve them, and the purchasing personnel shall send them to the supplier, and the supplier shall prepare and deliver the goods accordingly.
(2) The processing flow of purchase orders for production and non-production materials is roughly the same. The difference is that the production material requirement is filled out by the planner after analyzing and sorting out the results of MRP operation. In order to ensure that the supplier delivers the goods on time and correctly, the purchasing department should request the supplier to report the delivery progress in time, establish the record of the non-delivery order, and inform the planner or the purchasing applicant in time.
4.5.2 The Diagnosis of Shortage Material Application Analyze material shortage application process activities and find out the main reasons for process delay.
Table 4.9 Analytical Table of Activities of Material Shortage Application Process Activities The content of activities Total The analysis of activities time (Hour) 1 Planner\demand department 2 Manual filling, time-consuming fill in purchasing application delivery form on demand 2 Departmental manager's 4 Long waiting time and time- approval consuming communication and coordination 3 Application form for review 4 Long waiting time by Finance department 4 General manager approves 4 Long waiting time application form 5 Purchaser input ERP system, 2 Manual input, more documents, production purchase order time-consuming 6 Material manager approves 4 Long waiting time purchasing order 7 General manager approves 4 Long waiting time purchasing order 8 Purchaser scans faxes to 2 Scanning signed orders one by supplier for stock one is time-consuming
Table 4.9 shows that there are seven activity steps in the application for material. The main delay occurs in the waiting process for approval. Purchasing application form and purchase order processing process have too many parts of signing and approving, without considering the concept of hierarchical authorization in modern enterprise
management. Whatever the purchasing amount is, it must be examined and approved by the general manager of department manager, financial manager and material manager. This is due to the deviation of H Company's understanding of the group's requirements on internal control system. Purchasing application forms need the general manager's final approval before the purchaser can input the purchase order in ERP system. After printing out the paper purchase order, it must be signed by the general manager again before it can be sent to the supplier, and the supplier can start to stock up after receiving the purchase order. General Managers and department managers are busy with their daily affairs, and the timeliness of signing and approving documents is often not ideal. The average waiting time of signing links reaches 2-3 working days. Many other links try to shorten the processing time by brainstorming for ways, but the results are being swallowed up in this needless waiting.
The number of occurrences of various causes of delays in 2017 is counted, and the distribution is shown in table 4.10 below.
Table 4.10 Statistical Table of Delay Number of Material Shortage Application Process First Second Third Fourth Total quarter quarter quarter quarter Interdepartmental communication 6 3 5 7 21 Waiting time for approval 38 56 40 30 164 Scan the order 8 4 9 5 26 The approval parts are multiple 33 33 15 30 111 and serial Manually fill sheet 12 9 6 11 38 Paper transfer 7 5 4 9 25 Total 104 110 79 92 385
On the basis of this statistics, the annual total is arranged in order. As shown in Table 4.11 below, the cumulative cases and percentage are calculated to identify the main causes of the problem, so as to put forward a targeted scheme.
Table 4.11 Sorting Table of Accumulative Number of Delays in the Application Process Material Shortage The percentage of Total The cumulative cases cumulative (%) Interdepartmental 164 164 43 communication Waiting time for approval 111 275 71 Scan the order 38 313 81 The approval parts are multiple 25 338 88 and serial Manually fill sheet 26 364 95 Paper transfer 21 385 100 Total 385
450 400 350 300 250 200 150 100 50 0
Total The cumulative cases
Figure 4.12 Analysis of the Reasons for the Delay in the Processing of Material Shortage Application
As can be seen from the figure 4.12, waiting time, more examination and approval links, serial and manual filling in the form conform to the "28" principle, which is the main
reason for the delay in processing the application process for material shortage. Based on this, the optimization scheme is put forward to solve these problems properly, which is of great help to improve the overall delivery time situation.
Purchasers have considered alternative ways to reduce the impact of waiting time for approval on delivery time, and notify suppliers of stock in advance before the general manager has signed the purchase order. However, this method is prone to economic disputes. When external demand changes and suppliers have stockpiled, canceling or reducing the order quantity will harm the interests of suppliers, and will choose to reject this change request. On the contrary, it will damage the interests of H Company. At the same time, without the approval of the company's authorized personnel, this way of dealing with suppliers has occurred, which seriously violates the requirements of the company's internal control system. For this reason, the company's invention stipulates that the purchase order signed by authorized personnel is the only legal transaction evidence. Before receiving the formal order from L Company, any notice of the procurement personnel's advance stock-up is regarded as personal behavior, and the company does not bear any economic consequences arising therefrom. The road to change is not a long-term solution, and it is necessary to find a feasible and compliant solution in the process.
The main problems in H Company's purchasing process are as follows: Lack of modern management means and lack of hierarchical authorization; Rigid understanding and implementation of internal control system; Some functions of ERP system are not fully utilized - it can fill in purchase application form online and automatically convert purchase order after online approval. The application process for repeated purchasing of common materials is tedious, and JIT (Just In Time) and VMI (Vendor Managed Inventory) supplier management modes are not introduced.
4.6 Warehouse Receive and Shipment Process Diagnosis Punctual delivery and improvement of delivery date are inseparable from a sound warehouse material management system and efficient delivery and delivery process. Accurate information processing and rapid delivery are important guarantees to improve overall efficiency.
