Transformational Lean in Accounts Receivables

Case Study - Transactional Lean

2009 ASQ Lean Six Sigma Conference
March 2-3, 2009 - Phoenix, Arizona

Consumer Tools & Storage Stanley Works, Inc.

Jaime Villafuerte, Lean Manager CSSBB, CQE, Shingo SME Lean Certified, PMP

Learning Objectives

At the conclusion of this session, attendees should learn: How the initiative was selected How the initiative was implemented How Lean Six Sigma tools were used

Agenda

I. II. III. IV. V.

Stanley SFS Initiative Accounts Receivables Initiative Lean Six Sigma Tools Nor Lean neither Six Sigma Tools Q&A

I. Stanley SFS Initiative

Working Capital Turns Return on Capital Employed

How Efficient is the Working Capital Used?

I. Stanley SFS Initiative

Working Capital Turns Return on Capital Employed

How do Accounts Receivables Affect These Metrics?

I. Stanley SFS Initiative

Working Capital Turns: Number of times in a year that a company is able to convert its working capital into sales
Working Capital Turns:

Sales Working Capital

How efficient is the Working Capital used?

II. Accounts Receivables Initiative

Working Capital =
Inventory + Accounts Receivables Accounts Payables

AR

AP Working Capital

IN

$0 Inventory Accounts Accounts Receivables Payables WC

II. Accounts Receivables Initiative

Accounts Receivables

Payment Terms

Collection Process

Disputes

Delinquent Payments Days

Invoice Issued

Cash Applied

II. Accounts Receivables Initiative

Accounts Receivables

Payment Terms

Collection Process

Disputes

Delinquent Payments Days

Invoice Issued

What Can We Do?:

Cash Applied

Decrease Payment Terms Simplify Terms Structure Define & Share Standardize Collection Work Objectives Correct Price, Amount, SKU The first time Reduce Time on Dispute Resolution

II. Accounts Receivables Initiative

Events & Projects: 5 Kaizen events 3 to 5 days 200+ action items 30 days tasks 10+ Projects +30 days tasks Locations: New Britain, CT Miramar, FL Kannapolis, NC Sheffield, U.K.

II. Accounts Receivables Initiative

Event Selection
Kaizen event Deduction Process New Britain, CT Kaizen event VSM LatAm DC Miramar, FL Kaizen event Collection Process Sheffield, U.K.

04/08 05/08

06/08 07/08

08/08 10/08

Project Definition New Britain, CT

Kaizen event Bill of Landing Kannapolis, NC

Kaizen event Customer Service Sheffield, U.K.

III. Metrics
Current
Dispute resolution (U.S.)
Lead time Process time Resolutions completed Backlog Transactions and $M Sheets per resolution (paper) 23 days 4 hrs 19 per day 812 $1.6M 23 sheets/dispute 66 cust./day 21 cust./day 30% 3 hrs 21 tr./day 12 days 2.5 hrs 10 per day 413 $0.7M 5 sheets/dispute 45 cust./day 10 cust./day 10% 1 hrs 29 tr./day

Future

Suspended orders (U.K.)

Customers with suspended orders Customers exceeded credit limit

Customer application (U.K.)

C&A

Credit Card payment (U.K.)

Lead time Credit card payments

II. Accounts Receivables Initiative

Lean Six Sigma Methodology: DMAIC Set working meetings with key stakeholders Avoid using Six Sigma lingo Expose tools only when they are needed Use kaizen events to:
Gain buy-in from users and stakeholders Extend comprehension Execute improvements

II. Accounts Receivables Initiative

Kaizen Events: Use PDCA Prepare, prepare, and prepare Motivate people to look for change and empower users Involve IT as early as possible

III. Tools - Define

Project Chapter SIPOC Process Map Value Stream Map

III. Define: Project Chapter

III. Define: SIPOC Deduction Process

III. Define: Value Stream Map

Target:

Allocation

Demand Filter

Credit Check

AR
Release AR Customer Service Sales

Invoice

Plants

Pick & pack

Ship

Customers

III. Define: Value Stream Map

Target:

Allocation

Demand Filter

Credit Check

Release

AR

Customer Service

Sales

Invoice

Plants

Pick & pack

Ship

Customers

III. Define: Value Stream Map

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III. Define: Value Stream Map

Information Flow

TOTAL VALUE STREAM

3 2

Material Flow

III. Tools - Measure

Work Analysis - VA/NVA Pareto Failure Modes and Effect Analysis (FMEA)

