The Order Fulfillment Process for Setterstrom Company:
The Setterstrom Company manufactures hi-fi stereo equipment. It is a B2B firm, so Setterstrom Co does not sell its products directly to consumers. To ensure customers (e.g., Best Buy) purchase the products they need, Setterstrom Co employs trained and knowledgeable sales representatives. Sales representatives also can provide product training to customers. As such, Setterstrom Co’s sales representatives are integral to the business process.
The process of fulfilling an order begins when a customer places an order for audio equipment through a Setterstrom Co sales representative. Representatives visit customers at their location, write up a (paper) order, generate a paper invoice to the customer, and send the order to Setterstrom Co’s order fulfillment center. Usually, customers remit payment at the time of purchase by writing a check, which the sales rep sends to Setterstrom Co’s accounting department along with a copy of the order for processing (The order fulfillment center and accounting department are co-located and considered to be part of the corporate office.). Both the order that is sent to the fulfillment center and the check/copy of the order sent to the accounting department are sent via the postal service (i.e., it is mail). All mailing processes takes anywhere from two to seven days to be delivered, but most often arrives in three days.
At Setterstrom Co’s corporate office, all incoming mail is handled by an administrative assistant. This assistant received his degree from Ohio State University’s College of Business. As can be expected, incoming mail typically sits in a pile on his desk for anywhere between two to five days (usually three days) before he gets around to delivering it to the proper recipients.
Setterstrom Co’s accounting department uses a computer with AccountPro software to track customer orders and to manage its accounting information. Each order is input into AccountPro and customer balances are closely monitored. When a check is received, it gets applied to the customer’s order using the AccountPro software and is then scanned and recorded into AccountPro’s database. The accountant that works at Setterstrom Co received her master’s degree in accounting from Northern Illinois University. Therefore, she is at the top of her game. On average, it takes her one day to complete any given data entry task in the accounting department.
Once the Setterstrom order fulfillment center receives an order from a sales representative, it gets placed in a “to do” pile. The senior order fulfillment manager used to be a professional guitarist, but his Korn cover band never took off. In fact, the only reason he took the job at Setterstrom Co was because his girlfriend kicked him out of her apartment and his parents would not let him move back home. Consequently, orders can sit in the ‘to do’ pile for anywhere from four to six days, though most often it takes six days.
Actual audio equipment is not kept on hand. Any orders requesting equipment are marked as “in production” on the order form. The updated order form is then sent to the manufacturing facility. Order forms are hand delivered to the manufacturing facility on Mondays by the senior order fulfillment manager. The order forms are not delivered daily, because the manufacturing facility is located across town and the senior order fulfillment manager thinks that the senior operations manager at the manufacturing facility is a “tool,” so he avoids contact with him as much as possible.
Upon receiving the order form, the senior operations manager at the manufacturing facility notifies the customer of the delivery date estimate, as delivery times for audio equipment will vary depending on the current backlog of orders being processed. The operations manager at this manufacturing facility received his undergraduate degree in operations management from NIU, so he is a top-notch employee. Consequently, contacting customers only requires a negligible amount of time and is done immediately upon receiving the order. The senior operations manager will then generate a purchase orders (POs) for the parts necessary to complete the equipment production. Since the parts required to manufacture ordered equipment come from multiple vendors, the manager has to look up the vendor for each part and mail (paper) POs to the appropriate vendors. This activity takes a day to complete. Copies of the POs are mailed to the accounting department in the corporate office, so the AccountPro system can be updated. Once a vendor receives a PO, it will package the requested parts and send them to Setterstrom Co’s manufacturing facility along with an invoice. Vendors typically have parts on hand, so there is not a wait for parts to be manufactured. Shipping parts to Setterstrom Co. uses takes two to five days, depending on what part of the country the vendor resides. However, shipping usually only takes three days.
When parts arrive at the manufacturing facility, they are received into inventory (The inventory area is at the manufacturing facility. Assume no cycle time) and the senior operations manager will forward the invoice to the accounting department by mail. When the accounting department receives the vendor’s invoice, it will link the invoice to the open PO by entering it into AccountPro. The accounting department will then send payment to the vendor (by mail), usually in the form of a check.
Once all of the parts for a given sales order are received into inventory, the senior operations manager creates a planned production order. Once the queue of production orders in front of the planned order are completed, the planned order will become an actual production order and the manufacturing process will begin. Depending on the time of year, there is anywhere from a 7 to 21 day backlog of orders being completed. Typically, the back log is seven days. Actual production of audio equipment takes between one to three days, with the process most often taking 3 days to complete. Once the production process is completed, the equipment is packed and delivered to the fulfillment center. Setterstrom Co’s employees from the manufacturing facility carry out this process and it typically takes two days to complete delivery. The senior operations manager will contact the customer to let them know that production is complete and that the order is in the process of being delivered. The order form is updated to indicate ‘production complete.’ The updated form is mailed to the accounting department, where AccountPro is then updated.
Upon receiving the delivery from the manufacturing facility, the senior warehouse manager contacts the deliver firm (actual delivery of goods to customers is carried out by a third-party company). This process takes one to three days, though usually is completed in only one day. The delivery firm responds to the deliver notice in one day and the delivery of equipment averages four days.
Step 1: Model this process using a cross functional process map.
Step 2: Analyze this business process. Estimate the cycle time (in days) for this business process (sale to delivery). Where necessary, make activity time estimates using the PERT distribution formula discussed in class. Additionally, identify which tasks have business value, real value, and no value. Present the results of this step using a table, as discussed in class.
Step 3: Discuss the efficiency of the modeled process. Point out places in the process that are candidates for process improvement and provide your reasoning.
Steps 1 through 3 represent the as-is business process
Step 4: Improve this business process! Feel free to integrate IT into your answer, though it is not a requirement of the assignment. Provide me with
a. cross functional process map of the improved process
b. the new cycle time (in table form)
This assignment is to be completed both digitally and in hard copy form. The tools needed to produce the diagrams can be found out on myapps.niu.edu (as discussed in class). The assignment must be turned in via Blackboard by the due date. At the start of class, turn in a hard copy of your assignment to me in class. Process maps must have a professional appearance.
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