4.6.1 The Description of Warehouse Receive and Shipment Process 4.6.1.1 Description of Receive Process There are two delivery methods for suppliers of H Company, and the processing process is shown in figure 4.13.
Regional suppliers. Heilongjiang, Shenzhen and Xinjiang suppliers deliver goods to the third party logistics company of H Company. According to the requirements of H Company's logistics department, the collected goods are regularly transported to the material area of H Company's warehouse receipt department for inspection. The warehouse administrator receives the physical quantity according to the supplier's on-board document list, signs and confirms the delivery order, and sends the delivery order to the warehouse clerk to input the receiving data of ERP system.
Beijing supplier. The supplier delivers the goods to the designated place of H Company. The warehouse manager checks the paper purchase order signed by the general manager or his authorized person according to the delivery slip. After confirmation, the warehouse manager pulls the goods back to the inspection area of the goods recovery department, stamps and signs on the delivery slip of the supplier, one of which is returned to the supplier as the basis for collecting payment, and the other is delivered to the warehouse. The clerk does the ERP system to receive the goods.
Figure 4.13 Warehouse Receive Process
4.6.1.2 Description of Shipment Process The delivery process is shown in Figure 4.14. Customer service department prints the delivery notice to the finished warehouse one day ahead of the promised delivery date. After receiving the delivery notice, warehouse administrator first finds the corresponding manual material counting card of the products required to be delivered on the delivery notice. Warehouse administrator sends out the bill of arrears of the day to customer service department, planning department and production department every day. It is true that the products cannot be delivered on time. After communicating with customers, the customer service personnel decide to delay the delivery of some or all of the products on that day.
Products that can be shipped according to plan, warehouse administrators register manual counting cards, break down the required quantity of shipments, re-package and label, print out the delivery label according to customer requirements and paste it in the outer box, submit the packing details (single weight, total net weight, gross weight and packaging size specifications) to the logistics department. Re-packaging is due to the same product ordered by different customers. In order to reduce costs and improve efficiency, the production line merges the orders of customers whose delivery time is close to each other. Different customers have different packaging and label requirements for the products. Customer service personnel input orders will be listed in the remarks column. When warehouse is shipped, the original product packaging will be separated, and then according to each customer separately. Customers require repackaging and labeling.
The Logistics Department makes the packing list according to the packing details provided by the warehouse manager. The export goods also need to send the packing details to the Customs Department to complete the customs declaration procedure. The warehouse clerk will deliver the delivery notice to the warehouse clerk to make the delivery deduction of ERP system and deliver the goods to the delivery area for delivery. After the driver of the transport company confirms that the number of loads is the same as the number of delivery notices, he signs the confirmation on the delivery notices and the warehouse keeper loads and delivers the good.
4.6.2 Warehouse Receive and Shipment Process Diagnosis Using the method of process activity analysis, the receiving and delivery processes were diagnosed respectively, and the main reasons for the delay were found.
4.6.2.1 Receive Process Diagnosis As can be seen from table 4.12, there are roughly 8 main activities in the receiving process. Analyze the activity content and find out various reasons for the delay.
Table 4.12 Analytical Table for Delays of Warehouse Receive Process Activities Activities The content of activities Total The analysis of activities time (Hour) 1 Warehouse keeper checks 1.5 Distributed area, time-consuming goods in the waiting area spot inspection 2 Check the signed order 1.5 Checking paper data is inefficient 3 Document Handing-in 1 Checking documents is time- and Recording System consuming and manual card registration is inefficient 4 Warehouse clerk input 1 Large amount of manual input data, ERP system duplicate filling in documents 5 Print receipt, delivery and 1 inspection documents and submit them to QC 6 Quality control inspection 2 Waiting too long to fill in the form of incoming materials repeatedly 7 Warehouse clerk input 1 Large amount of manual input data, ERP system warehouse low timeliness location transfer
Table 4.12 Analytical Table of Warehouse Receive Process Activities (Continued) Activities The content of activities Total The analysis of activities time (Hour) 8 Transfer of physical 1 goods into main warehouse
Six of these activities were delayed, and the main reasons were analyzed. In the receive process, the warehouse administrator of the receiving department needs to receive the delivery order from the supplier at the unloading desk, and the office of the recycling department checks whether the paper purchase order has been signed and approved, and then returns to the unloading desk to collect the goods. Checking paper purchasing orders takes time, especially when the time of centralized delivery is too long for suppliers to wait for unloading when there are too many corresponding orders for the same type of delivery. H Company has ERP system, but the warehouse still uses paper to sign and approve purchase orders as the basis for checking, which not only wastes resources, but also wastes the time of warehouse administrator to check purchase orders, and takes time and effort to archive and query.
1. Despite the existence of ERP system, in order to ensure accuracy of products, inventory management still believes in and follows the way of using the original material count card before using ERP system to manage inventory. Material count card registration is time-consuming and needs to be checked with the records in ERP system one by one every day, which consumes a lot of manpower and time.
2. The warehouse personnel are divided into two parts, one is the warehouse administrator, who is responsible for the processing of products receipt and dispatch, documents and products check; the other is the warehouse clerk, who
is responsible for receiving and dispatching records into the ERP system. Documents are frequently transmitted between two parts of personnel, and there is a high probability of errors. Especially at the end of the month and before the end of the year, there are a large number of shipments in a short period of time, and the workload of data entry is heavy, which easily affects the timeliness and accuracy of data entry. Warehouse clerk undertakes a lot of data entry work, in addition to purchase order receipt, sales order shipment, there are more production order receipt and dispatch records. High labor cost, high error probability, easy backlog, time difference between book number and product number, which is not conducive to inventory control, but also may affect the accuracy of MRP operation results, cannot accurately reflect the real situation of inventory at the time of delivery, and affect the delivery efficiency.
