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Enabling Business Process Improvements
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The next phase of the process improvement project was to recommend impactful business process improvements, and support those improvements through greater process awareness and visibility at the staff level.
Simulating Improvements to the Order Fill Process
The COO and the COE team met with a sales consultant from an Order Management System vendor to discuss potential improvements to Northwind’s Order Fill process. The team was able to quickly communicate the process pains to the sales consultant using the Visio process models with Shape Data that they had developed.
Working with the sales consultant, the team quickly modeled how the process would change if Northwind upgraded its current Order Management System to one that better integrated with the company’s modern Inventory Management System. Labor time for certain process steps was reduced, while the step to manually query Northwind’s inventory on-hand was removed altogether.
The team modified the Visio model and generated a future state report in Excel using the Northwind BPA Report template. Comparing the future state to the current state, the team calculated that labor costs would decrease by $70 for each process iteration once the new Order Management System was in place. Extrapolated over the 4,000 orders Northwind processed each year, the process labor cost savings equated to an annual reduction in labor cost of $280,000. Using this cost savings alone, the team created a business case to justify the $400,000 upfront cost in hardware, software, and services to install and deploy the new system. Their business case based on labor savings alone showed a net present value of $194,000, a rate of return of 36 percent after three years, and a payoff period of a little over two years.
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