WQD2011 - Breakthrough Process Improvement - Ducab - To reduce Business Process Cycle time for Quotations


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Breakthrough Process Improvement case study submitted by Ducab during 3rd Continual Improvement & Innovation Symposium organized by Dubai Quality Group's Continual Improvement Subgroup to celebrate World Quality Day 2011.

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WQD2011 - Breakthrough Process Improvement - Ducab - To reduce Business Process Cycle time for Quotations

  1. 1. Business Process improvement projectTo reduce Business Process Cycle time for Quotations To enhance functionality of the quotation system to the benefit of both Ducab and the customer.By: Graham Rafferty Dubai Cable Company UAE 1
  2. 2. Inroduction to Ducab• Founded in 1979.• Jointly owned by the Governments of Abu Dhabi and Dubai• Leading manufacturer of Electric Cables in the Gulf.• Sales predominantly in the Gulf region but also exports to Asia and Europe.• >800 employees• 3 manufacturing units in Masafa, Abu Dhabi.• 4 manufacturing units in Jebel Ali.• Turnover > 3 Billion AED / year.• Approx 150,000 t material processed / year. 2
  3. 3. DEFINE 3
  4. 4. Business Case• Project commenced in 2010 as part of the Operational Excellence initiative.• Due to a decline in demand arising from the global recession the number of quotations being raised to secure business had dramatically increased.• Pressure on the quotation system had resulted in an increase in the process cycle time.• Business opportunity was being lost due to failure to quote in a timely manner. 4
  5. 5. Voice of the customer• Uncertainty in the market place with construction projects being placed on hold or cancelled.• Needed very fast response to enquiries for cable.• Would give preference to supplier who could quote within 24 hours.• Required short lead times for supply of cable.• Quotations needed to be in a user friendly format. 5
  6. 6. OpportunityDucab had available capacity,manufacturing flexibility and marketpresence to respond very quickly todemand if more business could besecured. 6
  7. 7. Our Goal• To establish a system where, as far as possible, required information is available for converting relevant enquiries to quotation without referrals to other departments.• To give a response within 24 hours to enquiries for standard items and 3 days for new designs or by tender due date specified. 7
  8. 8. Project Scope• In scope: – Dubai Cable Business – Enquiry to Quotation• Out of Scope: – Ducab Connect Business. – Pre-enquiry Sales activities. – Quotation to order 8
  9. 9. Goals• 70% of enquiries responded to within 24 hours by end of 2010.• 90% of enquiries responded to within 24 hours by June 2011. 9
  10. 10. Project TeamName Role Approved ByChew Wah Tan SponsorUlhas Menon Process Owner G M SalesDanish Farouque Project Leader Commercial ManagerGraham Rafferty Facilitator G M TechnicalKeith DSouza Team member G M TechnicalKeshev / Manna Facilitator Planning ManagerAhmed Rashid Ali Commercial Expert Commercial ManagerHadi Mohammed Design Engineer Technical ManagerSales Managers Voice of the customer G M Technical 10
  11. 11. Project Time linePhase Start Date End Date Number of WeeksDefine 21/03/2010 08/04/2010 2.6Measure 09/04/2010 23/04/2010 2.0Analyse 23/04/2010 30/06/2010 9.7Improve 01/07/2010 31/08/2010 8.7Control 01/09/2010 30/09/2010 4.1 11
  12. 12. Project management Quality Companion. 12
  13. 13. Measure 13
  14. 14. Quotation statistics• Number quotations raised per month had increased from 244 in 2008 to 582 in 2009.• Placed great strain on resources in Commercial Department. Quotation Statistics Jan 2008 to Feb 2010 800 700 Number of quotations 600 500 400 300 200 100 - Jan- Feb- M ar- Apr- M ay- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- M ar- Apr- M ay- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- 08 08 08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 14