The number of delays due to various reasons in 2017 is shown in table 4.13 below.
Table 4.13 Statistics of Delay Number of Warehouse Receive Process First Second Third Fourth Total quarter quarter quarter quarter Registration manual card 23 18 13 21 75 Delivery time chaos 4 2 4 5 15 Check paper documents 21 30 16 19 86 Duplicate document 6 3 6 4 19 Entry data 11 14 17 13 55 Problem of communication 5 4 3 6 18 Total 70 71 59 68 268
According to the statistics of the number of delays caused by various reasons, the cumulative number and percentage can be calculated as shown in table 4.13 below.
Table 4.14 Sorting Table of Accumulated delays in Warehouse Receive Processes The The percentage of Total cumulative cumulative (%) cases Registration manual card 86 86 32 Delivery time chaos 75 161 60 Check paper documents 55 216 81 Duplicate document 19 235 88 Entry data 18 253 94 Problem of communication 15 268 100 Total 268
According to the drawing of Pareto, see Figure 4.15, showing the main reasons for the situation.
300 250 200 150 100 50 0
Total The cumulative cases
Figure 4.15 Analysis of Reasons for Delays in Warehouse Receive Process Activities
Checking paper data, registration manual card and data input account for 80% of the delay, which will be the key optimization parts. To solve the delays caused by these
three reasons, we can basically improve the warehouse receipt process, improve work efficiency, improve punctual delivery and improve the delivery status.
4.6.2.2 Shipment Process Diagnosis In Figure 4.14, the shipping flow chart shows that there are 11 main activities as follows table 4.15. Analyze the contents of the activities and find out the reasons for the delay.
Table 4.15 Analytical Table for Delays of Warehouse Shipment Process Activities Activities Activity content Total time Activity analysis hour 1 Warehouse keeper checks 1 Irregular storage time and products in finished product time-consuming spot check area 2 Quality control completed 1 Waiting too long, grass-roots product inspection personnel without authorization 3 Transfer of qualified 1 finished products into main warehouse 4 Finished product quantity 1 Large amount of manual input input ERP system data, low timeliness 5 Check shipping notice 1 Shipment quantity is adjusted from time, and it takes time to check many times. 6 Separate and pack 2 Waiting too long to fill in the according to customer's form repeatedly requirement 7 Output quantity input ERP 1 Large amount of manual input system data, low timeliness
Table 4.15 Analytical Table for Delays of Warehouse Shipment Process Activities (Continued) Activities Activity content Total time Activity analysis hour 8 Customs declaration 2 Frequent changes in the arrangement of transport number of packaging, vehicles customer service production of packing list, waste of time 9 Loading 1 Delivery time is concentrated and waiting time is long. 10 System deduction to 4 System credit lock-in removal account for the quantity of time-consuming products 11 Shipment of goods 1
In order to solve the problem of process delay and inefficiency, the number of delays in 2017 is counted.
Table 4.16 Statistics of Delay Number of Warehouse Shipment Process Activities First Second Third Fourth Total quarter quarter quarter quarter Split and repackage 7 8 10 6 31 Credit lock off 55 48 41 51 195 Registration manual card 3 5 4 3 15 Entry data 4 6 5 8 23 Warehousing is not standard 45 37 30 43 155 Packing list responsibility and 5 7 3 5 20 communication Total 119 111 93 116 439
As can be seen from table 4.16, the main cause of delays in the delivery process is the disassembly and repackaging of products, followed by the checking and registration of manual counting cards. By sorting the total number of delays, the cumulative percentage of various causes can be obtained.
Table 4.17 Sorting Table of Accumulative Delay in Warehouse Shipment Process The The percentage of Total cumulative cumulative (%) Split and repackage 195 195 44 Credit lock off 155 350 80 Registration manual card 31 381 87 Entry data 23 404 92 Warehousing is not standard 15 419 95 Packing list responsibility and 20 439 100 communication Total 439
Draw Pareto according to the statistical results of table 4.17, as shown in Figure 4.16 below, to further clarify the key to solving the problem.
500 400 300 200 100 0
Total The cumulative
Figure 4.16 Reasons for Delays in Warehouse Shipment Process Activities
(1) In the delivery process, because H Company does not make to order according to customer orders, but considers the way of efficiency and cost optimization, and produces similar products with delivery dates. Packing in warehouse is not packed separately according to different customers and orders, which results in the warehouse need to split the original packaging and re- requirements, which increases the cost of labor and materials, and also consumes a lot of time.
(2) Credit customers fail to pay according to the agreed account period, resulting in a record of payment arrears; or when the actual transaction amount is greater than the forecast value when credit evaluation is applied, it will be automatically locked by the system, resulting in the warehouse cannot deduct the number of deliveries. Customer service personnel need to communicate with customers the reasons for arrears and follow-up payment plans. With the assistance of sales staff and financial personnel, they can make a comprehensive judgement: customers have special circumstances; credit status has always been poor; and credit lines are insufficient. Where it can be released in particular, it shall be approved and released in accordance with the authorization level of the company's credit control policy. After receiving approval, the finance department will unlock the system, notify the customer service department and the warehouse to release the goods, and the warehouse will deduct the number of deliveries. The control point is seriously lagging behind, which not only has great operational risks, but also leads to the time-consuming solution process and the failure to deliver products in time.
