Date: November 13th, 2013
From: Team Lean: Carina Tricaso, Diana Hauptman, Mannan Kohli, Matt Arthur, Thomas Young
To: Dr. Andrea Prud’homme
Subject: Improving Ramsville Accounts Payable
The key problem encountered by Ramsville is that 6.5% of the accounts payable (AP) are overdue, causing
Ramsville’s relationships with their suppliers to deteriorate. In a few cases, it is impacting further shipment of parts, potentially causing Ramsville’s manufacturing plant to miss shipping due dates and negatively impacting customers. Ramsville’s irregular distribution of workers and the inefficient accounts payable process has led to over-utilization in some processes and superfluous capacity in others and several non-value add segments of the process, which results in a lot of waste. These issues have led to defects such as late payments and sending payments to the wrong company, which have inevitably led to a conflict between Ramsville and their suppliers. Ramsville requires an improved accounts payable process that decreases the total lead-time while eradicating the errors that they have been making.
The present process comprises ten steps and has five different takt times. It first receives 300,000 pieces of mail in the mailroom but 35,000 of those mails do not belong to AP, so have to be sorted out first. The remaining 265,000 invoices then go through a Purchase Order check and then move them to the Pay From
Receipt (PFR) Check. The first PFR check removes 200,000 of the PFR receipts. The remaining 65,000 receipts then go through an additional PFR checks from accounts payable analysts that further removes 1,250 receipts on average. After this final PFR check, 63,750 invoices are moved to the sorting process which determines if the invoices are “pay now” or “pay later”. The “pay later” invoices are queued for fifteen days before moving to the payment processing process where the