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Memorandum
November 14, 2013
To: Pat Davis
Subject: Improving Accounts Payable at Ramsville
This memorandum is being written in an attempt to amend the problems discovered within Ramsville’s Accounts Payable Department. Process inefficiencies have led to 6.5% of payments being overdue. These errors are jeopardizing supplier relationships and could lead to a loss of business. The application of lean principles within the Accounts Payable Department was implemented in order to gain improvements in cost, quality, and time. The inefficiencies discovered by the current-state Value Stream Map will be addressed and resolved by the future-state Value Stream Map.
RECOMMENDATIONS
By analyzing the current value stream, several non-value adding steps were discovered. We recommend that you eliminate the PFR check in Accounts Payable. This step only catches 1,250 of the 65,000 errors (1.92%), and it will save you 420 seconds (7 minutes) in processing time. When checked twice, the first group relies on the second group to catch any errors they may have missed, which creates an inefficient system. Additionally, by eliminating this step, one of the employees will be able to spend 25% of his or her time in the batch process and the final inspection step. This will decrease utilization from 106.25% to 85%. Another employee from the PFR check, in the Accounts Payable Department, can be used to elevate the bottleneck. In this case, the bottleneck is the “Enter Into Pay Now Process” step. By moving one person here for 25% of his or her time, the utilization decreases from 106.22% to 84.97%. Likewise, we recommend that you eliminate the check for the PO step in the mailroom, because Bill has stated that, “Fortunately, we don’t really get any invoices without valid PO numbers on them.” This will decrease total processing time by two minutes and lead to a leaner system.
The current Value Stream Map also shows where waiting occurs and helps determine where waiting
November 14, 2013
To: Pat Davis
Subject: Improving Accounts Payable at Ramsville
This memorandum is being written in an attempt to amend the problems discovered within Ramsville’s Accounts Payable Department. Process inefficiencies have led to 6.5% of payments being overdue. These errors are jeopardizing supplier relationships and could lead to a loss of business. The application of lean principles within the Accounts Payable Department was implemented in order to gain improvements in cost, quality, and time. The inefficiencies discovered by the current-state Value Stream Map will be addressed and resolved by the future-state Value Stream Map.
RECOMMENDATIONS
By analyzing the current value stream, several non-value adding steps were discovered. We recommend that you eliminate the PFR check in Accounts Payable. This step only catches 1,250 of the 65,000 errors (1.92%), and it will save you 420 seconds (7 minutes) in processing time. When checked twice, the first group relies on the second group to catch any errors they may have missed, which creates an inefficient system. Additionally, by eliminating this step, one of the employees will be able to spend 25% of his or her time in the batch process and the final inspection step. This will decrease utilization from 106.25% to 85%. Another employee from the PFR check, in the Accounts Payable Department, can be used to elevate the bottleneck. In this case, the bottleneck is the “Enter Into Pay Now Process” step. By moving one person here for 25% of his or her time, the utilization decreases from 106.22% to 84.97%. Likewise, we recommend that you eliminate the check for the PO step in the mailroom, because Bill has stated that, “Fortunately, we don’t really get any invoices without valid PO numbers on them.” This will decrease total processing time by two minutes and lead to a leaner system.
The current Value Stream Map also shows where waiting occurs and helps determine where waiting