4.7 The Summary and Solution of Current Process Problem Usually, company can redesign the process by changing the order of activities in the process, sorting and merging, eliminating redundancy, and applying information technology.
1. Change the order, analyze the logic of the sequence of each component activity in the process, change the unreasonable part, so as to reduce the invalid working time and improve the overall reaction speed of the process.
2. Organizing and merging, rigid division of labor in playing cards, in order to improve efficiency, the organic activities separated by different departments are re-integrated into one department to reduce the time of transmitting information and communicating.
3. Redundancy elimination, decomposing activities into value-added activities, non-value-added activities and redundant activities, reducing non-value-added activities and eliminating redundant activities.
4. Information technology application, some activities in the process can use information technology to improve the efficiency of information transmission, storage, processing and sharing.
The following principles should be followed in designing process optimization schemes:
4.7.1 Objectives of Process Optimization in H Company In the fierce market competition environment, the survival and development of enterprises need to adapt to the changes of internal and external conditions, optimize, standardize, re-optimize and re-standardize the existing process of self-improvement, and constantly consolidate and enhance the core competitiveness of enterprises. With the process of process optimization, enterprises continue to improve the level of operation and management, promote business development and profitability, and support enterprises to achieve strategic vision. Business process is composed of a series of activities with internal parts. The process of implementing process reengineering and optimization is to improve and improve the relationship so as to make its logic more rigorous and activities smoother. Based on the premise that the new process is more reasonable, the existing process activities are transformed, added or deleted, sequential adjustment and so on, that is, to use "cancel, merge, and heavy".
H Company combines its own advantages and current practical problems, through process reengineering and optimization, achieves the goal of shortening delivery time and improving punctual delivery rate, promotes greater breakthroughs in work efficiency and improves customer satisfaction. Using the method of process analysis and diagnosis, this paper puts forward and implements the optimization scheme, starting with the order processing process, to solve the thorny problems that have plagued the enterprise for a long time, and to promote the whole enterprise to attach importance to the process problems, so as to achieve the opposite effect.
Based on the comprehensive diagnosis and analysis of H Company's order processing process, the optimization scheme is designed. From customer selection strategy, information technology application, exploring ERP system function, simplifying approval process, rearranging process activities, introducing new management means, process optimization is implemented to achieve the goal of improving punctual delivery.
4.7.2 Order Comprehensive Review Process Optimization Process analysis and diagnosis identified that the problems of order comprehensive evaluation process mainly existed in the process of cost evaluation of new products, the process of planned delivery time evaluation and the process of credit evaluation of new customers.
4.7.2.1 Optimize New Product Cost Evaluation Process The problems in the whole quotation process are as follows: There is no mechanism to identify key customers and effective needs; Manual filling and calculation work is heavy and error-prone; Paper data transmission is easy to be backlogged in one link, resulting in delays in all subsequent parts; There are many links of transmission, and documents are often lost. Lack of traceability;
On this basis, the optimization scheme is proposed.
(1) Customer selection strategy. H company management must have a clear strategic positioning of the target customer group, which is the premise and foundation. Without the front-end selection of customer needs and orders, the back-end will always be in a busy situation. Enterprise's resources are limited, meeting customer's needs indiscriminately will only have the opposite effect, and non-target customers should give up; concentrate superior resources, focus on meeting the needs of target customers, develop high-quality customers with development potential, and seek long-term benefits.
(2)
Because ERP system is related to financial accounting processing and financial statements, parameter setting requires scientific rigor, perfect data structure and logical rigor, and has not yet been finally confirmed with legal constraints of customer needs, including new product inquiry and quotation process, delivery evaluation process, etc. It is not allowed to enter and modify arbitrarily in the system. Therefore, as a complement to the ERP information processing system, the information sharing platform which is separated from the ERP system has its value and significance. Considering the efficiency of input and output, we only need to design and build a small database based on Microsoft Excel and Access as information sharing platform. Departments can input and query different field information of the database according to different authority. It is similar to an information office system, but it is mainly designed for the process of customer demand processing. It has the advantages of low cost, fast on-line, simple operation and clear effect. It has obvious characteristics. The tasks that each department needs to accomplish every day are clearly and completely displayed on the platform. After completion, the data are automatically transmitted to the next link. It is clear that each department should accomplish tasks, unfinished tasks and delays. There are fair and objective criteria for performance appraisal, so as to avoid the waste of time caused by ineffective communication process.
4.7.2.2 Process Optimization of Planned On-time Delivery Evaluation
(1) Establishing information sharing platform. Cancel the use of paper documents as a carrier of information transmission, which is a major problem of communication, break the inevitable situation, so that the gap and communication barriers between the customer service department and the planning department should be closely coordinated, promote cooperation, improve the efficiency of information transmission, and enhance customer satisfaction. Similarly, through the establishment of information sharing platform, timely transmission and feedback of information, planners, customer service personnel and customers can maintain good communication channels.
