Evergreen Products
The top managers of Evergreen Products of East Lansing, MI, have asked you to act as a consultant on a problem plaguing the entire company. Evergreen Products manu- factures decorated containers and care tags for a market consisting primarily of small- to medium-sized florists and grocery stores. The containers are relatively inexpensive to make, but they are sold at a high markup (60 percent). The same is true for the tags. Because of the targeted market segment, management feels that it must be able to provide its customers with quick delivery and quality. However, this has not been happening lately.
To understand what happens, it is useful to first fol- low the course of an order received from the customer. Orders are placed in one of two ways at Evergreen. First, customers may notice that their stocks are get- ting low. They call the Evergreen sales department with an order, which is received by one of three clerks. The clerk records on a sheet the customer number, the type of product, and the quantity needed. At this point, a customer due date is set based on the customer's needs. However, the clerks try to encourage a due date that is about five working days out (there is no hard-and-fast rule for this procedure).
Once a day, the sales account manager picks up all sales orders. He is responsible for ensuring that all orders are complete and accurately entered and that the customer's credit rating is OK. If it is, the order is put into another pile where it is picked up once every morning. If the order is not acceptable or if there are errors, the order is returned to the person who took the order. That person is then respon- sible for correcting the problem within a reasonable period of time. When the order has been corrected, the process is repeated. It takes about half a day to move from phone order to sales account manager and about an hour to clear the sales account manager. Forty percent of the orders experience some form of error.
The second way that an order can be placed is through the company's own traveling salespersons that stop in on accounts and check their inventory stocks. When they see that an item is low, they fill out an order. They then phone the order into the plant (about once every day-this varies depending on how busy they are). Since each salesperson is rated on the total dollar sales he generates, there is a built-in incentive to be very concerned about clients' inventory stocks. When the order is turned over to the sales account manager, the process is identical to the one previously described. On average, the delay for entering orders through the salesperson is about half a day (but it can range up to two days).
Once the order clears the sales account manager, it goes to accounting where it first is put into the day's pile. It is then entered into the accounting system. This step marks the beginning of the billing process. It takes an average of half a day to clear accounting (but this can range up to two days). From here, it goes to the shop floor scheduler.
The shop floor scheduler reviews all orders for accu- racy and completeness. Any problem orders are set aside and returned to the sales account manager for correction. About 15 percent of the orders are typically set aside each day. The rest of the orders are released to the shop floor. It typically takes one day to clear the shop floor. The time can vary depending on the time of year. Christmas, Valentine's Day, Easter, Mother's Day, and other similar holidays put a great deal of pressure on the shop floor (which runs on average at 80 percent utilization). The shop floor is held accountable for meeting all quoted customer due dates.
Top management is concerned over the poor performance of the shop floor. Inventories are high and grow- ing; overtime is excessive; on-time delivery performance is poor; and customer dissatisfaction is growing. The top manager has asked you if he should replace the current shop floor planner.
Questions
1. What are the desired outcomes for Evergreen? What should Evergreen wish to accomplish with its order entry system? How do we know if the order entry system is working well or poorly? How is it doing now?
2. What do the customers want from Evergreen? What types of problems do the existing customers pose for Evergreen? Why?
3. Apply the process for incorporating value through process thinking to this problem. What metrics would you apply to this process? What insights into the pro- cess did you obtain?
4. How would you improve the operation of the current order entry process at Evergreen? Be specific.