  15. 15. Process Mapped• Very complicated. ENQUIRY TO ORDER Customer contacts SM for B finalising the quotation A NO Co-ordinator prepares NO YES Is the quote NO Call the customer to send Is it Connect or Rod or Forward to concerned Is the price acceptable Can we offer a price Get it translated to English regret letter with Baan A acceptable to the all pages PVC enquiry? department to the customer? discount? Number & reason code customer? YES YES NO NO NO NO NO Mode of Enquiry Received Team leader proposes Customer sends Order to discount based on YES YES YES Commercial co-ordinator Ducab Minimum NAV/T By Fax Is it a complete Is the enquiry in Is it in Ducab product Can we manufacture Is it legible? sorts the enquiries & Is it a cable enquiry? guidelines By Courier enquiry? English? Range? it? brings it to Team leader Tender by Hand Verbal Enquiry YES YES Forward to Technical/ Is it in agreement with NO Discount to be agreed by Planning GM Sales Policy? GM Sales YES Revise the worksheet Consult SM. Inform YES YES YES NO Do we know the Do we know of the Should we accept the customer to use Is it a HV Enquiry? A customer credentials? project? enquiry? agreement prices NO YES Is the delivery NO YES NO Planning is consulted for NO Is T&C acceptable? acceptable to the revised delivery schedule customer? NO YES YES Collect information from Is it part of framework Team leader reviews SM’s Forward to SM. Do we Do we know the SM/ Is it a Utility business? SDM to review the customer on the agreement? decision need to Quote? LOB NO project YES Does customer send GM Sales/CFO consulted Delivery agreement the order? for revised T&C as asked communicated to the NO YES by customer customer NO Is it any other UAE Do we require Bid YES Is bid bond viable in NO A market enquiry? Bond? this region Revised proposal communicated to customer YES NO NO Is the NAV/T as per YES Worksheet forwarded to Is it a standard cable? guidelines? TL for approval/consent CCO creates a Baan YES Team leader allocates NO Does the item code Do we require a YES Worksheet data input by YES Does the customer Create new customer Quotation# with time and Prints the worksheet with Is the price inline with Is the value >= 2M? enquiry to a CO and gives exist in Baan? (M -> Tender Committee Guidelines? CO based on guidelines in code exist? code in de database date, Project identifier, CO factor the market trend? it to CCO B)? meeting? Baan name NO NO Tender committee Team leader decides the Revised guidelnes meeting process guidelines to CO NO TL sends the quote, Co prepares formal quote alongwith NO NO YES Is worksheet/quote as worksheet, inquiry, TL approves the quote & Commercial T&C, Tech points & No. YES SM & 2 GM/MD to sign off Is the quote value Is the quote value < Is T&C as per Ducab Quote sent to TL for Is NAV/T as per plan/ B per agreed tactics/ variation formula, TDS, worksheet and returns to of signatories by value quote >20M & <40M 20M agreeable terms? approval previous orders? order with GM Sales compliance, certification to CO Clarifications/delivery/payment terms CDM etc YES YES NO Quote received by CO, copy of quote sent to SM & GM Sales or other customer & SM without GM to sign off the quote CDM & G. Sales to decide worksheet on strategy CO gets confirmation of Allocated SM signs off the quote to update Baan for quote response date & time Quote filed in Commercial file 15
  16. 16. ANALYZE 16
  17. 17. Key sources of delay identified1.Work sheet preparation2.Interface between Commercial and Technical Departments. 17
  18. 18. Worksheet preparation• Worksheet formed part of the ERP system and was used create quotations.• To arrive at final agreed price a quotation may loop through the worksheet several times. NO Is the NAV/T as per YES Worksheet forwarded to guidelines? TL for approval/consent Worksheet data input by YES Prints the worksheet with Is the price inline with CO based on guidelines in factor the market trend? Baan NO Revised guidelnes NO YES Is NAV/T as per plan/ previous orders? 18
  19. 19. Worksheet preparation – Key Pain areas• Work sheet was not user friendly• Limited search facility to identify existing Item Code. – Only 3 product characteristics could be searched. – Commercial assistant may have to inspect the contents of each item in detail to identify correct item code to quote against. – Wrong item code sometimes selected. – New code created simply because correct code to be used could not be found. 19