(2)Cancellation of paper work orders. Print out the paper work order from the system and send it to the production department together with the production plan. H Company has about 300 work orders arranged for production every day, and requires several links in one form. It must use the needle printer with very slow speed. This backward mode of operation is the inherent practice that was followed when the ERP system was not used. No one has ever questioned the waste of time caused by it. In fact, the production line staff carry out actual production activities according to the operation instructions, and the work order is only a reference for the material manager of the production line. As long as the computer terminal is installed in the production line, field personnel can view it by themselves without printing, which can save a lot of time and paper, and improve the work efficiency as well as environmental protection. At the same time, under certain conditions, considering the appropriate authorization of planners or plan managers, production plans can be directly generated to improve the efficiency of information and documents transmission and shorten the waiting time for approval.
(3)Explore the function of ERP system. Optimizing the parameters of production planning in ERP system, changing its incomplete and unscientific status quo, transiting from manual production planning to automatic production based on the system, eliminating the waste of time in this link, and avoiding possible human errors in production planning based on experience.
4.7.2.3 New Customer Credit Evaluation Process Optimization (1) Update performance assessment indicators. H Company's assessment index for sales staff has been adjusted from the previous emphasis on sales volume and the light return rate to equal emphasis on both. To promote sales staff to pay attention to the collection of credit status data at the beginning of contact with customers, and provide necessary support and enough time for the back end.
(2)To adjust the authority to approve credit conditions. Based on the adjustment of the above assessment indicators, the position of salesmen has changed, and the cooperation degree of credit control policy has greatly increased. We can consider appropriately granting factory financial managers greater approval authority, reducing the number of cases involving small amounts to global management approval, which can speed up the approval speed and shorten the time of customer order processing. At the same time, process monitoring should be strengthened to ensure the rational use of authority.
(3)Process activity sequence adjustment. Based on the establishment of information sharing platform and the need of credit investigation report, the Finance Department can intervene in advance, communicate with salesmen first, predict the possible credit conditions from a professional point of view, and start the tripartite investigation procedure first if necessary.
4.7.3 Process Optimization Application of Material Shortage In the process diagnosis stage, the main problems of the application process for missing materials are identified as the long waiting time for examination and approval, the multiple links of examination and approval, and the serial and manual filling-in.
4.7.3.1 Simplify Approval Process Establishing a hierarchical authorization mechanism to solve the problems caused by the excessive examination and approval links of procurement application forms and procurement orders. At the same time, the financial department checks the system data at the end of each month, supervises the implementation of authorization, submits reports to the management, and prevents the occurrence of over-authority events, which not only guarantees the integrity and continuity of the implementation of the company's internal control system, but also provides flexibility to solve practical problems. The general manager can appropriately authorize the Department Manager and the material manager to have the right of final approval of the purchase application form and
purchase order according to the actual situation of H Company, which can speed up the process of document processing and eliminate the invalid waiting time.
H Company's large number of non-production material purchase applications and purchase orders are not large. As the final authorization approval link, the first approval link can quickly respond to users' needs and improve the efficiency of the whole process. The authorization matrix is shown in Table 4.18.
Table 4.18 Approval Authority Form for Non-production Materials Approval level Authorized amount (IDR: Million) department manager [0, 10] Financial Manager [10, 40] General manager
Production material purchasing authorization is based on MRP operation results after customer order input system, authorizing material department manager to have purchasing volume of demand less than 8 weeks. Material Manager and General Manager repeatedly sign the purchase application form and purchase order for production materials. In the process of system automatic conversion of MRP operation material demand, this link can be cancelled. Planning Manager can determine the rationality of purchase demand. Material Manager and General Manager can control the purchase quantity in the final approval link of purchase order according to the different amount of authorization. H Company has the characteristics of multi-varieties and low output. Except for a few common basic raw materials, there are not many materials purchased in large quantities. The production material demand is calculated on the basis of bill of materials, which is reliable and less likely to occur human errors. It can also cancel the examination and approval process of the production material purchase application form by the financial manager. On the premise of conforming to the company's internal control system, approving power can be delegated appropriately,
which can greatly speed up the approving speed. The authorization matrix is shown in Table 4.19.
Table 4.19 Production Materials Approval Authority Form Approval level Authorized purchasing volume Material Manager Less than 8 weeks requirement for MRP results General Manager More than 8 weeks requirement for MRP results
4.7.3.2 ERP System Function Exploration A few years ago, the group implemented the ERP system. Due to the limitation of the overall implementation time and the total budget, H Company must successfully implement the ERP system in three months. In order to ensure the timeliness of project implementation, some functions of the ERP system have not been studied and used.
In the procurement process, the user department can submit the procurement application online. After the authorized person examines and approves online, the ERP system can automatically convert the procurement demand into the procurement order. According to the actual operation situation, H company sets system parameters appropriately, combines with the aforementioned hierarchical authorization, changes the current situation of paper documents as carriers to transfer procurement demand, reduces the backlog time in the examination and approval process, greatly strengthens the integrity and traceability of system records, provides objective data support for the performance evaluation of process processing, and makes the procurement demand processing process more advisable.
4.7.3.3 Use Advanced Management Methods Selecting suitable qualified suppliers and materials, implementing JIT (Just In Time) and VMI (Vendor Managed Inventory) modes, reducing the time-consuming repetitive
purchase request and purchase order approval process. The basic idea of JIT can be summarized as "when needed, produce the required products according to the required quantity". JIT itself is to pursue a production system with no inventory or minimum inventory through production planning and control and inventory management. The actual operation effect of supply chain management can also be reflected in the shortening of supplier delivery time. H company draws up medium and long-term material demand plan according to customer's order status, sends purchase orders to suppliers according to the approval process, suppliers organize production or supply according to the scheduled delivery time, H Company's production department material manager informs suppliers of delivery according to the actual needs of the site. This mode of operation can effectively reduce the time consumption of repetitive purchasing process.
