Lean Six Sigma Assignment

1. Improving Dispatching and Courier Arrival AccuracyTitle
1. Background PDI Inc. 3nd quarter 2015 goals:
• Improve Customers satisfaction
• Increase Return on Sales
Operational goals:
• JIT start - Reduce idling
• Arrive on Time - Reduce rebates
Margin
46%
Rebate
16%
Drive
32%
Idle 6%
Field Ops.
38%
Revenue June 2015
2. Current Conditions (June 2015)
3. Goals / Targets
4. Analysis
7. Follow-Up
6. Implementation Plan
5. Proposed Countermeasures
Primary Goal:
• Decrease Field Operations cost by 30%
• Decrease Rebates from 16% to 5%
• Decrease Idling from 6% to 1%
• ROS 11% - shutdown imminent
• ROS 20% - avoiding shutdown
• ROS 30% - growing business
• By reaching these targets On - Time parcel handover will increase
from 72% to 95%. Such On-Time handover will positively affect
Customers’ satisfaction
• Decreasing Filed operations Cost will positively impact ROS
4.1 Idling is a Waste
Q: Why is courier idle at Customer’s place?
A: Courier waits for package handover
Q: Why is courier waiting?
A: Courier arrived early
Q: Why courier arrived early?
A: Courier route was short. Courier arrived quickly.
Q: Why courier hasn’t planned for a short trip?
A: All trips are assigned 30’ travel time.
4.2 Rebate is a Waste
Truck Bike Bike Bike Bike Bike Bike Truck
0
5
10
15
RebatesDistance
Trips with Rebates
REBATES DISTANCE: 11.3 MILES
Prepared for: Pat Hunter, Precision Delivery Inc. (PID) Date: July 18, 2015.
Prepared by: Tibor Tot Location: Toronto, ON
Item Action Item Responsible Implements
4.1 Routes shorter than 7 miles do not need standard 30’. Assign
them 15’.
Dispatcher JM, Kelly R.
4.2 Routes over 11.3 miles should be assigned to Track couriers. Dispatcher Jake J.
Generic Collect data PDI Inc. Pat Hunter
Rebates were given to Customers on trips longer than 11.3
miles. Manly these trips were performed by Bike. Switch to
Track.
Short trips need flexibility when assigning them time.
Standard 30’ seems excessive for short trips.
Bike couriers generate higher Revenue and are cheaper to
operate. Reduce Truck fleet. Look to hire one additional Bike
Courier.
Less than 5 miles
Flexible trip start
5 - 10 miles
Standard:
30'
Over 10 miles
Send trucks only
Sales Rebates Field Ops Idle Cost Profit
$58,500 $9,400 $18,900 $3,600 $6.600 (ROS 11%)
Revenue
Ops.
Revenue
Ops.
$0
$200
$400
$600
$800
$0
$200
$400
1
2
Rebates
Margin
Week
Rebates are up, Margin is down
- should be opposite -
Idling (64%) On-Time (30%) Rebate (6%)Trip (100%)
30’ 15’
Only 30% of all
trips finishes
on time.
2 miles
4 miles
3 miles1 mile
5 miles
7 miles
6 miles
8 miles
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
2
4
6
8
10
12
14
16
18
20
Pareto Chart: Distance for 80% of Idling
Expenses
Idle Cost Cum. %
Vehicle - Revenue -
Field Operations
7 miles
Action Due Date Responsible Outcome
Reduce start time for short
distances by 15 minutes.
July 30, 2015. JM, Kelly R Verify that Courier arrival is inside
allowed time frame.
Dismiss one of three
trucks
July 25, 2015. Pat with
Subcontractor
Renegotiate with subcontractor to
eliminate one truck from the fleet.
Send only trucks for
longer distances
July 25, 2015. Jake J. Dispatchers should familiarize with
new rules.
Vehicle - Revenue -
Field Operations
Week 1, July 22, 2015
Week 2, July 29, 2015
• Verify reduction of rebates and idling
• Confirm that bikes are running safely.
• New policies must not increase risk of
Couriers. Safety first!!!
Expected:
Further reductions in Field Ops. Calculate
carefully.
Prepare Rebate, Margin and Idle Cost
detailed reports.
Reducing fleet by one
truck and replacing it
with Bike is reflected in
Field Operations cost
reduction
Results communicated and
success celebrated
Revenue
Fieldops.
Revenue
FieldOps.
$0
$200
$400
$600
$800
$1,000
Trip Data: 50 days
30’
45’
On-Time
During June 2015, Rebates and Filed Operations took 54% of Revenue due to inefficient dispatching, thus generating
very low ROS of 11%. Customer satisfaction was negatively affected by delays and Rebates are not helping.