Current State VSM

Topics: Value stream mapping, Value added, Receipt Pages: 9 (1062 words) Published: December 10, 2014
MEMORANDUM
November 15, 2013

TO: Sarah McDougal, Manager of Disbursements at Ramsville
FROM:Team 5
SUBJECT:Process Improvements for Ramsville
______________________________________________________________________________Team 5 will be analyzing and providing recommendations on how to improve the issue of overdue payments to suppliers at Ramsville. After walking the process, creating a current value stream analyzing data, Team 5 has suggestions on how to increase efficiency by eliminating muda that will improve customer satisfaction and supplier relationships.

ANALYSIS
Team 5 identified the key issues by creating a Current Value Stream Mapping (Table 1, Page 3). Ramsville’s pay now invoices have a total lead time of 196,200 seconds (54.5 hours) and a total processing time of 1,740 seconds. As shown in the comparison of Pay Now and Pay Later Invoices on Table 2 (Page 4), pay now invoices spend 99.12% of the time waiting. Pay later invoices have a total lead time of 628,200 seconds (174.5 hours) and a total processing time of 1,800 seconds. Pay late invoices spend 99.71% of the time waiting.

The current VSM shows that the lead time and waiting time are too long because of too many non-value added activities. To improve the situation, the team suggests that Ramsville maximize the value added activities and remove muda. Based on the definition, an activity is value added only if it is changed or transformed. According to Table 3 (Page 4), there is one activity, Final Inspection, which actually adds value to the process. Other activities are supposed to help complete the whole process for the company. The PO checking is unnecessary because Ramsville did not get any invoices with invalid PO numbers thus far. The handlings of the Pay later invoices are also found to be a time-consuming activity because they are manually processed. The Analysts spend about 20% of their time sorting payments for readiness, which is time-consuming and leads to muda. Since the processes of PO checking and Pay later invoices are non-value added activities, it will be safe to change these activities without huge effects. These non-value adding activities should change to eliminate or decrease the possibilities of error or time wasting. There are bottlenecks in both preparations for payment processing and final check processing, indicated by utilization rates exceeding 100%. This means that there is no capacity cushion to deal with customer demand, which will lead to waiting time.

Based on the Pareto Chart on Table 4 (Page 5), the majority of the invoice errors result from paying late, accounting for 54% of 631 invoice errors. We are able to determine this information by sorting the complaints by frequency, adding up the total number of complaints and figuring out what percentage of the total each contributed in a running total.

A p-chart was used to analyze the number of PFRs found by AP analysts because Team 5 is measuring the number of defects in the accounts payable process (Data used can be found on Table 5, Page 6). In general, the process of PFR checking is not in control (Table 6, Page 6). In week 12, the percentage of PFR is below the lower control limit. From week 1 to 7, the trend goes down; however it suddenly increases almost over the upper control limit in week 8. This fluctuation indicates the instability of the process, supporting the assumption that the task is not in statistical control.

RECOMMENDATIONS
Please reference the Future Value Stream Map (FVSM) on Table 8 (Page 8) to support all recommendations. Team 5 recommends eliminating the Purchase Order Checking activity and transferring the eight workers from PO Checking to PFR Checking because Bill Hoskins, the Mailroom Manager, states that Ramsville does not “really get any invoices without valid PO numbers on them”, making PO Checking a redundant and unnecessary step in the process. Cutting out PO Checking increases utilization at PFR Checking and...
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