The core idea of VMI is that suppliers can share the current inventory and actual consumption data of users' enterprises, and make actual replenishment according to actual consumption model, consumption trend and replenishment strategy. As a result, both sides of the transaction have changed the traditional independent forecasting model to minimize all kinds of waste caused by the uncertainty of independent forecasting, reduce the total cost of the supply chain, and improve the effectiveness of responding to customer needs. H Company can choose materials with large supply and relatively stable demand, and reach VMI supply mode with supplier agreement, which can also effectively reduce the time consumption of repetitive procurement process.
4.7.4 Warehouse Receive and Shipment Process Optimization 4.7.4.1 Receive Process Optimization In the process diagnosis stage, the main reasons for the delay of the receiving part caused by checking paper data, manual registration card and large amount of data input are identified. The corresponding solutions are as follows:
(1)Cancel the checking of paper materials. Due to the problems in the previous purchasing process of paper purchasing order signing and approval, purchasing orders with complete elements in ERP system may still be in the state of non-signing and approval. The unapproved purchase order cannot be used as the warehouse receipt evidence, so the purchaser needs to transfer the signed purchase order to the warehouse in time. The warehouse administrator must check the paper purchase order before collecting the goods. Delays in the delivery of documents and the checking process itself will result in delays in the delivery process. After optimizing the process of purchasing documents processing, all purchase orders with complete elements in the system are approved according to the process. The warehouse administrator only needs to query the corresponding data at the ERP terminal to complete the checking, which avoids delaying the receipt time of inquiring paper orders, and there is no delay in the delivery of documents.
(2)Cancel the manual card to record the number of stocks. Choosing circular and comprehensive inventory methods to ensure the accuracy and safety of inventory, and canceling the manual inventory registration card operation mode with lower efficiency can save time. H company records hundreds of inventory transactions every day, each note is manually registered once, the delivery time will be affected. Some warehouse documents can be simplified, such as the qualified goods transfer receipts mentioned in the process diagnosis, which can be used in the form of several links in the warehouse single form to reduce the time waste caused by filling out the documents manually many times.
(3) Bar Code barcode system is introduced. The application of bar code technology is a necessary means to realize modern management. Its advantages in sales management, inventory management and production process management are well known. Through the interface with the existing ERP system, materials are integrated into inventory management through scanning from the beginning of entering H Company. The whole
process of internal flow is clearly reflected in the ERP system, which can make the inventory information accurate and timely.
4.7.4.2 Shipping Process Optimization In the process diagnosis stage, the main reasons for the delay in delivery are identified as the disassembly and repackaging of goods, checking and registration of manual counting cards. In addition, credit control points are triggered at the final deduction stage, resulting in delivery delays.
(1) Improve production mode. In view of the time-consuming and cost-increasing of repackaging, the original Make To Inventory production mode can be changed to Make To Order production mode, that is, when the production order is issued by the planning department, the same product is not merged. Each customer order corresponds to a production order. ERP system supports the realization of this function. The production plan can continue to list the work orders that can be produced at the same time according to the optimized mode, and the actual manufacturing can still be arranged at the same time period, but after the production of each work order is completed, it will be packaged into storage according to the requirements specified by the corresponding customers. The warehouse does not need to be repackaged when it is shipped, which saves a lot of time and improves the speed of delivery.
(2) Cancel the manual card to record the number of stocks. This is the same as the receiving part.
(3) Process activity sequence adjustment. The policy control points of credit control are actually triggered at the last minute of the system deduction after all the shipments have been completed. There are great operational risks and delays in delivery time. Firstly, the manufacturing of products is over, and the cost of materials, labor and machinery has been fully invested, which has become the sunk cost of enterprises. If the customers are unable to ship due to the credit control problems, this part of the
inventory is likely to become dull goods. In addition, the labor of other supporting work at the front end will bring irreparable losses to enterprises. Secondly, credit control triggers. Points take effect at the end of the process, and the time required to solve the problem will result in delay of delivery on the whole, but the backup has been completed but cannot be delivered, which disrupts the customer's own production and delivery plans. Usually, customers will be more disgusted with the fact that they did not ask questions beforehand, but in the final stage, there will be blockade and artificial sense of urgency. The process of communicating with customers will become more difficult, and customer satisfaction will be seriously affected. Credit status inspection can be completed in advance to the time of receiving customers' demand or accepting orders. It has sufficient time to communicate with customers to settle arrears, or to release and increase credit lines according to internal approval process. It also gives customers the time to adjust their production and delivery plans in advance in anticipation of possible changes, so as to avoid urgent adjustments that have to be made at the moment. The Finance Department issues weekly reports on customer arrears. Customer service personnel know in advance the status of each customer's arrears, payment habits, credit records and other information, and inform them in time when they receive customer needs and contact related matters. Possible measures:
4.8 Analysis of the Implementation Effect of Process Optimization In the above process optimization and reengineering schemes, the target customer strategy transformation is based on long-term, which is related to the business strategy of the enterprise, and has a greater impact on the enterprise. Only the change of management concept can be supported to implement; the establishment of information sharing platform and the adjustment of process sequence are the typical application of process reengineering technology in practical work.
