2018Case6DesignerGroup

30 L EAN C ONSTRUCTION I RELAND A NNUAL B OOK OF C ASES 2018 The first step was to Analyse the problem. To carry out this analysis, all order details for FM works were downloaded from a selected period. Looking at this chosen data-set allowed us to see what type of spending was carried out by the FM department. The aim of this analysis was to see if we could identify groups and patterns within the ordering data. The following groups were identified so we could find out the frequency on orders with respect to the chosen groups: • Small value orders are orders that total to € 200 or less (“OS”). • Large value orders are orders that total to above € 200 (“OL”). When comparing the order groups, it was found that the OS group accounted for 52.44% of all orders. It was also identified that the value of OS only accounted for 5.18% of the total value of all the orders from FM. The next step was to identify how to create a more efficient way to process the OS as they accounted for 52.44% of all orders being processed. Any reduction in time on OS would have a positive impact on the overall efficiency and performance of the FM procurement function. Figure 1. Quantity Vs. Value Analysis. Therefore, we identified that OS did in fact account for half of the volume of orders, but this did not have a significant monetary value. Due to these findings, the decision was made to create new cost-heads that would be assigned to OS. The aim of this was to reduce the amount of time entering ordering details for the OS as they could all be grouped together as they didn’t have that much of a monetary value. This meant they could be grouped together at a high level and could al l be grouped under one cost-head level . Grouping the OS at higher level cost-head would result in a lower amount of lines needed for putting through the order into Redsky, thus resulting in a more efficient function where OS were still accounted for, but in a more time-efficient manner. Firstly, a new menu was created for FM orders in Redsky. To accompany the new menu, two new cost-heads were created in the systems for the FM business: • FMEXXXXXX for Electrical goods. • FMMXXXXXX for Mechanical goods. The purpose of the new cost-heads was to capture the 52.44% of orders that only accounted for 5.12% of total FM spend. Management was happy that orders under € 200 would be grouped together for reporting purposes as they accounted for such a small percentage of overall spend. In this case we would only have created one new cost-head for all OS to fall under, but it was decided they needed to be split between electrical and mechanical spend. Now the analysis of these orders (OS) is limited to a breakdown between electrical and mechanical goods only. All the electrical items are added together and added as one line in the order, the same for mechanical items, and there will typically only be one line per OS order with a maximum of two lines. The sum of the order will match the supplier’s docket. Lean Purchasing for Reactive Works As part of the Check phase, the procurement department decided to monitor work carried out on a government agency project over a week. It was found that multiple orders per day from the government agency’s helpdesk were creating an email backlog and PO delay for more significant areas of purchasing. Analysis of the Problem When analysing the problem it was found that there were approximately 50 unnecessary emails coming into the procurement department every week, which equated to 200 unnecessary emails per month. This resulted in the time- consuming exercise of creating an additional 100 POs per month, as well as the processing of an additional 100 invoices for the accounts payable department. This amounted to a very long and unnecessary paper trail that clogged-up the procurement department’s inbox, as well as created a very long PO process for orders that were relatively small. Overall, this wasteful process accounted for 17% of all emails being received by procurement in a month. Figure 2. Control Measure. The new procedure would cut down this wasteful and extens ive paper trai l , and free-up the procurement department to carry out POs on more value-adding (VA) and significant areas of purchasing. The following steps were introduced to help reduce the backlog that was created by the reactive works purchasing emails: 1.Raise ticket on the system to correspond to a reactive call made to the FM Helpdesk. The engineer is dispatched. 2.Obtain the material from one of two specified wholesalers – strategically located on either side of Dublin – using the job ticket number as a reference (as opposed to the IR number). The wholesaler hands over the goods and keeps a record of the ticket number used to obtain items. 3.The wholesaler quotes Designer Group as buyer on a monthly basis for all materials collected relating to these reactive calls – all through one email issued on the last day of each month. 4.The buyer then raises one PO against this quote which allows accounts to process only one invoice. We bill the client each month as usual, using the ticket associated for each specific call-out. To ensure the new method for purchasing for reactive works worked and satisfied Designer Group’s needs from all departments, the following controls were put in place: • Monthly review meetings with call-out engineers to discuss in more detail the pattern of materials they are collecting. • Careful checking of monthly quotations. • Continuing to bill the client for individual jobs to satisfy their requirements.