  20. 20. Worksheet preparation – Key Pain areas • A lot of manual adjustment needed to reach target price. • Amending quotation took the same time as creating a new quotation. ERP Commercial Worksheet Commercial Clerk Clerk loads Prices not Final Quotation prpared defaults to exports ERPitems on to ERP approved Ducab list Worksheet to Excel Worksheet price Commercial Clerk uses guidelines to establish prices for Commercial Commercial Clerk prints copy Offering of ERP worksheet and gets Prices approved approval from required authority. Commercial Clerk uses excel to calculate line / Commercial Clerk manually order discount adjusts line / order discounts in factors needed to ERP Worksheet to set prices set prices for to Commercial offering Commercial Offering 20
  21. 21. Worksheet preparation – Key Pain areas• Poor retention of quotation history. – Could only retrieve hard copies of previous quotations for comparison – Inconsistency in pricing.• No system generated customer / region factor in prices.• Poor “what if” facility. – Quotations had to be exported to excel in order to analyse the effect of discounts on margins• No systematic way of charging for small order quantity. 21
  22. 22. Worksheet preparation – Key Pain areas• Currency conversions were manual.• Product descriptions were free flow text.• Terms and conditions were in free flow text.• Final Quotations had to be printed and then scanned into pdf format to send to customers.• Customers disliked the landscape format of quotations.• Some customers required the quotation in excel format which had to be created manually. 22
  23. 23. Interface between Commercial and Design Departments.• No formal protocol for information exchange. – Mostly done by e-mail. – Frequent needs to clarify information. – Repeated requests for the same information.• Departments working to different sets of priorities.• No common database of information.• Need for Commercial to request information even of a trivial nature.• Hence high workload on Technical Department resulting in delays. 23
  24. 24. Ducab order intake for 2009• 80% of sales revenue came from 13% of orders• 80% of man hours spent on 20% of order revenue.. Pareto Analysis of order intake 90% 80% 70% % of Sales Revenue 60% 50% 40% 30% 20% 10% 0% 13% of Sales orders 87% of Sales orders 20% of man hours 80% of man hours Order intake 24
  25. 25. Ducab order intake for 2009• To add value to activities in the Commercial / Technical Departments more time needed to be directed towards the Commercial offering for large high value business.• However, system constraints meant that the time spent on a quotation was independent of the potential value of the quotation.• Commercial staff had no free time to put extra effort into high value quotations.• This was not good business sense since higher value quotations carried higher risk and therefore needed more scrutiny. 25
  26. 26. Initial Conclusion• Minor modifications to the existing mode of operation would not yield the desired benefit.• Business Process Re-Engineering was needed.• Change needed to be: – Fundamental • Why to we do it this way? • Why not differently? – Radical • Starting from scratch. Not modifying. – Dramatic. • Looking for an “order of Magnitude” change. • A Quantum leap. – Processes. • Work on processes not activities. 26
  27. 27. Questions1. Could the desired change be achieved within the limits of the existing ERP system?2. Could the desired change be achieved outside of the existing ERP system? The first question was of a practical nature. To what extent could the existing ERP system be modified to accommodate the desired change? The second question was of a cultural nature. The ERP system was considered to be sacred. To depart from the ERP system would be a hard sell inside the company. It would also be courageous to take such a bold step. It would certainly qualify as Fundamental, Radical and Dramatic. 27
  28. 28. IMPROVE 28
  29. 29. Two Phase Approach• Phase 1: – Improve the Commercial activity.• Phase 2 – Improve the Commercial / Technical Department interface. 29
  30. 30. Phase 1 Functional Design Specification• The first step towards answering the burning questions• The Commercial team put together a functional design specification for what was needed from the Process.• We tried to do this with out basing it around the limitations of the existing ERP system.• A table of definitions was created for essential characteristics along with a list of inputs / outputs to the Process of creating a Quotation. 30
  31. 31. Work sheet input dataInput variable Data SourceCustomer ERP Data baseCustomer Code ERP Data baseSales Rep ERP Data baseSales Manager ERP Data baseCommercial Officer ERP Data baseLine of business ERP Data baseArea ERP Data baseProject ERP Data BaseQuotation no / Version ERP Data Base 31