4.8.1 Comprehensive Order Review Process (After Optimization) After optimizing the new product cost evaluation process, the planned delivery time evaluation process and the new customer credit evaluation process, the processing efficiency of the order comprehensive evaluation process is improved.
After the establishment of information sharing platform, customer information or orders enter the platform and start timing. The last link completes the confirmation, and the information is transmitted to the next link. At the same time, record the completion time of the last link, which is also the start time of the next link. Relevant personnel of various departments will receive reminders of their new tasks. Information in each field of the platform will be input according to the pre-established norms to ensure that information can be searched and compared quickly and accurately in the future. The engineering department evaluates and enters technical information to determine whether a new product is available, and can compare information such as quotation history in the platform database. The Planning Department evaluates the delivery date information according to the existing information. According to the feedback information of the sharing platform, reply to customer's delivery date, quotation and new customer can provide credit conditions. After the customer accepts the formal order, H Company can start production, scheduling, procurement and other activities until the goods are delivered to the customer's designated location. Figure 4.19 is the new product quotation processing process - after optimization.
After the implementation of process optimization, the following are the process activities listed in the order comprehensive review activity analysis table. The order and time consumed have changed because of the change of the process. Now compare and analyze the main activities.
Table 4.20 The Comparison the Processing Time in Order Comprehensive Review Process Before and After Optimization Process of before The process time of Process of after The process optimization before optimization optimization time of after (Hour) optimization (Hour) Approval orders 4 Approval orders 4 Engineering review 2 Put the order into 24 process Information Sharing Platform New product cost 36 New product cost 16 assessment assessment New customer credit 28 New customer 4 assessment credit assessment Lead time assessment 8 Lead time 8 assessment
Customer approval 8 Customer 1 approval
Order check and entry the 1 Process the order 1 ERP system
Total processing time 87 57
Table 4.20 is the timeliness of the order comprehensive evaluation process after optimization. Through comparison, it can be seen that the overall processing time is 87 hours before optimization, and the optimized processing time is about 20 hours. The new customer credit evaluation process moves forward and synchronizes with the checking of basic information, which saves 4 hours. With the help of information sharing platform, the efficiency of new product cost evaluation is greatly improved and
the processing time can be reduced to 20 hours. The lead time evaluation is changed from serial to parallel and the waiting time is reduced.
4.8.2 Application Process of Shortage Material After Optimization After the examination and approval process of production material purchasing is changed according to the hierarchical authorization, the financial manager's review of the purchase application form is cancelled, and the plan manager is responsible for the total purchasing amount, which is submitted directly to the examination and approval process of the purchase order. The material manager and the general manager sign and approve the purchase order finally according to the authorization. The reduction of examination and approval links saves time. The order with complete online approval elements is the only legitimate evidence for internal and external related processes. It does not need to print paper purchase orders. It uses the function of sending electronic orders in ERP system to inform suppliers of stock-up and payment requests. The optimized processing of material shortage application is shown in Figure 4.20.
In ERP system, the purchaser converts the approved purchasing application into purchasing order, which is directly signed and approved by the material manager when the amount is less than the set amount, and after the approval by the general manager when the amount exceeds the authorization of the Material Manager, the purchaser will send it to the supplier as the backup basis. Through the optimization of purchase order process, remarkable results have been achieved. Table 4.21 The Comparison about Application of Shortage Material Before and After Optimization
Process of before The process time Process of after The process time optimization of before optimization of after optimization optimization (Hour) (Hour) Fill in the 2 Automatic 1 purchasing conversion of application form material by handwriting requirements to purchase application forms Manager approval 4 Production Manager 1 approval Financial 4 New purchasing 0 manager approval order in ERP system
General approval 4 Logistics manager 2 approves purchase orders with < 8 weeks New orders for 2 New orders for ERP 1 ERP system and system and print print paper paper purchase order purchase order
Table 4.21 The Comparison about Application of Shortage Material Before and After Optimization (Continued) Process of before The process time Process of after The process time optimization of before optimization of after optimization optimization (Hour) (Hour) Approval by 4 General manager 2 material manager approves purchase orders with >8 weeks General approval 4 ISP automatically 1.5 purchase sends and approves application form purchase orders
Purchaser scans 2 Stocking and 0 orders delivery
Total processing 26 8.5 time
After process optimization, the application for material shortage takes about 8.5 hours, as shown in table 4.21, and the effect is obvious.
4.8.3 Warehouse Receive and Shipment Process (After Optimization) The optimization effect of warehouse receipt and delivery process focuses on the implementation of Bar Code scanning system and the advance of the control point of arrears credit lock and release.
4.8.3.1 Receive Process (After Optimization) According to the optimization plan, cancel the paper signed orders and directly check the product name and quantity in ERP; Cancel registration of manual card; Bar Code
scanning system is used to reduce the quality of data input, and the effect comparison is shown in the following table to obtain the corresponding effect.
Figure 4.21 Warehouse Receive Process - After Optimization
Table 4.22 The Comparison about Warehouse Receive Process Before and After Optimization Process of before The process time Process of after The process time of optimization of before optimization after optimization optimization (Hour) (Hour) Take stock 1.5 Take stock 1
Check Paper singed 1.5 Go to ISP to 0.5 purchase orders check purchase orders Sorting documents 1 Sorting 0 documents
Input ERP System 1 Input ISP 0 System
Print receipt and 1 Entry the 0.5 delivery order number of products in ISP system
QC inspection 2 QC inspection 1
Input warehouse 1 Input warehouse 0 transfer order in system transfer order in system
Table 4.22 The Comparison about Warehouse Receive Process Before and After Optimization (Continued) Process of before The process time Process of after The process time of optimization of before optimization after optimization optimization (Hour) (Hour) Products transfer to 1 Products 1 qualified products transfer to warehouse qualified products warehouse
Total processing time 10 4
After the implementation of the optimized scheme, the processing time can be reduced to 4 hours, and the results can be referred to table 4.22.
