Unapplied Cash Canon Ricoh Credits, Discrepancy in System Project #0307-44-002 Black Belt -...
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Transcript of Unapplied Cash Canon Ricoh Credits, Discrepancy in System Project #0307-44-002 Black Belt -...
Unapplied Cash – Canon & Ricoh Credits, Discrepancy in SystemProject #0307-44-002
Black Belt - Jonathan WilliamsDivision-Service/ Order Entry/Vendor
2
$71.5MM Unapplied Cash
(a/o 5/31/03)
Dealer Comp Vendor Credit Trade A/R
OMD
$18.1MM
eIKON
$5.7MM
OMD
$14.5MM
eIKON
$26.7MM
OMD
$1.3MM
eIKON$7.2MM8/12/03
• Little/No Reason Code Data at MSSC
Top 3 Defects ($$ & Counts)
• Need Service Invoice
• Missing Serial Number
• Need Equip Invoice
Top 3 Defects $$• Need Equip
Invoice• Further
Research: Equip
• Billing Error: Equip Invoice
Top 3 Defects (counts)
• Converted items
• Unclaimed property
• 3rd Party
Top 3 Defects (counts)
• Underpaid• Overpaid due
to adjustment• Payment sent
to wrong address
1 2 3 4 5 6
Top 3 Defects ($$ & Counts)
• No Bill• Not Linked• No Equipment
IKON MSSC Unapplied Cash Flow Down
3
Project Definition
Problem Statement:
Discrepancies in systems of record (Canon, Ricoh) result in payments received from vendors that do not match the invoices in Oracle resulting in unapplied cash. This causes an increase in DSO, decrease in customer satisfaction and considerable research and rework by multiple functions within IKON.
Project Definition:
Reduce number of “no service invoices” by 70% which will result in a decrease of unapplied credits received from Canon and Ricoh and the elimination of 8 cash application positions. Six Sigma Project (0307-44-002) to be completed by 12/31/03
Project Benefits:
Decrease labor required to research and correct unapplied cash
5
Project Team
Champion – Donna Wood Financial Analyst – Frank Eaton Black Belt – Jonathan Williams Team Members:
IT Support – Anne Quigley Cash Applications – Lynn Hester Customer Care Center – Sue Knight Service – Cedric Trice, Josh Alexander
Master Black Belt – Laura Wells
7
8/20/2003JonathanWilliams
Project #0307-44-002
Unapplied Cash – Canon & Ricoh Credits,Discrepancy in System
CT Tree
CT Satisfaction
Y1= Decrease Headcount in MSSC CashApllication function associated withunapplied Canon and Ricoh service
credits.
CT Cost
Cost of research,analysis andcorrection at theMSSC, CCC's andin the field.
CT Delivery
Customerdissatisfaction
Excessive reworkand cost
CT Quality
First time matchof credit toreceivable
Accurate/Timelymeter reads
AccurateContract set-up
Serial numberdata accuracy oninvoices
CT Tree
8
SIPOC
8/24/2003JonathanWilliams
Project #0307-44-002
Unapplied Cash – Canon & Ricoh Credits,Discrepancy in System
High Level SIPOC
ServiceTechs
Contract Set-up org
Vendorsupplied
3rd partycustomers
Meter ReadCollectionTeam (CCC)
Accurate/timelymeter reads
Accuratecontract Setup
Serial #dataprovidedwith invoice
CashApplicationProcess(rework,research,correction)
CCC process(rework,research,correction)
Receivablescorrectlymatched toinvoices thefirst time
Errored/unappliedinvoicesprovided t othe CCC forresearch andcorrection
CFOorganization
Accuratefinancialstatements
CustomerSatisfaction
ReducedCosts
Requirements Requirements
Outputs CustomerSupplier Inputs ProcessInputBoundary
OutputBoundary
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Cash Application Unapplied-Atlanta CCC
5235 1665 1451 1450 1026 38746.7 14.8 12.9 12.9 9.1 3.5
46.7 61.5 74.5 87.4 96.5 100.0
0
5000
10000
0
20
40
60
80
100
Defect
CountPercentCum %
Per
cent
Cou
ntPareto Chart for Reason Codes
Invoice that has no base or meter
Missing Serial # in PO Field
Service invoice w/multiple erro
rs
Lack of Equip. In
voice
Service invoice pending research
by the MSSC
April 03
May 03
June 03
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Cash Application-credit matching process flow
8/21/2003JonathanWilliams
Project #0307-44-002
Unapplied Cash – Canon & Ricoh Credits,Discrepancy in System
OrderManagement
ContractManagement Meter entry
Cash ApplicationCanon/Ricoh
Interface
Macon Shared Service Center (MSSC)Atlanta Customer Care Center (CCC)
Current unapplied Statistics :
Total unapplied $7,167,075Southeast CCC $4,645,914Houston CCC $1,875,228In Process $645,932
Vendor CreditAssociate appliesreason code and
provides to CCC forresolution
Entry ofequipmentinformation
50 Stepsrequired to
download data(2 hrs/week/
vendor
Average 16,195transactions per
month
Entry of Contractbase/CPC datainto contracts
module
Web
Fax
Phone
ServiceTechnician
Vendor
Cusotomer
*Initial Samplerevealed 95%
inaccurate meter readentry
Field Service
ADS
ServiceTechnician
Oracle Module
14.8% of errors* = Missing serial #, 12.9% of errors=Lack of equip. inv., 12.9%of errors=Lack of service inv.
Hardcopy documentcreated
CanonData
RicohData
RemitanceMatch
Receivable?End
YES
REWORK, REWORK, REWORK!!
46.7% of errors40.6% of errors
NO
Vendor CreditAssociatematch?
YES
EstimatedDPMO=940,000
Vendor supplieddata
Unapplied Cash - Canon &Ricoh Credits
($12.96M over past 12 monthsrecieved
$7.1 currently unapplied)
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HeadcountCurrently
•20 (actual) 22 (budgeted) personnel scheduled to support entire company•Currently supporting two of five regions•Performing 60% of current unapplied dollars, 0% of backlog
At current levels, Cash Application team would have to add 13 people to stay current for two regions, with no decrease to the backlog ($ ).
Future•At current performance levels, team would have to add 63 additional headcount (over $2M in expense) with no decrease to the current backlog. Backlog will continue to grow.
This is not the answer!Focus areas :Meter Reads not accurate or timely (47% of errors), Lack of service & equipment invoices(26%) Missing serial # (15% of errors)
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Benefits of focusing on the supplier
•Current error rate on first time matching is 94%. Effective error rate is 100% because even first time matches must be reviewed
•Cash application associates currently resolve 1 transaction every 17 minutes
•Cash application receives averages 16,195 new credit transactions each month
•For every sustained incremental improvement of 720 (.04% of the total) matched transactions, Cash Application organization can reduce one associate.
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Next Steps
•Enhance measurement system – include metrics that reflect:
o First time match, remittance to receivable percentage
o Aged unapplied by reason code and functional responsibility
o Resolution productivity (time to complete MSSC, CCC’s)
oTransactions resolved by MSSC Cash Application
•Perform Measurement Systems Assessment on unapplied reason codes
•Expand cash applications sample to enhance accuracy of DPMO
•Determine if scope of this project should be expanded to include meter read accuracy.