  32. 32. Work sheet inputsInput variable Data SourceDate AutomaticCu price in Sales ERP Data baseLME Copper price ERP Data baseCu price in Cost ERP Data baseCu Premium ERP Data baseOrder discount Manual Adjustment 32
  33. 33. Work sheet inputsInput variable Data SourceItem code ERP Data baseItem Description ERP Data baseTPL ERP Data baseQuoted Price QP TPL adjusted by LMELine factor Variable used to set PriceNet Quoted price / unit NQP QP adjusted by Line factor to give target NAV.Target NAV ERP Data baseQuantity Manual inputLine price NQP x Quantity 33
  34. 34. Work sheet inputsInput variable Data SourceNet Cost Standard cost adjusted by LME and material escalation factor.Actual NAV Net price – Net CostActual NAV % (Net price- Net cost) /NPActual NAV / Cu t (Net price- Net cost) / Cu tCu variation factor ERP Data baseCu t Cu variation factor / 3.675 x Quantity.Min order Quantity MOQ ERP Data baseSurcharge for short length Based on Tgt NAV and MOQ 34
  35. 35. Quotation specific data required for retrevalQuotation no / VersionCustomer Code DateSales Rep Cu price in SalesSales Manager LMECommercial Officer Cu price in CostLine of business Cu PremiumArea Order discountProject 35
  36. 36. Line specific data required for retrevalQuotation no / VersionSerial noItem CodeLine factorQuantity 36
  37. 37. Modeling the Solution• Combining the functional design and the input / output data requirements a solution was modelled using Excel.• Data base tables were exported from the ERP system to Excel Files.• Over a period of 4 weeks the model was reviewed regularly by the Commercial team and enhanced. 37
  38. 38. Solution Criterea PreferenceCriteria Weighting CommentsTime needed for 30% Time was of high importance as lack of solutionimplementation was damaging the company.Needed to be 20% Wanted to be clear that Process Improvement isachieved with existing not dependant on increasing resourcehuman resourceHigh probability of 15% Wanted to avoid a solution that still left thesuccess system constrained to any extent.User friendly 15% Needed complete buy in from the end users.No external help 15% An in house solution would generate much betterrequired. ownership of the process and incur less cost.Low cost 5% Cost is always important, but should not over ride the need for a satisfactory solution. 38
  39. 39. Building the final Solution• Ducab’s IT department were called in to see the demonstration model.• Two options were possible: • Re-create the model in the existing ERP system • Or Write a program to replicate the functionality of the model. 39
  40. 40. Choosing the OptionOption Points in Points against favour All data bases used to create The ERP system was veryModify existing Quotations existed in the ERP dated.ERP system system and were accessed by many other processes. The desired functionality required by the model could The Company policy was to not be achieved without major migrate all activities to the upgrade or re-writing of the ERP system. ERP system. Upgrade or re-writing would be costly and take months to achieve. Outside consultants would be needed. Customisation of the existing ERP would make it incompatible with later versions of the ERP. 40
  41. 41. Choosing the OptionOption Points in Points against favour Solution could be reached Would exist outside of theWrite new that 100% met the ERP system.program to requirements. Data would still need to be No external help was needed. maintained in the ERPreplicate the system. Could be achieved in weeks.function of the Very low cost solution.model Would not require customisation of the existing ERP system. 41
  42. 42. Decided to write new program• Only practical solution.• Quotations could exist outside of the ERP as they had no impact on the accounts until an order is taken.• New program would access the existing ERP data base for costs / BOM. 42
  43. 43. CONTROL 43
  44. 44. Trial period• New software written inside 4 weeks.• Trialled in parallel with existing system from Mid August to end September 2010. Modifications made• Used 100% for all quotations from 1st October 2010.• Minor issues only incurred. 44
  45. 45. Training program• To facilitate the implementation an interactive training program was developed for users. 45