4.8.3.2 Shipment Process (After Optimization) The shipment process optimization scheme is aimed at the process of breaking up and repackaging the goods, checking and registering the manual counting card and the lock and release of arrears credit. The implementation effect is compared as follow:
Figure 4.22 Warehouse Shipment Process- After Optimization
Table 4.23 The Comparison about Warehouse Shipment Process Before and After Optimization Process of before The process time of Process of after The process optimization before optimization optimization time of after (Hour) optimization (Hour) Delivery the finished 1 Delivery the finished 1 products to finished products to finished product warehouse product warehouse
Finished product 1 Finished product 0.5 inspection inspection
Product transfer to 1 Product transfer to 0 qualified product qualified product warehouse warehouse
Put quality of 1 Input quantity to ISP 0 productions into system system
Check shipment 1 Check shipment 0.5 notification notification By ISP
Repackaging 2 Repackaging 1
Input shipment quantity 1 Input shipment 0 to ERP system quantity to ISP system
Preparing vehicles 2 Preparing vehicles 0.5
Table 4.23 The Comparison about Warehouse Shipment Process Before and After Optimization (Continued) Process of before The process time of Process of after The process optimization before optimization optimization time of after (Hour) optimization (Hour) Loading 1 Loading 1
ERP system deduction 4 ISP system 1 the qualities for deduction the shipment qualities for shipment
Check system 1 Check system 0.5 deduction and start deduction and start shipment shipment
Total processing time 16 6
In table 4.23, it takes about 16 hours to the shipment process before the implementation of process optimization. The main link that causes the delay is the deduction of accounts in information sharing platform after the warehouse is ready. Because of the customer's arrears or excess credit limit and the system's automatic locking, it takes time for multiple departments to intervene in unlocking the system, which seriously affects the timely delivery. It takes only 6 hours to complete the process after optimization. It mainly affects the trigger point of credit lock-in for timely delivery. It starts to solve the problem when receiving customer orders, avoids operational risks and improves the on-time delivery rate.
4.8.4 Overall Order Processing Process - after Optimization
Figure 4.23 Order Processing Process - After Optimization
Due to order processing overall process have more serial parts, using information sharing platform to reduce the number of serial parts and establish the parallel parts. Because the every department need the information of orders to quickly give the comprehensive the results that the reply to customers. Once the order enter the company, the worker collect the all relative information about the orders to put them in the platform database. And the engineering department, production department, purchase department and warehouse at the same time can get the information from the platform database to analyze the order and as possible as quickly give the results. It can save more time and improve the on-time delivery rate.
4.9 The Result of Optimization H Company implemented the process optimization in the second quarter and the third quarter of 2018. Through the tracking and data collection of reengineering work, we calculated the on-time delivery rate in the second and third quarters of 2018.
Table 4.24 On-time delivery rate in 2018 Second quarter in Third quarter in 2018 Average of on- 2018 time delivery rate On-time delivery 95% 97% 96% rate Goal 95% 95% Result Success Success Success
Although the optimization process cannot take into account the whole process of the company, there may be some unreasonable optimization in the process. Through the optimized on-time delivery rate, we can see that the optimization results of this process are successful. It is hoped that H Company can optimize its process more reasonably according to its own development and feedback from customers or staffs.
CHAPTER V CONCLUSION AND RECOMMENDATION
5.1 Conclusion Based on optimization that have been done in the research, the final conclusion for this study are:
5.2 Recommendation There are several recommendations for further research, such as:
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The Questioners about the Factors in Critical Success Factor
On-time Ability of No. of Rapid response to Cost control delivery communication staff service levels capability capability and management
1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 1 10 1 11 1 12 1 13 1 14 1 15 1 16 1 17 1 18 1 19 1 20 1 21 1 22 1 23 1 24 1
The Questioners about the Factors in Critical Success Factor (Continued) On-time Ability of No. of Rapid response to Cost control delivery communication staff service levels capability capability and management
26 1 27 1 28 1 29 1 30 1 31 1 32 1 33 1 34 1 35 1 36 1 37 1 38 1 39 1 40 1 41 1 42 1 43 1 44 1 45 1 46 1 47 1 48 1 49 1 50 1 51 1
The Questioners about the Factors in Critical Success Factor (Continued) On-time Ability of No. of Rapid response to Cost control delivery communication staff service levels capability capability and management 52 1 53 1 54 1 55 1 56 1 57 1 58 1 59 1 60 1 61 1 62 1 63 1 64 1 65 1 66 1 67 1 68 1 69 1 70 1 71 1 72 1 73 1 74 1 75 1 76 1 77 1 78 1
The Questioners about the Factors in Critical Success Factor (Continued) On-time Ability of No. of Rapid response to Cost control delivery communication staff service levels capability capability and management 79 1 80 1 81 1 82 1 83 1 84 1 85 1 86 1 87 1 88 1 Total 31 26 18 13