Dramatic Order Fulfillment Time Reduction of Over 60%

Background

The client was a multi-national corporation facing ever-increasing pressure of fast-paced competition. In 1999, the response time of the competitors has out-performed the client. The Order Fulfillment Process (from order confirmation through production to confirmed delivery) had been performing at an average of about 2 weeks. In order to satisfy the customer requirement of shorter lead-time and to maintain a low level of inventory, the client has to shorten the cycle time to outperform competition and win back customers.

However, the process was not completely under local control. The supply chain consisted of Order Processing function in Hong Kong, Production Planning in the US, and Production in an Asia-Pacific plant.

Facing pressure from customers, the Hong Kong operation center engaged High Impact Management Consulting Limited to facilitate the client's project team to reduce the cycle time dramatically.

The Methodology

Process Improvement was employed as the methodology for change. Simply put, the methodology provided a systematic framework for improving cross-functional processes. It was consisted of six major steps (as shown in the figure below.)

The Journey

Having identified the project as a high priority one, the client first appointed a Process Improvement Team (PIT) consisted of people from various functions, including Order Processing, Credit, Shipping, Warehouse & Delivery, Quality, Information Technology, and Production (Asia-Pacific). To establish a solid foundation of skills, the team was first trained in process improvement methodology, tools, and skills.

At the first stage of the project, the team, under the facilitation of the consultants, formulated the Project Charter Statement, which outlined the project scope and the improvement goals. The PIT set an ambitious target of shortening the cycle time by over 60%.

The cross-functional process map was then constructed to depict the workflow across functions. After validating the process map through case review, field interviews, and observation, the PIT identified the bottlenecks, and other areas for improvements. On concluding the process analysis, several high impact areas were identified, which included:

• Incompatible performance scorecard between Production and Order Processing, which caused the two parties to work against each other;


• Various sources of delay were found in the process, which should be reduced or eliminated through redesigning the process;


• Lack of communication among different units, each without the knowledge of the overall workflow; and


• Policies that hindered the performance of the process.

After uncovering these major sources of problems, the PIT invoked their creative thinking to devise a new process. As instructed by the consultants, and constrained by company resources, the new process should require little or no additional resources. A blueprint for the new process was soon completed.

Though theoretically sound, the new process design had to be accepted by the people working in the process, including those across the oceans. The PIT members then conducted briefing sessions and presentations to communicate the proposed changes, and to seek feedback for refinement. For some departments, pilot programs were also conducted for a few weeks to test the new process and to win acceptance.

The Results

After 4 months' hard work, the new process was implemented with success. Without major commitment of new resources, the Order Fulfillment Cycle time, measured from the point of order arrival (via fax or e-mail) to the point of confirmed delivery, was shorted by over 60%. The result not only excited the team, but it was also well received by the customers.

Lessons Learned

The team reviewed the project in the final meeting. Members had remarked that:

• Improving cross-functional processes can truly direct the focus of all parties towards satisfying the ultimate customer, rather than just internal procedural requirements.


• Process Improvement methodology is a very effective tool for improving cross-functional operations. In particular, it enhances cross-unit communication.


• Performance measurement must be aligned with the overall process goal. Departments working under different performance measurements may work against each other, thus hindering the performance of the overall process. By employing the appropriate methodology, teamwork, and support from management, dramatic improvement is not mere miracle, but practically possible.


• By employing the appropriate methodology, teamwork, and support from management, dramatic improvement is not mere miracle, but practically possible.