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III. Measure: Work Analysis

56% is NonValue Added Activity

Identify Potential

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III. Tools - Analyze

Process Map

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III. Process Map Deduction Process Level 0

III. Process Map

Project Action: Target: Reduce Process Time Action: Implement workflow

Project Action: Target: Eliminate waiting, motion, searching and transportation of BOLs Action: Implement Content Mgmt solution instead of paper-based

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III. Process Map Resolution Level 1

Go for details

III. Tools Improve: Kaizen Event

Date 05/13 05/13 05/14 05/14 05/15 05/16 ID of waste

Activity

Learning Theory and Process Mapping Mapping Current Process Brainstorm and Mapping Future Process Pilot Run Report Out

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IV. Kaizen Event - Preparation

AR -Deduction Kaizen Event Prep Kaizen - ID & Elimination of Waste

Start 10:00 10:30 11:15 11:25 End 10:30 11:15 11:25 11:35 Activity Why We Are Here Toast Kaizen Video (30 min + 15 min stop) Project Chapter review Administrative details and Agenda - Kaizen event Items Required Powerpoint DVD Powerpoint Powerpoint Responsible Kurt Jaime Theresa Jaime

Team/Area: Event Date: Event Time: Meeting Room:

AR - Deductions Monday May 8, 2007 10:00 am - 11:35 am Kennedy Conference Room

III. Kaizen Event Detail Agenda

Deduction - Account Receivables Day 1 - ID Waste and Process Map

Start 8:00 8:10 8:20 9:00 9:15 9:45 10:30 11:00 12:00 12:45 1:30 2:30 3:00 4:30 4:45 End 8:10 8:20 9:00 9:15 9:45 10:30 11:00 12:00 12:45 1:30 2:30 3:00 4:30 4:45 5:00 Activity Introductions & Administrative Details Why We Are Here - Review Learning Theory Break ID of Waste "Hear" & "See" ID of Waste "Do" - Team Break Outs ID of Waste "Do" - Team Report Outs Value Stream Mapping Introduction - "Hear" Lunch Follow Deductions process - "See" Mapping Values Stream - Deductions - "Do" Finish Current Mapping Brainstorm - ID of waste Review Results & Open Issues 5 minute 5S, Evaluations Items Required Training Roster Powerpoint Powerpoint Powerpoint Wall Posters Wall Posters Powerpoint Food Instructions, Paper Paper Paper Evaluation Forms Responsible Jaime Theresa Jaime Individuals Jaime Team Everyone Jaime Individuals Everyone Everyone Everyone Everyone Jaime Individuals

Team/Area: Event Date: Event Time: Meeting Room:

AR team Tuesday May 13, 2008 8:00 am - 5:00 pm Kennedy Conference Room

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III. Kaizen Event Action Plan

Future State Implementation Plan
Value Stream Value Stream Champion Value Stream Mapping Facilitator Date Created Item # 1 Problem to be Resolved
Reduce number of created deductions Eliminate waiting for deduction notices

NB Deduction Team Theresa Karas Jaime Villafuerte 5/13/2008 Kaizen Action Planned
Increase tolerance from $100 to $500. Lowes and WM currently at $250 (Exclude HD.) Print deduction notices in local printing instead of sending it to the Xerox room Owner Theresa

Implementation Plan Review Dates

Type

Target Date 6/1/08

Date Complete 6/1/08

Status

Kaizen

Kathy

Kaizen

5/15/08

5/15/08

Need to increase font size of report Run Pilot 1st Qtr. With 3 customers: Ace, TrueValue and ?

4 5 6

7 8

Process Rebates as they come. Eliminating need to create Reduce number of deductions Audrey deductions. Need to write a brief procedure. Eliminate need to use multiple Add current level of details found Kathy systems/programs: DM+ in DM+ to Legacy Eliminate need to print all invoice Include customer number in Kathy pages from ANACOMP Legacy Eliminate waiting, motion, Implement a BOL electronic searching and transportation of Heather database instead of paper-based BOL Move Cabinet. Heather Eliminate excess walking (BOL) Reduce from 150 steps to 54 steps Reduce rejects and reduce Add deduction summary Theresa process time during approval description.

Kaizen

5/14/08

7/10/08

Project Kaizen Project

5/15/08 5/14/08 5/22/08 5/14/08 Completed Schedule for 05/22

Kaizen Kaizen

5/14/08 5/14/08 5/14/08 Completed

Increase approval level from $1k Reduce waiting and process time to $2K. during approval

Theresa

Kaizen

5/15/08

5/15/08

Kurt's approval requested. Next step is modification of limits in SOX

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