  46. 46. Key improvements• All functionality needed to create quotation existed in the new program.• No need for any off line working in Excel.• 75% reduction in the time needed to prepare a quotation.• 95% reduction in the time needed to revise a quotation. 46
  47. 47. Key improvements• Comprehensive search facility to find correct product code for quotation.• Library of Standard descriptions and Terms and Conditions created which could be directly imported into the quotations.• Direct export of quotation to pdf file in user friendly portrait format.• Direct export of quotation to Excel file to meet customer preference. 47
  48. 48. Key improvements• Good storage and retrieval facility to search previous quotations 48
  49. 49. Goal Achieved Quotation performance Oct 2010 to Jun 2011 % of quotations sent within target time. 95% 90%% within target time 85% 80% 75% 70% October November December January February March April May June Month 49
  50. 50. Phase 2 Commercial / Technical Interface• Three actions identified 1. Create a database of frequently asked questions and Technical Data Sheets to reduce the need for repeated referrals from Commercial to Technical for the same information. 2. Establish a protocol for information exchange between the two departments 3. Automate the system for providing Estimated Material Weights for quotations for new products. 50
  51. 51. Data base of information• A data base of Technical Data sheets was created and indexed such that it could be easily accessed by the Commercial Department.• Over a period of time a data base of answers to frequently asked questions was created and made available to the Commercial office. Golden Rule: Before you try to improve an interface, first eliminate where ever possible the need for the interface 51
  52. 52. Establish protocol for information exchange• Formal structure set up with on-line forms for communication between the Commercial and Technical Departments.• Forms included such fields as responsibility allocated to task and dead line for information required.• Forms also monitored progress status.• The use of free flow e-mails as a form of communication almost eliminated.. 52
  53. 53. Automation of creation of estimated material weights.• Existing cable design system created comprehensive BOM required to make a product.• It was time consuming and created a lot of extra detail not needed for quotation purposes.• A simpler, faster system was needed to create designs with the bare minimum of information needed for quotations.• In house program created by a Design Engineer and an IT expert.• Time required to produce Estimated Material Weights reduced by >50% (still under evaluation) 53
  54. 54. Reduction in queries from Commercial Department to Technical. Requests for Information From Commercial to Design 210 195 180 165 Average 2010 150 135 120No. of requests 105 90 75 60 45 30 15 0 Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 11 11 11 11 11 11 11 11 11 11 11 11 54
  55. 55. Summary.• Large scale improvements were achieved by making fundamental improvements to the Business processes.• No increases were made to the resource in any area.• Zero costs were incurred in contracting in outside help.• All improvements including software writing were achieved using in house talent.• By using resources already employed by the company the project was achieved at zero cost. 55
  56. 56. Recognition.• One Employee from the Project Team was selected as Employee of the month. 56
  57. 57. Key lessons learned.• To achieve Business Process Improvement you have to be prepared to break the rules.• Most constraints exist in our minds only.• Make the Process fit the needs of the Company. Don’t try to fit the Process into a constraining system.• Make life easy for people.• Look for a large scale improvement.• Do not start with the objective of cost reduction. An improved process will be more efficient and will improve Return On Capital Employed.• In house talent exists and is far more cost effective than outside consultancy. 57
  58. 58. Final Comment.Within 3 months of implementing the newQuotation system the Company came tothe conclusion that the existing ERPsystem no longer met the business needs.An upgrade of the ERP system wasrejected in favour of a brand newimplementation.Ducab is approaching the newimplementation with opened minds. 58